The House was poised to vote out possibly as early as Wednesday evening legislation calling for sweeping financial regulatory reforms, including regulation and transparency of the over-the-counter (OTC) derivatives market for the first time. Passage of the bill in the Senate, however, wasn't expected to be as easy.

The bill (HR 4173) moved to the House floor only hours after House-Senate conferees took the unusual step of reopening the conference to make adjustments to attract more support for the bill in the Senate (see Daily GPI, June 30). It's very unlikely that Democrats will be able to send the financial reform package to President Obama before leaving for their Fourth of July recess, as had been expected. The death of Sen. Robert Byrd (D-WV) upset the schedule.

The legislation, which comes nearly two years after the collapse of banks and Wall Street investment houses, calls for OTC derivatives transactions to be cleared in clearinghouses and traded on major exchanges in an effort to restrict excess speculation in markets. But it provides a clearing/trading exemption for end-users who use derivatives to hedge their commercial risk rather than for speculative purposes.

The financial reform package did not clarify whether companies that meet the end-user exemptions are required to post margins for swaps, said energy analyst Christine Tezak of Robert W. Baird & Co. House Financial Services Chairman Barney Frank (D-MA) promised to clarify Congress' intent (prior to the House vote) that the Commodity Futures Trading Commission should not set margin requirements on entities that meet the definition of commercial end-users. However she said that was "cold comfort" to energy companies.

Rep. Gary Peters (D-MI), a conferee, said companies that "solely use these [derivatives] contracts as a way to provide consumers with lower cost goods...are exempted from clearing and margin requirements." Frank agreed with the assessment.

"I'm mostly pleased with the energy derivatives portion" of the more than 2,000-page bill, said Paul Cicio, president of Industrial Energy Consumers of America.

The financial reform package faces a rockier road in the Senate. The passing of Byrd means the Senate has one less Democrat to support the bill, which was brought to the floor last month only when three Republicans joined Democrats to provide the 60 votes needed to end debate. His death is expected to push back consideration of the bill in the Senate to the week of July 12.

"Byrd's death [has] left Senate Democrats with 58 members in their caucus, two shy of the 60 needed to end debate on the bill [and bring it to the floor]. The two Democrats who opposed the legislation in May -- Russ Feingold of Wisconsin and Maria Cantwell of Washington -- appeared unlikely to reverse their stance, leaving Senate Majority Leader Harry Reid (D-NV) with just 56 likely Democratic supporters," CQ Today reported (see Daily GPI, May 20).

Democrats will need the support of a few Republicans to get the conference report through the Senate. However, the handful of Republicans who voted in favor of the bill in late May are said to be reconsidering their position (see Daily GPI, May 24).

Sen. Scott Brown (R-MA) said he is undecided. "I appreciate the conference committee revisiting the Wall Street reform bill and removing the $19 billion bank tax. Over the July recess, I will continue to review this important bill," he said. Sen. Susan Collins (R-ME) indicated that she would vote for the bill after the revisions were made in the reconvened conference.

Two other Republicans -- Sens. Olympia Snowe of Maine and Charles Grassley of Iowa -- voted for the regulatory reform bill in May, but it's uncertain whether they will break ranks again and vote with Democrats.

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