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This one snuck in the back door | Financial regulation

zyakaira notes: Two points to note, which would even be clear to regulators and the big banks from here..Dodd’s bill cannot handle derivatives, SAC leader Blanche Lincoln is getting ready for election year. The proposed ‘regulation’ would ask banks to hive off oall derivatives trading to separate units so that FDIC reserve calculations can eventtally go back to that easy times 10 years ago.

Also, in a separate story, we avoided the Wells Fargo results as they seem to be a lethargic misprint with $5.3 billion in write offs trailing $5.4 b last quarter and $21 billion in revenues. REbadging of Wachovia in California completes this week.

WASHINGTON MarketWatch — Big commercial banks would be forced to shed lucrative derivatives trading operations under provisions of controversial, sweeping legislation to regulate the $450 trillion derivatives market that was approved Wednesday by the Senate Agriculture Committee.The vote was 13-8 with all Republicans opposed except for Sen. Charles Grassley, R-Iowa.

The committee has 12 Democrats and nine Republicans.The bill has more expansive restrictions on derivatives than bank-reform legislation approved by the House in December. It would be more restrictive on derivatives than a Senate Banking Committee bill.

The provision to have banks with commercial units divest their entire derivatives units was introduced by panel chairwoman Blanche Lincoln, D-Ark. Large financial institutions who argue that divesting these units would limit their ability to lend to Main Street.Lincoln said her proposal would limit risky behavior by commercial banks. She added that small and regional community banks are spending “double or triple” the amount of money they normally would require to fund the Federal Deposit Insurance Corp.s deposit insurance fund “to cover some of the costs of the larger banks that are dealing in these risky businesses.

“This provision was not included in an Obama administration proposal, nor in bank reform legislation approved by the Senate Banking Committee last month and its unclear whether it would stay in the final bank reform legislation.Sen. Saxby Chambliss, R-Ga., said he was opposed to the measure because he believed it could appreciably hurt commercial bank incomes. He added that Treasury Secretary Timothy Geithner, Lincoln and officials at the Commodity Futures Trading Commission will have to sit down and “work through it.”

via Senate panel approves sweeping derivatives bill – MarketWatch.

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