Conferees OK Volker rule to reduce banking risk, move on to derivatives

By Jon H. Harsch

© Copyright Agri-Pulse Communications, Inc.

Washington, June 25 – After approving the Volker rule to limit risky proprietary trading by banks, just after midnight the House/Senate conference moved on to their final issue: derivatives.

House Agriculture Committee Ranking Member Frank Lucas (R-OK) immediately objected. He pointed out he'd only seen the Democrats' latest derivatives proposal after midnight. He called on conferees to pass the derivatives bill approved by the House last year rather than the Senate's more stringent proposal.

Senate Agriculture Committee Chair Blanche Lincoln (D-AR), the main author of the Senate proposal, responded that “Banks should be banks” rather than engaging in risky trading activities – and that riskier financial transactions should be subjected to additional capital requirements.

As the derivatives debate continued past 1 AM, Senate Agriculture Committee Ranking Member Saxby Chambliss (R-GA) insisted that “derivatives trading is a part of banking and we need to keep derivatives trading inside of banks.” He warned that the Senate proposal would impose additional capital requirements, draining money which could be used to create jobs. He added that “those entities that want to trade in the dark will still be able to do so” on overseas markets, not subject to U.S. regulations. Nearing 2 AM, as the conferees moved through amendments, Chambliss warned that the Lincoln approach “is going to have a huge negative impact on the financial industry.

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