Republicans signal thaw in battle over financial rules bill

WASHINGTON: Senate Democrats and Republicans signaled they were nearing a compromise on an overhaul of financial-industry regulation even as they continued to face obstacles over derivatives and a consumer-protection agency. “There is a new element of seriousness,” Senate Republican Leader Mitch McConnell of Kentucky said on Tuesday after Majority Leader Harry Reid of Nevada said Democrats are considering dropping plans for a $50 billion fund to unwind failed banks that Republicans oppose.

Republican Senator Richard Shelby of Alabama said he and the measure’s Democratic author, Banking Committee chairman Christopher Dodd of Connecticut, are close to an agreement on the legislation. “I believe that we’re going to get us a bipartisan bill,” Shelby told reporters on Tuesday in Washington. “We’re probably conceptually together on 85%” of the bill.

At the same time, Reid reiterated that he intends to bring the bill to the floor this week or next even though Republicans called for more negotiations. The more conciliatory tone — which follows the Securities and Exchange Commission’s announcement this week that it was suing Goldman Sachs Group for fraud linked to its derivatives trading — marks a shift from weeks of unified Republican opposition to the measure, which they said would create a permanent taxpayer-funded bailout. It also is a change for Democrats, including President Barack Obama, who said in an April 18 radio address that McConnell was using “cynical and deceptive” arguments.

The remaining sticking points in the talks — from more stringent regulation of derivative markets to the creation of a consumer-protection agency inside the Federal Reserve — could stall any momentum as both sides gear up for the initial floor vote as early as this week.

The first hurdle is a measure before the Senate Agriculture Committee today that seeks to regulate the $605 billion over-the-counter derivatives market. Among other things, it would require banks such as JPMorgan Chase & Co and Bank of America to choose between trading swaps and their core business of holding deposits. The proposal would bar swaps dealers from using the Federal Reserve’s discount lending window and emergency liquidity functions and the Federal Deposit Insurance’s deposit guarantee.