US Congress faces more hard work on Wall Street overhaul

US President Barack Obama held a strategy session Friday with the two key lawmakers tasked with shepherding a sweeping financial regulatory overhaul bill to his desk in a matter of weeks.

Obama, who has made enacting the measure his top domestic goal, met in private with Senate Banking Committee chair Chris Dodd and House Financial Services Committee chair Barney Frank, both Democrats.

Dodd and Frank are set to be the point men when the Senate and House of Representatives start work on merging their rival versions of the complex legislation into a compromise version both chambers can approve.

"I understand the urgency for the financial stability of the country in getting this done quickly," Frank said after the talks, stressing "it is hard for me to think this is going to take us more than a month."

"There's not a great deal of difference. We need to take the best parts of both bills and marry them together and present our colleagues in both chambers with our final product," said Dodd.

The two versions of the overhaul both aim to curb Wall Street excesses blamed for the global financial meltdown of 2008, but differ in their approach to several key issues.

Both dramatically expand the government's ability to dissolve a failing firm whose collapse threatens the broader economy, whereas financial titans deemed "too big to fail" commanded lavish taxpayer-funded bailouts in the 2008 crisis.

The House bill would hit up big financial firms to fill a 150-billion-dollar fund to break up collapsing companies, looking to spare taxpayers from footing the bill.

But after Republicans complained that this might lead regulators to save, not liquidate, big banks, the Senate changed its approach so that a firm would be dissolved first, and the cost recovered later from the financial sector.

The House bill creates an unprecedented consumer financial protection agency, independent of the US Federal Reserve, and notably exempts auto dealers who provide loans to their customers, while the Senate bill places the agency under the Fed's umbrella and does not exempt auto dealers.

A first battle on that front could occur Monday, when senators are due to name their delegates to the talks with the House and will also consider an initiative by Republican Senator Sam Brownback to spare auto dealers.

It was not clear when the House would appoint its delegates.

Both bills emphasize a need for greater transparency at the US Federal Reserve, and the House would give the investigative arm of the US Congress to power to audit some of the Fed's monetary policy decisions as well as emergency lending to struggling firms.

The Senate would let the investigators review emergency loans, but not monetary policy moves.

The two measures are also apart on how, and how far, to curb so-called "proprietary trading" by big deposit-holding banks and lucrative, largely unregulated trading in complex financial instruments called derivatives.

And even inside the Senate, lawmakers are split on both issues, potentially endangering the Democratic push to wrap up the process before the July 4 congressional break.

Senate Agriculture Committee chair Blanche Lincoln, a Democrat, authored a measure in the bill that aims to force big banks to end their derivatives work, a step forcefully opposed by big banks and their army of lobbyists.

Dodd introduced a measure gutting Lincoln's proposal -- but then pulled back from bringing it to a vote.

Aides said the future of Lincoln's provision could turn on her political fortunes: She faces an uncertain path to a new term in November mid-term elections, starting with a June 8 run-off against a Democratic rival.

Another battle could brew over enacting the so-called "Volcker rule" -- named after former Fed chairman Paul Volcker -- to stop banks from holding customers' deposits at the same time as making investments for their own gain, so-called proprietary trading.

Democratic Senators Jeff Merkley and Carl Levin sought its inclusion in the main legislation, but failed, and expressed only guarded optimism late Thursday that parts of their proposal might be added to the final compromise bill.

Curbs on "prop trading" went into effect after the Great Depression. In 1933, the Glass-Steagall Act prohibited commercial banks from underwriting corporate securities, or acting as brokerages, but it was undone in 1999.