–House Financial Services Chief Expects To Conclude Work On Bill Thurs
–‘We Believe We Can Finish Today’
–Still Must Resolve Volker Rule, OTC Derivatives Reg

By John Shaw

WASHINGTON (MNI) – House Financial Services Committee Chairman
Barney Frank said Thursday that he expects the House-Senate conference
committee on regulatory reform to complete its compromise bill
later in the day.

“Today is the last day,” Frank said, as he opened the conference
committee’s deliberations.

“We believe we can finish today,” he said.

But Frank acknowledged the panel still must resolve several of the
most difficult issues concerning regulatory reform: the so-called Volker
rule and regulating over-the-counter derivatives.

He also said that the panel must conclude its debate on a Senate
proposal to toughen capital requirements at banks. Under a provision,
drafted by Republican senator Susan Collins, banks would no longer be
able to use “trust preferred” securities in their capital calculations.

The panel agreed Wednesday to allow banks with less than $15
billion in assets to avoid the new rule. The remaining issue to resolve
is how the new rule capital would be phased in.

Frank has said that the conference panel will consider a “very
tough” variation of the Volker rule. The underlying package now bans
banks from most proprietary trading.

Two Senate Democrats, Carl Levin and Jeff Merkley, have offered a
strong version of the Volker rule by limiting the discretion of
regulators when the provisions are implemented.

“Merkley-Levin will, I believe, be adopted,” Frank said this week.

But Senate Banking Committee Chairman Chris Dodd has said that he
wants to exempt some industries, such as mutual funds, from its impact.
Frank said that once the panel agrees on the final details of the Volker
rule it will turn its deliberations on regulating over-the-counter
derivatives.

This issue, widely seen as the most controversial, contentious and
consequential, has been scheduled as the final major issue to be
resolved.

Senate Agriculture Committee Chairman Blanche Lincoln continues to
advocate provisions that would force banks to spin off their derivatives
units or risk losing access to the Fed’s discount window and FDIC
insurance.

The provision which requires a bank which qualifies as a swap
dealer to “push out” its swap desk to an affiliate of the bank holding
company has attracted strong opposition from major banks.

Frank has indicated that much of what Lincoln is calling for will
be preserved in the final package.

“The essence of what Sen. Lincoln wanted to do on pushing
derivatives out of banks will happen and certainly they will be totally
insulated from any insured deposits,” he said earlier this week.

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

Both Frank and Dodd have said they would like a final bill to be
approved by Congress and sent to President Obama by July 4th.

If a final package is agreed to this week, the final compromise
would be debated and voted upon by the House and Senate next week.

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

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