US REFORMS:KEY MEMBERS of both parties in the United States say they are close to agreeing the main elements of a bill to overhaul US financial regulations, raising the prospect that the senate could begin formal discussion of the landmark legislation early next week.

“I’m more optimistic than I’ve ever been,” said Richard Shelby, the lead Republican negotiator. “I think we can put a bill together pretty soon.” His Democratic counterpart in months of talks, senate banking committee chairman Christopher Dodd, agreed they were on the cusp of a consensus.

If no last-minute hurdles arise, Senate majority leader Harry Reid plans to hold a test vote on Monday. If he gets 60 or more votes, he could move ahead with formal debate on the bill, which among other things would create an agency to protect consumers against abuses in mortgages and other loans, set up a council of regulators to watch for risks to the financial system, and give the government power to wind down large, troubled financial firms.

The likely emergence of a bipartisan consensus is a notable departure from the fractious debate over healthcare legislation, which passed last month without a single Republican vote.

With both parties eager to claim that they are tackling financial excesses, Republicans have been focusing their objections on specific tenets of the legislation rather than on its overall thrust, allowing for more compromise.

The effort to build bipartisan support received a small but perhaps critical boost on Wednesday as the senate agriculture committee approved a measure that would establish oversight of the vast market for financial derivatives, with Republican Charles Grassley joining the Democratic majority.

The derivatives measure, proposed by committee chair Blanche Lincoln (Dem), could dramatically reshape several critical markets and deprive financial firms of a major source of revenue. The proposal will be added to the broader overhaul bill sponsored by Mr Dodd.

“This is no time for small fixes or tweaking around the edges,” Ms Lincoln told her colleagues, adding that “to contemplate inaction is unacceptable”.

While Mr Grassley expressed disappointment that the measure did not garner more Republican support, he said in a statement that he voted for it “because I think transparency is the right policy”. He added that Ms Lincoln’s draft “isn’t perfect” and that his vote did not mean he would support the overall bill.

Ms Lincoln’s legislation bans big Wall Street banks from trading derivatives, contracts that allow financial traders to make side bets on the direction of stocks, commodities and other assets. Derivatives trading, which aggravated the financial crisis, has roots in the trading of certain farm commodities, which is why the agriculture committees have some jurisdiction over it.

Treasury officials and some Democrats on the senate banking committee, which is also interested in derivatives, do not support the ban.

Ms Lincoln’s measure could prove more favourable to food manufacturers and other commercial firms than to banks, even though her staff made some late adjustments, at the request of treasury officials, to limit derivative trading by non-financial companies. The bill that emerged out of the banking committee is tougher on these companies. Politicians must resolve the differences between the proposals.

After Mr Grassley’s vote, some politicians say the passage of a sweeping regulatory bill is more likely than ever.

Republicans said progress on the bill was due to the unified position taken last week by all 41 Republican senators, who warned that they could vote as a bloc against the legislation.

Meanwhile, Democrats seized on Mr Grassley’s vote as a sign of growing consensus on the need for financial reform, given his central role in almost every piece of key domestic legislation approved with bipartisan support in the past decade.

In meetings with treasury secretary Timothy Geithner on Tuesday, several Republicans asked the administration to clarify how new regulations would affect community banks and small businesses and expressed opposition to a $50 billion “resolution fund” to wind down large, troubled financial firms. Republicans have said that this fund, although financed by the financial industry, would open the door to future taxpayer-funded bailouts.

Administration officials do not view these demands as burdensome. Originally, the administration also opposed the creation of such a fund. – (Washington Post service)