Financial Regulatory Forum

U.S. Senate financial reform snags, no bill Monday

March 1, 2010

   By Kevin Drawbaugh and Rachelle Younglai
   WASHINGTON, Feb 28 (Reuters) – Marathon weekend negotiations in the U.S Senate on financial reform failed to result in a bipartisan breakthrough, with disagreement over how much power to give a consumer watchdog office still a key hurdle.
   Key lawmakers from both parties were still hopeful for a breakthrough on an issue that is one of President Barack Obama’s top domestic policy priorities, but an aide to Senate Banking Committee Chairman Christopher Dodd said no revised bill will be released on Monday.
   “We continue to hope for a consensus bill,” said Kirstin Brost, spokeswoman for Dodd, a Democrat.
   Republican Senator Bob Corker, who has been been continuing talks with Dodd over recent weeks, was also optimistic “that we will be successful in getting a good piece of regulatory reform legislation,” said his spokeswoman Laura Herzog.
   (For a Factbox on the key issues in the Senate’s compromise bill on financial reform, double-click on [ID:nN27194850])
   Brost emphasized that consumer protection remains a key area for Dodd.
   “Dodd wants a consumer watchdog with teeth,” she said. “He will compromise on structure, but he will not accept anything short of real change for consumer protections.”
   Nearly a year and a half since a severe financial crisis tipped the U.S. economy into its worst recession in decades, financial regulation has changed little, despite repeated assertions that reform is critical to avoiding another crisis.
   For Congress, time is running short. Midterm elections are approaching in early November. Between now and then, Congress will be in session for perhaps 23 weeks.
   In that timeframe, a bill would have to move out of the banking committee, be debated and voted on on the Senate floor and, if passed, reconciled with a sweeping bill passed by the House of Representatives in December.
   Democrats are keen to see legislation sent to Obama and signed into law before the November elections, giving them a clear achievement after disappointing outcomes on other key issue such as health care reform and climate change.
   Policy analysts said Republicans increasingly sense political danger ahead of November in blocking reforms and being cast as allies of the army of bank and Wall Street lobbyists who for months have been fighting stricter rules.
   “The calendar is starting to become a factor,” said Brian Gardner, a policy analyst at investment firm Keefe Bruyette & Woods. “All in all, I think the banking committee is headed toward getting a bill done before the end of the year.”
  
   BILL MAY NARROW
   The struggle in the Senate suggested to some that new legislation — which many still expect from Dodd next week — may be narrower in scope than Obama’s proposals of nine months ago, and the sweeping bill passed by the House in December.
   “They’re going to push real hard to get something out next week,” Gardner said. “There’s a chance that it could be a little bit smaller” than the House bill and Obama’s proposals.
   Provisions that may be dropped could include over-the-counter derivatives regulation, as well as proposals to give shareholders more say in electing corporate directors and determining corporate executive pay, Gardner said.
   One of Dodd’s boldest proposals from a November draft bill — to consolidate the patchwork U.S. banking supervision system into one agency — was unlikely to make it into the committee’s final bill, a source familiar with negotiations told Reuters.
   Sources told Reuters on Saturday that neither Democrats nor Republicans had embraced Dodd’s offer on Friday to scale back Obama’s proposed Consumer Financial Protection Agency.
   (For a Factbox on key players in reshaping U.S. financial regulation, double-click on [ID:nN17146028])
   Dodd had circulated a proposal to make the consumer protection agency a division of the Treasury Department, instead of an independent agency, which Obama recommended. But in a setback for Dodd, his offer was rejected by Corker and Shelby, sources said.
   The sources said Shelby and Corker objected to the rule-writing power Dodd proposed for the consumer division, but not necessarily to the idea of the division itself being located in the Treasury Department or another federal agency.
   On the opposite side of the consumer watchdog issue, many Democrats were still holding out for an independent agency, said lobbyists and aides close to the talks.
   “In our view, this language will change considerably before the bill advances to the floor of the Senate,” said Jaret Seiberg, financial services policy analyst at investment advisory firm Concept Capital. (Editing by Leslie Adler) ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax))) Keywords: FINANCIAL REGULATION/ 
  
Sunday, 28 February 2010 23:18:12RTRS [nN28215288] {C}ENDS

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