* Frank sees debit card fee limits in final bill
* Shelby, Dodd clash at first House-Senate panel session
* Next meeting on Tuesday to be on credit rating agencies
* Also on Tuesday agenda: insurance, bank agencies, funds
(Recasts with Frank, Dodd, Obama, Davis comments, outlook)
By Kevin Drawbaugh and Andy Sullivan
WASHINGTON, June 10 U.S. lawmakers proposed no
new limits on banks on Thursday as they met to hammer out a
final overhaul of Wall Street regulations, but they voiced
strong support for measures that directly threaten industry
The final bill being crafted in a House-Senate conference
committee will hit banks hard, leaders said at the end of a
meeting where lawmakers staked out opening positions on the
biggest overhaul of the financial industry in decades.
The committee's next session is scheduled for Tuesday when
it will focus on reforms related to credit rating agencies,
insurers, hedge funds and bank supervisory agencies. A
half-dozen more meetings are expected through June.
Democratic Representative Barney Frank said the final bill
probably will limit debit card fees. He also told reporters
after the opening session that a tougher "Volcker rule" curbing
risky bank trading likely will be in the bill, as well as some
aggressive new over-the-counter derivatives regulation.
On debit card fees, he said: "I think some modifications
will be coming, but basically, it's one where there's pretty
strong support for the underlying provision."
Democrat Christopher Dodd, the panel's lead senator, said
he supports a controversial measure from Democratic Senator
Blanche Lincoln that would force banks to spin off their
lucrative swap-trading desks.
"We haven't resolved that yet," Dodd said, but he added "at
this point ... I'm supportive of what she has in the bill. We
need to work from here and see where our colleagues are."
Approval of a final bill is expected by early July.
President Barack Obama has made tighter financial oversight a
top goal. He urged Congress on Thursday to complete the bill,
which would give Democrats a major domestic policy victory.
Key Republicans conceded that they will probably be
powerless to block reforms that they and the banking industry
have resisted for months.
Republican Senator Richard Shelby decried the bill but said
it will "likely become law."
"I am afraid that our economy's prognosis is not good
unless significant changes are made to this bill," he said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ (For a Factbox briefly listing the keys to Wall Street
reform in Congress, double-click on [ID:nN28188452])
(For a Factbox with details on major U.S. financial
regulation reform proposals, double-click on [ID:nN27130507])
(For a Factbox on some financial reforms missing from U.S.
legislation, double-click on [ID:nN09128173])
DODD DEFIES 'BLITZ'
Dodd warned that a "last-minute lobbying blitz" by reform
opponents would not weaken the sweeping bill, which would set
up a new protocol for dismantling troubled financial firms to
avoid bailouts like rescue of insurer AIG (AIG.N).
It would also create a new financial consumer watchdog and
mandate higher bank capital standards, all in an effort to
avoid a repeat of the 2007-2009 credit crisis that hammered the
economy and triggered huge taxpayer bailouts of Wall Street.
The conference committee must merge bills already approved
by the Senate and the House. Its initial meeting came two days
after primary elections rewarded candidates who were tough on
big Wall Street banks, which have become deeply unpopular since
Lincoln's surprise victory in a Democratic primary election
on Tuesday vindicated her get-tough-on-Wall-Street politics,
Lincoln's proposal would force banks to spin off their
lucrative trading desks for over-the-counter derivatives, such
as credit default swaps. She wants to ensure that trading of
this sort -- widely criticized for aggravating the crisis --
does not drag down banks.
"Derivatives dealing is not central to the business of
banking," Lincoln said at the opening of the panel session.
Representative Collin Peterson, who chairs the House
Agriculture Committee, said banks should be able to use
derivatives to hedge risks in the banking business. But he said
he would consider Lincoln's call for a ban on other swaps
Analysts expect the Lincoln provision to be dropped from
the final legislation. Frank has spoken out against it and the
Obama administration, which firmly backs other reforms, has
also shown little interest in the plan.
But Dodd said her primary victory strengthens her hand.
Some Democrats may want to show support for Lincoln as she
heads into her November general election contest.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ (For the full "base text," go to
(For a Factbox on proposed new swaps market rules,
double-click on [ID:nN07134624])
BANK STOCKS UP
Although financial shares have frequently come under
pressure on fears about the impact of regulatory reforms, bank
stocks rose on Thursday as Wall Street staged a broad rally.
The KBW Banks index .BKX surged 3.7 percent.
So far in 2010, the KBW index is up 14.5 percent versus a
2.5 percent drop for the broad-based S&P 500. Bank stocks were
badly beaten down during the financial crisis.
The sector might undergo a relief rally on passage of the
reform bill, despite some of the contentious portions in it,
said Jeff Davis, bank analyst with Guggenheim Partners LLC.
Lawmakers introduced a modified version of the Senate bill
to serve as a start of the negotiations which included dozens
of tweaks. None of the changes altered the main provisions,
including Lincoln's provision on swaps.
Swaps are financial contracts tied to movements in
commodity prices, interest rates or -- as in credit default
swaps -- on the chance of a borrower defaulting on its debts.
These off-exchange market contracts were were widely blamed for
aggravating the financial crisis.
The OTC swaps market is dominated by Wall Street giants
such as Goldman Sachs (GS.N), JPMorgan Chase (JPM.N) and
These and other major financial institutions were bailed
out by taxpayers in 2008-2009, prompting public outrage and
unleashing a wave of reform initiatives worldwide.
The Obama administration is pushing for tough reforms,
which it hopes to hold out as an example to other nations.
The United States is already further along than the
European Union in achieving changes to regulation pledged last
year by the Group of 20 countries. The G20 holds a summit in
Toronto in two weeks, just as the congressional panel is due to
be winding up its work.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ (For a Factbox listing the 43 House-Senate conferees,
double-click on [ID:nN07215551])
(For a Factbox on international financial reform efforts,
double-click on [ID:nLDE6581QU])
(For a Factbox comparing EU and U.S. financial reforms,
double-click on [ID:nLDE6582FW])
(Additional reporting by Roberta Rampton, Mark Felsenthal, Kim
Dixon, David Morgan and Karey Wutkowski in Washington; Joe
Giannone and Chris Sanders in New York; and Joe Rauch in
Charlotte, N.C.; Editing by Eric Walsh)