White House Signals It Won't Fight to Keep Rule on Derivatives

[Better Believe It]

White House Signals It Won't Fight to Keep Rule on Derivatives
By DAMIAN PALETTA
May 26, 2010

WASHINGTON—A senior Treasury Department official on Wednesday said a controversial provision that could force banks to spin off their derivatives portfolio was not part of the "core" changes White House officials wanted in the financial overhaul, offering the second signal in two days that the provision could be stripped out.

But Treasury Department assistant secretary Michael Barr went out of his way not to disparage the amendment or say it should be killed. Rather, he said the provision's wording left it open to various interpretations that could have varying impacts on the financial system.

"It's a little bit hard to tell with certainty today how the provision would operate," Mr. Barr said of the provision, written by Senate Agriculture Committee Chairman Blanche Lincoln (D., Ark.). "If it would result in a banking organization not being able to engage in swap transactions, the provision could have very significant consequences. If it has a narrower set of interpretations, those consequences would be smaller, and the language in the provision is somewhat unclear on that point."

On Tuesday, House Financial Services Committee Chairman Barney Frank (D., Mass.) said the provision "goes too far," and suggested it wasn't necessary for new financial rules.

Mr. Barr was asked repeatedly about the derivatives provision, and he mostly sidestepped every opportunity to define the White House's view on the matter.

"There are other provisions like the Lincoln provision that are not part of that core set of questions, and I think those are going to get worked through in conference," Mr. Barr said.

- Worked through in conference? I think that's Washington talk meaning dumped. BBI -

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