BANKS looked increasingly likely to face limits on swap trading as a proposal to rein in “risky” business practices gained traction among lawmakers negotiating a landmark Wall Street reform bill.
In a rebuke to the banking industry, lawmakers yesterday were warming to a revised proposal from Democratic Senator Blanche Lincoln that would force some banks to spin off lucrative over-the-counter derivatives trading operations.
The proposal to rein in risky business practices by banks, once seen as dead-on-arrival, had new life breathed into it last week after Lincoln, an Arkansas Democrat, won a primary election in which she campaigned for tough banking reforms.
Lawmakers have been responding to voter anger against banks ahead of the general elections in November.
The proposal now would limit what kinds of activities would have to be spun off, allowing banks to continue hedging their own risks in-house using swaps, among other changes.
Portions of Lincoln’s proposal will be incorporated in legislation expected to be finalised by the end of the month by a joint US Senate-House of Representatives conference committee.