07 June 2010

NYT: Congress pressed for reform bill deal

As Congressional negotiators begin this week to merge two bills overhauling the financial system, the White House wants them to reach an agreement before President Obama leaves for a Group of 20 meeting this month in Toronto.

The administration has tried to use the summit meeting to foster a sense of urgency among lawmakers. It thinks a deal would give Mr. Obama greater leverage in efforts to persuade other countries to support proposals like a global bank tax and higher capital standards for the largest financial institutions. The higher standards are part of the legislation but would require international coordination.

 

Congressional negotiators must resolve substantial differences between the bills. The process will begin formally on Thursday with a meeting of more than 20 lawmakers from both parties and both houses of Congress.

 

A White House spokeswoman, Amy Brundage, said over the weekend that Mr. Obama was looking forward to discussing the financial overhaul at the G-20 meeting and reiterated that “he hopes to sign financial reform into law by July 4th.”

 

Perhaps the foremost question is whether to force giant banks to spin off their lucrative operations trading derivatives, the complex instruments that were at the heart of the financial crisis. Adding a political twist, the author of that provision, Senator Blanche Lincoln of Arkansas, faces a Democratic primary runoff on Tuesday.

 

No matter the outcome of the runoff, the provision faces substantial opposition, not only from Wall Street but also from regulators like Ben S. Bernanke, the Federal Reserve chairman, and Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation. Also, the administration does not support it.

 

In a final, ferocious round of lobbying, big banks are also trying to influence negotiations on whether to curb the fees that retailers must pay when customers swipe credit and debit cards — as the Senate bill seeks to do — and how strictly to impose a ban on proprietary trading, or banks’ making market bets with their own money.

 

The Senate bill directs regulators to impose such a ban, known as the Volcker Rule, after a period of study; the House version would merely permit the Fed to ban proprietary trading if it threatened the overall stability of the financial system. Most banks prefer the House version.

 

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© New York Times