WASHINGTON — Sens. Bob Corker and Mark Warner, key players in crafting a bipartisan regulatory reform bill, acknowledged Wednesday what has become increasingly clear as negotiations have dragged on: striking a deal has proved more tedious and complicated than expected.
Still, both lawmakers reiterated that a deal with Senate Banking Committee Chairman Chris Dodd is within reach. Corker, a Tennessee Republican, said much of what the media has said about a compromise bill is wrong, and that observers should withhold judgment until lawmakers reveal a final deal.
"I've noticed in the last couple of days there have been numbers of leaks regarding the discussions, some of which are inaccurate, or pretty much all of them," Corker said at a National Journal event in Washington. "The goal is to get something out pretty soon so that during this time before Easter recess we'll have the ability to probably move something out of the Banking Committee, so if everyone would kind of just chill. There are a lot of things that are being said that are just not accurate and this is complicating discussions."
In particular, Corker indicated that lawmakers are wrestling with how best to regulate derivatives, a key part of the bill which has largely been publicly ignored in favor of other issues like supervision and consumer protection.
"This is complex stuff," Corker said. "Look at just derivatives. It's arcane, really difficult stuff that we're working through."
Corker and Warner, who is a moderate Virginia Democrat, offered a few new details on how the bill would establish a resolution regime for systemically important firms.
They said the bill would try to put significant "speed bumps" in the way of preventing systemically significant companies from getting too risky in the first place with a focus on higher capital requirements, living wills and contingent capital that can be converted to common equity.
The two lawmakers said they believe their bill will be tougher on the financial industry than the House regulatory reform bill that passed in December.
In the event of failures, Corker and Warner said most institutions would be forced into bankruptcy, making resolution of a large financial corporation an extremely rare and far worse option because it would wipe out most creditors and shareholders. "We are going to I think ensure that the financial industry is not going to want resolution to take place," Warner said.
Corker said that a key difference with the administration has been that he and Warner oppose giving the administration carte blanche power to bail out or rescue a failing institution. Corker said the administration is finally softening its resistance to his and Warner's objections. He said the Treasury should have to come to Congress before bailing out several institutions. "What people should recognize is that if there is another systemic meltdown like we saw, I'm sorry, the policy is the administration is going to have to come back to Congress," Corker said.
Warner and Corker clarified that the administration would not need to go back to Congress to handle one individual failure of a large, systemically important firm. "If an institution or two or three fail, then in essence there is a mechanism here to deal with it," said Corker.
He added that the systemic-risk portion of the bill would include the creation of an institute proposed by Sen. Jack Reed, to synthesize systemic-risk information.
Other lawmakers continued to raise concerns with the bill on Wednesday. Sen. Charles Schumer, D-N.Y., said he has issues with how the bill appears to handle consumer protections. Dodd and Corker are discussing putting a consumer division in the Federal Reserve Board. "I'd much prefer to see it independent," than housed at the Fed, Schumer said.
Sen. Judd Gregg, R-N.H., also said lawmakers are working to address concerns about a provision added originally by the Treasury Department that would subject derivatives contracts to Section 23A of the Federal Reserve Act, which limits inter-affiliate transactions. Bankers have said the provision would prevent institutions from properly managing risk, a claim the administration has denied. "It's an issue. We have to make sure we do it right," he said. "We are going to address it."