The stand-off on financial reform just got more interesting. Obama says he will veto any bill that doesn't include derivatives regulation, although how far that regulation should go seems to be a matter of dispute between the administration and Senate Dems, specifically Blanche Lincoln.
Geithner wrote a letter to Lincoln saying that
new financial rules must create restrictions on how over-the-counter derivatives are traded "in order to curb abuses that were at the very center of the financial crisis." But he notably stopped short of endorsing a proposal from Ms. Lincoln to force large banks to spin off derivatives trading businesses entirely.
Lincoln has released her proposal, and the provision to require banks to spin off those derivatives "swaps desks" is in it.
The bill, which would require banks to spin off swaps desks if they are protected by federal deposit insurance or access the Federal Reserve discount window, came on the same day the government leveled a major fraud charge against U.S. swaps dealer Goldman Sachs group Inc.
"This is another example of how risky Wall Street behavior puts our nation's financial system in peril and further illustrates the need for the strong reform that my legislation provides," Lincoln said of the fraud charges filed against Goldman Sachs in a statement provided to Reuters.
Lincoln's timing on this was superb, coming on the same day as the SEC's Goldman Sachs fraud charge. There will probably be some intense negotiation this weekend over this proposal.
And meanwhile, back in the Republican caucus, Susan Collins signed on to McConnell's opposition letter, though the letter stops short of threatening a filibuster of the bill, and calls for more "bipartisan" negotiations.
It seems that not every Republican is ready to jump on the political suicide bandwagon of protecting the banksters.