As reported this morning by Reuters private equity news correspondent Andy Sullivan, Democrats are aiming for a final bill on financial reform by this evening; however, given that lawmakers have waited until the final, frantic hours to sort out the most controversial provisions in the bill, negotiations aiming to resolve differences between versions of passed by the House and the Senate in a final session could last deep into the night.
Among the most controversial provisions still to be resolved:
1. Volcker Rule
- Moderate Republican Senator Scott Brown has been at the center of efforts to weaken the “Volcker rule” — the ban on banks’ trading first proposed by White House economic adviser Paul Volcker, according to aides.
- Brown has pushed to allow the large insurers and mutual funds based in his home state of Massachusetts to continue their investments in hedge and private equity funds.
- The latest compromise floated on Wednesday would allow banks to invest 2 percent of their core capital in hedge and private equity funds. But it would also strengthen the rule by giving regulators less leeway to interpret it as they see fit.
For related Compliance Avenue posts on the subject, see:
Banks Worry As Volcker Rule Looms (posted June 18, 2010)
Volcker Rule May Survive (posted June 15, 2010)
2. Derivatives
- Democratic Blanche Lincoln continues to push to force banks to spin off their swaps-dealing operations. Many analysts had expected Lincoln to quietly drop the provision after she successfully fought a primary election challenge from the left in her home state of Arkansas, but she has fought to keep it in and a softened version could become part of the law.
- Thus, the panel will have to work through more than 100 proposed tweaks to the derivatives crackdown, which aims to tame a $615 trillion market that exacerbated the financial crisis and led to a $182 billion taxpayer bailout of insurance giant AIG.
According to Mr. Sullivan, “Wall Street has deployed an army of lobbyists to fight the measure; however, with the endgame at hand in Congress, the lobbyists’ efforts may soon shift to the regulatory agencies that will put the new rules in place.”
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For related Compliance Avenue posts on the subject, see:
FinReg Conference This Week Will Take Up Toughest Issues Remaining on Wall St. Reform (posted June 21, 2010)
CNBC Reports on Week Ahead: Banking Reform Will Overshadow Even the Fed (posted June 19, 2010)
In addition, for additional information on the final Wall Street negotiations, see Reuters’ article Factbox: Major financial regulation reform proposals.