Senate Beats Back Efforts to Ease Regulation Bill

By DAVID M. HERSZENHORN
NYT

WASHINGTON — In a defeat for major Wall Street banks, the Senate on Wednesday rejected a Republican effort to ease some of the tight new rules included in the bill for trading derivatives, the complex financial instruments that were at the center of the 2008 financial collapse.

The question of how to regulate derivatives has generated fierce debate in the Senate, as lawmakers wrestled with a desire to bring new transparency and safeguards to the market while not hurting businesses that routinely use derivatives to hedge against risks, like swings in energy prices, foreign currency rates or other commodities.

The regulatory legislation now includes some extremely tough provisions, put forward by Senator Blanche Lincoln, Democrat of Arkansas and chairwoman of the agriculture committee, including language that would most likely force most of the major financial institutions on Wall Street to spin off their lucrative derivatives businesses.

The Obama administration and even some Democrats have expressed apprehension about that proposal. But the Senate rejected an amendment by Senator Saxby Chambliss of Georgia, the senior Republican on the agriculture committee, that would have let banks keep their derivatives units and would have loosened other proposed rules.

(More here.)