TUESDAY, APRIL 27, 2010

Regulatory bill stalls in Senate

regulation from A1

publicans demonstrated Monday may not endure. GOP negotiators said their goal remains a final bill that includes enough changes that it can win broad support from both parties. But Democrats are looking to limit their conces- sions and say they will probably win a few conversions among Re- publicans who have expressed support for the overwhelming majority of the bill in its current form.

Democrats say they believe about half a dozen GOP law- makers are open to switching their votes. They include Sens. Olympia J. Snowe and Susan Col- lins of Maine, Sen. Scott Brown (Mass.), and Sen. Charles E. Grassley (Iowa). Grassley, a conservative who is

up for reelection in November, surprised colleagues recently in voting to support strict new rules for derivatives, one of the most complex but fundamental parts of the legislation. The 1,400-page bill would also

create an agency to protect con- sumers against abusive lending practices, establish a council of regulators to monitor potential risks to the financial system, and give the government authority to shut down large, failing firms be- fore they collapse. Snowe has outlined two main concerns about the current ver- sion of the bill, including a pro- posed $50 billion fund to be used in liquidating distressed finan- cial firms and restrictions on community banks that engage in certain types of small-business lending. “There are some concerns about the legislation, and I want to make sure they’re addressed,” Snowe said. But she added: “We’re not going to have unani- mous support for this legisla- tion.”

Brown said he voted “no” Mon-

day to allow the Senate banking committee’s chairman, Christo- pher J. Dodd (D-Conn.), and the panel’s ranking Republican, Sen. Richard C. Shelby (Ala.), more time to rewrite several major pro- visions. “People want this area addressed,” Brown said. “They don’t want to have problems like they had before, including me.” But even as Reid pledged to hold vote after vote, some Demo- crats warned privately that the strategy could backfire if he ap- pears to be short-circuiting nego- tiations. Snowe and Brown, along with other GOP lawmakers, com- plained that the Monday vote was premature. “It’s clear that they’re trying to score political points,” Brown told reporters after the vote. Nelson said he had opposed

starting debate on the bill be- cause he objected to consumer- protection provisions that could harm “Main Street businesses” back home, including dentists, whose patients often borrow to fi- nance major procedures that their insurance policies don’t cov- er, and auto dealers. But after talking with Nelson, Dodd said, “Dentists and auto dealers did not come up.” Instead, Dodd said, Nelson had

spoken with him about making a change to the derivatives portion of the bill. Nelson favored includ- ing a provision that would ex- empt owners of existing deriva- tives contracts from having to post additional collateral, as re- quired in the legislation. This requirement could force companies that use derivatives to set aside large sums of money to cover possible losses, and these set-asides could eat into profits by depriving the firms of resourc- es they could use in another way. Critics of the requirement say firms should not have to redo ex- isting contracts.

Dodd said he was not willing to

insert the exemption Nelson wants in his bill. In the latest Washington Post-

ABC News poll, respondents were evenly split on President Obama’s handling of financial regulation, with 48 percent of those polled approving of his performance and 48 percent disapproving. But compared with congres- sional Republicans, Obama has a clear advantage. A slim majority — 52 percent — of Americans said they trust Obama over the GOP on the issue; 35 percent favored congressional Republicans. Inde- pendents preferred Obama by 47 to 35 percent, with 16 percent trusting neither side on the issue. Dodd and Shelby have said in recent days that they are on the cusp of a bipartisan agreement, and they have expressed opti- mism that further negotiations will end with consensus. Shelby aides said Monday that although the two men have con- tinued to talk by phone and meet periodically, their staff members

“It’s clear that they’re trying to score political

points.”

— Sen. Scott Brown (R-Mass.), on

the Democrats’ holding a vote Monday

have not met to hammer out spe- cifics for more than a week. “We need to be in a room, at the

staff level, nailing down the lan- guage, and that’s not happening,” one Shelby staff member said. “They stopped talking to us.” To illustrate the work that re- mains, the aide said that if Dodd and Shelby “met today and re- solved every issue, it would still take us days to get it all together.” Shelby aides repeated previous criticisms of the Democratic leg- islation and said Republicans probably would introduce their own version of the bill. “We have been drafting an al-

ternative approach since the very beginning,” said one staff mem- ber, who like others spoke on the condition of anonymity to dis- cuss the situation more frankly. “It may come to the point where Republicans decide, ‘Let’s just put out specifically what we’re for.’ That decision hasn’t been made yet.”

Aides declined to talk in depth about how a Republican alterna- tive bill would differ from the leg- islation sponsored by Dodd. But they said it almost certainly would include language to over- haul the government-sponsored entities Fannie Mae and Freddie Mac.

Staff members on the Senate banking and agriculture commit- tees huddled through the week- end with Obama administration officials to merge competing measures aimed at reining in the $600 trillion derivatives market. Derivatives are private contracts that allow traders to bet on the direction of the prices of stocks, commodities and other assets.

KLMNO

- ABC News poll

Broad support for stricter regulation

Q:

Support

Oppose

Somewhat stricter 32%

31%

59% 53% 43%

support increasing

federal oversight of consumer loans

Q: Q:

want banks to pay into fund to cover the cost of taking over and breaking up any large financial company that fails

Do you approve or disapprove of the way Barack Obama is

handling regulation of the financial industry?

Approve Disapprove

Strongly 22% Strongly 33%

48% 48%

Whom do you trust to do a better job handling regulation of the

financial industry?

Obama

Republicans in Congress Neither Both

35 11 1

SOURCE: This Washington Post-ABC News poll was conducted by telephone Apr. 22-25, 2010, among a random national sample of 1,001 adults including users of both conventional and cellular phones. Results from the full survey have a margin of sampling error of plus or minus three percentage points. Sampling, data collection and tabulation by TNS of Horsham, Pa. Figures may not add to 100% because “no opinion” not shown.

Complete data and wording available at voices.washingtonpost.com/behind-the-numbers.

THE WASHINGTON POST

Many companies also use such deals to lock in prices for goods, such as oil, which often fluctuate in value.

Dodd and Sen. Blanche Lin-

coln (D-Ark.), who chair the re- spective committees, said late Monday that an agreement had been reached. Key provisions put forth by Lincoln’s committee re- mained largely intact, including a measure that could force big Wall Street banks to spin off their de- rivatives operations. The bill also aims to increase

transparency by requiring nearly all derivative contracts be traded in public on exchanges and ap- proved by a separate body called a clearinghouse. In addition, the measure imposes a “fiduciary du- ty” on dealers, like the one re- quired of investment advisers, to look out for the best interests of clients such as municipalities and pension retirement funds. The legislation provides ex-

emptions for commercial busi- nesses and manufacturers that use derivatives to hedge risk, such as an airline seeking cer- tainty on fuel prices. But Dodd and Lincoln said the bill gives regulators the authority to close loopholes so financial firms can- not claim exemptions. The two senators said the measure also gives regulators “broad enforce- ment authority” to punish bad ac- tors. In the latest poll, support for

federal regulations of derivatives draws an even split, with 43 per- cent supporting federal regula- tion of the derivatives market and 41 percent opposing. Nearly one in five — 17 percent — express no opinion on the complicated topic.

dennisb@washpost.com murrays@washpost.com

Staff writers Renae Merle and Ben Pershing and polling director Jon Cohen contributed to this report.

52%

S

A13

Do you support or oppose stricter federal regulations on the way

banks and other financial institutions conduct their business?

Much stricter 34%

65%

With regulatory bill, FTC may become Internet cop

by Cecilia Kang

support federal regulation of derivatives. 41% oppose; 17% have no opinion.

The Federal Trade Commis- sion could become a more pow- erful watchdog for Internet us- ers under a little-known provi- sion in financial overhaul legislation that would expand the agency’s ability to create rules.

An emboldened FTC would stand in stark contrast to a be- sieged Federal Communications Commission, whose ability to oversee broadband providers has been cast into doubt after a federal court ruled last month that the agency lacked the ability to punish Comcast for violating open-Internet guidelines. The version of regulatory over- haul legislation passed by the House would allow the FTC to is- sue rules on a fast track and per- mit the agency to impose civil penalties on companies that hurt consumers. FTC Chairman Jon Leibowitz has argued in favor of bolstering his agency’s enforce- ment ability. “If we had a deterrent, a bigger stick to fine malefactors, that would be helpful,” Leibowitz told Fox News last week. That provision to strengthen

the FTC is absent from the finan- cial overhaul legislation before the Senate. Some observers, however, expect the measure to be included when the House and Senate versions are combined. The proposal comes as un-

certainty surrounds the federal government’s ability to regulate the Internet and oversee service providers. Spokeswomen at the FTC and FCC declined to com- ment. “Everyone is trying to figure out who is on first and what the game is here. Everything is a moving target right now,” said Art Brodsky, a spokesman for Public Knowledge, an advocacy group. Major media, telecom and ca- ble companies stand to win or lose greatly from changes at the FTC and FCC. For example, a proposed rule at the FCC would force carriers to treat all Web

traffic equally on their networks. That has drawn sharp opposition from broadband service provid- ers, who would prefer that Con- gress mandate such a change. Comcast has complained that some traffic is so heavy that it slows the entire system. The proposal to expand the

FTC’s authority has sparked a flurry of lobbying by advertisers, industry groups and the U.S. Chamber of Commerce, which are seeking to block it citing con- cerns about possible overreach by the agency. Advertisers and retailers, for

example, are wary of new rules from the FTC, which acts as their primary enforcement agency. The House financial overhaul bill would make it easier for the FTC to issue rules on privacy that would curtail an advertiser’s ability to collect personal data on consumers’ Web habits. The Chamber of Commerce sent a letter last week signed by 41 trade groups to Senate Major- ity Leader Harry M. Reid (D- Nev.) and Minority Leader Mitch McConnell (R-Ky.) protesting any move to include a provision on the FTC in the Senate bill. Ad- vertisers took out a full-page ad in Roll Call, asking lawmakers to reject an effort to embolden the FTC. “These FTC rules are a big deal and deserve their own debate,” said Chris Merida, the director of congressional and public affairs at the Chamber.

Consumer interest groups,

however, want to give the FTC greater clout in overseeing Web- related issues. They say online advertisers are gathering per- sonal data about consumers and potentially abusing that infor- mation with little federal over- sight. “The bottom line is that these

powerful special business inter- ests want to keep the Internet as their private financial play- ground — where they get to reap the big bucks without any reg- ulatory oversight,” said Jeff Chester, executive director of the Center for Digital Democracy.

kangc@washpost.com

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