From Bloomberg News | U.S. lawmakers on Thursday are expected to decide whether banks should pay for their funerals before they happen or afterwards as they craft a final rewrite of financial regulations.

The most sweeping overhaul of Wall Street rules since the 1930s would allow regulators to step in and dismantle troubled financial firms before they threaten the stability of the economy, in an effort to avoid a repeat of the 2007-2009 market meltdown.

But negotiators from the House and the Senate will have to resolve a standoff over whether the financial industry should have to pay for the process now or after a firm runs into trouble.

Behind the scenes, Democrats were also looking for a way to ease
concerns about a controversial proposal to limit banks’ risky trading
activities. The latest plan would tighten Federal Reserve rules to
ensure that banks would keep lucrative swap-dealing desks sufficiently
separated from core bank operations.

With congressional elections looming in November, Democrats aim to
harness widespread anger at Wall Street and iron out the differences
between the House and Senate bills by June 24.

That would give President Barack Obama an example for other world
leaders to follow at a G20 summit of rich nations in Toronto, which
starts on June 26. Europe is aiming to tackle similar reforms, but the
United States is far ahead.

The U.S. financial rules rewrite would establish new consumer
protections, crimp big banks’ profits and saddle the industry with
tighter regulations in a bid to avoid a repeat of the financial crisis,
which sparked the the worst U.S. recession in generations.

It would give regulators clear authority to seize unstable firms before
they threaten the economy. During the recent meltdown, regulators had no
roadmap to limit the damage.

At the height of the crisis, regulators provided $182 billion to bail
out American International Group but let Lehman Brothers declare
bankruptcy, and steered Bear Stearns and Merrill Lynch into mergers with
other financial firms. They pressured Congress into authorizing $700
billion to bail out Wall Street firms, spurring widespread voter anger.

Lawmakers want to ensure that banks, not taxpayers, foot the bill next
time. A bill passed by the House in December would set up a $150 billion
fund to cover costs for liquidating troubled financial firms, paid for
by firms with more than $50 billion in assets.

The Senate bill, passed last month, would cover those costs by selling
off the troubled firm’s assets. Other firms would have to chip in if the
asset sales didn’t cover the bill.

The banking industry does not want to pay any fees up front.

House Democrats on the committee negotiating a final bill also plan to
push for a requirement that large banks cannot be leveraged by more than
a 15 to 1 ratio, and want to kill a proposal that would require secured
creditors to accept some losses when a bank fails.

The panel also plans to resolve whether the head of the Federal
Reserve’s New York branch should be directly appointed by the president,
rather than its board of directors. Fed officials say the move would
compromise the central bank’s independence, and Democrats in charge of
the process have reached a preliminary agreement to drop the idea.

In negotiations so far, lawmakers have stopped short of their most
aggressive proposals.

They dropped a proposal to examine the Fed’s interest-rate decisions,
and postponed a plan that would have upended the credit-rating business
by installing a clearinghouse between debt issuers and the agencies that
rate their offerings.

The committee next week is scheduled to tackle consumer-protection plans
and whether to limit fees on debit-card transactions, as well as the
proposal on limiting risky trading.

Once a final bill is agreed, it must be approved by the full House and
Senate before Obama can sign it into law.