Senate Democrats neared a deal Sunday on legislation regulating the multitrillion-dollar derivatives market as part of the financial overhaul bill headed to a vote this week.
A Democratic aide close to the negotiations said the broad financial bill will likely include derivatives legislation that closely mirrors a bill crafted by Senate Agriculture Chairwoman Blanche Lincoln (D-Ark.).
The Senate Agriculture and Senate Banking committees worked through the weekend on derivatives legislation. The two committees share jurisdiction over the market, which many blame for exacerbating the financial crisis in 2008.
Lincoln earlier in April pushed a tougher-than-expected bill on derivatives that will have major impacts on Wall Street and the biggest banks that dominate the market.
The aide said Sunday the central provisions in Lincoln's bill likely will remain, including a requirement that banks spin off their desks that trade swaps and derivatives. That would mean big changes on Wall Street, where derivatives are a key source of revenue for banks, such as JPMorgan Chase & Co. and Goldman Sachs.
The provision is designed to restrict derivatives dealers from receiving federal assistance, from the Federal Reserve or Federal Deposit Insurance Corporation (FDIC).
Consumer advocacy groups, labor unions and liberal Democrats have pushed for strong new regulations on derivatives. Many financial, energy and agriculture interests, meanwhile, had lobbied Lincoln's committee to include a broad exemption for derivatives users.
The Democratic aide said there will be some technical changes to a provision on the regulation of foreign exchange currency derivatives. They will be covered under the new regulations, unless the Treasury Secretary deems otherwise, the aide said.
The Lincoln bill passed the Agriculture committee on a 13-8 vote, with Sen. Charles Grassley (R-Iowa), the lone Republican in support.
Senate Majority Leader Harry Reid (D-Nev.) is looking to hold a vote Monday to open debate on the financial measure, but Republicans appear unanimously opposed. Senate Banking Committee Chairman Chris Dodd (D-Conn.) and Sen. Richard Shelby (R-Ala.), ranking member on the panel, continue to discuss a possible compromise that could garner bipartisan support.