–Senate Minority Leader McConnell: Reg Reform Debate Will Take Time

By John Shaw

WASHINGTON (MNI) – Senate Majority Leader Harry Reid said for the
second time Tuesday that he is determined the Senate will complete
action on regulatory reform legislation by next week.

“We have no choice but to finish it next week,” Reid told reporters
after a Senate Democratic luncheon.

He walked through a long legislative agenda for the spring and
summer and said it is imperative the Senate finish its work on
regulatory reform by the end of next week.

“We have a very good bill on the floor,” Reid said.

Reid said he is open to having the bill strengthened by votes on a
wide range of amendments.

Asked if he would allow a vote on an amendment to expand auditing
of the Federal Reserve Board by the Government Accountability Office,
Reid said he has “no problem” with allowing votes on pending amendments.

He said he was not familiar with the details of the amendment by
Independent Sen. Bernie Sanders to expand auditing of the Fed.

Speaking just before Reid, Senate Minority Leader Mitch McConnell
said the Senate must take its time dealing with a bill with such “an
extraordinarily broad reach.”

“I don’t think it’s a couple of week bill,” he said.

The Senate began debating last Thursday the bill that was largely
drafted by Senate Banking Committee Chairman Chris Dodd.

It establishes a new independent Consumer Protection Bureau at the
Federal Reserve Board, creates a process to liquidate failed financial
firms, sets up a council of regulators to oversee systemic risk in the
economy, establishes a regulatory structure for over-the-counter
derivatives, requires hedge funds that manage over $100 million to
register with the SEC and creates a new office within Treasury to
monitor the insurance industry.

Dodd’s bill has been merged with a package that was approved by the
Senate Agriculture Committee which requires OTC markets to adopt aspects
of the regulated markets such as mandatory clearing through derivatives
clearing organizations and trading on exchanges or exchange-like
facilities.

It has a narrow exemption for commercial “end users” who use
derivatives to hedge against economic contingencies such as fluctuations
in fuel prices, currency and interest rates.

The most controversial feature of the package is a provision that
requires a bank that qualifies as a “swap dealer” or a “major swap
participant” to either divest its swap desk or forego access to federal
credit assistance such as the Federal Reserve Board’s discount window of
FDIC deposit insurance.

Republican Sen. Judd Gregg assailed the derivative provisions of
the package on the Senate floor Tuesday, saying they make “no sense” and
could undermine efforts to oversee the OTC derivatives market.

Dodd also said Tuesday afternoon that he has reached an agreement
with Sen. Richard Shelby, the ranking Republican on the Banking panel,
on a provision prohibiting “too big to fail.”

If the Senate passes a financial regulatory reform bill, it must be
reconciled with a competing version that was approved by the House in
December.

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

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