In Washington, the horse trading over the massive finance reform bill has begun in earnest with 100 amendments on the table, a smorgasbord of tinkering.
The amendments approved so far include a 96-1 vote on a proposal by Sen. Barbara Boxer, D-Calif., that would mandate liquidation of any firm that fell into receivership — a failing firm yanked out of circulation by a council of regulators, which would be unwound with court approval by the Federal Deposit Insurance Corp.
At that point, thanks to an amendment proposed by Sens. Christopher Dodd, D-Conn., and Richard Shelby, R-Ala., the costs of the liquidation would be borne by the FDIC — borrowing from the Treasury, if it had to — rather than by a $50 billion escrow fund that seemed to bother everyone, including the president.
From there, the Dodd-Shelby amendment, which passed 95-5, says the government would recoup its expenses by selling the firm’s assets. The creditors and shareholders would be next in line for compensation, if there was anything left. And the financial sector could be asked to pay the government if the costs outran the proceeds from the sale.
Dodd said, “With this agreement there can be no doubt that this Senate is unified in its commitment to end taxpayer-funded bailouts,” The Washington Post reported Thursday.
Those could be the last easy, which is to say inexpensive amendments, however. From here on senators are courting support for the package amendment-by-amendment. Democrats, the Post said, approved amendments to permit small-businesses to put up their homes for collateral on loans and to ease back regulations on small banks, in part because the author of those proposals, Sen. Olympia Snowe, R-Maine, is viewed as a key Republican vote they’ll need later.
It will not be so easy to find Republican votes for a proposal from Sens. Jon Tester, D-Mont., and Kay Bailey Hutchinson, R-Texas, to shift the FDIC fees formula to a risk-based system that would force large banks to pay more and community banks less.
A proposal to force banks to spin off their swap desks, proposed by Sen. Blanche Lincoln, D-Ark., was met with resistance by the Treasury Department, which is trying to force a compromise there, The New York Times reported.
Treasury Secretary Timothy Geithner said it would make the system “less stable” to scatter the derivatives market. “You would not make the system more stable by taking functions that are integral and central to banking and separating them and putting them somewhere else,” he said.
Proposals are in play to limit the size of banks and to separate commercial and investment banking by reinstating the Glass-Steagall Act that was in place from the Great Depression until its repeal in 1999.
In market movement Thursday, markets in Asia dropped sharply, while European markets opened with modest gains. The Nikkei 225 index in Japan dropped 3.27 percent, while the Shanghai composite index lost 4.11 percent. The Hang Seng index in Hong Kong lost 0.96 percent, while the Sensex in India fell 0.59 percent.
In Australia, the S&P/ASX 200 index lost 2.16 percent.
In midday trading in Europe, the FTSE 100 in Britain rose 0.26 percent, while the DAX 30 in Germany added 0.43 percent. The CAC 40 in France added 0.58 percent, while the pan-European DJ Stoxx 50 gained 0.42 percent.
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