–Senate Agriculture Chief Says Derivs Bill Will Be Merged W/Dodd Bill
–Wants To Find ‘Common Ground’ With GOP on Derivatives
–Regulatory Train Is About To ‘Leave The Station’
–Senate Panel Rejects GOP Alternative Bill

By John Shaw

WASHINGTON (MNI) – The Senate Agriculture Committee Wednesday
approved a bill by the chairman of the panel, Senator Blanche Lincoln,
to toughen regulation of the over-the-counter derivatives market.

Lincoln’s bill was approved on a 13 to 8 vote. The bill was
approved by all Democrats on the panel and one Republican senator, Sen.
Chuck Grassley.

Lincoln said that her bill will be merged with a broader package
that is being developed by Senate Banking Committee Chairman Chris Dodd.

Prior to the vote, Lincoln said that she will continue to reach out
to Republicans on her panel to find “common ground” on derivatives
regulation.

The Agriculture Committee rejected a Republican alternative on a
party line vote.

Lincoln said that the Democratic and Republican bills are very
similar, adding that only 4 or 5 issues divide them.

“I believe that Democrats and Republicans want to get this right,”
she said.

Lincoln said she decided to move forward with her bill without
Republican support because the Senate is about to begin debating
financial regulatory legislation and it was critical for her committee
to pass a derivatives component to the broader bill.

“The train is leaving the station … . My instructions are that it
will move quickly,” she added.

Several Republican senators said a bipartisan agreement was reached
several weeks ago, but that Lincoln set it aside to push a more partisan
bill.

Lincoln said her bill 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.

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

One of the most controversial features of Lincoln’s bill 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 or FDIC deposit insurance.

Several senators had indicated that they may offer amendments to
strip this provision. But no one did.

It is unclear how much of Lincoln’s bill will be included in the
larger package that comes to the Senate floor.

Dodd continues to negotiate with Sen. Richard Shelby, the ranking
Republican on the Banking Committee.

Dodd said he continues to want to reach a bipartisan agreement
with Republicans on financial regulatory reform.

Senate Majority Leader Harry Reid has said he wants the Senate to
pass a regulatory reform bill by the end of May.

President Obama has said that financial regulatory reform is one of
his key goals for the rest of this legislative session.

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

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