Derivatives Dividing Democrats

The Wall Street Journal - WASHINGTON—Ahead of a pivotal vote Monday on financial regulation, divisions are emerging among Senate Democrats over how best to strengthen oversight of the market for the exotic financial instruments known as derivatives.

All 59 members of the Democratic caucus are still expected to stand together Monday on whether to begin action on legislation overhauling regulation of the financial system. But the differences underscore the complexity of the coming debate, and will have to be resolved later this spring.

At issue is whether the derivatives oversight bill written by Senate Agriculture Chairman Blanche Lincoln (D., Ark.) will be folded into the broader regulatory overhaul. The Lincoln measure would beef up oversight and increase transparency of the market, and includes a proposal that could push Wall Street banks to spin off their derivatives trading operations.

"I want to make sure that without a doubt...I have a privileged ability to be able to be a part of this bill," Sen. Lincoln said in a statement forwarded Friday by her office.

Sen. Chris Dodd (D., Conn.), who is leading the broader overhaul effort, has pushed a competing proposal that would increase oversight but not push banks to spin off derivative operations. He's opened negotiations with Sen. Lincoln.