Senate Financial Regulatory Bill
On Friday, Senate Banking Committee Chairman Christopher Dodd indicated he would introduce a new financial regulation reform bill next week. The markup for the bill would therefore likely occur during the week of March 1-5. Dodd and Republican Senator Bob Corker, who announced last week that the pair would be working together on the bill, are spending this week together on a Congressional trip to South America. While there is bipartisan agreement on major issues including resolution authority, consumer protection remains one of the largest areas unresolved. The role of the Federal Reserve in the new financial regulatory scheme also remains a point of contention. In a change from the bill he introduced in November, Dodd is now likely to propose creating a council of regulators to monitor emerging risks, which would be chaired by the Treasury Secretary.
Fed Raises Discount Rate
On Thursday, the Federal Reserve Board of Governors raised the discount rate (the rate charged to banks for direct loans) by a quarter-point to 0.75 percent, effective Friday, February 19, 2010. It was the first increase in the discount rate since June 2006. The change was sooner than most analysts had predicted which indicated to many investors that the Fed would tighten monetary policy in the near future. Banks have generally been reducing their reliance on the discount rate over the past year. As of February 17th, banks had borrowed $14.1 billion as opposed to a year ago when borrowing stood at $65.1 billion.
