–House-Senate Conference Panel To Shift Into High Gear This Week
–House Panel To Hold Hearing Wednesday on U.S.-China Economic Issues
–Senate Continues Work On $113 Billion Tax Extenders Bill
–BP Chief Hayward Faces Hill Grilling Thursday On Oil Spill

By John Shaw

WASHINGTON (MNI) – The House-Senate conference committee on
financial regulatory reform will shift into high gear this week, as
lawmakers begin to plow through the pile of issues that need to be
resolved before a compromise bill is achieved.

The House-Senate conference panel convened last Thursday for
opening statements and to elect House Financial Services Committee
Chairman Barney Frank as the panel’s chair.

Frank said that when the panel reconvenes Tuesday it will consider
provisions related to credit rating agencies, hedge funds, insurance,
and federal bank regulations.

Later this week and into next week, the House-Senate conference
panel will consider regulation of over-the-counter derivatives, a
council of regulators to monitor system risk, and the structure of a
consumer agency overseeing financial products.

The House passed its regulatory reform bill in December of 2009
while the Senate approved its bill several weeks ago.

The House-Senate conference committee is trying to reconcile the
House and Senate regulatory reform bills. Any compromise must then be
approved by the full House and Senate.

Both Frank and Senate Banking Committee Chairman Chris Dodd said
they would like a final bill to be approved by Congress and sent to
President Obama by July 4th.

One of the central issues to be resolved will is how to regulate
the over-the-counter derivatives market. Both the House and Senate bill
require most derivatives to be traded through third parties, but the
Senate bill has fewer exemptions for end-users. Additionally, the Senate
version would force banks to spin off their derivatives units or risk
losing access to the Fed’s discount window and FDIC insurance.

Administration officials and key congressional Democrats have
indicated they are uncomfortable with the Senate’s derivatives language.

Sen. Jack Reed, a Democrat on the conference committee, has said
the provisions preventing banks from buying and selling securities
solely for the firm’s profit would be a more effective tool to control
risk than preventing banks from trading derivatives.

On other matters, the House Ways and Means Committee will hold a
hearing Wednesday at 10 a.m on China’s trade and industrial policies.

The panel held a hearing earlier this spring on China’s currency
policies, but this week’s session is certain to include considerable
discussion of the yuan.

The Senate Finance Committee held a hearing on the U.S.-China
economic relationship last week in which Treasury Secretary Tim Geithner
said he has seen few tangible signs that China is committed to
short-term currency reform

Analysts are eager to see if lawmakers continue to escalate their
criticisms of China and if this translates into concrete steps to push
legislation.

Sen. Chuck Schumer last week repeated his threat to push a bill
soon that would automatically threaten economic sanctions if Treasury
finds that a trading partner’s currency is “misaligned” based on
various economic indicators.

Congressional Democratic leaders will resume discussing this week
if they will attempt to pass the annual budget resolution which sets
five year spending and revenue goals and makes deficit estimates.

Congress is required by law by pass annual budget resolutions by
April 15, but this deadline is rarely met.

In addition to setting broad fiscal goals, a budget resolution sets
a ceiling on discretionary spending for the coming year which then
triggers work on the 12 annual spending bills that fund discretionary
programs.

Senate Budget Committee Chairman Kent Conrad told reporters several
weeks ago that he is trying to persuade his Democratic colleagues to
consider the budget resolution that his panel approved several weeks
ago. This plan, he said, would reduce budget deficits from 10% of GDP to
3% of GDP.

However, House Speaker Nancy Pelosi has signalled that House
Democrats will not try to pass a five year fiscal blueprint this year.
She said there are “several other ways to meet our responsibility”
regarding the budget.

Of the $3.8 trillion federal budget, more than $1 trillion is in
the discretionary portion of the budget which is allocated in the annual
spending bills.

Congress could pass a resolution that “deems” the budget is passed,
thus setting a ceiling on discretionary spending to allow work to
advance on the FY’11 appropriations bills.

The Senate will resume consideration Monday of a $115 billion
package of tax cuts and benefit extensions which the House recently
approved.

The package would extend about a dozen tax cuts that expired at the
end of last year, expand unemployment benefits, and provide a 19 month
extension of current Medicare payments for doctors, the so-called “doc
fix.”

Finally, Tony Hayward, the CEO of British Petroleum, will testify
on the Gulf of Mexico oil spill before a House Energy and Commerce
subcommittee Thursday at 10 a.m.

** Market News International Washington Bureau: (202) 371-2121 **

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