A Scramble to Finish Bank Rules This Week

President Obama is meeting with world leaders at the Group of 20 Summit this weekend in Korea. Our financial overhaul regulations need to be completed before the President’s trip and Lawmakers are scrambling to sort out their differences on a range of certain provisions. According to the Wall Street Journal, in their debate they are are discussing everything from bank regulations to consumer protection. If they don’t complete their work this week, Obama will go to the Group of 20 Summit without a bill and Congress might not be able to pass a law before their July 4th recess, which is what they have been pushing for.

One provision under debate is the Volcker Rule (originated by former Federal Reserve Chairman, Paul Volcker) which had originally imposed a ban on banks making investments with their own money—a practice called proprietary trading. Lawmakers are looking to compromise with allowing large banks to invest a small amount, like 2%, into certain privately managed funds. "Mr. Volcker wants and expects a really strong bill," said the former Fed chairman's assistant, Tony Dowd. "He doesn't want it to look like Swiss cheese."

They were also divided about how to set up stricter capital rules for banks with more than $10 billion of assets, as required by an amendment Senator Susan Collins (R., Maine) attached to the Senate bill last month. Banks are saying the new rules would restrict their ability to lend. Lawmakers on Monday did reach a deal that would limit the amount of fees banks are allowed to charge retailers for processing debit cards.

The conference committee of congressional negotiators seeking to resolve differences between the House and Senate versions of the bill plans to work through the consumer-protection issues on Tuesday, the Volcker Rule on Wednesday, and derivatives regulation on Thursday. The timing could slip if lawmakers need more time to resolve disputes. The very reason for the Summit is to discuss measures to promote the financial stability of the world—having our domestic issues worked out would sure look better for the President during the Summit.

Senate Financial Bill Misguided, Some Academics Say

From NYTimes.com:

As Democrats close in on their goal of overhauling the nation’s financial regulations, several prominent experts say that the legislation does not even address the right problems, leaving the financial system vulnerable to another major crisis.

Some point to specific issues left largely untouched, like the instability of capital markets that provide money for lenders, or the government’s role in the housing market, including the future of the housing finance companies Fannie Mae and Freddie Mac.

Others simply argue that it is premature to pass sweeping legislation while so much about the crisis remains unclear and so many inquiries are in progress.

“Until we understand what the causes were, we may be implementing ineffective and even counterproductive reforms,” said Andrew W. Lo, a finance professor at the Massachusetts Institute of Technology. “I understand the need for action. I understand the need for something to be done. But what I expect from political leaders is for them to demonstrate leadership in telling the public that we need to proceed about this in a much more deliberate and rational and thoughtful way.”

Senate Republicans echoed some of these concerns as they delayed debate on the legislation last week. Democrats agree that significant issues remain to be addressed. But they say that the government must press forward in responding to the problems that already are clear.