Senator Blanche Lincoln, who has pushed a crackdown on Wall Street's use of derivatives, wants to give some banks a break from new capital requirements in the financial reform bill.
Lincoln believes a threshold for new bank capital standards should be high enough so that it does not apply to any banks in her home state of Arkansas, a spokeswoman said on Wednesday.
Among those banks is Arvest Bank Group Inc of Bentonville, Arkansas -- a bank predominantly owned by the Walton family of Wal-Mart Stores Inc.
These banks did not cause the near-collapse of our financial system and should not be punished for Wall Street's actions, her spokeswoman Marni Goldberg said in a statement.
The Wall Street Journal first reported the attempt to exclude Arkansas banks from the new capital requirements -- a proposal that could have forced Arvest to raise about $115 million in capital.
Lincoln's attempt to shield Arkansas banks comes as she tries to preserve her controversial provision to force banks to loosen their ties to their swaps trading desks.
The Senate-House of Representatives conference committee is due to debate Lincoln's provision on Thursday.
The committee is also still considering the capital requirement measure offered by Republican Senator Susan Collins.
Collins' measure would prevent bank holding companies from including trust-preferred securities when calculating their levels of capital reserves for regulators.
Some Senate Democrats have proposed that banks with less than $10 billion in capital should be exempt from the Collins provision, but Lincoln wants to raise the threshold to $15 billion, according to the Wall Street Journal report.
Arvest, which has met with Lincoln, a Democrat, is the only bank in Arkansas with assets between $10 billion and $15 billion in assets, the newspaper reported.
Arvest Bank Group and Wal-Mart did not return requests for comment on Wednesday.
Lincoln believes the threshold should be high enough to ensure no bank in Arkansas -- no matter its owner -- is subject to these new rules on existing capital, which would hinder their ability to generate lending for consumers and businesses at a time when access to credit is already difficult to come by, her spokeswoman Goldberg said.
Lincoln, who is part of the Senate-House panel, is the main author of new rules in the bill that would require most over-the-counter derivatives to move through clearinghouses and force banks to spin off dealing desks to affiliates.
Michael Greenberger, a law professor at the University of Maryland, believes Lincoln's threshold maneuver is unlikely to hurt Lincoln's credibility in derivatives negotiations, which are coming down to the wire this week.
This (derivatives) effort has gained her phenomenal admiration and respect, said Greenberger, a former Commodity Futures Trading Commission official.
She certainly went against the wind to craft what I believe to be the most vigorous of the four bills that came out of the various committees. She did it at a time of high political vulnerability, Greenberger said.
(Reporting by Roberta Rampton and Christopher Doering in Washington and Sakthi Prasad in Bangalore; Editing by Lisa Von Ahn and Tim Dobbyn)