Conference Marches Onward

While it seems like the whole world is looking in other places this week, the House-Senate Conference on Financial Regulatory Reform has been busy carrying out it’s business. While it appears there’s a relatively high level of transparency in this process, the bottom line is that the vast majority of decisions and action in a forum like this will take place behind closed doors. Fortunately, there are hard-working investigative journalists on the case, trying to keep the public informed as to what has happened, will happen, and may happen.

Tim Fernholz has another excellent piece up at The American Prospect, in it he details the fate of the Franken amendment on ratings agencies:

The House objected to a provision authored by Sen. Al Franken in the Senate legislation, which would create a panel of industry representatives, supervised by the SEC, charged with preventing conflicts of interest between ratings agencies and their clients. Those conflicts played in part in so many toxic financial products being considered safe before the crisis.

An all-day fight ensued behind the scenes among Democratic members of the Senate delegation over whether to protect Franken’s idea or accept the House’s language. Franken’s proposal, despite a strong vote in the Senate, is still viewed skeptically by some Democrats because it preserves the existing ratings agencies and by others because agencies have lobbied hard against it. Eventually, a compromise was brokered, directing the SEC to implement Franken’s plan — after a year-long study. It’s a classic Washington agreement, at once meaningless and damaging since regulators could ignore legislators’ intent after public scrutiny subsides.

“Today’s compromise is not everything we wanted, but it’s a major step in the right direction,” Franken said later. “The language agreed on by the conference committee means more time and more study than I think is necessary, but it also means definite action will be taken.”

Meanwhile, old friend Brian Beutler checks in with a report  focusing on what he calls “Wall Street friendly House members” working to influence the bill, saying they:

have privately pushed to write a loophole into the Volcker rule which would allow banks to invest in hedge and private equity funds. That loophole has the strong backing of Bank of New York Mellon, and State Street Bank and Trust among other firms, but is fiercely opposed by Volcker himself, who has had tremendous influence over the shape of the reform bill up to now. Volcker was supposed to meet with the Democrats yesterday to warn them away from supporting this loophole, but the meeting was canceled at the last minute.

These machinations, gyrations, and general sausage-making are pretty fascinating to watchand without work like Brian’s and Tim’s it’d be very difficult to have any knowledge about what was going on behind the scenes and very difficult for citizens to have much of an idea about how the process was unfolding and how it might impact their lives. While passage seems likely in relatively short order, there remains a great deal to be decided.