Deals were flying fast and furious as the U.S. Congress strained to complete the biggest overhaul of the financial rulebook since the 1930s, with banks likely to take some knocks at a meeting Tuesday.
On consumer protection, debit card fees and mortgage lending, House Democrats announced agreements Monday that set the stage for including modified Senate proposals in a bill being finalized for submission to President Barack Obama.
A Senate-House of Representatives panel, reconvening Tuesday at noon, looked likely to include reforms on all three fronts in the final bill despite banks having fought against them for months, winning some reductions in their scope.
The outlook for the joint "conference committee" could change as it resumes its marathon sessions since lawmakers can accept, reject and make counter-offers to agreed measures.
But House Democrats were moving firmly to clear away disputes with the Senate by, for instance, agreeing to make a new financial consumer watchdog an independent unit within the Federal Reserve, instead of a stand-alone agency.
The new watchdog would have substantial budget, staffing and rule-making power, but its rules could be overridden in some cases by a new inter-agency council of regulators.
It would consolidate consumer protection duties now dispersed across several agencies, and oversee mortgages, credit cards and other consumer financial products that critics say were poorly supervised in recent years.
The House had voted in December to make the watchdog a new agency.
But Democratic Representative Barney Frank, chairman of the conference committee, agreed to compromise after being assured that the watchdog would have real teeth, aides said.
Enactment of the far-reaching Wall Street reform legislation, targeted to occur before July 4, would give Obama and the Democrats a major domestic policy victory to add to healthcare reform going into November's general elections.
The reforms are meant to prevent a repeat of the 2007-2009 credit crisis that tipped the economy into a deep recession, triggered massive taxpayer bailouts of big banks, and unleashed a wave of regulatory reform initiatives worldwide.
On Capitol Hill, a swarm of bank lobbyists, often working closely with Republicans, has tried to block or water down proposals for change put forward by Democrats, but has faced an uphill battle amid deep voter anger with Wall Street.
Tightening global oversight of banks and capital markets in a coordinated way will be a key topic at a meeting of the Group of 20 economic powers in Canada next weekend.
A senior Obama administration official said Monday the panel would finish a bill within days that would be the strongest reform plan to emerge from a G20-member government.
Monday, House Democrats also agreed to add language to the final bill that would limit fees charged on debit card transactions — a proposal that banks have resisted fiercely since it was offered by Democratic Senator Richard Durbin.
House lawmakers want some changes, however, which Durbin said he agreed to, such as exempting from the rule prepaid and debit cards used in distribution of government benefits, and allowing the Fed in some cases to adjust fee rates.
"We were able to reach an agreement which makes minor changes to strengthen consumer protections and bring competition to a market where there is none," Durbin said.
The National Association of Federal Credit Unions said it was "greatly disappointed" by the agreement on Durbin's proposal, predicting it would raise consumer costs and disadvantage credit unions versus large card issuers.
In a third possible blow to banks, House Democrats called for beefing up a rule that would require mortgage lenders to carry on their books at least 5 percent of the risk from home loans that they make and then sell off as securities.
The 5-percent "skin-in-the-game" provision is in the base bill being considered by the Senate-House panel.
But the Senate added an exemption for some low-risk residential mortgages.
Frank said House lawmakers want to drop that, along with a provision that would require regulators to consider other forms of risk retention for commercial mortgage-backed securities.
The conference committee is trying to combine bills already approved by the two chambers.
It aims for final legislation by Thursday.
The finished product would need to win approval in the Senate and the House once more, then go to Obama to sign.
Groups likely to take the hardest profit hits from the proposed reforms, taken as a whole, include Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America and Citigroup, according to analysts.
Lawmakers were still seeking compromises on proposals to force banks to spin off their swap dealing desks, and to curb risky proprietary trading unrelated to customers.
Some version of the "Volcker rule" to limit banks' proprietary trading will be in the final bill, aides said.
Banks were pushing hard, as reported last week by Reuters, for limited, or 'de minimis,' exemptions to a part of the Volcker rule that would prohibit them from sponsoring or investing in private equity and hedge funds.
Some lawmakers were inclined to support the banks on this front, while others were not, with some looking to White House economic adviser Paul Volcker himself for guidance.
The former Federal Reserve chairman, who commands deep respect on Capitol Hill, has told lawmakers he does not want his proposed rule to end up so full of loopholes that it looks like "Swiss cheese," his office told Reuters Monday.
Some banks are arguing they should be allowed to continue making small investments in private equity and hedge funds as this is central to their asset management business.
But Volcker is concerned that exemptions tend to expand over time, according to a person familiar with his thinking.
He is not opposed to all exemptions, however, the person said.
For instance, he has endorsed proposals from Democratic senators Jeff Merkley and Carl Levin that include a carve-out to assist insurance companies and asset managers.
The Merkley-Levin measure is widely expected to form the basis of the Volcker rule as included in the bill, aides said.
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