Financial reform bill close to completion

Marion Dakers
US lawmakers came closer to hammering out legislation to regulate the financial industry yesterday, dropping several proposals in an effort to finalise the new rules by tomorrow evening.

A House-Senate panel continued negotiations to merge two major bank reform bills, which aim to overhaul Wall Street and beyond in the wake of the financial crisis.

Democrats agreed to drop rules that would have required large banks to ring-fence a total of $150bn (£100bn) to cover the cost of liquidating troubled financial firms.

A proposal that would restrict banks’ trading activities appeared likely to remain in the bill as negotiators from the Senate and the House of Representatives said it would encourage them to focus on lending.

“They cannot continue to do business as they were doing,” said Representative Barney Frank, the Democrat who is overseeing the process. “They have to get back in the business of accumulating capital and making loans to private parties.”

Members of the Senate negotiating team still hope to block non-US banks from expanding into the American financial industry if they threaten stability, reports said last night.

Senate Democrats also offered a tightened version of the Volker Rule, modelled on the repealed Glass-Steagall Act, which would limit banks using customers’ money to trade for their own profit.

The panel is set to look at derivatives in today’s sitting. The current form of the bill would force banks to spin off their credit default swaps operations to ensure that taxpayer-backed deposits are not put at risk.
Democrats have suggested broadening exemptions for non-financial companies that use derivatives to offset risks, such as utilities and airlines.

Participants in the House-Senate panel face several other outstanding issues if they are to complete their work by their self-imposed deadline.