With both houses of Congress now having passed a Wall Street reform bill, the action now moves to the conference committee. There, House and Senate negotiators will work to finalize a bill with new regulations for the financial services industry, and report back for a final Congressional vote. Annie Lowrey runs down the participants:

The conference committee is comprised of senior members of the committees that worked on the bills. In this case, that means the House Financial Services Committee, the Senate Banking Committee and the Senate Agriculture Committee — expect to see Rep. Barney Frank (D-Mass.), Rep. Spencer Bachus (R-Ala.), Sen. Richard Shelby (R-Ala.) and Sen. Saxby Chambliss (R-Ga.) as well as Dodd, Lincoln and others. The committee will prepare a “conference report,” splitting the difference between the House and Senate bills; the House and Senate approve the report and then, once signed by President Barack Obama, the bill becomes law. Frank, the head of the House Financial Services Committee, says he expects that done by July 4.

What can the conference committee change? It cannot introduce any new language to the bill. It can only adopt either House or Senate measures, or split the difference between the two. (That said, if the bill needed new language coming out of conference committee, there are ways to tack it on.)

As Michael Greenberger told me, “I’ve seen Phil Gramm do wonders in a conference committee.” If the committee really wanted to make changes, they could tack it on without a whole lot of trouble. Nobody ever got voted out of office because of changes in a conference committee.

The House and Senate bills are broadly similar in the abstract and quite different in the specific. The best of the House and the best of the Senate bills would still not produce an earth-shattering, world-historical piece of legislation, but it would lay an OK down payment on a safer, saner financial system. It would not break up the banks or truly end the casino on Wall Street to the extent that it could have.

Some of the bigger pieces, like resolution authority or shareholder say on pay, are pretty much the same in the bills, so that won’t change. And some Senators are already protecting their language, saying that the conference committee cannot differ much from their version. Let’s take a look at the major issues that might:

• The Volcker rule. Contrary to some media reports, there is a “Volcker rule” in the Senate bill; it essentially authorizes a study and tells the regulators to come up with something on it. This is but one of the 28 “studies” in the bill. The House bill passed before there was such a thing as the “Volcker rule” in the lexicon, so that’ll probably be the best we can get here. But we should at least get that.

• The Fed. The House bill has a full annual audit of the Federal Reserve; the Senate bill has a one-time audit of emergency lending facilities. In addition, the Senate bill allows a much bigger role for the Fed than the House version; in fact, the Fed gained more power while the Senate bill was on the floor. Some of that could be reeled in if the House language is adopted.

• Derivatives. Everyone expects the 716 provision, which forces the mega-banks to spin off their swaps trading desks, to be excised in conference. But Michael Greenberger believes something like it will be retained. The House’s derivatives piece is a mess and nearly useless, but Barney Frank has admitted a mistake on that front, and wants to preserve strong rules against derivatives, like in the Senate bill.

There’s also the matter of Maria Cantwell’s main complaint, that the mandate of all trades going through clearinghouses is unenforceable. Obama Administration officials appear to think this is a misreading of the legislation, and that Cantwell’s fix could have unintended consequences. So it looks unlikely that this loophole will be closed, if the major players in conference don’t think it’s a loophole.

• The CFPA. The House bill has an independent Consumer Financial Protection Agency with a compromised, exemption-riddled mandate. The Senate bill has a CFPA inside the Federal Reserve but without as many exemptions. Both bills include some pre-emption of state consumer financial protection laws, though the Senate bill preserves a role for the state Attorneys General in enforcement. A mix of both of these would be preferable. The Senate motion to instruct conferees will urge adoption of the auto dealer exemption from the CFPA, which is in the House bill, but given the Administration’s position there is almost no chance that conference will adopt that.

• Capital requirements. The House bill, in its strongest plank, has a hard 15:1 leverage cap for financial institutions. The Senate bill leaves capital requirements and leverage up to the regulators, although the Collins amendment does force bigger banks to have stronger requirements. The more distinct and specific the language is, the better. And the bank lobbyists will work hard to get the opposite, pure discretionary language.

• Credit rating agencies. There were two competing options for the rating agencies: end the conflict of interest by giving government more of a role, or end the rating agency process altogether. The Senate kind of opted for BOTH approaches, with the Franken amendment empowering an SEC bureau to assign initial ratings to qualified agencies, and the LeMieux amendment eliminating the qualified “seal of approval” for the rating agencies. Franken insists they’re compatible. The House has language similar to the LeMieux amendment. If possible, the Franken amendment should be retained.

• Mortgage underwriting. Both bills actually have some pretty good new standards for mortgage lending, banning the premiums for pushing borrowers into riskier loans, and forcing some ability to pay. This is likely to stay in the bill.

• Interchange fees. One of the toughest measures in the Senate bill changes the swipe fees charged to local merchants when their customers use debit cards. The bank lobbyists will have their knives out for this one.

There are probably a lot more provisions, but that’s what I can come up with right now.

UPDATE: Bloomberg reminds me of one piece I forgot:

Negotiators will have to reconcile differences over a pre- paid $150 billion fund created by the House bill to cover the government’s cost of unwinding a failing financial firm. The Senate bill requires the industry to repay the government only after a company collapses. Frank said yesterday he wouldn’t push to keep the industry-financed pre-paid fund in the bill.

“The two bills are very similar, and the House is ready to go to conference to work out the remaining issues,” Frank said in a statement. “I am confident that we can have a bill ready for President Obama’s signature very soon.”

Frank’s obviously showing that he’ll relent on this, which means that the banks would have to pay for their own bailouts after and not before a crisis emerges.