Geithner expects changes in derivatives provisions

Provisions to regulate the over-the-counter derivatives market will be modified, an Obama administration official said Friday. 

"I'm very confident they'll work out an appropriate solution that preserves the key thing, which is we bring these markets out of the dark, make them stabler, more stable, better protection for investors," Treasury Secretary Tim Geithner told Bloomberg News.

Geithner didn't suggest what changes would be made and said he would leave that to the authors of the financial regulatory reform bill -- Senate Banking Chairman Chris Dodd (D-Conn.) and Senate Agriculture Chairman Blanche Lincoln (D-Ark.), who wrote the derivatives provisions that would regulate the $600-trillion market. 

Geithner said he expects Dodd and Lincoln to work through concerns around forcing big banks to divest their derivatives trading desk. 

Other than that issue, Geithner called the bill "very strong" and said "we're very close now," on completing the bill. 

Several Republicans this week said they were resigned to the fact that changes they wanted on the consumer protection agency section and derivatives would probably have to be worked out in conference. 

As soon as financial reform passes, Geithner expects to move on to legislation to reform government-controlled mortgage companies Fannie Mae and Freddie Mac. 

"We're going to move very quickly to start to build the consensus on a set of reforms to Fannie and Freddie and the broader housing finance market," he said. "We started this process in the administration six months ago. We've been working very carefully looking at all range of options."

Democrats have rejected Republican efforts to add language into the financial reform bill dealing with the mortgage giants that have received more than $100 billion in federal aid.