U.S. House and Senate lawmakers introduced legislation thatwould allow more swaps trading to be conducted at banks that havefederal insurance by repealing part of the Dodd-Frank Act.

The bipartisan measures call for altering the 2010 law'srequirement that banks with access to deposit insurance and theFederal Reserve's discount window move some derivatives trades toseparate affiliates that have their own capital. Commodity, equityand structured swaps tied to some asset-backed securities would beallowed in banks under the legislation.

“People who object are going to say this allows banks to takehuge risks. Not true,” said Representative Jim Himes, a Democratfrom Connecticut who is among the bill's sponsors. “It's going toallow them to maintain inventory of the swaps that their customersneed to buy from them; just the same way when you go to buy a carfrom a car dealer.”

The legislation, which would need approval by Congress beforeheading to President Barack Obama for signature, is part of aseries of congressional efforts to amend or limit Dodd-Frank'sderivatives regulations. Dodd-Frank requires the Commodity FuturesTrading Commission and other regulators to write rules to reducerisk and increase transparency in the market after swaps helpedfuel the 2008 credit crisis.

Congressional efforts to change the law have so far failed towin passage in Congress, while the CFTC and other regulators seekto finish writing regulations.

The legislation was introduced today by Senators Kay Hagan, aNorth Carolina Democrat, Pat Toomey, a Pennsylvania Republican,Mark Warner, a Virginia Democrat, and Mike Johanns, a NebraskaRepublican. The House measure was introduced by Himes as well asRepresentatives Randy Hultgren, an Illinois Republican, RichardHudson, a North Carolina Republican, and Sean Patrick Maloney, aNew York Democrat.

Blanche Lincoln, an Arkansas Democrat who led the SenateAgriculture Committee during talks leading to the regulatoryoverhaul, sponsored the original so-called pushout provision as away to limit taxpayer support for risky derivatives trades. FedChairman Ben S. Bernanke and Sheila Bair, the former FederalDeposit Insurance Corp. chairman, opposed the provision and arguedthat it would drive derivatives trading to less-regulatedentities.

Representative Maxine Waters, the top Democrat on the HouseFinancial Services Committee, said last year that “legitimateconcerns have been raised about whether pushing a significantportion of swaps out of banks is the best way to mitigate againstfuture systemic risk.”

Americans for Financial Reform, a coalition including theAFL-CIO labor federation as well as other unions and consumeradvocacy groups, has opposed changes to the push-out rule.

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