by Jeff Horwich
Arkansas Senator Blance Lincoln's Democratic primary win means a continued impact on the Senate's financial reform.
Senator Lincoln has been a vocal advocate of reforming derivatives trading. Derivatives are complex securities that get some of the blame for the financial crisis. Lincoln inserted a provision into the Senate financial reform bill that requires banks to spin off their derivatives trading desks. Banking analyst Chris Marinac of Fig Partners says for the big banks, those operations are worth billions. "If you are a large bank, Citigroup, JPMorgan, BofA etcetera, you are looking at the derivatives business as one of your big mainstays," he says.
Lincoln ran as an anti-Wall-Street crusader, and her derivatives trading ban was Exhibit A. The provision is not in the House financial reform bill. But Lincoln is on the conference committee now negotiating a final bill, and Marinac thinks the ban will survive. "I'd be surprised if it was removed completely. On this particular issue there's probably going to be some meeting in the middle."
At her victory speech last night, Lincoln carried on with her reform message: "The vote of this Senator is not for sale, and neither is the vote of the people of Arkansas," she said.
Senator Lincoln is on the conference committee that is resolving the differences between the House and Senate bills. The derivatives ban is not in the House version, but winning last night empowers Lincoln to move towards that end. On the other hand, Congressman Barney Frank, the House financial services chair, has signaled that he might want to soften or even eliminate the derivatives ban from the final bill.