Sen. Richard Shelby: Limiting Derivatives 'Might Be a Good Idea'

WASHINGTON, April 26, 2010— -- Republicans could support a Democratic proposal to limit trading of derivatives, Sen. Richard Shelby, R-Ala., said today on "Good Morning America."

"That might be a good idea," the ranking member on the Senate Banking Committee said. "I haven't seen all the details of it, but I can tell you when they use other people's money, especially when they rely on the taxpayer to do this kind of risk-taking, if something goes wrong they take the whole system down. We don't need this."

Derivatives, or "bets" on the future value of a stock, bond or commodity, have been traded in a murky marketplace largely free of government regulation in recent years. Under Democrats' proposal, nearly all derivative contracts would have to be traded on public exchanges and approved by clearinghouses.

"The fact is that there are now $600 trillion of derivatives that are trading in the dark, that we know virtually nothing about and are unregulated," White House economic adviser Austan Goolsbee said Sunday on "This Week."

But whether Republicans or the White House will support details of the derivatives measure being pushed by Sens. Chris Dodd, D-Conn., and Blanche Lincoln, D-Ark., is still unclear.

Some lawmakers appear concerned about the potential impact of proposed restrictions on less risky derivatives used by some manufacturers and companies.

"[The limits on derivatives] would suck more money out of the American economy than the stimulus injected into it," one Republican staffer close to the negotiations told ABC News. "It would negatively impact jobs, and would increase the cost of just about everything."

The proposal would still allow banks to trade derivatives with their own money, but they would be ineligible for backing by the taxpayer-funded Federal Deposit Insurance Corp. or access to special, low-interest rates from the Federal Reserve.

Meanwhile, Republicans and Democrats continue to negotiate a broader bill to over haul practices on Wall Street. The parties are conceptually "very close together" but a deal is unlikely to come today, Shelby said on "GMA."

Senate Democrats are expected later today to push for a vote on moving the measure to the floor for debate. But Republicans, who could filibuster the measure, say they're still trying to work out a bipartisan deal.

Democrats, who hold 59 seats in the Senate, would need 60 votes to override a Republican veto.