WASHINGTON/PANAMA CITY (Reuters) - Efforts to tighten U.S. financial regulation advanced on Thursday, with a new bipartisan bill expected next week from two key senators who were working on it while traveling together in Panama.
Senate Banking Committee Chairman Christopher Dodd, a Democrat, and Republican Senator Bob Corker, a first-term member of Dodd’s panel, told reporters they were discussing legislation while touring several Central American nations.
Both are members of the Foreign Relations Committee, as well, and the tour is unrelated to financial reform, but they said they were using the time to keep talking about the issue, one of the highest priorities of the Obama administration.
“We’re both optimistic that we can work something out that would be a major reform of our financial services sector,” Dodd said at a news conference at the U.S. Embassy in Panama. “We’re not there yet, but we’re working at it.”
The Dodd-Corker talks are giving new momentum to an initiative that faltered last month when talks broke down, after months of frustrating back and forth, between Dodd and Senator Richard Shelby, the committee’s top Republican.
Corker defied Senate seniority tradition last week by stepping into the breach left by the impasse with Shelby. Since then, Dodd and Corker have been making progress toward a bipartisan agreement, said Dodd spokeswoman Kirstin Brost.
“We’re working with Corker and hope to have a revised bill to present next week,” she said, adding that the banking committee was targeting a working session on the legislation, which could bring it to a vote, for the first week of March.
Corker said in Panama that talks with Dodd were advancing. “We haven’t had quite as much time to talk about it as everybody might think,” he said. “But I know our staffs are talking ... We’re going to get to where we need to be.”
At the same time, amid doubts that Corker will be able to win wide support from party colleagues for whatever he and Dodd produce, other Republicans on the panel were developing substitute legislation of their own, Senate aides said.
CONSUMER WATCHDOG AT ISSUE
While details were still being discussed, Republicans remain deeply opposed to a Democratic proposal to create an independent financial consumer watchdog agency. Proposals and counter-proposals on the matter have resulted in a deadlock.
Other disputed topics include how much power to give a new systemic risk regulator, and whether to give shareholders more say on executive pay and electing corporate directors.
Separately, top White House economic adviser Lawrence Summers said in a CNBC television interview that it was crucial for Congress to move quickly on regulatory reform.
The U.S. House of Representatives in December approved the biggest crackdown in bank and capital market oversight since the 1930s. “We’re certainly pushing the Senate to act as rapidly as it can,” Summers said. “Unfortunately, the hundreds of lobbyists -- three for every Congressman -- that many in the financial industry have hired ... slowed down this process.”
Policy analysts have been expecting a regulatory reform bill to emerge from the banking committee and move to the Senate floor this spring, possibly in late March or April.
If the Senate approves a bill, final House-Senate compromise legislation could be on President Barack Obama’s desk by mid-year, said analysts and lobbyists.
MORE THAN A YEAR AFTER CRISIS
Regulatory reform has been working its way slowly through Congress for more than a year, with the aim of preventing another crisis like the one that saw the collapse in 2008 of Lehman Brothers, government-led mergers of Bear Stearns and Merrill Lynch, and bailouts of many financial firms.
A draft reform bill unveiled by Dodd in November was immediately rejected by Republicans, and he and Shelby eventually came to an impasse over Obama’s proposal to create a new agency to regulate consumer financial products.
Corker, like Shelby, has ruled out a stand-alone agency, but will consider new consumer protection powers within a larger regulator, a compromise that Democrats have discussed. Differences remain on how extensive those powers should be.
Obama complicated negotiations last month by calling for limits on banks’ proprietary trading, barring them from the hedge fund business, and curbing their growth -- dubbed the ‘Volcker rule’ after White House economic adviser Paul Volcker.
Banking committee members are considering adding to their legislation a watered-down version of ‘Volcker rule’ that might only require stronger supervision of banks involved in such activities, said sources close to the panel.
Volcker said on Thursday he hopes financial reform will overcome partisan bickering, but that it is not a “sure shot.”
Separately, House Financial Services Committee Chairman Barney Frank said on Thursday his panel will hold a hearing on February 25 looking into pay practices in the financial industry.
Additional reporting by Rachelle Younglai in Washington, with Daniel Bases and Edward Krudy in New York, and Patrick Rucker in Mexico City; Editing by Muralikumar Anantharaman
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