Senate Finance Deal Given 80%-Plus Chance by Warner

U.S. Senator Mark Warner said there’s a “north of 80 percent” chance that lawmakers will reach a bipartisan compromise on a financial overhaul bill that faces a test vote in the Senate next week.

Republican and Democratic negotiators will produce a deal that will ultimately get the support of “a number” of Republicans, Warner, a member of the Senate Banking Committee, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” being broadcast this weekend.

“It’s awful hard, 18 months after the meltdown, not to be in favor of financial reform,” said Warner, a Virginia Democrat. “There’s still a high possibility -- probability -- I’d say north of 80 percent -- that we get a bipartisan deal.”

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, is negotiating with Alabama Senator Richard Shelby, the banking panel’s top Republican, to incorporate Republican ideas into Dodd’s legislation, which is scheduled for a procedural vote on April 26.

Republicans oppose the current version of the measure, which is based on a proposal by President Barack Obama and is aimed at preventing a repeat of the $700 billion in taxpayer- funded aid extended to companies including Bank of America Corp. and Citigroup Inc. as a result of the 2008 financial crisis.

Photographer: Jay Mallin/Bloomberg

U.S. Senator Mark Warner, a Democrat from Virginia, listens during a television interview in Washington. Close

U.S. Senator Mark Warner, a Democrat from Virginia, listens during a television interview in Washington.

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Photographer: Jay Mallin/Bloomberg

U.S. Senator Mark Warner, a Democrat from Virginia, listens during a television interview in Washington.

Two of the thorniest issues still to be worked out legislatively are derivatives oversight and new government powers to liquidate failed financial firms in an orderly way.

Exemption

The derivatives measure approved this week by the Senate Agriculture Committee “doesn’t do as well” as the Dodd bill at creating an exemption “that’s not abused” to let corporate end-users trade outside of regulated exchanges, Warner said. End-users are businesses such as oil companies and airlines that use derivatives to hedge operational risks.

“There’s a way to get to a middle ground,” he said.

Also, Republicans have raised objections to a provision in the Dodd bill that would set up a $50 billion industry-supported fund to cover the cost of liquidation, arguing it would set up a permanent bailout of Wall Street banks. Democrats say the reserve fund would be paid for by the industry and is a better alternative to having taxpayers cover the cost after a company collapses.

Warner, who crafted the reserve-fund language with Senator Bob Corker, a Tennessee Republican, said he didn’t agree that the fund would lead to more bailouts. Even so, he said he is willing to support having the financial industry instead pay for the dissolution of a firm after it collapses.

Paid by Industry

“So pre- or post- is not really that important at the end of the day as long as you make sure that whatever dollars you use will ultimately be paid for by the industry,” said Warner, 55.

One solution could be setting up a pre-funded trust in which each bank’s share is reflected as an asset on its balance sheet, Warner said in an interview later. “They have a self- interest to make sure resolution isn’t over-used,” he said.

During the “Political Capital” interview, Warner expressed skepticism that a provision taking away the Federal Reserve’s power to oversee small banks would remain in the Dodd bill.

“Some of the smaller banks that have been regulated by the Fed in the past will say ‘no, we want to keep the Fed,’” Warner said. “Is it something you’re going to fall on your sword on? Probably not.”

Warner said he didn’t think the timing of the government’s lawsuit against Goldman Sachs Group Inc. was politically motivated. Some Republicans have said the Securities and Exchange Commission’s decision to file the case on April 16 was intended to stoke public anger at Wall Street before the Senate debate on the Dodd bill.

Federal cases “usually are worked on for a long period of time,” Warner said.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net.

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