Wall Street reform: The hang-ups

WASHINGTON (CNNMoney.com) -- With President Obama pushing hard, the Senate is on the verge of taking up a hotly disputed Wall Street reform measure.

On Monday afternoon, the Senate will vote on whether to begin work on the bill - although there's no assurance that Democrats will have the votes to get started.

Should the debate begin, there's broad bipartisan agreement to prevent bailouts, increase capital cushions at banks, protect consumers and shine a light on complex financial contracts now traded in the shadows.

But Democrats and Republicans disagree about a lot of things, ranging from how to prevent bailouts to how to empower a new consumer regulator.

"Details matter here," Sen. Richard Shelby, R-Ala., said Thursday. "What is the main goal? To do it right. Don't just do it, but do it right."

Shelby, the ranking Republican member of the Senate Banking Committee, has been negotiating for months with panel chairman Christopher Dodd, D-Conn., on the remaining differences. Republicans want to wait until the two reach an agreement. Democrats say it's time to move forward.

"If we don't have the chance to even get there, to start this process, you can't ask the two of us to resolve this for everyone," Dodd said Thursday.

Here are some of the remaining conflicts that could determine the fate of the overall bill:

The proposal: Create a council of regulators who keep an extra eye on firms whose failure would threatens the economy. Empower the Federal Deposit Insurance Corp. to step in and take down big Wall Street banks, tapping a pot of money that banks pay into.

What the critics say: New unwinding powers and the resolution fund suggest an implicit guarantee of future government intervention. It could also create conflicts over how to pay creditors.

Possible solution: Democrats indicate that they may be willing to drop the $50 billion fund, and instead tax banks after the FDIC has stepped in to unwind a Wall Street bank. The House reform proposal, passed late last year, has a $150 billion fund. Those and other differences would have to be resolved through a conference between House and Senate leaders before President Obama could sign a bill into law.

The proposal: Make bets on complex financial contracts known as derivatives more transparent, pushing them onto clearinghouses and exchanges. Make those involved post collateral, backing up the bets.

What the critics say: Too much regulation will hurt U.S. businesses, such as airlines and farmers, who benefit from making such bets to shed the risk of swings in prices and interest rates. And it will push the industry to make trades overseas.

Possible solution: A final Senate bill could end up looking a little more like the House version, which allows those big broker dealers who make contracts with airlines and farmers to duck tougher rules.

The proposal: Create a new independent consumer financial protection regulator. The Senate measure houses the regulator inside the Fed but gives it strong powers to make its own rules, such as capping credit card fees and fees for paying down mortgages early. New rules can get vetoed by a council of regulators. The House goes further with a stand-alone agency.

What the critics say: If the consumer regulator's rules are too tough and cut too deeply into banks' balance sheets, the banks could become unstable and insolvent.

Possible solution: This piece is among the most contentious, having previously caused a breakdown in talks between Dodd and Shelby. So solutions are anyone's guess. There could be some effort to ensure the consumer regulator works more closely with existing regulators.

The proposal: The Volcker rule, named for former Federal Reserve chairman Paul Volcker, limits the size and scope of banks' investment activities. The rule prevents banks from owning hedge funds and trading on their own accounts. The Senate Agriculture panel enhanced this effort on Wednesday by passing a bill that would force banks to spin off their swaps desks that make these trades.

What the critics say: Big banks that got back on their feet quickly and paid back their TARP bailouts after the last financial crisis did so in large part from their investment activities. Preventing such activities could push firms to move their business to other countries.

Possible solution: Dodd's bill gives an oversight panel of regulators the power to set rules banning proprietary trading, but adds that regulators have to do it. Lawmakers could leave more of the decision to limit banks' investment activities in regulators' hands.