July 8, 2009
Congressional activity on financial services regulatory reform will quickly
reach a fever pitch after the brief Independence Day recess. House Financial
Services Committee Chairman Barney Frank announced an ambitious hearing and
"markup" (committee approval/amending) process for July. At this time, the
Committee schedule is:
Thursday, July 9: Hearing on the role of the Federal Reserve in
systemic risk regulation
Friday, July 10: Hearing on the Adminstration's proposal on
Monday, July 13: Preventing unfair trading by government officials
TBD (ppd from July 13): Systemic Risk: "Too big to fail" and remedies
Tuesday, July 14: Oversight hearing on the Securities and Exchange
Wednesday, July 15: Hearing on financial regulation restructuring
Thursday, July 16: Hearing on financial regulation restructuring
Friday, July 17: Hearing on financial regulation restructuring
Tuesday, July 21: Hearing to receive the Federal Reserve's Monetary Policy Report
Wednesday, July 22: Hearing on financial regulation restructuring
Thursday, July 23: Potential markup date
Friday, July 24: Full committee hearing on financial regulation
Wednesday, July 29: Potential markup date
Thursday, July 30: Potential markup date
The Administration (including House Democrats) and Republicans offer
significantly different visions of financial services regulatory reform that
will be fought out through July and set the stage for debate in the Senate
following the congressional summer recess.
The Administration plan would:
- Upgrade the existing group of financial
regulators to avoid bureaucratic turf battles, modify the authority of the
Federal Reserve, U.S. Commodity Futures Trading Commission (CFTC), and
Securities Exchange Commission (SEC) among others, and create a Financial Services Oversight
Council, headed by the Treasury secretary and consisting of all major
- Create a national bank supervisor by merging the Office of the
Comptroller of the Currency (OCC) and the Office of Thrift Supervision.
- Increase oversight for "systemically important" banks and non-banks by
the Federal Reserve, which would include authority to monitor the market for
systemic risk and wind-down, or bail out potentially dangerous corporate
- Invest the SEC and CFTC with new powers to regulate the over-the-counter
derivatives market, establish a central electronic clearinghouse,
standardize retail financial products, and require advisers of hedge funds
and other private capital pools to report confidentially to SEC.
- Form a Consumer Financial Protection Agency to eliminate allegedly
deceptive or abusive practices in credit cards, mortgages, and other retail
House Republicans want to:
- Refocus the Federal Reserve toward monetary
policy, remove its regulatory functions toward other agencies, prohibit
future Federal Reserve bailouts for individual firms,
and rely upon the Federal Reserve solely as a provider of general liquidity.
- Prevent the government from using special wind-down procedures and
mandate that creditors take responsibility for losses through normal
- Form a Market Stability and Capital Adequacy Board, headed by the
Treasury secretary, to assess the financial system through government and
private sector experts.
- Require government sponsored entities to become independent of taxpayer
- Consolidate consumer protection from powers now held by
the Federal Deposit Insurance Corporation (FDIC), OCC, Over-the-Counter
Bulletin Board (OTCBB)
and National Credit Union Administration (NCUA).
- Assess derivatives markets and leverage for transparency and danger to
the system by a series of experts before enacting specific requirements.
- Eliminate the ability of a "favored few" credit rating agencies to
influence federal assessments of creditworthiness by removing references to
ratings within federal laws, and opening the ratings industry to greater
July's House debate will be a concentrated effort to effect the most sweeping
effort to increase regulation of financial services institutions since the Great
Depression. In addition to its impact on banks, financial services regulatory
reform will fundamentally change how all companies work with lenders and could
dramatically affect the availability of capital for business expansion.
and McGuireWoods LLP are available to
help you participate in the legislative debate before legislative proposals
become law. That is when you have the best opportunity to avoid adverse effects
on your business goals and plans. Given the anticipated schedule for debate, we
encourage all interested parties to contact us as soon as possible to discuss
how you can meaningfully participate in the congressional debate and seek to
have your concerns addressed.