The House Financial Services Committee voted 43-26, with one Republican, Rep. Walter Jones of North Carolina, breaking ranks to vote for the creation of an exchange for derivatives, financial instruments that act as insurance policies against risk.
It was just such an insurance gamble that nearly brought down American International Group Inc., which sold credit default swaps as hedges in the housing market and needed a massive federal rescue as the subprime mortgage crisis intensified.
Committee Chairman Barney Frank said the committee will next debate creation of a Consumer Financial Protection Agency, a key policy shift proposed by the White House.
As the debate on derivatives moves to the House floor, the debate on bonus checks for bankers intensified Thursday with outgoing Bank of America Chief Executive Officer Kenneth Lewis announcing he would forgo his entire compensation package for 2009, The New York Times reported.
Lewis said he would return the pay he has received for the year, succumbing to pressure from the Treasury Department's pay czar, Kenneth Feinberg.
The gesture does not include a $53 million pension package Lewis is scheduled to receive that will be subject to a Treasury review.
But the news came with more revelations concerning Bank of America's purchase of Merrill Lynch.
Four sources said the legal firm of Wachtell, Lipton, Rosen & Katz advised Bank of America to keep information on losses at Merrill Lynch from shareholders. Attorneys also kept secret a deal to provide Merrill Lynch employees with bonuses without discussing this with the bank's management, the Times reported.
From a legal point of view, some experts said it matters not where advice originates. If a lawyer tells you to run a red light, a judge may find that more on the order of an amusing anecdote than a legally pertinent point.
In market news, the Dow Jones industrials shrugged off early losses Thursday to climb higher, holding its two-day vantage point above 10,000 points.
The DJIA closed at 10,062.94, up 0.47 on the day as the New York Federal Reserve and the Philadelphia Fed said manufacturing activity had increased in the past month.
In Asian markets Friday, the Nikkei 225 in Japan rose 0.18 percent, while the Hang Seng index in Hong Kong fell 0.31 percent. The Shanghai composite index lost 0.11 percent, while the Sensex in India added 0.74 percent.
In midday trading in Europe, the FTSE 100 in Britain lost 0.47 percent, while the DAX 30 in Germany lost 1 percent. The CAC 40 in France fell 1.07 percent. The pan-European DJ Stoxx 50 shed 0.6 percent.
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