Banking/Financial Institutions

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. 

U.S. Chamber of Commerce President Tom Donohue said Friday he will meet with Chinese leaders next week to discuss intellectual property, currency, counterfeiting and their strategy to reward indigenous innovation. 

Donohue, whose visit comes ahead of a bilateral Strategic & Economic Dialogue in Beijing on May 24-25, opposes China's strategy to require companies to register intellectual property in China to qualify for government incentives. 

"China is using industrial policies and an array of regulatory tools to foster national champions and to promote the transfer of technology and innovative capacity to their country," he said during a speech at the National Press Club on Friday. 

Lawmakers and business leaders have widely complained about China stealing American intellectual property that has harmed competitiveness. 

On the issue of currency, Donohue said that while the exchange rate with China should be adjusted, he is more concerned about the "theft of intellectual property" and counterfeiting of American products, he said today. 

Treasury Secretary Tim Geithner has been trying to convince China to let their currency, the yuan, strengthen against the dollar, which critics argue is severely undervalued. He has yet to embrace calls from Congress to sanction China for currency manipulation, preferring a diplomatic approach. 

A top financial regulator said Friday the government would look for new regulations on agricultural swaps after broader Wall Street overhaul legislation is enacted.

Commodity Futures Trading Commission Chairman Gary Gensler said in a speech that pending congressional legislation is likely to leave untouched current regulations on agricultural swaps. Gensler said current regulations allow for agricultural swaps only if they are between eligible parties and if they are not on a clearinghouse.

Gensler said the CFTC would pursue new rules to make regulation of agricultural swaps "consistent" with regulations of other types of swaps.

"We would address whether to generally allow the clearing of agricultural swaps or to continue to make decisions on clearing on a case-by-case basis as we do now," Gensler said.

The Senate on Thursday passed controversial legislation clamping down on fees that card issuers charge merchants, handing Senate Majority Whip Dick Durbin (D-Ill.) a major victory.

The Senate Thursday postponed voting on a controversial amendment to Wall Street overhaul legislation that would carve out auto dealers from a new consumer protection regulator.

The amendment is sponsored by Sen. Sam Brownback (R-Kan.) and is supported by the National Automobile Dealers Association (NADA). The Senate will not vote on the amendment until next week.

The Obama administration has strongly opposed an exemption for auto dealers from a new consumer financial protection regulator housed at the Federal Reserve.

NADA said it is planning to bring 150 auto dealers to Washington next week to lobby lawmakers on the issue.

A financial regulatory reform bill isn't going to get any better before it's passed and a conference may be the only hope for much-needed changes, a leading Republican negotiator said Thursday. 

"As someone who spent the last year and a half working on it, I'm under no illusion that this bill is going to get better. I'm disappointed," Sen. Bob Corker (R-Tenn.) told reporters today. 

After a mostly party-line vote Wednesday on an amendment to change the derivatives portion of the bill authored by Republican Sens. Richard Shelby (Ala.) and Saxby Chambliss (Ga.), the fate of the bill was sealed, he said. 

"I think we all realize that this there's no real attempt for a bipartisan bill," Corker said. "We're outnumbered."

He said there may be a few Republicans who are satisfied with the bill but he's "not going to vote for a bad bill."  

Although Corker didn't rule out a "miraculous" event within the next week -- such as an amendment by bill manager Sen. Chris Dodd (D--Conn.) to improve the bill -- he expects the bill to pass without changes to consumer protection agency and derivatives provisions, which could sway more Republicans to support the measure. 

"If that happens I would support it," he said. 

Federal Reserve Chairman Ben Bernanke said a controversial derivatives provision in Wall Street overhaul legislation would "weaken" financial stability.

The provision, backed by Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.), would require banks to spin off their derivatives operations. Big banks, which earn billions of dollars in revenue on derivatives, are strongly opposed to the provision.

In a letter to senators, Bernanke said the provision would compromise new regulations.

"Forcing these activities out of insured depository institutions would weaken both financial stability and strong prudential regulation of derivative activities," Bernanke said.

"I am concerned section 716 [referring to the specific provision] in its present form would make the U.S. financial system less resilient and more susceptible to systemic risks and, thus, is inconsistent with the important goals of financial reform legislation."

Bernanke said the provision would force derivatives operations into less regulated operations or toward foreign firms.

Bernanke is the latest U.S. regulator to oppose the Lincoln provision. Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair and Paul Volcker, White House adviser and former Fed chairman, have recently spoken out against the "spin off" provision.

Senate Majority Whip Dick Durbin (D-Ill.) said he believes support is building for a modified "interchange fee" amendment to Wall Street overhaul legislation.

Durbin faces an uphill battle to pass the amendment, however, with small banks and credit unions strongly opposed to the measure that would limit fees from merchants to debit card issuers. Durbin's amendment would direct the Federal Reserve to issue rules on debit card swipe fees that aims to ensure that the fees are "reasonable and proportional" to processing costs.

Durbin exempted banks and credit unions with $10 billion in assets or less.

"It wasn't introduced as a partisan amendment," Durbin said. "I brought this because it is a small business, retail amendment that I think is valid and just. I've had Republicans come up to me and say we're going to vote for it. And many Democrats who were against it say now with the $10 billion exemption for banks we'll be for it. Am I going to get every Democratic vote? Probably not."

The Independent Community Bankers of America (ICBA), National Association of Federal Credit Unions (NAFCU) and Credit Union National Association (CUNA) all strongly oppose the amendment.

Many merchant and retail groups support reining in interchange fees.

Senate Democrats don't seem ready to call an end to debate on financial regulatory reform legislation just yet. 

After emerging from a caucus lunch this Thursday afternoon, Senate Banking Chairman Chris Dodd (D-Conn.) said the caucus hasn't reached an agreement yet on moving forward, as talks revolved around amendments that some lawmakers want considered before debate ends. 

So far, there has been no indication from Senate Majority Leader Harry Reid (D-Nev.) that he's prepared to shut down debate.

Reid and Dodd were aiming to finish the bill by the end of this week but it became quickly apparent with the number of amendments offered that debate would stretch into next week. 

Dodd said votes would continue through tonight and amendments would be filed Friday but no votes are expected. Votes are scheduled to take place on Monday and "we'll be in until at least the early part of next week," he said about completing the bill. 

Sen. Tom Carper (D-Del.) on Thursday defended an amendment to Wall Street overhaul legislation, saying that without his proposed change the Democratic legislation would "weaken" the power of a new consumer bureau of financial protection.

Carper is the main sponsor of an amendment designed to ensure federal standards and oversight on consumer financial protection regulations. The Obama administration said Thursday it is opposed to the amendment, arguing that it undermines the ability of states to pursue tougher regulations than the federal government. The administration and most Democrats have pushed for allowing states to go beyond the federal standards.

Carper said his amendment retains current law.

Carper's amendment is supported by 10 Senate Democrats and Republicans. Carper said Senate Banking Committee Chairman Chris Dodd's (D-Conn.) financial legislation would limit the power of a new consumer financial protection agency and hand over power to states instead.

Here is Carper's statement in full:

As a former governor, I believe strongly in state rights. However, there are times when it’s not always wise to have 50 different states weighing in on what’s best. It’s important to note that my bipartisan amendment is supported by 5 former Governors and I think that’s a strong statement that this does not hinder states’ ability to protect consumers.

I support creating a new Consumer Protection Bureau to guard against unfair and deceptive lending practices.  All my amendment says is that we should make that bureau do its job. This is the cop on the beat that we need. Consumers benefit from a national banking system that has uniform standards. The Dodd legislation, unfortunately, would weaken that bureau and hand over its enforcement tools to the states. This would only create more confusion that would inadvertently hurt consumers. 

My amendment is a sound compromise that would establish clear lines of responsibility at the federal and state level. Also, my amendment would allow state attorneys general to maintain their current powers under existing law to enforce bankruptcy laws, debt collection protections, and unfair and deceptive practice statutes that consumers rely on to make sure they’re not being taken advantage of by bad actors.”