Since the Financial Reform bill passed the Senate, it will now go to conference committee to resolve the differences between the House and Senate versions. The New York Times has a graphic on the two bills, describing some of the differences and what is not in either version of the legislation, spreadsheet style.

Currently we do not know who the conferees are. They will be determined on Monday. Senator Kaufman:

The final Wall Street reform bill can't drift too far from the version passed Thursday night by the Senate, Sen. Ted Kaufman (D-Del.) warned Friday.

While there is no certainty in how conferees from the House and Senate might address differences between their two bills, Kaufman said, substantial changes could endanger the 60-vote majority needed to pass the bill in the upper chamber.

"There isn't a lot of wiggle room in the conference, in terms of changing what's in the Senate bill," Kaufman said Friday morning on CNBC.

Senator Kaufman is referring to the rule conferees have the ability to introduce new additions into an already passed bill. But now (rule changed in 2007), someone can object and the Senate must "re-pass" the bill by a 60 vote margin. That said, assuredly they can remove provisions without a 60 vote margin due to the differences between the two bills. If it's already in one passed version of the bill in some form, the conferees are free to change it, as long as the scope of the change is in the House or Senate version of the bill.

In other words, the House bill has an audit the Federal Reserve section completely. The Senate version is much weaker. Therefore the conferees can adopt the Senate version and remove the House version. The same is true with derivatives. The House version has more loopholes, which exempt almost all derivatives from exchanges and regulation in actuality, than the Senate version (which has no consequence to violations). Therefore, the conferees can strip out the Lincoln amendment, the derivatives section of the Senate version and adopt the House version. All of this can be done without the required 60 votes in the Senate, instead an up or down vote.

Meanwhile Wall Street is gunning to kill any reforms on derivatives.

Wall Street banks, surprised that the Senate’s financial overhaul passed with language that could curtail their derivatives trading, are now hoping the rule can be killed in Congressional negotiations.

Lawmakers have been telling Wall Street the Senate provision would fail, “but it passed, so people are nervous,” said Paul Miller, analyst at FBR Capital Markets in Arlington, Virginia. “The problem is that everybody in Congress wants it out, but nobody wants the responsibility of taking it out.”

The Senate bill demands that companies like Bank of America Corp., JPMorgan Chase & Co., and Goldman Sachs Group Inc. conduct derivatives trading outside of their commercial banking units that benefit from federal support. They could still escape the impact if the rule is stripped out during a conference committee to resolve differences between the Senate bill and one passed by the House of Representatives in December.

“There’s a reasonable chance it will remain only because anti-bank sentiment has increased since the House bill was passed,” said Robert Litan, vice president of research and policy at the Kansas City-based Kauffman Foundation, which promotes entrepreneurial economic growth. While the likelihood is hard to handicap, he said, “it’s certainly not zero.”

Raj Date, a former Deutsche Bank managing director and now executive director of New York-based research group Cambridge Winter Center for Financial Institutions Policy, said he expects the rule to get watered down in conference.

Bear in mind the bill does not have the Volcker rule (sorry fellow bloggers but a study is not a law!), does not stop too big to fail, does not limit the powers of the Federal Reserve, in fact expands them. Most importantly, the derivatives reform legislation is incomplete and this is the stronger Senate version.

So, while everyone and their brother is rushing out to write a piece on the Financial reform bill, this site will hold off and see what's going down in conference committee. To date, we know a manager's amendment cannot be introduced, yet it has happened and is possible to completely change a bill in conference committee.

^{Reference, Library of Congress:}

^{The House conferees are strictly limited in their consideration to matters in disagreement between the two Houses. Consequently, they may not strike or amend any portion of the bill that was not amended by the other House. Furthermore, they may not insert new matter that is not germane to or that is beyond the scope of the differences between the two Houses. Where the Senate amendment revises a figure or an amount contained in the bill, the conferees are limited to the difference between the two numbers and may neither increase the greater nor decrease the smaller figure. Neither House may alone, by instructions, empower its managers to make a change in the text to which both Houses have agreed.}

^{When a disagreement to an amendment in the nature of a substitute is committed to a conference committee, managers on the part of the House may propose a substitute that is a germane modification of the matter in disagreement, but the introduction of any language in that substitute presenting specific additional matter not committed to the conference committee by either House is not in order. Moreover, their report may not include matter not committed to the conference committee by either House. The report may not include a modification of any specific matter committed to the conference committee by either or both Houses if that modification is beyond the scope of that specific matter as committed to the conference committee.}