I mentioned earlier that Blanche Lincoln’s passage of fairly strong derivatives legislation – with bipartisan support from Chuck Grassley – in the Senate Agriculture Committee does not mean that her legislation will simply be inserted into the final bill. Sen. Chris Dodd (D-CT) confirmed that today at a press event.

Sen. Chris Dodd (D-Conn.) hinted Wednesday that his committee would revisit new rules for derivatives markets passed today by a separate Senate panel.

Dodd, the chairman of the Senate Banking Committee, said he hadn’t seen the specifics of a proposal that Sen. Blanche Lincoln (D-Ark.) passed out of her Agriculture Committee this morning in a 13-8 vote.

But reports have indicated that the White House would like to walk back some of Lincoln’s strong language, which would force more disclosure on derivatives, and force firms to spin off their divisions which trade in the instruments.

“The Banking Committee has a major major responsibility on derivatives,” Dodd said during an appearance on MSNBC, adding that he’s been talking to members of his committee to gauge opinion on Lincoln’s measure.

I don’t know why people are talking about the Lincoln bill like it just got signed by the President. All accounts show that the President, or at least the Treasury Secretary, doesn’t even support it, and now Dodd is trying to claim territorial control. This is the exact opposite of how it played out in the House of Representatives, where Agriculture Committee Chair Collin Peterson significantly weakened the derivatives legislation that came out of Barney Frank’s FinReg bill. But in both cases, it appears the stronger language will get dropped.

The fact that Dodd claimed not to have seen Lincoln’s bill is disingenuous and a bit insulting.

Ultimately, we should fear and not look hopefully at the presumptive deal between both parties on FinReg, which is designed to get 70 or 80 votes. There’s no guarantee such a bill would be anything that the banks couldn’t live with. The far better policy would include not just the strong derivative trading rules but The Safe Banking Act of 2010, which would put strict size and leverage caps on financial firms. That’s a bill worth fighting for.

UPDATE: It’s frankly hilarious that the Majority Leader is sending out statements on the Lincoln bill, while Chris Dodd basically warms up his knife to chop it up. Someone’s being insincere here.

UPDATE II: In addition, Chris Bowers notes that Senate Democrats like Kirsten Gillibrand, Bob Casey and Debbie Stabenow inserted all sorts of parochial exemptions and carve-outs into the Lincoln draft.

Gillibrand has sponsored an amendment that would put up roadblocks to Lincoln’s language prohibiting banks from receiving FDIC deposit insurance or accessing the Federal Reserve discount window if they trade in swaps or securities-based swaps. The bill would effectively force JPMorgan Chase, Goldman Sachs, Citigroup, Morgan Stanley and Bank of America to spin off their swaps desks, which bring in billions of dollars in revenue annually. All except Bank of America are headquartered in New York, though its Merrill Lynch investment banking subsidiary is housed in the city.

The amendment would require the Commodity Futures Trading Commission to undertake a study on banks that had swap operations as to whether they pose a risk to the FDIC system and the impact of barring them from offering such services. The CFTC would then propose rules based on the findings, which would have to be approved on a two-third vote by a panel representing the Fed, Treasury, the SEC, the FDIC and the Office of the Comptroller of the Currency.

And it wasn’t just Gillibrand. Bob Casey secured permanent exemptions for pension funds that deal in derivatives. Debbie Stabenow of Michigan pulled some corporate home-state pork by securing exemption for Ford Motor Finance and other highly leveraged financial subsidiaries of manufacturing and homebuilding firms.