WASHINGTON - House Banking Committee Chairman Rep. Henry B. Gonzalez and the committee's top Republican, Rep. Jim Leach are nearing agreement on a compromise derivatives bill that could be enacted later this year, committee aides said yesterday.
The compromise bill, which may be drafted by next week, will contain parts of derivatives bill that each lawmaker introduced earlier this year but will avoid the jurisdiction of other committees, in particular the House Energy and Commerce Committee, the aides said.
A bipartisan bill that stays within the jurisdiction of the banking committee could be enacted before the end of the session, the aides said.
The compromise bill, one of the aides said, will not contain Gonzalez's call for a tax or margin requirements on derivatives to curb their speculative use. The derivatives bill that Gonzalez, D-Tex., introduced earlier this month would have required the General Accounting Office to study the feasibility of imposing a tax or margin requirement on derivatives transactions.
But the proposal was strongly opposed by federal regulatory officials and derivatives market participants as well as Leach, R-Iowa.
The new bill also will drop Leach's proposal to create an interagency commission that would set comparable regulatory standards for derivatives products and participants.
Leach, in the derivatives bill he introduced in January, had called for the creation of a federal derivatives commission that would include not only the bank regulatory agencies but also the Securities and Exchange Commission and the Commodity Futures Trading Commission.
That proposal had ensured Leach's bill would be referred to the House Energy and Commerce Committee, which would not have had time to consider derivatives legislation this year, as well as the House Agriculture Committee.
The compromise bill will instead authorize the Federal Financial Institutions Examination Council to establish comparable capital, accounting, disclosure, and suitability standards for derivatives products and participants, an aide said. This is more in line with Gonzalez's bill, which had called for bank regulators to set uniform policies and standards for derivatives.
The council is an umbrella regulatory group for bank, thrift, and other regulators whose members include officials from the Federal Reserve Board, the Treasury's Office of the, Comptroller of the Currency and Office of Thrift Supervision, and the Federal Deposit Insurance Corp.
Leach is considering the possibility of drafting a separate bill that would ensure the derivatives activities of insurance companies are supervised by federal regulators, the aide said.
The bill introduced by Leach in January had called for the SEC to "supervise" the derivatives activities of any financial institution not regulated by a federal hank regulatory agency, or the Commodity Futures Trading Commission. That would. have included insurance companies, which generally are regulated by state commissions.
The compromise bill will include Gonzalez's proposal for the Treasury secretary convene a meeting with the Group of Ten ministers and governors to examine the adequacy of international regulation and supervision of derivative products, the aide said.
It will also include Leach's proposal for the chairman of the Federal Reserve Board of Governors to encourage other governments and international organizations to adopt comparable standards for derivatives.
The two lawmakers have not yet worked out how the compromise bill will be introduced, the aides said. The new bill could be introduced as a substitute for the Gonzalez bill or it could be released as a committee print without a bill number that could be passed by the committee before being introduced.
The new derivatives bill will be introduced or released in some form in May. The committee plans to take the derivatives bill up after a pending housing bill. The housing bill is expected to be passed by the full committee in early June and by the House before the July recess.