Financial regulation bill gets last-minute amendment from Sen. Chris Dodd

By Brady Dennis
Washington Post Staff Writer
Wednesday, May 19, 2010

According to the note scribbled at the top of the first page, Amendment 4110 arrived Tuesday at 11:57 a.m., three minutes shy of the deadline for lawmakers still hoping to alter the massive financial overhaul bill before the Senate.

It was only five pages and carried a lone, handwritten signature: Chris Dodd.

Without announcement or fanfare, the Connecticut Democrat -- chairman of the Senate banking committee and chief architect of the pending legislation -- was quietly trying to resolve one of the few remaining disputes that could impede the passage of the landmark bill: a disagreement over financial instruments called derivatives that has sent shudders through Wall Street.

At issue was a single section a third of the way through the massive 1,400-page bill that could force a handful of the nation's biggest banks to spin off their billion-dollar businesses in trading derivatives.

Dodd offered a clever Washington solution aimed to appease both friends and foes of the provision. His amendment preserves the tough language -- but it postpones any action for two years so it can be studied. And it assigns that study to a new council of regulators, headed by Treasury Secretary Timothy F. Geithner, whose members have serious reservations about such a dramatic measure and may very well kill it in the end.

Voila. Language saved, action averted. Move on.

Problem is, the idea didn't sit so well with Sen. Blanche Lincoln (D-Ark.), chief advocate of the derivatives ban, who was in Arkansas on Tuesday fighting for her Senate seat in a primary election. (Her bid to secure the nomination fell short, setting up a June 8 runoff election.) When contacted about Dodd's proposal, staff members seemed unaware of it. They later sent out a statement on Lincoln's behalf.

"I remain fully committed to my provision and will fight efforts to weaken it," she said. "I'm proud of the support my provision has received both inside and outside the Senate and will defend it should there be a debate on the Senate floor."

Nor did the banks cheer Dodd's compromise.

"It's immediately going to have a chilling effect," said one banking lobbyist, who spoke on the condition of anonymity to speak more freely. "Markets crave certainty. All this does is introduce a comic amount of uncertainty."

That uncertainty has been magnified by Dodd's last-minute stratagem, and by the mystery surrounding it. The year-long debate over how to overhaul the nation's financial regulations and avoid another economic crisis has taken place very much in public, especially during recent, marathon hours of Senate speechifying, but few knew Tuesday afternoon about Dodd's amendment. Press staffers at the Senate banking and agriculture committees, which share oversight of derivatives, said they did not know the details.

With anti-Wall Street fervor running high, the agriculture committee, which Lincoln chairs, approved her bill this spring barring banks that deal in swaps, a type of derivative, from tapping into federal aid programs -- effectively forcing the firms to shed their derivatives business. That bill later became part of the wider financial legislation now under debate and has so far remained there, despite stiff opposition from the Obama administration, regulators, some lawmakers and the nation's biggest banks.

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