WASHINGTON — Sens. Joe Manchin, D-W.Va., and Roger Wicker, R-Miss., introduced legislation Monday to address concerns about how collateralized debt obligations backed by trust-preferred securities are treated under the Volcker Rule.

The legislation would exempt community banks with less than $50 billion in assets from having to shed CDOs backed by Trups held when regulators released the Volcker Rule last month.

"Unless the Volcker Rule is further clarified, some community banks in Mississippi and across the country will see severe and immediate losses under the requirement regarding investments in CDO-Trups," Wicker said in a press release. "It could have a negative impact on economic growth and recovery in our nation's communities. This legislation would protect small banks that had these investments before the rule was finalized."

Republican lawmakers in both the Senate and House have also introduced legislation to solve the issue, grandfathering previously held Trups-backed CDOs at banks of all sizes.

Regulators, meanwhile, are expected to release an interim final rule on the issue by Wednesday, and are said to be weighing both a broad exemption and a narrower fix for small community banks with less than $15 billion in assets.

Manchin and Wicker in their press release argued that a more limited exemption would keep the biggest banks from taking advantage of the exemption.

"While other legislation has been introduced to fix the Volcker Rule, these other bills would apply to all banks, including Wall Street banks, and would also apply to other types of risky securities owned by the largest Wall Street banks, such as all types of collateralized loan obligations (not just Trups)," the lawmakers said in the release. "These provisions would allow the biggest banks to continue to own billions of dollars in the types of securities that led to the 2008 crisis."

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