ANALYSIS-Key US senator gains clout on Wall Street bill
WASHINGTON, June 8 (Reuters) – U.S. Senator Blanche Lincoln, an Arkansas moderate Democrat, is buoyed by winning nomination to a third term in the Senate but not sure of victory for her hot-button Wall Street reform — forcing big banks to spin off their swaps desks.
The proposal is one of the salient disputes for House-Senate negotiations that could begin this week on a financial regulatory reform law. The Senate endorsed the idea. The House is silent on the question.
“I’ve stood up to special interests and I’ve done it for you,” Lincoln said in a victory speech in Little Rock, Arkansas after edging Lieutenant Governor Bill Halter in a runoff election.
* Ballot-box success carries weight in Congress. Winners, especially in a rough year for incumbents, impart momentum to their legislation. Lincoln has said she will fight to see the swaps-desk spinoff become law. She surmounted earlier predictions that the spin-off was doomed. There is broad opposition so it appears an uphill struggle for Lincoln.
* While Lincoln is the only senator identified with the spin-off, she has some backing. Vermont Sen Patrick Leahy supports the spinoff, says an aide. Lincoln and Leahy are among the 12 Senate negotiators on the financial reform bill so she will have a direct role in the negotiations.
* Two financial analysts said Lincoln may be more willing to compromise ahead of the November general election. By nature, she is a centrist. But one analyst said the spin-off may become a reality because Wall Street is a popular target.
* The so-called Volcker rule often is mentioned as an alternative to Lincoln, since both involve trading by banks in derivatives. The Volcker rule would bar banks from buying and selling investments on their own accounts unrelated to customers’ needs. Two senators said on Tuesday they are working on a stronger version than was included in the Senate bill.
* Chairman Sheila Bair of the Federal Deposit Insurance Corp said in a May letter that a spinoff would drive swaps trading into “less regulated and more highly leveraged venues.” White House economic advisor Paul Volcker said banks should have the power to serve their customers’ hedging needs.
* Banks could lose billions of dollars in revenue if a complete spin-off is mandated. Lincoln says banks would move the swaps desks to affiliates, a less painful step. Goldman Sachs, Citigroup, JPMorgan Chase, Bank of America, and Morgan Stanley dominate the derivatives market.
(Reporting by Charles Abbott, Editing by Sandra Maler)
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