Financial Services Regulatory Reform – July Schedule

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 derivatives regulation
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 Commission
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 restructuring
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 federal regulators.
  • 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 collapses.
  • 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 products.

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 bankruptcy procedures.
  • 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 funding.
  • 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 competition.

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.

McGuireWoods Consulting 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.