By Catherine Dodge Feb. 6 (Bloomberg) — Senator Jack Reed , a senior Democrat on the Banking Committee, said he is “optimistic” Congress will overhaul U.S. financial regulations even as the head of the panel, Senator Christopher Dodd , said negotiations with Republicans on a bill were blocked. “We’ve made a lot of progress,” Reed, of Rhode Island, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt ,” airing this weekend. “There are some sticking points, but at some point in the process you just have to go ahead and start taking votes,” Reed said. Connecticut Democrat Dodd said yesterday he has “reached an impasse” with the committee’s ranking Republican, Richard Shelby of Alabama, on drafting a bill that supports President Barack Obama’s proposed revamping of financial rules. Dodd told his staff to write a measure that he will present later this month. The U.S. House passed its version of the bill in December. Senate Democrats can’t pass legislation without Republican support because the arrival of Massachusetts Republican Senator Scott Brown , who was sworn in this week, ended the Democrats’ 60-vote supermajority that lets them overcome stalling tactics. Reed also said passing a measure taxing corporate executive bonuses would be “challenging.” Consumer Agency Among the most contentious proposals, and a priority for Obama, is creating a Consumer Financial Protection Agency. Shelby has said he’s against a stand-alone agency. Instead, he has said he would support including it as part of a national bank regulator. Reed, 60, said he prefers a separate agency for consumer protection. If that can’t pass, he said it could function as part of the Treasury Department. “What you have to do is ensure that they have the autonomy to be proactive,” he said. The financial-services industry opposes the consumer agency more than any other provision in the Obama plan and has lobbied members of Congress to defeat it. Dodd has indicated he may consider dropping the agency and replacing it with a division in another federal agency, people familiar with negotiations said last month. Reed said he agrees with a plan proposed by former Federal Reserve Chairman Paul Volcker that would prohibit banks from owning proprietary-trading operations, hedge funds and private- equity funds. The debate over the “Volcker Rule,” introduced by Obama on Jan. 21, has gotten bogged down in details over definitions of proprietary trading, he said. ‘Real Economy’ “We have to make sure that the financial system serves the real economy: loans to small business, loans to commercial enterprises, good consumer lending at reasonable cost,” Reed said. “That, frankly, is not happening.” Exempting energy companies, airlines and other so-called end users of derivatives from reporting their trades to a clearing house would create “a significant loophole,” Reed said. In addition to narrowing the end-user exemption, Reed said, “there has to be a data repository that reports all trades — over-the-counter trades as well as trades that are cleared.” On curbing executive compensation, Reed said it would be “challenging” to pass a plan to tax bonuses that was introduced this week by Democratic Senators Barbara Boxer of California and Jim Webb of Virginia. The plan calls for a one- time 50 percent tax on bonuses of more than $400,000 at financial firms including New York-based Goldman Sachs Group Inc. and Charlotte, North Carolina-based Bank of America Corp. that received U.S. bailout money. ‘More Challenging’ “There is a sentiment there,” he said. “Will it translate into legislation? I think that’s more challenging.” On the issue of where to hold the trial of Khalid Sheikh Mohammed , accused mastermind of the Sept. 11 attacks, Reed, also a member of the Armed Services Committee, said a military base, such as his alma mater, the U.S. Military Academy at West Point, “could be considered.” Obama and Attorney General Eric Holder announced in November a plan to hold the trial in federal court in lower Manhattan, near the site of the World Trade Center. The Justice Department is examining other potential venues after lawmakers and New York officials raised concerns about holding it in the city. Asked about the Obama administration’s call to lift the ban on openly gay service members in the military, Reed, a former Army Ranger, said a policy could be ready “within this year or next year.” Obama said in his State of the Union address last month that he intended to reverse the rule. Defense Secretary Robert Gates said on Feb. 3 that the Pentagon needs a year to study the potential impact of lifting the ban to avoid mistakes. To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net .
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Reed Says He’s `Optimistic’ U.S. Financial Overhaul Will Overcome Impasse
