Lawmakers worked into the night and came up with an oddly unsatisfying compromise on the two most contentious issues left in financial reform, with the final package voted upon at 5:30 this morning (ET). But hey, that was on C-SPAN, so eight people did probably get to see it. Transparency!

I’ve been telling you about the critical concessions in the last days of the FinReg conference committee. Let’s step back a second. This bill won’t end too big to fail. It won’t protect the country to enough of a degree in the event of the next crisis. But it could do some positive things that would head in that direction. It could balance the relationship between the country and the oligopoly of giant, unaccountable banks. It could give consumers a fighting chance to protect themselves from getting screwed repeatedly. And as a financial reform bill, it’s a pretty solid anti-predatory lending bill. Heck, I’d cleave those pieces off, support it as a standalone, and hail a good progressive victory.

Yesterday was a singularly unimpressive day at the Wall Street reform conference committee, with concessions and industry giveaways galore.

After the first week of the conference committee for Wall Street reform, I would call the verdict middling. Reformers have won some victories – all hedge funds and private equity firms will have to register with the SEC, credit rating agencies will be on the hook for standard liability for negligence, the Fed audit is more robust and ongoing.

Community banks (with assets all the way up to $50 billion dollars) could conceivably create a trading operation of their own, collect subsidies through the discount window and FDIC depositor insurance, and still engage in risky, speculative activity connected to all sorts of positions across Wall Street and the world. Hundreds of community banks of this size already engage in swaps trading. As a result, you could see the mega-banks either retain some of their business in well-capitalized subsidiaries, but the rest of it shift to somewhat smaller regional entities. If they aren’t properly capitalized, that could end up being just as bad a problem and foster more consolidation in the industry, without reducing risk.

Despite earlier reports of a new day for the embattled Section 716 provision of the Wall Street reform bill, which would force mega-banks to spin off their swaps trading operations, a compromise appears in the works. Blanche Lincoln has a lot to think about here. She supposedly won her Democratic primary on the strength of committing to “tough” new rules on Wall Street. A compromise like this would damage that argument significantly. It’s her move.

I wouldn’t get quite as optimistic as the Financial Times appears to be, but clearly this is a major development in the fight to force some legitimate, restrictive rules on the Wall Street casino. Volcker can offer a lot of cover to lawmakers if they choose to go through with keeping 716 in the bill, which nobody really wants to keep in, but which nobody wants to be the one to take out.

For the first time, I’d say there’s an outside shot of this happening. And it’s a real reform.

All four key areas identified by Mike Konczal of the Roosevelt Institute are under attack from the finance lobby. All four are crucial to get us closer to a safe and working banking system. Negotiations continue throughout the weekend.

The New York Times has a preview of the conference committee for the Wall Street reform bill, which the President would like completed by the time of the next G-20 conference in Toronto at the end of the month. They narrow down the whole negotiation to basically three proposals expected to be the major sticking [...]

We shouldn’t assume a perfect analogy between strengthening the Volcker rule and spinning off the swaps desks. Each has independent merit on its own terms, and one shouldn’t be traded away for the other.