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House, Senate leaders finalize details of sweeping financial overhaul

House and Senate lawmakers agreed on the terms of a financial overhaul bill early Friday after a 20-hour work session, ending weeks of delay and debate.

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On the House side, the final tally was 20 to 11 to approve the conference committee's report. On the Senate side, it was 7 to 5. The votes fell along party lines, earning no support from Republicans on the two panels.

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Asked whether he expected the compromise legislation to pass the full Senate -- which on May 20 approved an earlier version, 59-39, with support from four Republicans -- Obama replied, "You bet."

Republican lawmakers who serve on the financial panels blasted the compromise bill. "This legislation is a failure on both counts," Sen. Judd Gregg (R-N.H.) said in a statement that denounced the compromise as failing to address "shoddy underwriting practices" or problems with Fannie Mae and Freddie Mac. "It will not encourage much-needed stability and confidence in our financial markets. It will not significantly reduce systemic risk in our financial sector."

Lincoln's provision on derivatives had for months remained a particularly thorny issue for Democrats, causing internal divisions that threatened to derail the massive legislation.

Although consumer advocates and many liberals supported her provision, it encountered stiff opposition from the Obama administration and some regulators, as well as from an influential bloc of moderate Democrats and House Democrats from New York, where much of the financial derivatives industry is concentrated.

Administration officials and Democratic leaders worked fervently to bridge the divide between Lincoln and those House Democrats. Top Treasury officials, including Deputy Secretary Neal Wolin and Michael Barr, an assistant secretary, roamed the Dirksen office building alongside White House economic adviser Diana Farrell, conferring with aides and key lawmakers. Gary Gensler, chairman of the Commodity Futures Trading Commission, worked the committee room throughout Thursday.

Lincoln came and went from the hearing room, meeting with members of the centrist New Democrat Coalition to try to find common ground and huddling with Dodd (D-Conn.); Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee; and other lawmakers.

In the very early morning hours Friday, Rep. Collin Peterson (D-Minn.) -- chairman of the House Agriculture Committee and a Lincoln supporter -- introduced a proposal that would compel banks to spin off only their riskiest derivatives trades, including particular forms of credit-default swaps, which are complex financial bets that exacerbated the financial crisis.

At the same time, the proposal would allow banks to hold onto certain derivatives trading related to interest rates, currency rates, gold and silver. They also would be allowed to continue trading in derivatives in order to hedge against their own risks.

Under the compromise, the derivatives operations that firms spin out of their federally insured banks could still be retained in a separately capitalized affiliate. In addition, firms would have two years to institute the new rules.

The Senate agreed to the compromise language just after 2:30 a.m.

The cavernous Dirksen 106 conference room remained packed at that hour, but it was a chaotic and cluttered mass of humanity. Lawmakers had stopped trying to conceal their yawns. Aides who had worn down their BlackBerry batteries recharged them for the home stretch. Trash cans spilled over with coffee cups and sandwich wrappers. Empty Fritos bags and plastic Diet Coke bottles littered the room, along with reams of paper -- old amendments, new amendments, handwritten amendments, amendments to amendments.


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