One last sticking point was whether Ford, Caterpillar, John Deere and Boeing would be able to use financial instruments known as derivatives to hedge risks.

U.S. Rep. Gary Peters, D-Bloomfield Township, lobbied his Senate colleagues to get them to accept his language that would allow firms that have a captive finance company — Ford owns Ford Motor Credit — to continue to use the financial instruments.

“They aren’t speculating,” Peters said Friday in an interview. “They are not part of the casino-type atmosphere that we saw on Wall Street. What they are doing is legitimately hedging business risk. They don’t try to make profits on crazy derivative synthetic strategies.”

Derivatives are financial instruments whose values are determined by the future price of a commodity or other financial entity.

Some Democrats wanted to give the manufacturers two more years to use the derivatives.
Peters said it was “clear there are folks who are legitimate end users” of derivatives. He noted that Ford would use them to hedge against swings in the price of steel or the value of foreign currencies.

If the effort had failed, Ford would have been at a competitive disadvantage with foreign automakers, Peters said, and would have had to set aside more money to account for the risks.

Congress is regulating the $600 trillion derivatives market. Banks will be forced to spin off or end operations that trade most derivatives.

The new consumer-finance agency, housed in the Federal Reserve, would oversee mortgages, credit cards and other consumer financial products in the wake of the biggest economic meltdown since the Great Depression.

But dealers’ role in arranging loans for customers would not be subject to supervision, enforcement or rule-writing by the so-called Consumer Financial Protection Bureau.

Instead, the agency would oversee the financial institutions including Ally Financial that extend credit to auto customers, as well as the few dealers that provide direct financing themselves.

Dealers would continue to fall under the supervision of the Federal Trade Commission and state authorities.

The conference agreement represents a hard-fought victory for NADA over a powerful coalition that included President Barack Obama, the Pentagon, senior Democratic lawmakers, military families, consumer advocates and civil-rights activists.

“The goal all along was to keep a new, untested government agency from creating burdensome and unnecessary rules that would make it harder and more expensive for car buyers to access auto credit,” NADA spokesman Bailey Wood said today.

The House’s lead negotiator, Rep. Barney Frank, D-Mass., conceded last night that he didn’t have the votes to get the supervision over dealers that he and other congressional leaders wanted.

Consumer advocates acknowledged that dealer lobbying carried the day, but said car buyers would be the losers.

“Billions of dollars in consumer financial transactions will escape the scrutiny of this important new agency,” said Jack Gillis, spokesman for the Consumer Federation of America and author of The Car Book.

Ally Financial, the renamed parent of automotive financier GMAC, is one of the many financial institutions that would fall under the purview of the new consumer agency. It extends credit to General Motors and Chrysler customers.

“While we have not seen the final language of the financial provisions yet, we understand both Ally Financial and dealers would be subject to regulation in making auto financing available to consumers,” according to a statement released by Ally today.

“We hope that ultimately the new rules will enable both the lender and dealer to best assist consumers as they finance their vehicles.”

Ford Motor Credit Co. also will be affected.

“The regulations still have to be written. But we already have stringent processes that ensure our customers are treated fairly and the financing process is understandable,” said an e-mail statement from Ford Credit. “We support efforts that ensure available consumer financing and well-functioning credit markets.”

Obama has opposed this dealer exemption, reported Automotive News.

“The president vowed to fight efforts to weaken this bill and find ways to strengthen it, which is why he opposes carve-outs like this one that would exempt auto-dealer lenders from new consumer protections,” White House spokesman Matthew Lehrich said in a statement today.

He added: “While we knew that we’d not win every fight, the president will soon sign into law historic Wall Street reform that includes the strongest consumer protections ever.”

House and Senate negotiators hope to wrap up a compromise measure today that they will send to the full House and Senate for a final vote next week before it goes to Obama.

House and Senate negotiators have agreed on proposals that will largely exempt dealers from oversight by a consumer-finance agency to be housed in the Federal Reserve.

Negotiators for both chambers have agreed that the new agency will neither supervise dealers nor enforce rules affecting them.

A Senate proposal pending in conference would give the new agency authority to write some rules affecting dealers. The Federal Trade Commission, which now oversees dealers, also would be able to write some rules without customary reviews.

Obama took the unusual step of personally speaking out against the dealer exemption in May.

It “guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers,” the president said in a May 12 statement. “Unfortunately, countless families – particularly military families – have been the target of these deceptive practices.”

The National Automobile Dealers Association today urged the 43 House and Senate negotiators to oppose the Senate version and vote for the House approach.

The dealer lobby, which has largely gotten its way thus far, received a boost today from Sen. Sam Brownback, R-Kan. He urged opposition to Senate changes “that would radically alter the original intention of a sensible bipartisan compromise.”

Both the Senate and House proposals would exempt dealers from supervision and enforcement by a new consumer finance agency lodged in the Federal Reserve — in defiance of a request by President Barack Obama to avoid special exclusions.

But the Senate plan put forth by Sen. Chris Dodd, D-Conn., would allow the agency to write rules for dealers that involve credit discrimination, credit disclosure, financial privacy, and credit-report accuracy, the NADA letter said.

The Senate proposal “disregards the goal of the vast majority of Congress, which is to maintain the existing oversight which has provided millions of Americans an affordable way to finance a vehicle,” NADA spokesman Bailey Wood said.

The Senate version also would allow the Federal Trade Commission, which would continue to oversee dealers, the authority to waive certain reviews in writing rules that bar unfair and deceptive practices.

A spokesman for Dodd, the lead Senate negotiator as chairman of the banking committee, did not immediately respond to a request for comment.

The 43 conferees are due to vote this afternoon on whether to adopt the House or Senate approach, Wood said.

Last month, Brownback’s proposal to exempt dealers from oversight by the new agency was approved 60-30 as a nonbinding recommendation to Senate negotiators.

The Brownback proposal’s language was incorporated by House negotiators this week into the House conference proposal.

The consumer finance agency is part of a broader financial regulation package that has passed both the House and Senate.

The legislation agreed on in conference, likely by the end of this week or early next week, would then be submitted to the full House and Senate for final approval before being sent to Obama for his signature.

In December, the House voted to exempt the nation’s 17,000 auto dealers from oversight under a new Consumer Financial Protection Agency. The Senate included the dealers — but separately approved a non-binding resolution calling on its leaders to agree to the House language on auto dealers.

Rep. Bill Owens, D-N.Y., sent a letter to Rep. Barney Frank, the chairman of the House Financial Services Committee, urging him to exempt the dealers.

“Many auto dealerships are locally owned and operated and played no part in creating the crisis on Wall Street that caused millions to lose their jobs,” Owens said. “During tough economic times when our local dealers are trying to expand their business and create jobs, they do not need new and uncertain regulations from Washington.” The dealer provision hasn’t yet been discussed by the negotiators for the House and Senate, said Rep. Gary Peters, D-Bloomfield Township, who is one of the House negotiators. He said he “doesn’t have a good sense” of whether the dealers will be dropped from the bill.

Auto dealers praised the effort.

“Consumers in upstate New York and across the country will ultimately benefit from this effort to preserve dealer-assisted financing as an affordable, convenient and competitive option for financing a car or truck,” said William McBride Sr., president of Bill McBride Chevrolet and Subaru of Plattsburgh, N.Y. “Maintaining dealer-assisted financing increases access for consumers and decreases the cost of an auto loan.”

But the White House and the Pentagon strongly back regulating auto lending, saying it’s necessary — especially to protect young service members from exploitation from unscrupulous auto dealers.

No Michigan members of Congress signed the letter circulated by Owens.