Senators close to a deal on financial regulation bill

By Brady Dennis and Paul Kane
Washington Post Staff Writers
Thursday, April 22, 2010

Key members of both parties said Wednesday that they are close to agreeing on the main elements of a bill to overhaul the nation's financial regulations, raising the prospect that the Senate could begin formal discussion of the landmark legislation early next week.

"I'm more optimistic than I've ever been," said Sen. Richard C. Shelby (Ala.), the lead Republican negotiator. "I think we can put a bill together pretty soon." His counterpart in months of talks, Sen. Christopher J. Dodd (D-Conn.), chairman of the banking committee, agreed that they were on the cusp of a consensus.

If no last-minute hurdles arise, Senate Majority Leader Harry M. Reid (D-Nev.) plans to hold a test vote Monday, aides said. If he gets 60 or more votes, he could move ahead with formal debate on the bill, which among other things would create an agency to protect consumers against abuses in mortgages and other loans, set up a council of regulators to watch for risks to the financial system, and give the government power to wind down large, troubled financial firms.

The likely emergence of a bipartisan consensus is a notable departure from the fractious debate over health-care legislation, which passed last month without a single Republican vote. This time, some Republicans say they hope to ultimately support the financial bill, which arose out of an economic crisis that has left millions of Americans angry and bereft of their jobs, homes and savings.

With both parties eager to claim that they are tackling financial excesses, Republicans have been focusing their objections on specific tenets of the legislation rather than on its overall thrust, allowing for more compromise.

The effort to build bipartisan support received a small but perhaps critical boost Wednesday as the Senate agriculture committee approved a measure that would establish oversight of the vast market for financial derivatives, with Republican Sen. Charles E. Grassley (Iowa) joining the Democratic majority. Grassley's yes vote was noteworthy, particularly after his lead role in failed negotiations over the health-care bill last summer.

The derivatives measure, proposed by the committee chairman, Blanche Lincoln (D-Ark.), could dramatically reshape several critical markets and deprive financial firms of a major source of revenue. The proposal will be added to the broader overhaul bill sponsored by Dodd.

"This is no time for small fixes or tweaking around the edges," Lincoln told her colleagues, adding that "to contemplate inaction is unacceptable."

While Grassley expressed disappointment that the measure did not garner more Republican support, he said in a statement that he voted for it "because I think transparency is the right policy." He added that Lincoln's draft "isn't perfect" and that his vote does not mean he will support the overall bill.

Reins on derivatives

Lincoln's legislation bans big Wall Street banks from trading derivatives, contracts that allow financial traders to make side bets on the direction of stocks, commodities and other assets. Derivatives trading, which aggravated the financial crisis, has roots in the trading of certain farm commodities, which is why the agriculture committees in the Senate and House have some jurisdiction over it. Treasury Department officials and some Democrats on the Senate banking committee, which is also interested in derivatives, do not support the ban.

Lincoln's measure could prove more favorable to food manufacturers and other commercial firms than to banks, even though her staff made some late adjustments, at the request of Treasury officials, to limit derivative trading by nonfinancial companies. The bill that emerged out of the banking committee is tougher on these companies. Lawmakers must resolve the differences between the proposals.

After Grassley's vote, some lawmakers said passage of a sweeping regulatory bill is more likely than ever.

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