I warned you last week that you could see the Democrats’ “tough on Wall Street” stance on derivatives reform expire today — along with Blanche Lincoln’s primary challenge. Sure enough, with three minutes to spare, Sen. Chris Dodd (D., Conn.) filed an amendment that would delay the implementation of Lincoln’s toughest measure for two years while it is “studied” (in other words, while the American people forget how angry they are at Wall Street):

Sen. Christopher J. Dodd (D-Conn.) has offered a last-minute compromise to resolve one of the few remaining disputes over the Senate’s landmark bill on financial regulation: a disagreement over derivatives that has sent shudders through Wall Street.
Three minutes before the noon deadline for amendments, Dodd filed a proposal addressing language in the bill that would force the nation’s largest banks to stop trading nearly all kinds of derivatives — a move that would dramatically reshape several critical markets and deprive the firms of a major source of revenue.
Under the compromise, the Senate would keep the sweeping provision, but delay its implementation for two years while it’s studied and quite likely kill it at the end.
Dodd’s plan calls for submitting the derivatives rules, which were initially proposed by Sen. Blanche Lincoln (D-Ark.), for study by a federal council of regulators. Several key members of the council and Treasury Secretary Timothy F. Geithner, who could have final say under the compromise, have serious reservations about forcing banks to get out of the derivatives business altogether.
The derivatives ban advocated by Lincoln, chairwoman of the Senate Agriculture Committee, has previously won support from the full Senate and has remained part the overall financial regulation bill despite stiff opposition from the Obama administration, regulators, some lawmakers and the nation’s biggest banks. Bank executives have warned about the consequences of barring derivatives trading at their firms while regulators and other administration officials say the prohibition could drive the business into the shadows, precisely what the legislation is trying to prevent.
Lincoln, who has been locked in a tough primary battle in Arkansas and spent Tuesday campaigning in her home state, has pushed to keep the provision as part of new rules to establish oversight of the vast derivatives market. The provision would prevent banks that deal in swaps, a type of derivative, from tapping into aid programs at the Federal Reserve or the Federal Deposit Insurance Corp. Lincoln has said repeatedly that her effort seeks to ensure that “banks get back to the business of banking.”

This is not to endorse the Lincoln language — as Spruiell could tell you much more ably, derivatives desks did not cause the crisis. This is merely to point out that the only piece of the Dodd bill Wall Street really doesn’t like was opposed by the Obama administration, federal financial regulators, and most of Congress, and is likely to be effectively stripped from the bill at the earliest possible political convenience.