Schumer positive on financial reform bill's chances
WASHINGTON — Sen. Charles E. Schumer said he's confident a financial reform package will pass Congress, because neither Republicans nor Democrats can afford politically to let the effort fail.
In a telephone interview, Mr. Schumer, who will serve on the House-Senate conference committee working out a final compromise, acknowledged that events, such as allegations of fraud by Goldman Sachs, have given financial regulatory reform enough momentum to become law.
Mr. Schumer, D-N.Y., plays a key role both because of his position on the panel and because of his long relationship with the banking industry, a result of his years representing New York City as well as the state as a whole. His willingness to back more regulation of Wall Street has raised some eyebrows in Washington and generated plenty of press.
Broadly, Mr. Schumer said, the House and Senate are not far apart on the legislation, although some key differences remain on derivatives, such as, for instance, credit default swaps, which fed the meltdown of AIG Group. Organized Republican opposition to Wall Street reform all but evaporated after the Goldman Sachs news broke, although there is still ground for debate on specific aspects of the bill.
As a high-ranking Democrat on the Senate Budget Committee, Mr. Schumer has pushed for tighter regulation of derivatives, including requirements they be traded on open exchanges or, at least, their trading becomes more transparent. Mr. Schumer will advocate for more open trading of derivatives as the conference committee begins work after the Memorial Day recess. Lawmakers aim to deliver a final bill to President Barack Obama by July 4.
"I think there's a broad consensus they need to be traded on exchanges wherever possible and need to be transparent," Mr. Schumer said. "I think that will happen."
The Senate version contains a measure backed by the Senate Agriculture Committee that forces banks to give up their business in derivatives. The House did not include such a provision, and the banking industry is fighting hard to keep it out of the final version.
The Agriculture Committee, where Mr. Schumer's counterpart, Sen. Kirsten E. Gillibrand, D-N.Y., serves, handled the derivatives measure because of derivatives' role in farm commodities trading. Mrs. Gillibrand tinkered with the idea of weakening the derivatives provision added by Sen. Blanche L. Lincoln, D-Ark., but backed off.
Some of Mr. Schumer's former House colleagues, including Rep. Gary Ackerman, D-Queens, have criticized Mrs. Lincoln's measure as too harsh.
Big trading firms, such as Goldman Sachs and JP Morgan Chase, complain the provision would rob them of billions of dollars in business and would simply drive derivatives trading overseas.
Mrs. Lincoln has blamed a shadowy derivatives trade for the big Wall Street firms' rapid expansions, which led to taxpayer-funded bailouts at the end of the Bush administration.
Asked about that provision, Mr. Schumer said he expects the conference committee to look for a middle ground that will allow banks to keep the derivatives business but with new conditions that ensure they conduct business in a fair manner.
Mr. Schumer championed other aspects of the bill, such as allowing stockholders to vote on pay packages for chief executive officers. Such votes would be nonbinding but would discourage overly generous compensation, Mr. Schumer has said, and they would also give a better chance to CEO candidates not handpicked by boards of directors.
The senator also pushed successfully for a measure allowing the federal Securities and Exchange Commission to keep revenue from fines it assesses, rather than being dependent upon congressional appropriations for its funding each year.
