Lincoln eyes compromise for derivatives rules

Senator Blanche Lincoln, who crafted the plan to get banks out of the swaps business, is trying to tweak her proposal in an attempt to keep it in a final regulation bill, according to a document obtained by Reuters on Monday.

The Senate bill currently contains Lincoln's provision requiring banks to choose between their lucrative over-the-counter derivatives desks and access to the Federal Reserve's discount window and other federal protections.

But as lawmakers try to merge the Senate bill with the House of Representatives measure, there is no clear support for Lincoln's controversial measure.

Lincoln, chairman of the Senate agriculture panel, has considered giving "swap entities" access to emergency loans from the Federal Reserve, according to the document.

The document, which had very few details, did not define "swap entities."

The document also said swaps dealers can be an affiliate of a bank holding company and separately capitalized, a point Lincoln made in May.

It was not known whether members of the conference committee, who are hashing out the final bill, are seriously considering the changes or whether Lincoln has started working on a different compromise.

There will be a two-year transition period for banks that own swaps desks to comply with the new rules, the document said. A federal banking regulator would determine the time frame for the transition and would be required to consider the impact on small business lending, capital formation and mortgage lending, according to the document.

[Source: Reuters, Washington, 14Jun10]

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