There's a real opportunity to for Wall Street reform to actually be improved in conference.
In a letter Tuesday, Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) expressed disappointment that the Merkley-Levin Amendment was not included in the Senate's financial reform vote last Thursday, but told Majority Leader Harry Reid (D-Nev.) and Banking Committee Chairman Chris Dodd (D-Conn.) that they hope the substance of the amendment will be added during conference committee negotiations....
It wouldn't be difficult for Democrats to justify adding the amendment, since it merely enhances what is already included in the Senate bill -- Merkley-Levin requires that the Volcker Rule be implemented, instead of allowing regulators to decide as the current bill does.
The provision already in the bill on the Volker Rule is one of more than two dozen "studies" the bill authorizes, this one telling regulators to study whether the Volker Rule--which would prevent the big banks from speculating on stocks, bonds, and derivatives, proprietary trading, and conflicts of interest--should be implemented. The Senators are urging that the language be changed to actually implement the rule. The House doesn't have any Volker provisions, so there wouldn't be a barrier there for the language change. The question would be whether the change would open the bill up to an objection and point of order because of the change.
The White House apparently is supportive of this effort, or any that gets the Volker Rule implemented. House chair Barney Frank is also amenable, though it looks like he wants sort of a trade-off with another provision--Lincoln's derivatives reform that forces big banks to spin-off derivatives desks.
House Financial Services Committee Chairman Barney Frank (D., Mass.) said the Senate bill's requirement that banks spin off their derivatives operations "goes too far." His comments are significant because he will play a central role in crafting any merger of the House bill passed in December and the Senate version approved last week....
Tuesday's comments by Mr. Frank, in a speech to the information-service group Compliance Week, suggest Democrats might replace the Lincoln proposal with a broader yet less onerous one known as the Volcker Rule, inspired by former Federal Reserve Chairman Paul Volcker. Mr. Frank said it was "very likely" his panel would adopt the Senate's language on the rule, which would effectively block banks from trading with their own capital, and include prohibitions on certain types of derivatives contracts.
"I don't see the need for a separate rule regarding derivatives because the restriction on banks engaging in proprietary activities would apply to derivatives as well as everything else," Mr. Frank said.
As it stands now, the Senate language would not "effectively block banks from trading with their own capital." The existing Senate language only suggests that regulators look at whether or not they should do so. If the Merkley-Levin language is substituted for the existing provision, it would. But if Frank is suggesting that the Lincoln derivatives reform is unnecessary because of the weak Volker language in the Senate bill as passed, he's being less than truthful.