Lawmakers to tackle toughest issues remaining on Wall Street reform

Lawmakers finalizing Wall Street overhaul legislation are set this week to take up the hardest issues remaining in the 2,000-page bill.

The 43-member House-Senate conference committee last week worked through some differences between the two chambers’ bills, but lawmakers put off several of the toughest issues. They will focus closely on new consumer protection regulations and new powers over the $600 trillion market for financial derivatives.

Four issues will headline the coming talks:

- “Interchange fees”: The conference is slated Tuesday to consider whether the Federal Reserve should have the authority to set “reasonable and proportional” fees paid by merchants and retailers to banks and credit unions that issue debit cards. Senate Majority Whip Dick DurbinDick DurbinInfrastructure bill carves out boosts to first responders, wildland firefighters Democrats face critical 72 hours Bipartisan lawmakers target judges' stock trading with new bill MORE (D-Ill.), the main backer of the provision, is pushing hard to keep it in the final legislation. The House bill did not include the provision. Small banks and credit unions are lobbying aggressively against it, while merchants and retailers are pushing for it to remain.

- Derivatives “push out”: Big banks are lobbying hardest on a provision in the Senate bill that would require banks to push out their derivatives trading desks. Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.), the main champion of the provision, sits on the conference committee and is loudly calling on lawmakers to retain it. Federal regulators and banks argue it would shift the multitrillion-dollar derivatives market to less regulated firms.

A group of 43 centrist House Democrats called this week to remove the provision. Members of the New York congressional delegation and New York City Mayor Michael Bloomberg are also urging Congress to oppose Lincoln’s effort.

Lincoln argues the provision would allow umbrella bank holding companies to own derivatives desks, but only outside of their traditional banking units. The aim is to prevent federal taxpayer assistance to derivatives dealers.

- “Volcker rule”: Banks are also lobbying against a provision that would ban proprietary trading at banks and limit their ability to sponsor or co-invest with hedge funds and other alternative funds. Democratic Sens. Carl LevinCarl Milton LevinOvernight Defense: First group of Afghan evacuees arrives in Virginia | Biden signs Capitol security funding bill, reimbursing Guard | Pentagon raises health protection level weeks after lowering it Biden pays tribute to late Sen. Levin: 'Embodied the best of who we are' Former Colorado Gov. Richard Lamm dead at 85 MORE (Mich.) and Jeff MerkleyJeff MerkleyDemocrats haggle as deal comes into focus Democrats ready to put a wrap on dragged-out talks Glasgow summit raises stakes for Biden deal MORE (Ore.) want to strengthen the rule by making it more explicit in the legislation. They expressed confidence Thursday that lawmakers were generally headed in their direction.

- Auto dealer exemption: Auto dealers have lobbied for more than a year for an exemption from a new consumer financial protection regulator. They won their case in the House in December, but the Senate bill did not include the exemption. A group of 62 House Democrats called on conferees to include the exemption. The carve-out is opposed strongly by the White House, Defense Department and Treasury Department.

The conference committee last week took up a few issues they were unable to resolve fully. Among them:

- “Proxy access”: The Senate pushed to significantly alter a provision granting shareholders stronger power to name directors on corporate boards. The provision is a longtime goal of shareholders and institutional investors. The Senate proposal limits proxy access to shareholders who collectively own at least 5 percent of outstanding shares. The threshold was in neither House nor Senate provision, and sparked an outcry from investors groups.

The Council of Institutional Investors said the 5 percent ownership requirement undermines the goal of the provision. The group is pushing back hard on the last-minute change. The Business Roundtable and U.S. Chamber of Commerce have lobbied against the proxy access provision.

- “Fiduciary duty”: The House and Senate are split on whether broker-dealers and insurance agents should have the same fiduciary duty to their clients as financial planners. The House bill extended the fiduciary duty, while the Senate bill included a mandate for a Securities and Exchange Commission (SEC) study on the issue.

- State insurance regulations: The House and Senate are divided on the power of a new federal insurance office to negotiate international insurance agreements and then pre-empt state regulations. The Senate bill provides more scope for federal pre-emption, which is supported by some large insurers. Consumer advocacy groups and insurers that traditionally favor state-based insurance regulations favor the narrower definition in the House bill.