A top European Union lawmaker is urging the Senate to pass financial legislation with strong power for the federal government to preempt state insurance regulations.

Peter Skinner, a member of the European Parliament who focuses on financial issues, wrote to senators encouraging them to support a federal Office of National Insurance (ONI) that has strong power to agree to international insurance agreements.

"It is vital the insurance office be allowed to conclude necessary agreements in the insurance field," Skinner wrote to Senate Banking Committee Chairman Chris Dodd (D-Conn.). "Efforts to weaken the authority of the office seriously jeopardises the possibility of the USA being recognised within the international sphere for purposes of equivalence.

"I urge you to preserve the preemption authority of the insurance office," Skinner wrote.

Sen. Jeff Merkley (D-Ore.) is sponsoring an amendment to the financial overhaul that would preserve the current state-based system of insurance regulation. Consumer advocacy groups, including Consumer Watchdog and U.S. Public Interest Research Group (PIRG), support the Merkley amendment. Skinner did not refer to the Merkley amendment specifically.

The National Association of Insurance Commissioners (NAIC) also supports the Merkley amendment.

Some insurance financial and insurance trade associations oppose the Merkley amendment and favor the current Dodd bill. The associations include the Financial Services Roundtable, American Insurance Association and American Council of Life Insurers, among others.

Senate Democratic leaders have designated Sens. Olympia Snowe (R-Maine), Susan Collins (R-Maine), George Voinovich (R-Ohio) and potentially Scott Brown (R-Mass.) as possible supporters for legislation extending several tax breaks and spending measures because they are deemed to be the chamber's most moderate of conservatives, said a Democratic aide.  

Democratic leaders only need 1 of these senators to support the measure and pass it from the chamber, assuming all Democrats support the bill.

Members like Sens. Chuck Grassley (R-Iowa) are expected to oppose the bill because it includes a wide range of spending initiatives, most of which will not be offset, and tax increases that are considered controversial, the aide said. 

The federal budget deficit totaled $82.6 billion for April, three times the amount recorded this time last year but slightly less than projected estimates.

For the first seven months of fiscal 2010, the deficit hit $799.6 billion, about $3 billion less than totals recorded during the same period last year, according to a Treasury Department report released Wednesday. 

The deficit was $20.9 billion in April 2009, the lowest recorded deficit last year. The next closest month was more than double that amount with a $45.2 billion deficit in September 2009. 

Last week, the nonpartisan Congressional Budget Office predicted an April deficit of $85 billion based on the shifting of certain payments from May to April because May 1 fell on a Saturday. After that adjustment, there was only a $39 billion difference between April 2009 figures and this year, according to CBO's monthly budget review. 

The decline also is attributed to low income tax payments because of a smaller workforce and tax relief from the economic stimulus package. 

CBO and the Office of Management and Budget have estimated that the budget deficit could hit a record $1.6 trillion this year after recording a $1.4 shortfall in fiscal 2009. Depending on the nation's economy during the final five months of the fiscal year, ending Sept. 30, that record figure may not be realized. 

President Barack Obama is urging the Senate to defeat an amendment to the Wall Street bill backed by auto dealers.

The Senate overwhelmingly Wednesday supported an amendment to allow the Federal Reserve to continue supervising small banks. 

In a 90-9 vote, the amendment offered by Sens. Kay Bailey Hutchison and Amy Klobuchar (D-Minn), retains the Fed's powers to oversee banks instead of adjusting the central bank's jurisdiction to supervise banks with more than $50 billion in assets, including Goldman Sachs and Morgan Stanley, as proposed in financial reform legislation. 

Senate Banking Chairman Chris Dodd (D-Conn.) opposed the amendment arguing that the Fed "didn't exactly live up to its reputation" and didn't step in to halt lending abuses that contributed to the financial crisis. 

Dodd's provision in the bill would've shifted oversight of smaller banks now under the central bank's purview to the Federal Deposit Insurance Corp., and the Office of the Comptroller of Currency, the regulator of national banks. Under Dodd's bill, oversight of small banks would've been reduced to a few or none for 11 of the 12 regional Fed banks. 

Federal Reserve Chairman Ben Bernanke has argued that setting monetary policy requires a view of the entire financial landscape and its supervision shouldn't be reduced. 

Hutchison echoed that argument, saying community banks can provide much-needed financial information to the central bank on monetary policy rather than creating an imbalance that would eventually lead to a shift in power to Washington. 

Several interest groups, including the Independent Community Bankers of America and the American Bankers Association supported the Fed retaining its powers. 

Rep. Scott Murphy (D-N.Y.), a member of the fiscally conservative Blue Dog Coalition, plans to introduce legislation requiring the Joint Committee on Taxation to publicly disclose an analysis of each provision in the tax code. 

As the Senate continues its slog through dozens of amendments to the financial regulatory reform bill, Senate Banking Chairman Chris Dodd (D-Conn.) continued urging lawmakers to speed the process along. 

In an effort to package together agreed upon provisions, Dodd said Wednesday that he is still waiting to hear from Republicans on a list of technical and "bipartisan" amendments he submitted Saturday as a potential managers amendment. 

"It's now Wednesday and I've yet to hear back on whether we want to accept, or reject or add to that package of amendments that would help tremendously to clean out a lot of issues I think there's consensus on," Dodd said on the floor. 

No votes are expected in the Senate on Friday and leaders, including Reid and Dodd had aimed to complete the bill by the end of this week. 

Eventually Senate Majority Leader Harry Reid (D-Nev.) will eventually going to say "enough is enough," he said. 

Dodd asked his colleague Senate Banking ranking member Richard Shelby (R-Ala.) to respond to the request "so we can actually move forward with the legislation." 

"Let us complete the work as we have begun," he said, praising the work-together attitude between the parties. 

U.S. and European Union officials said Wednesday they have a "special responsibility" to overhaul financial regulations.

Treasury Secretary Timothy Geithner and European Commissioner Michel Barnier met on Wednesday to discuss global capital standards, financial regulations and ways to reduce the problem of "too big to fail" institutions, according to a readout of the meeting. 

The readout said the officials agreed they have, "a special responsibility," because of the United States and European Union represent the world's two largest economies and financial systems.

They said they would pursue "broadly equivalent" standards and laws in the U.S. and European Union in an effort to create a "level playing field," according to the readout. 

Legislation extending several expiring measures that is being created by congressional tax leaders will be hard to pass in the Senate, according to several sources on and off Capitol Hill. 

A chief reason for the resistance is the bill might ultimately tax carried interest at ordinary income rates. The investment-related compensation is now taxed at the much lower capital gains rate. 

The change is expected to raise $20 billion by creating a roughly 24 percent tax increase on carried interest once it is fully phased in.