Will the proposal to force big banks to give up their derivatives trading units survive the final Congressional negotiations on what looks to be a historic reform package? It sure looks that way, to the chagrin of Wall Street, which is making its last stand this week.

As of now, the proposal, championed by Sen. Blanche Lincoln, seems to be gaining support, including support from various Federal Reserve executives across the system. Lincoln is angling to keep her controversial proposal in the final bill. Her current proposal essentially forces banks to choose between their OTC derivatives trading desks and access to government programs, such as emergency Fed lending.

Reuters reports that Lincoln is amenable to various tweaks to make the proposal more palatable to detractors. Her modifications would give "swaps entities," including big dealers and clearinghouses, access to emergency Federal Reserve loans or other "broad based federal assistance." She's also supporting a two-year transition period for banks that own swaps desks to comply with the new rules. Also, proposed swaps dealers could be affiliates of bank holding companies and separately capitalized. The Huffington Post notes that the Treasury Department, led by Timothy Geithner, continues to oppose the measure as bad for Wall Street.

For more:
- here's the Reuters article

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