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

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).

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.

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.

“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.”

Comments (3)

  1. Submitted by Glenn Mesaros on 05/25/2010 - 12:34 pm.

    Nero Bama Doormat Senators Franken and Klobuchar joined Boston Banker Scott Brown and voted to CUT OFF debate on the Cantwell/McCain/Feingold amendment (3884) (restore FDR Glass STeagall separation of investment and commercial banks). The Senate would have passed this amendment except for this anti democratic cloture vote.

    Here’s what a real Senator Feingold has to say about the Wall Street endorsed “financial reform” bill:

    “Yesterday, Washington had an opportunity to correct past mistakes, get tough on Wall Street, and prevent what happened before from happening again. It doesn’t meet Wisconsinites’ demands of being tough enough and it doesn’t include the reforms, which I fought for, that are essential to preventing another economic meltdown.

    People are struggling to recover and they needed Washington to get this right by eliminating the risk to our economy posed by “too big to fail” financial firms and by restoring the proven safeguards established after the Great Depression, which separated Main Street banks from big Wall Street firms.

    But Washington wasn’t tough enough in protecting taxpayers and consumers from another financial crisis. So our work isn’t done and I will continue fighting for tough reforms that get the job done, because now is the time to fix a broken system that should work for Wisconsin, not Wall Street.”

  2. Submitted by Bernice Vetsch on 05/25/2010 - 01:21 pm.

    Mr. Mesaros is exactly right. It’s hard to know who to trust in the Congress any more – Chris Dodd, for one, used to be firmly on the side of consumers/people but now seems at times to be happy to help the banksters.

    Feingold gets it. Glass-Seagall needs to be reinstated if we are to be protected from Wall Street vultures. Our senators and reps should listen to him and to such as Alan Grayson and Anthony Wiener on this and any other bills affecting corporate power.

    The Congress also needs to remind the Federal Reserve that it is responsible to the Congress and not the other way around. If Congress wants regular and complete audits, the Fed should not be give the opportunity to refuse.

  3. Submitted by Richard Schulze on 05/25/2010 - 06:21 pm.

    Shame needs to go through a clearinghouse.

    Two things strike me funny- first, that Republicans want the government to have more discretion, not less, and, second, that one recent experience we have with regulatory discretion was the SEC choosing not to investigate some pretty scary stuff.

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