The Merkley-Levin proposal would target major Wall Street banks, such as Goldman Sachs and Morgan Stanley, which became bank holding companies in 2008 at the height of the financial crisis.
Industry lobbyists and congressional aides have suggested, however, that Goldman Sachs and Morgan Stanley could shed their bank holding companies and in the future escape the outright ban. They would still be subject to potentially higher capital requirements set by the Fed.
The reform is designed to tamp down on highly leveraged firms that did not have enough capital to weather the financial crisis.
"It is a very important amendment," said Heather McGhee, director of the Washington office of Demos, a liberal-leaning advocacy group. "It is a crucially important amendment to safeguard our economy from reckless gambling that does not benefit the vast majority of businesses."
The pending bill would leave it up to a council of regulators to restrict proprietary trading.