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Now comes the hard part: Trying to reconcile financial reform bills

WASHINGTON — As Congress prepares to reconcile financial reform plans, Rep. Collin Peterson will likely be a key player as the only Minnesotan on the conference committee.

WASHINGTON — Congress is preparing to reconcile the two separate versions of financial reform passed by the House and Senate, and Rep. Collin Peterson is likely to be a key player as the only Minnesotan on the conference committee.

“It’s not going to be impossible, but it’s not going to be easy,” to join the House and Senate’s financial reform bills, Peterson said.

The conference committee must consider several amendments, including those offered by Sens. Amy Klobuchar and Al Franken that were included in the Senate’s bill but not the House’s.

The Franken proposal that garnered the most attention in the Senate would require that a new federal commission assign a credit rating agency to new financial products, rather than allow banks to hire them (and as was alleged, pick the one that would offer the best rating).

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While not on the conference committee, Klobuchar and Franken may get a good view of the goings-on thanks to a proposal from House Financial Services Committee Chairman Barney Frank.

Unlike the health care law, which was combined largely behind closed doors, Frank wants to televise the hearings. The logic goes that in the Senate, thanks in part to public pressure and roll call voting, the bill got tougher than it would have been otherwise.

While there will be some work done behind the scenes, Peterson said he’d prefer cameras in the conference hearing room.

“I’m fine with that,” Peterson said. “When you’ve got issues that need to be voted on, that stuff being made public would be a good thing.”

Lobbying from the sidelines

Neither Klobuchar nor Franken are senior enough to be included on the conference committee, meaning both will have to fight to keep their amendments in from the sidelines.

Franken began that lobbying effort with a 15-minute conversation on the Senate floor with Senate Banking Chairman Chris Dodd (who was one of only five Democrats to oppose the amendment).

Franken would later call Frank, a philosophical ally on much of financial reform, and urge him to fight to keep the credit rating amendment in.

Given that the merged bill must pass the House and the Senate again, Klobuchar and Franken are pointing to the bipartisan votes on their amendments.

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Franken pointed to the 64-35 vote for his credit rating amendment, saying that “I think the margin here speaks to keeping it in.”

“My amendments as well as Sen. Franken’s amendment got support from Republicans as well as Democrats,” Klobuchar noted after her two amendments passed.

At least one of hers is certain to pass. A Klobuchar amendment on the scope of the Federal Reserve (leaving it unchanged) changed the Senate’s language on that segment back to the House’s.

The Senate’s language would have seen the Federal Reserve only manage the largest banks.  Klobuchar said her amendment ensured that the Federal Reserve Bank of Minneapolis would continue to regulate about 600 banks instead of being cut to regulate just one.

Focus on derivatives

Peterson is expected to win a spot on the conference committee due to his designation as chairman of the House Agriculture Committee. Peterson said his appointment would cover the areas in which his panel has jurisdiction, such as derivatives.

“Largely they followed what we had done,” Peterson said. “Some of the changes they made are problematic.”

Among the major changes in the Senate’s bill are rules that force banks to separate their derivatives trading business from the actual deposit-holding bank business, either by forming subsidiaries or by scrapping their trading floors entirely.

One change Peterson listed as particularly problematic was end-user exemption rules.

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“They made some changes in narrowing the end-user exemption which are problematic for some of my agriculture people,” Peterson said. “The way they’ve got it constructed, from what I can tell, they’re going to pull in people that don’t need to be pulled in – people like John Deere and so forth.”

The key, Peterson said, is in whether the final bill is workable, not whom it punishes and how severely.

“What I’m trying to do is make sure we mitigate the risk in the system, that the risk is going to be covered, through collateral and capital and margins, and that the moral hazard is not taken off of these banks.”