WASHINGTON — Senate Democrats tapped mostly liberal members Tuesday to be conferees on the regulatory reform bill, making it harder for the banking industry to remove provisions it considers too tough.

Of the seven Democrats picked to work out issues with House lawmakers on their differing versions of reform, only one, Sen. Tim Johnson of South Dakota, is considered a moderate who is receptive to banker arguments that the legislation goes too far in some areas.

The others — including Sen. Tom Harkin of Iowa, who is pushing to keep a provision that would force banks to spin off their swaps desks — are considered likely to defend provisions the industry would like to see stripped out.

"I intend to uphold what we came out of the Agriculture Committee with and which was adopted by the Senate," Harkin said Tuesday. "I will fight for the Senate's position."

The 12 conferees — seven Democrats and five Republicans — are to hash out a compromise with the House.

The other Democrats are Senate Banking Committee Chairman Chris Dodd, Senate Agriculture Committee Chairman Blanche Lincoln and Sens. Patrick Leahy of Vermont, Charles Schumer of New York and Jack Reed of Rhode Island.

The Republicans will be led by Sen. Richard Shelby, the party's senior member on the banking committee, Sen. Saxby Chambliss, the lead GOP member of the agriculture panel and Sens. Mike Crapo of Idaho, Judd Gregg of New Hampshire and Bob Corker of Tennessee.

The GOP conferees were lead negotiators during the Senate deliberations on the bill, with each taking a role on a specific issue. Ultimately, however, all five voted against the legislation, which may minimize their influence on the conference committee.

Corker acknowledged as much.

"I don't have any huge expectations," he told reporters Tuesday.

The House is not expected to name its negotiators until next month, but House Financial Services Committee Chairman Barney Frank recommended several members of his panel on Tuesday. He wrote a letter to Speaker Nancy Pelosi recommending she pick eight Democrats and five Republicans based on seniority. For his party, he suggested himself, Reps. Paul Kanjorski of Pennsylvania, Carolyn Maloney of New York, Luis Gutierrez of Illinois, Maxine Waters of California, Mel Watt of North Carolina, Gregory Meeks of New York and Dennis Moore of Kansas.

Frank cautioned that a final bill would need to clear a filibuster threat in the Senate.

"There is also the fact that the need to keep 60 votes in the Senate will be something of a constraint and so I believe that we who are conferees will be more the agents of collective decision making than autonomous deciders," he wrote.

According to a timetable provided by Frank, the conference committee will begin substantive discussions on June 15 and will send a bill to the president before the July 4 recess.

Senate Democrats' decision to include three agriculture panel members — Lincoln, Leahy and Harkin — may have an impact on the final bill. The three are expected to fight to keep a provision that would force banks to spin off their swaps desks. The measure was added to the bill by Lincoln, who has fiercely opposed efforts to strip it from the legislation.

Whether they will succeed is another matter. Frank, who is widely expected to chair the conference, said Tuesday that the Lincoln provision goes too far and should not be part of the final bill. "Banks ought to be able to hedge their own risks," Frank said during a speech reported by Dow Jones Newswires. (See related story.)

Some observers also speculated that the Obama administration could use the provision as a bargaining chip, allowing it to be removed from the bill in return for keeping or adding other provisions.

Reed said Tuesday that a different approach favored by Sens. Carl Levin and Jeff Merkley that was not part of the Senate bill would better address derivatives than Lincoln's amendment. The Levin-Merkley amendment was not voted on for procedural reasons but would have more explicitly banned banks from proprietary trading and limited their investments in hedge funds and private-equity firms.

Both the Levin-Merkley and Lincoln measures "are aiming at the same thing, which is to eliminate risky trading in depository institutions," Reed told reporters. "I think Merkley-Levin is more targeted, more effective, but both of them have the same objective, which is to curtail risky trading, particularly in those institutions that have federal support."

Corker said the Lincoln amendment is dead.

"It has been self-evident to the White House and everyone that has been working on this that [the swaps ban] is unnecessary, irrelevant and not going to be part of the law that passes," he said.

Also at stake is an interchange amendment added by Sen. Richard Durbin, D-Ill., that would let the Fed regulate interchange rates on debit cards.

Leahy declined to speak to reporters on the subject Tuesday, but he voted for the measure in the Senate and is widely considered sympathetic to Durbin on the issue.

Reed also said he supports the interchange amendment. Asked whether the provision should be part of the final bill, he responded, "I hope so."

Durbin said Tuesday that he was lobbying both chambers to protect the provision.

"I haven't talked to Barney Frank yet, but Dodd is committed to keeping my interchange amendment. … I hope that helps," he said.

What other lawmakers will fight for remains unclear.

On preemption, Johnson, who is in line to succeed Dodd as chairman of the banking panel next year, is likely to fight for the Senate's language.

Though both the House and Senate bills try to restore the so-called Barnett standard to let the Office of the Comptroller of the Currency preempt state laws on a case-by-case basis, the Senate version is preferred by the banking industry.

Sen. Tom Carper, D-Del., who wrote the preemption amendment, said Tuesday that its chances are good. "I think we've got a pretty good shot," he said.

Schumer, meanwhile, remains something of a mystery. A liberal Democrat and one of the original champions of a separate consumer protection agency, he represents New York, home to many of the money-center banks that could be hurt by provisions in the bill, including the Volcker Rule and Lincoln swaps measure.

The No. 3 Democrat in the Senate has so far taken an uncharacteristically low profile during the reform debate, in part because he wants to avoid alienating senators before he runs for majority leader next year.

Schumer declined to comment on Tuesday.

Register or login for access to this item and much more

All Bank Investment Consultant content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access