Now the Real Work Begins – Two years after the economic meltdown and two weeks into a legislative stalemate, Republicans and Democrats yesterday agreed to proceed with debate on the Senate’s financial reform bill. Bloomberg reports that Republicans agreed to go forward after assurances that Democrats would remove from the bill a $50 billion industry-supported fund that would be used to wind down failing firms.

The first provision set for debate is the derivatives measure from the Agriculture Committee that would require commercial banks to get rid of any swaps-trading desks. Sen. Bob Corker (R-Ten.) has promised that the provision is “toast” because it “will be altered tremendously before a bill is passed.”

Numerous other provisions will be hotly contested, including bank proprietary trading, the Fed’s authority over certain banks, and consumer protection issues. If and when the Senate passes a financial reform bill, it must still be reconciled with the bill already passed by the House, which has its own take on the power of the Federal Reserve, consumer protection, and derivatives regulation.

Climate Legislation – Majority Leader Harry Reid (D-Nev.) is facing mounting pressure to abandon immigration reform and focus on climate legislation. More than 170 businesses signed a letter to Reid on the importance of placing a price on carbon through a complex bill that is facing a political impasse.

“Every day the Senate fails to pass comprehensive climate and energy legislation is a day our economy falls another step behind and delays our ability to create millions of new American jobs,” the businesses said in an open letter to Reid. “Now is the time to bring the parties together and finish what we started.”

Climate change legislation has taken a backseat to immigration consideration in the Senate, a move by Senator Reid that resulted in Senator Graham (R-SC) angrily withdrawing his support on the climate change proposal that he hammered out with Sens. Lieberman (I- Conn) and Kerry (D-Mass.). Kerry said over the weekend that “We all believe that this year is our best and perhaps last chance for Congress to pass a comprehensive approach.” Providing a glimmer of hope, President Obama has said that ‘There may not be an appetite to tackle immigration this year.”

Obama’s nominees for the Fed – President Obama nominated three new members to the Federal Reserve Board, and Senate approval is expected for all of them. Their confirmation will mean that President Obama will have appointed a majority of the seven members of the Federal Reserve Board. The new nominees are two economists and a lawyer: Janet Yellen (San Francisco Fed president), Peter Diamond (MIT economist), and Sarah Bloom Raskin (Maryland state banking regulator). According to the Wall Street Journal, these nominations aren’t likely to prompt a major shift in interest rate policy, but they would reinforce the Fed’s activist bent as policy makers overhaul the central bank to monitor and regulate risk-taking across the financial system, review compensation policies at banks, and tighten consumer regulation. All these responsibilities could change, however, if Congress passes financial reform proposals that deal with the authority of the Fed.

No SEC self-funding – Three days after the SEC filed its suit against Goldman Sachs, Sen. Charles Schumer (D., N.Y.), SEC Chairman Mary Schapiro, and five former SEC chairs lobbied various members of Congress to give the SEC the ability to fund itself with the fees it collects. Fees and fines collected by the SEC are often double the budget that Congress eventually awards. In 2007, the SEC brought in $1.54 billion in fees but secured just $881.6 million in funding from Congress.

The problem with annual allotments of cash from Congress, according to Chairman Shapiro, is that funding priorities shift, and the SEC can be short when resources are needed. On Wednesday, in testimony before a Senate appropriations subcommittee, Chairman Shapiro cited the Goldman case as an example of “the importance of the actions we brought.”

She didn’t get very far. The Wall Street Journal reported that the chairman was “peppered” with questions by both Republicans and Democrats about the agency’s recent problems — including reports that its employees viewed Internet porn on the job. The committee refused to agree to self funding for the SEC, but in reality, it probably had very little to do with recent events. Lawmakers traditionally feared losing oversight control of the regulator. As far back as 2002, the GAO had concluded that self funding by the SEC would mean that Congress and OMB would lose the ability to directly affect the budget and direction of the agency.

“I Will Not Comment…..BUT”- Citing Goldman’s bad behavior as justification for overall financial reform continues on a grand scale, with senior and former government officials piling on, even as they contend that they will not comment on the case. Asked about his views on Goldman, President Obama said, “I don’t want to comment on a pending case,” but he added that most Americans might find some of the behavior of the big financial institution out of whack with mainstream America. In a speech this week, former President Clinton said “he’s not sure” Goldman broke the law. Over the weekend, senior White House adviser Lawrence Summers said he would not comment on specifics of a fraud suit against Goldman brought by the SEC, but he added that it underscores “what is at the center of the president’s vision here.”

Forewarned is Forearmed – Sen. Ben Nelson (D-Neb), stung by suggestions that he may have had ulterior motives in helping block the Senate financial reform bill, issued a statement yesterday saying that “Washington is a cesspool of gotcha politics. It’s so out of control you can’t even shake hands in the hallway with a Future Farmer of America without people questioning your motives.”

While some attribute this to the public skewering that Nelson is getting in the press, perhaps the senator is really providing his colleagues with a very specific warning. According to the Web site of the Future Farmers of America, in the Summer of 2010, over 2,300 FFA members will travel to Washington, D.C. to attend the National FFA Organization’s Washington Leadership Conference, where they will “make new friends” and “visit with members of Congress. ” Doubtlessly, many of these 2,300 FFA members will be in hallways, and some may actually want to shake hands.

Senators need to know these things and may want to take appropriate measures. You can’t be too careful in a cesspool of gotcha.