Analysis: What’s in the financial reform agreement?

Early this morning, the conference committee reconciling the House and Senate versions of financial regulatory reform approved final language for the legislation on a party-line vote following a marathon 20-hour negotiating session. A flurry of changes were made to the legislation last night, including the addition of an exemption to the Volcker rule and a weakening of Sen. Blanche Lincoln’s (D-AR) provision requiring banks to spin-off their derivatives trading desks. Below is a comparison of the House and Senate versions of the bill, as well as what ultimately ended up in the conference report:

Provision	Senate Bill	House Bill	Reconciled Bill
Derivatives Exchanges and Clearing	Forced almost all derivatives trading onto exchanges and through clearinghouses, with narrow exemptions for non-financial end users.	Forced derivatives trading onto exchanges and through clearinghouses, but with wide exemptions for end-users, including financial companies.	Senate version
Derivatives Spin-Off	Forced banks to spin-off their derivatives trading desks into a separately capitalized entity.	Did not include a spin-off provision.	Forces banks to spin-off some derivatives trading activity (commodities, energy, metals, agriculture, equities and below-investment-grade credit default swaps) but keep trading related to interest rate swaps, foreign exchange swaps, credit, gold and silver, investment-grade credit default swaps and “any transaction used to hedge risk.”
Volcker Rule	Directed regulators to study and then implement a ban on proprietary trading.	Allowed regulators to ban proprietary trading at systemically risky firms.	Implements a stronger ban proposed by Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR), but with an exemption sought by Sen. Scott Brown (R-MA) that allows banks to invest up to three percent of their Tier 1 capital in risky hedge funds and private equity firms.
Consumer Protection Agency	Included a Consumer Financial Protection Bureau, housed within the Federal Reserve, with an independent director and rule-writing authority. It could be overruled by a majority vote of the Financial Stability Oversight Council, which is composed of bank regulators.	Included a stand-alone Consumer Financial Protection Agency with an independent director and rule-writing authority.	Senate version
Auto Dealer Exemption	Did not exempt auto dealers from oversight by the new consumer regulator, but the Senate did pass a “motion to instruct” encouraging conferees to approve the House language.	Exempted auto dealers from oversight by the new consumer regulator.	House version
Resolution Fund	Included resolution authority funded by an after-the-fact assessment on large financial institutions. Any extra money needed to unwind a firm can be fronted by the Treasury Departent.	Included resolution authority pre-funded by an assessment on institutions with more than $10 billion assets. The fund could grow no larger than $150 billion.	Senate version