By Silla Brush - 10/15/09 02:42 PM EDT
A key House committee on Thursday passed legislation reining in the multitrillion-dollar market for financial derivatives.
The House Financial Services Committee passed the bill on a 43-26 vote, with only one Republican, Rep. Walter Jones (N.C.), siding with all Democrats.
Rep. Barney Frank (D-Mass.), chairman of the Financial Services Committee, is now turning his attention to marking up legislation creating a new Consumer Financial Protection Agency (CFPA). Frank said he hoped to complete the markup of the measure by Wednesday. The CFPA legislation has been much more contentious.
Lawmakers are weighing changes to the bill to shore up support among concerned centrist Democrats. Republicans, the financial industry and parts of the business industry are strongly opposed to the new agency.
Democrats are looking to bolster support for the proposal by considering an amendment that, according to a draft, would leave most of the responsibilities for overseeing small banks and credit unions with the existing regulators. The amendment, sponsored by Reps. Dennis Moore (D-Kan.) and Brad Miller (D-N.C.), could siginificantly blunt opposition from the community bank and credit union lobbies, two powerful parts of the financial industry.
Frank told reporters he supports the amendment and it is a “legitimate response” to concerns raised by community banks and credit unions.
“It’s not campaign contributions that affects people. It’s votes. Everyone has community banks in their districts and it’s not just community banks. It’s credit unions.”
Frank ripped into some of the larger banks that lobbied hard against the agency proposal.
“Goldman Sachs, Bank of America, JPMorgan Chase & Co., Morgan Stanley have no influence," he said.
The derivatives legislation is aimed at bringing transparency to a massive market that many blame for exacerbating the crisis last year and contributing to the downfall of American International Group (AIG).
The bill aims to move most trades in derivatives, financial tools used to hedge risk, on to a public exchange if they are between financial institutions. Frank included a broad exemption for companies, or “end-users”, that are not dealers and that use derivatives to hedge risk for commercial purposes. The business and financial lobby and centrist New Democrats worked hard to include the exemption in the bill.
This story was updated at 2:13 p.m.