Washington: The outlook for a plan to force banks to spin off their swap-trading desks dimmed on Wednesday when an Obama administration official said it was not a core Wall Street reform goal for the White House.
The plan — proposed by Democratic Senator Blanche Lincoln, who faces a re-election challenge — is one of the most controversial components of a Senate bill approved last week.
Major banks, whose profits and business structures could be hit by the Lincoln plan, are lobbying in Congress to kill it.
For the Obama administration, overhauling financial regulation is a top priority and involves certain key goals, but the Lincoln plan is not one of them, Assistant Treasury Secretary Michael Barr told reporters at a briefing.
"There are other provisions, like the Lincoln provision, that are not part of that core set of questions, and I think those are going to get worked through," Barr said.
When asked if the administration opposes the Lincoln plan, Barr said: "I think I've laid out pretty clearly what the president's core objectives are".
His comments could influence the debate set to get under way next month in a House-Senate conference committee that must combine the Senate bill with one approved in December by the House of Representatives, which excludes the Lincoln plan.
Analysts have said the Lincoln proposal will likely fade away as lawmakers combine the two bills.
"Lincoln has little choice but at some point to back off of her demands" to include her plan in the final bill, policy analysts Teddy Downey and Chris Krueger said in a report on Wednesday from investment research firm Concept Capital.
Democratic Representative Barney Frank, who will chair the House-Senate conference, said on Tuesday he disagreed with Lincoln's proposal.
She has vowed to put up a fight, however.
