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WASHINGTON: US lawmakers neared the end of a year-long Wall Street reform effort early Friday, as they finalized rules aimed at preventing another global financial meltdown.
After a marathon 20-hour overnight debate, delegates from the House of Representatives and the Senate agreed to a compromise deal, which could now be on President Barack Obama's desk as soon as next week.
More than two years after a financial crisis pushed the global economy to the brink, bleary-eyed lawmakers -- with jackets slung aside and shirt-sleeves rolled up -- worked until 5:40am to reconcile House and Senate versions of the legislation.
Although both chambers have still to vote on the deal Tuesday, the agreement hands Obama the prospect of a major legislative victory as he leaves for a summit of the G8 and G20 in Ontario, Canada, where financial reform will be high on the agenda.
Much of the bill had been agreed when final negotiations began early Thursday -- including the outline of a powerful consumer financial protection bureau -- but a deal had still hinged on long-standing disputes over bank trading rules.
Democrats had bickered over controversial measures that would limit banks' ability to invest for their own profit and from investing in derivatives -- speculative financial products that are credited with fuelling the crisis.
Under withering criticism from the left, which accused lawmakers of gutting reforms in order to reach for a deal, some Democrats held out for tougher measures.
Democratic Senator Blanche Lincoln, who faces a tough race to retain her seat in November, had insisted that banks' derivatives desks be spun off into separately capitalized entities, a move the sector argues would hit profitability.
According to analysts at Bank of America-Merrill Lynch, the reforms could lower the sector's profits by as much as 20 percent.
But Lincoln's opposition eroded following a deal that would curb the most risky trades, while still allowing businesses to hedge risk through derivatives linked to foreign exchanges, interest rates, gold and silver, the bulk of the estimated 600 trillion dollar business.
A loophole was also agreed on the so-called Volcker Rule that would allow banks to continue trade in certain investment funds.
Republicans meanwhile argued that unilaterally adopting the rules would put American firms at a "major disadvantage" to foreign competitors, according to representative Spencer Bachus.
"It's unilateral disarmament," he said, "it could be a disaster if we follow this road alone."
Republicans also criticized the cost of the legislation, which is estimated at around 22 billion dollars, 19 billion of which would be paid for by a levy on banks with assets worth over 50 billion dollars.
Obama fired the starting gun for reform a year ago, unveiling what were hailed as the most sweeping reforms in a generation.
Earlier on Thursday one of his administration's top economic advisers urged lawmakers to reach a deal.
"The finish line is in sight," Deputy Secretary Neal Wolin said in a blog post, adding an agreement would "lay a new foundation for a stronger, safer financial system."
- AFP/ir
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