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Bank securities held by the Treasury Department through the Troubled Asset Relief Program would no longer count toward a banking company's Tier 1 capital under the Senate's version of the reform bill, legal experts said.
June 9 -
More bankers are grappling with the prospect that the government will soon go from being a passive investor in their companies to an influence in the boardroom.
June 9 -
WASHINGTON — After refusing to answer questions for weeks about whether banks should be allowed to continue to operate as swaps dealers, Senate Banking Committee Chairman Chris Dodd quietly filed an amendment Tuesday that would give regulators the power to gut such a proposed ban.
May 18
WASHINGTON — Senate Banking Committee Chairman Chris Dodd on Wednesday endorsed a proposal to force banks to spin off their derivatives desks, saying Sen. Blanche Lincoln's primary win this week had increased odds some form of it would be in the final regulatory reform bill.
Lincoln, who chairs the Senate Agriculture Committee, has been fighting an uphill battle to protect her provision, which regulators have said would increase risk to the system by forcing derivatives units offshore where they could not be monitored. Most observers had expected the provision would be dropped once Lincoln's primary was over. (Lincoln bested an opponent late Tuesday in a closely fought contest.)
While Dodd had avoided taking a position on the provision, on Wednesday the Connecticut Democrat said he supports it.
"It's a strong provision in the bill and I think she's on the right track," Dodd told reporters. "Certainly we'll listen to ideas that people have. … [But] her hand is strengthened in this process and strengthens our position. Her renomination by the Democrats in Arkansas is great news politically that actually helps us in this debate."
While many observers had said the issue could be addressed by changing language implementing the Volcker Rule to ban proprietary trading, Dodd would not say whether he favored such an approach.
"At this point, what is in the base text is the Senate-passed bill on the Volcker Rule, and at this point I wouldn't want to say anything more about that," he said.
The House was expected to name its conferees on Wednesday, but only the Republicans had done so by late afternoon.
Senate Republicans named to the conference committee two weeks ago openly wondered Wednesday how much impact they will have.
Although the banking industry has routinely looked to the GOP to help moderate the bill, many Republicans said their role will be marginal at best.
"A conference is designed for the majority, so unless they invite us into the room, it will be very difficult for us to participate," Sen. Judd Gregg, R-N.H., one of five Senate Republicans on the panel, said in an interview Wednesday.
Sen. Richard Shelby, the top Republican on the Senate Banking Committee, echoed that sentiment. Given that the conference committee will have seven Democrats and five Republicans from the Senate, and the House will have a similarly stacked ratio, Shelby said he does not expect the GOP to have much influence.
"I asked the question, 'Are we really going to be able to participate?' " Shelby told reporters after a meeting of Senate conferees behind closed doors. "Of course [Dodd] says yes, but we'll see."
Shelby said he has several "suggestions" for changes to the bill, but has little hope he will succeed.
"I don't know if we have the votes to affect changes," he said.
Still, Sen. Bob Corker, R-Tenn., told reporters Wednesday that he was hopeful they could make some changes.
"I still want to work to improve the bill," he said.
"At the end of the day, it's going to be the law of the land and it's going to affect people in a real way. Although it's probably not going to be something I can support, I hope we can improve it in conference."
Corker mocked the supposedly open conference process, noting that conferees would not be seeing the base text of the bill until Thursday and would probably not be given a "redline" copy indicating what in the 1,700 pages had changed from the Senate-passed bill.
"It's interesting in this 'transparent' process we're having, we'll get a copy of what has been worked out tomorrow," he said.
Still, Dodd insisted Wednesday that Republicans could play a role if they want to.
"I was asked by the Republicans, 'Are there certain matters that are off the table?' No, there are not," Dodd said. "Does that mean that if you present it to me that I'm going to agree with you? No. But certainly the opportunity to raise them, to discuss them, to be heard — that's the entire way I've conducted this process from beginning to end. I'm not going to change it now."
While Dodd surprised some observers Wednesday by endorsing the Lincoln amendment, Shelby raised eyebrows by sounding concerns about a provision from Sen. Susan Collins, R-Maine, that would eliminate the use of trust-preferred securities in the calculation of Tier 1 capital. The Alabama Republican said he worried about setting capital standards in statute.
"Basically I support strong capital," Shelby said. "Now, the question is, do we mandate that statutorily? Or do we leave some input for the regulators assuming that they've learned something from the debacle. That's the thing. If we put too much emphasis on statutes, you are kind of bound up. I do believe the regulators, although I've criticized them very much at times, have to have some discretion, some flexibility."
