An all-night negotiation session on Capitol Hill has delivered a clearer picture of the financial-regulatory reform likely to emerge from Congress. U.S. Sen. Blanche Lincoln, D-Ark., said she will accept a compromise put forth by Rep. Collin Peterson, D-Minn., that would allow banks to continue trading foreign exchange and interest-rate swaps, as well as instruments deemed as "hedging for the bank's own risk." The compromise would still force banks to spin off their trading of other derivatives. Democrats also came to an agreement on a modified version of the "Volcker rule" that would allow banks to invest 3% of their tangible equity in hedge funds and private-equity funds.

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