The House bill effectively gives state regulators veto authority over foreign trade agreements negotiated by the Treasury Department, and allows courts and Congress to pay a role in the process.

State legislators and the National Association of Insurance Commissioners have written several letters to conferees supporting the weaker Federal Insurance Office contained in the House bill, but nine insurance trade associations wrote a letter to conferees supporting the Senate version's ONI.

The industry letter argues that the Senate version only allows the Treasury Department to exercise "narrow preemption" of state insurance measures in order to effectuate international regulatory agreements on prudential insurance matters "under clearly defined circumstances and with appropriate due process."

The bill's surplus lines reform section aims to eliminate the current state-by-state system of making reports and tax payments by excess and surplus lines companies and managing general agents, and instead have the state in which the insured is domiciled collect and distribute reports and monies.

Officials of the House Ways and Means Committee confirmed that neither the imposition of a "bank tax" nor the controversial tax on offshore insurers currently being debated will be used to help fill a $20 billion budget gap over 10 years that the Congressional Budget Office says the new financial services bill will create.

The committee is now working on legislation that would fill the budget gap.

Specifically, the CBO projected that the bill would increase budget deficits by $12.9 billion over the next five years, and $19.7 billion over the next 10 years.

The bank tax, proposed in President Barack Obama's 2011 budget, would apply to bank, thrift and insurance companies with more than $50 billion in assets.

It would not apply to certain holdings, such as customers' insured savings, but would apply to assets in risk-taking operations.

The levy would raise an estimated $90 billion over 10 years, according to the White House.

The offshore tax issue deals with H.R. 3424, legislation proposed by Rep. Richard Neal, D-Mass. It would deny tax deductions for reinsurance premiums paid to offshore affiliates.

The Ways and Means Committee would not confirm why the Bermuda tax would not be used as a revenue-raiser, but several congressional sources said the provision "just isn't ready."

The conferees plan to hold three sessions next week and three sessions the subsequent week, and plan to work Saturday, June 26, in order to ensure that a final bill is on the desk of President Obama by Independence Day.