–Senate Approves Dodd-Shelby Amendment To End ‘Too Big To Fail’
–Senate Also Approves Boxer Amendment To End Taxpayer Bailouts
–Senate Banking Chief Says Senate Beginning To Move On Reg Reform
–Sen. Dodd: Has 95 Amendments Pending To Bill
–Sen. Shelby: Reg Bill Affects Entire American Economy

By John Shaw

WASHINGTON (MNI) – After a week-long impasse, the Senate began
voting Wednesday on amendments to the financial regulatory reform bill,
approving one amendment which removes a $50 billion resolution fund.

The Senate voted 93 to 5 on an amendment that was drafted by Senate
Banking Committee Chairman Chris Dodd and Sen. Richard Shelby, the
ranking Republican on the Banking panel.

The Dodd-Shelby amendment would strip the underlying bill of a
provision creating a $50 billion resolution fund that would have covered
the costs of a major financial collapse.

Under the amendment, the FDIC would have the ability to liquidate
large losses and could tap a credit line from the Treasury Department to
cover any costs. The FDIC could recover its losses by selling off the
assets of the failed firm.

The creditors of the collapsed firm would be required to pay back
funds they received during a financial failure that is above what they
would have been awarded through a traditional bankruptcy process.

Under the amendment, the Federal Reserve could use its emergency
lending powers to help solvent firms.

The Senate also approved an amendment by Democratic senator Barbara
Boxer, 96 to 1, that would explicitly ban taxpayer bailouts of financial
firms.

After the two votes, Dodd and Shelby said they believe the Senate
is finally ready to move into high gear on the bill.

“That’s a pretty good beginning,” Dodd said, adding that there are
now 95 amendments pending.

Shelby applauded the Senate’s “burst of activity” but said it must
consider the bill carefully.

“It affects all of our economy in one way or another,” Shelby said.

The Senate bill was largely drafted by 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.

Dodd and Shelby said the next amendment will deal with the proposed
consumer financial protection agency.

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

[TOPICS: M$U$$$,MFU$$$,MCU$$$]