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« Fed Chairman Bernanke Warns Congress Over Out Of Control Deficit Spending (Prepared Remarks) | Main | Wednesday Morning Reading (June 9, 2010) »
Wednesday
Jun092010

Volcker Rule Still THE Issue As Wall Street Reform Bill Heads To House-Senate Conference Today (NYT Graphic)

Several links inside including a simple graphic from the NYT explaining the differences between House and Senate bills.

Related from Monday:

The Volcker Rule Is Now The Volcker Suggestion -- Grading Obama On Wall St. Reform (Ratigan & Spitzer CLIP)

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Today is the beginning of work by House and Senate conference committee members charged with reconciling the 2 versions of financial reform.  Barney Frank has said he hopes their work is completed by June 26, so they had better hustle.

For background, take a look at this NYT graphic explaining the differences between the House and Senate bills:

Financial Reform Graphic  >>

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Then read this quick Reuters factbox on conference members:

House and Senate Conference Breakdown  >>

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WASHINGTON (MarketWatch) -- A European Parliament delegation visit to Washington revealed a split within Europe over whether each country would support implementing the so-called "Volcker rule," a legislative proposal on Capitol Hill that would bar big commercial banks from making speculative proprietary derivatives and stock investments for their own accounts.

Will Europe Agree to the Volcker rule?  >>

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The most severe point of contention, and what most frightens prop traders on Wall Street is the so called Volcker Rule.

"Volcker rule" at issue as reform bill nears finale...

(Reuters) - As Congress got to work crafting a final Wall Street reform bill on Tuesday, new tensions surfaced over the proposed "Volcker rule" that aims to curb risky trading and investing by banks.

White House economic adviser Paul Volcker, in a letter obtained by Reuters, said he firmly opposes exemptions to his rule being sought by banks that say they make only small investments in private equity and hedge funds.

At the same time, some Senate Democrats were moving to toughen the Volcker rule by reducing the latitude given to regulators in implementing it once it becomes law -- a prospect now widely seen as all but certain, likely within weeks.

Conflict over the rule -- which threatens the profits of banking giants such as Goldman Sachs and Morgan Stanley -- came as a congressional conference committee prepared for its first meeting on merging House and Senate reform measures into the biggest bank regulation overhaul since the 1930s.

After days of behind-the-scenes talks among conferees, the committee will hold its first public meeting on Thursday, with the goal of completing its work by June 26, Representative Barney Frank, the committee chairman, said on Tuesday.

House of Representatives Speaker Nancy Pelosi will appoint Democratic members from that chamber to the joint Senate-House committee on Wednesday, Frank told reporters.

Frank and other conference committee leaders will have the difficult job of balancing Democrats' desire for a hard-hitting bill with the need to retain some support from Republicans who have generally sided with Wall Street in resisting changes.

The completed House-Senate package must win passage in each chamber before it can be sent to Obama to be signed.

FRANK, DODD VOW OPEN PROCESS

Frank said conferees will aim to work for six to eight days between Thursday and June 26. He and his Senate counterpart, Democrat Christopher Dodd, said they would make committee sessions as open as possible.

Using the Senate-passed legislation as a starting point, conference members will have to propose changes a day before they are voted on, in an effort to avoid the secret deal-making that has marked past conference committees, Frank said.

"We certainly have no reason to try to keep the public out," Frank said. "We've benefited from its presence, he added," noting that public attention so far has had the effect of making the legislation tougher on Wall Street.

Dodd said the Senate conferees, who have already been appointed, will hold an initial meeting on Wednesday.

The Volcker rule was first proposed in January by Volcker and President Barack Obama, stunning capital markets.

It would curb proprietary trading by banks for their own accounts unrelated to customers' needs; bar them from sponsoring hedge funds and private equity funds; and limit their future growth through a new cap on market share.

The Senate bill, approved last month, endorsed the rule, but subjected it to a two-year study by regulators that critics said left the door open to watering it down later.

The Volcker rule is not in the House bill, but the bill has language that would let regulators bar proprietary trading at institutions that threaten financial stability.

Senate aides said large banks are pressing for "de minimis" exemptions to the Volcker rule that would let them invest in outside funds for marketing or relationship purposes.

VOLCKER "ABSOLUTELY" OPPOSES EXEMPTIONS

"I absolutely oppose any such modification" of the Senate bill, Volcker said in his May 17 letter sent to Dodd.

"Allowing a bank to invest in a speculative fund goes against the very intent of the (Senate) bill as we seek to define those activities that are worthy of government protection," he said in the letter.

The fight over the Volcker rule was unfolding in tandem with efforts by banks to kill another proposed measure that would force them to spin off their swap-trading desks.

Swaps are derivative contracts that allow wagering on the direction of interest rates or the likelihood of a borrower defaulting on its debt, known as a credit default swap.

Credit default swaps were blamed in the 2007-2009 financial crisis that hammered economies worldwide, triggering taxpayer bailouts and a global wave of financial reform initiatives.

The swap-desk measure from Democratic Senator Blanche Lincoln could be dropped if the Volcker rule is toughened, some sources said, but the interplay between the two was unclear.

"We should correct the derivatives language independent of the Volcker rule and then try to get the Volcker rule right, which is also a complex issue. I don't think the two should be linked," Republican Senator Judd Gregg told Reuters Insider.

A key factor will be the outcome of Lincoln's difficult primary election race back home in Arkansas on Tuesday.

Analysts have said for weeks that her swap desk "push-out" measure would likely be dropped, something that would be even more likely if she loses in the primary.

MERKLEY: TOUGHEN VOLCKER RULE

Senator Jeff Merkley told Reuters on Tuesday that the Volcker rule is crucial to reform and should be toughened.

He and Senator Carl Levin, both Democrats, want to give regulators less discretion in implementing it. Merkley said he and Levin would meet on Tuesday with Volcker "to discuss the conference committee and how we're going to get this done."

Volcker, in a May 19 letter to Merkley and Levin, expressed support for their proposal, saying it would "clarify and enhance the proprietary trading restrictions" in the bill.

Levin told reporters on Tuesday that he was not linking the measure he and Merkley support to the Lincoln provision. "We're not arguing that it's one or the other," Levin said.

Banking industry analysts estimated last month that the sweeping financial reforms then being debated in Congress, taken together, could reduce big banks' profits in a range of 12 to 35 percent, depending on the institution.

Other banks whose profits could be hit by the Volcker rule, include Citigroup, JPMorgan Chase and Bank of America.

On another front, Dodd said discussions were under way about a possible transition period that would help banks comply with new capital standards being proposed in the Senate bill under an amendment by Republican Senator Susan Collins.

"I don't know if it's been resolved yet. We're working very closely with Senator Collins," Dodd said.

Both the House and Senate bills call for higher capital requirements on banks and financial firms as they get bigger and assume more risk. Neither bill has much detail, however, largely leaving that up to regulators -- with one difference.

The Collins amendment would make bank holding companies adhere to the same capital standards as bank subsidiaries. It would also bar bank holding companies from counting certain hybrid securities in meeting a key measure of strength.

(Additional reporting by Caren Bohan, Rachelle Younglai, Thomas Ferraro and Charles Abbott; Editing by Leslie Adler)

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Reader Comments (19)

"Volcker rule" at issue as reform bill nears finale

http://www.reuters.com/article/idUSTRE6575PN20100608
Jun 9, 2010 at 12:43 PM | Registered CommenterDailyBail
Bill Passed in Senate Broadly Expands Oversight of Wall St.

http://www.nytimes.com/2010/05/21/business/21regulate.html
Jun 9, 2010 at 12:43 PM | Registered CommenterDailyBail
Jun 9, 2010 at 12:44 PM | Registered CommenterDailyBail
The Chicago Teacher’s Union took legal action against the city for trying to increase Chicago Public School classroom sizes to 35 students.

In an unprecedented move that hinges on a decades old municipal code, the Teacher's Union filed a lawsuit against the school system citing overcrowding.

Source: http://www.nbcchicago.com/news/local-beat/Unions-Plan-to-Sue-CPS-95853409.html#ixzz0qNJgQxPN
Jun 9, 2010 at 12:44 PM | Registered CommenterDailyBail
Plumes of Oil Below Surface Raise New Concerns

http://www.nytimes.com/2010/06/09/us/09spill.html
Jun 9, 2010 at 12:45 PM | Registered CommenterDailyBail
Recovery can shrug off coming fiscal drag: Bernanke

Inflation remains well under wraps, Fed chairman tells Congress

http://www.marketwatch.com/story/recovery-can-survive-coming-fiscal-drag-bernanke-2010-06-09-10800
Jun 9, 2010 at 12:46 PM | Registered CommenterDailyBail
European delegation reveals rift on Volcker rule, bank tax

U.K. supports implementing rule while head of European group is not

http://www.marketwatch.com/story/european-delegation-reveals-rift-on-volcker-rule-2010-06-08
Jun 9, 2010 at 12:47 PM | Registered CommenterDailyBail
Jun 9, 2010 at 2:31 PM | Unregistered CommenterBryce
nice link bryce...you have an email address from new deal 2.0...are you one of the writers...?....needless to say we have differing views of the stimulus and continued deficit spending but i have agreed completely with your views of reform...your site puts out great work on the need for reform of wall street...thanks for the derivatives link...
Jun 9, 2010 at 3:19 PM | Registered CommenterDailyBail
Published on Tuesday, June 8, 2010 by Agence France-Presse
Austerity Anger Grows in Europe
http://www.commondreams.org/headline/2010/06/08-12

WHEN WILL USA zombies wake up?

SOON : WASHINGTON criminal traitor rulers have no Budget yet and why?LOL

No one covering Hell in Latvia?lol

IMF forcing to shut down Hospitals in LATVIA in reform effort/lol

Latvia government collapses amid economic crisis
Jun 9, 2010 at 10:28 PM | Unregistered Commenterken
The Advantages Of World War (For Globalists):

As we have covered in previous articles, Russia and other BRIC nations are moving to shore up wealth, buying gold and diversifying their currency holdings away from Treasuries and U.S. Dollars. This indicates the probability that they will soon drop the dollar as the world reserve currency if not entirely. Russia has in several instances stated its desire for a “world currency” and even world government, just as political elements of the U.S. and Europe have in the past. I believe what we see unfolding is a scenario much like that of WWII, except this time, the U.S. sits in the position of the Weimar Republic, its currency ready to hyperinflate, it treasury on the edge of insolvency, its debt holders becoming its enemies, and its government looking for any excuse to dilute personal liberties for the “greater good”.

Russia and other eastern nations appear to be forming an opposing economic (and perhaps political) block, yet the ultimate goal of the elites there is the same as it is for elites here. If war were to occur, it would once again be puppet governments set loose upon each other in an illusory conflict in which the real targets are the masses themselves.

The goal is to force the people to take sides, to divide them against each other and make them forget the true enemy; the elites who cultivated the problem in the first place. Under the threat of world conflict or rampant terrorism, the average American could be made to feel “disruptive,” or even “traitorous” for speaking out against the war, while those who point out the dangers of the police state could simply be labeled terrorists themselves. Such an atmosphere could also distract our attentions away from the eminent economic breakdown. It is difficult to imagine this happening here, but think of how many Germans laughed at Hitler in his early days, as opposed to how many eventually followed him when they were faced with absolute desperation.
Jun 9, 2010 at 10:43 PM | Unregistered Commenterken
OBAMA WATCH CENTRAL
Call for Obama's resignation cites 'deceit, fraud, dishonesty'
'We can wait no longer for a traditional change of power and new government'
http://www.wnd.com/?pageId=164409
Jun 10, 2010 at 7:21 AM | Unregistered CommenterKen
***************** Breaking New Flash **********************************

BHO tells His People he was not born in the USA, but Kenya............................

http://www.youtube.com/watch?v=MwhKuunp8D8&feature=player_embedded#
Jun 10, 2010 at 12:52 PM | Unregistered CommenterTexas Dar
****************************************************** The Last Sitting President ***********************************************************

http://www.youtube.com/watch?v=dvdPAOqG7x4&feature=related
Jun 10, 2010 at 1:58 PM | Unregistered CommenterTexas Dar
GREAT posts Ken. Keep 'em coming!
Jun 13, 2010 at 10:16 PM | Unregistered CommenterRecoverylessRecovery
"The Last Sitting President "

The guy in the video you posted claims to hold a PhD, yet @ 1:42 he mispronounces the word 'greivous'. So so much for THAT.
Jun 13, 2010 at 10:25 PM | Unregistered CommenterRecoverylessRecovery

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