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Financial Services Update

Department of Labor Weekly Unemployment Report Released 

On Friday, the Department of Labor announced that the unemployment rate fell in 18 states during the month of July. The Department also said the jobless rate rose in 14 states and stayed the same in the remaining 18 states. Nationwide, the unemployment rate remained stuck at 9.5 percent in July. New York and Massachusetts reported strong job gains with Massachusetts reporting that it added 19,200 private-sector jobs in July, the largest monthly gain for any state in more than 20 years.　

Housing Conference Foreshadows Fight Ahead 

On Tuesday, the Departments of Treasury and HUD invited a cross section of housing and banking industry participants to Washington for a summit on the future of the housing finance industry. The industry representatives voiced overwhelming support for the government to maintain a large role in supporting the nearly $11 trillion mortgage market. Participants expressed support for a new program that would allow homeowners to refinance their mortgages at lower interest rates through Fannie Mae and Freddie Mac, although Treasury officials indicated they have no plans to enact such a program.

 Treasury Secretary Timothy Geithner pledged “fundamental change” to the structure of Fannie and Freddie, but saying that the two companies were not the only cause of the financial crisis. While Geithner did not offer a specific strategy for reforming the two mortgage giants, he said that the government could remain involved in the mortgage system by guaranteeing that investors in mortgage-backed securities receive fair compensation, even when borrowers default. Representative Spencer Bachus (R-AL), the Ranking Republican on the House Financial Services Committee, accused the Administration of excluding critics of the Administration from Tuesday’s conference. In a letter to Secretary Geithner, Bachus said the housing conference appears to be “laying the groundwork for a predetermined policy outcome that looks uncomfortably similar to the failed status quo.” 

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , , , , , , . By Matt Jessee - Friday, August 20, 2010

Financial Services Update

Romer to Leave Council of Economic Advisors

On Thursday night, the White House announced that Dr. Christina Romer, chair of the Council of Economic Advisors, will leave September 3rd to return to the University of California at Berkley. Some are speculating Friday’s announcement of the 9.5% July unemployment rate may have contributed to her resignation since Romer predicted the 2009 stimulus bill would help keep the unemployment rate under 8 percent. Sources indicate that Council of Economic Advisors member Austan Goolsbee appears to be the front-runner to succeed Romer as Chairman. There is also speculation that Romer is under consideration to replace Janet Yellen as president of the Federal Reserve Bank of San Francisco. Yellen was recently nominated to be Vice Chairman of the Federal Reserve.

July Jobs Report Released

On Friday, the Department of Labor released the July jobs report showing that nonfarm payrolls declined by 131,000 jobs and the unemployment rate remained steady at 9.5 percent. 71,000 private-sector jobs were added last month while 143,000 temporary workers on the 2010 census were let go. The June data were revised down significantly showing that payrolls fell by 221,000, more than the 125,000 drop previously reported, as only 31,000 jobs were added in the private sector. Taking into account revisions to prior months this year, the U.S. economy added an average of less than 100,000 jobs a month in the first seven months of 2010.

Tax Cut Showdown In September

On Wednesday, Senate Majority Leader Harry Reid (D-NV) announced that the Senate would vote on a package of expiring tax cuts when the Senate returns in September. It remains unclear whether Senate Finance Committee Chairman Max Baucus (D-MT) will hold a committee markup on the bill or it will be brought directly to the floor. Moderate Democratic Senators Kent Conrad (D-ND) and Evan Bayh (D-IN) have called for an extension of all the “Bush” tax cuts, including those benefiting individuals earning more than $200,000 and families earning over $250,000 annually. If the Senate passes such an extension, it would likely set up a showdown with the House where a majority of Democrats do not want to extend tax cuts for all individuals. Some Democrats on the Ways and Means Committee have discussed a proposal to repeal the Bush tax cuts for the top tax brackets but delay the collection of those revenues until 2012.

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , . By Matt Jessee - Friday, August 6, 2010

Financial Services Update

Financial Regulatory Reform Bill Becomes Law 

On Wednesday, President Obama signed into law the Dodd-Frank Wall Street Reform Act at a ceremony at the Ronald Reagan Building. Speculation and controversy surrounded which bank CEOs were to be invited. Among those invited were Citigroup CEO Vikram Pandit, Morgan Stanley CEO James Gorman, Bank of America CEO Brian Moynihan, and UBS Americas CEO Robert Wolf. However, those not invited included among others　JPMorganChase CEO James Dimon or Goldman Sachs CEO Lloyd Blankfein.

Issa Questions SEC Over Goldman Settlement Timing 

Last Friday, House Reform and Government Oversight Committee Ranking Member Darrell Issa (R-CA) sent a letter to SEC Chairman Mary Schapiro requesting an inquiry into the timing of the agency’s $550 million settlement with Goldman Sachs. On Thursday, SEC Inspector General David Kotz responded to Issa and confirmed that the Commission would open a formal inquiry and investigate communication between the SEC and Goldman employees. 

The President Signs into Law Unemployment Benefits Extension 

On Thursday, President Obama signed into law legislation passed by the House on Thursday and the Senate on Wednesday that would restore unemployment benefits to an estimated 2 million Americans without jobs. The $34 billion measure was the subject of a fierce partisan battle in Congress over whether the cost should be offset with spending cuts or tax increases to avoid enlarging the federal deficit. The vote in the House was 272 to 152, with 31 Republicans joining 241 Democrats in supporting the measure. The final vote in the Senate was 59-39. Among other issues, the bill also extends through 2012 a number of business tax credits and changes multi-employer pension funding requirements. 

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , . By Matt Jessee - Friday, July 23, 2010

Financial Services Update – Issue 26

June Jobs Report

On Friday, the U.S. Department of Labor reported that the economy added 83,000 private-sector jobs in June but lost 125,000 jobs overall because of the loss of temporary workers hired by the federal government to help with the census. The unemployment rate, based on a different survey, declined to 9.5 percent in June from the previous 9.7 percent.

Financial Regulatory Reform Bill

On Tuesday, House and Senate conferees met after Senator Scott Brown (R-MA) said he opposed the conference report because of a $19 billion “bank tax” on large financial firms and hedge funds used to cover the bill’s costs. Brown had provided key support to pass the Senate version of the legislation, and his opposition, along with the death of Senator Robert Byrd (D-WV), could have left Senate Democrats short of the 60 votes needed to end debate on the conference report. After reconvening, the conference voted to strip out the bank tax and fund the measure by ending the Troubled Asset Relief Program and increasing premium rates to raise the Federal Deposit Insurance Fund’s (FDIC) minimum reserve ratio from 1.15 percent to 1.35 percent by Sept. 30, 2020. However, banks with consolidated assets less than $10 billion would be exempt from the increased premiums. Based on Congressional Budget Office and FDIC estimates, the extra assessment is projected to raise more than $5 billion and would likely be implemented by extending the current premium rates for an extra five quarters, beginning the last quarter of 2017.

On Wednesday, the House passed the financial regulatory reform conference report on a 237-192 vote. Three Republicans crossed the aisle to support the measure, while nineteen Democrats voted against the bill. The conference report now goes to the Senate, which plans to take up the measure the week of July 12th. However, Senator Brown still remains uncommitted despite the removal of the bank tax. In a statement Wednesday, Brown said “I appreciate the conference committee revisiting the Wall Street reform bill and removing [the tax]. Over the July recess, I will continue to review this important bill.” Among the other three Republican supporters of the bill’s Senate version, Senator Susan Collins (R-ME) and Senator Olympia Snowe (R-ME) have now indicated they will vote to end debate on the conference report. However, Senator Charles Grassley (R-IA), the fourth Republican to support the original Senate bill, remains uncommitted. Late Thursday, Senator Maria Cantwell (D-WA), who voted against the Senate bill, announced she would support the conference report leaving Senator Russ Feingold (D-WI) as the only Democrat opposed to the measure.

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , . By Matt Jessee - Friday, July 2, 2010

Financial Services Update – Issue 22

Financial Regulatory Reform Bill

On Tuesday, Sen. Blanche Lincoln (D-AR) won her state’s primary runoff over Lt. Gov. Bill Halter (D-AR), overcoming what many considered long odds for her campaign. Lincoln’s loss could have jeopardized the provision she sponsored to the Senate-passed bill that would require banks to spin off their derivatives desks. Those same sources are now predicting that Lincoln’s victory makes it much more likely for the provision to survive the conference committee. Supporters, including Senate Majority Whip Dick Durbin (D-IL) and Sen. Tom Harkin (D-IA), rallied behind Lincoln saying her primary election win Tuesday boosted her bargaining power. House Speaker Nancy Pelosi (D-CA) has also privately indicated support for Lincoln’s language. However, Lincoln’s provisions face opposition from the Administration, the Treasury Department and the Federal Reserve. In a meeting with House Democrats Wednesday, Securities and Exchange Commission Chairman Mary Schapiro expressed concern over Lincoln’s proposal. Shapiro argued that it could give a “false sense of security” to the marketplace.

 On Wednesday, Pelosi appointed Democratic conferees to the committee including Barney Frank (D-MA), the chair of the Financial Services Committee; Agriculture Committee Chairman Collin Peterson (D-MN), Energy and Commerce Committee Chairman Henry Waxman (D-CA), Judiciary Committee Chairman John Conyers (D-MI), Oversight and Government Reform Chairman Edolphus Towns (D-NY), and Small Business Committee Chairwoman Nydia Velazquez (D-NY). The non-chairmen level House Democrat appointees include Paul Kanjorski (D-PA), Maxine Waters (D-PA), Carolyn Maloney (D-PA), Luis Gutierrez (D-PA), Mel Watt (D-PA), Gregory Meeks (D-NY), Dennis Moore (D-KS), Mary Jo Kilroy (D-PA), Gary Peters (D-PA), Leonard Boswell (D-PA), Bobby Rush (D-PA), Elijah Cummings (D-PA), Heath Shuler (D-PA). House Minority Leader John Boehner (R-OH) also named GOP members including Spencer Bachus (R-AL), ranking member on the House Financial Services Committee; Joe Barton (R-TX), ranking member of the House Energy and Commerce Committee; Rep. Sam Graves (R-MO), ranking member of the House Small Business Committee; Darrell Issa (R-CA), ranking member of the House Oversight and Government Reform Committee; Frank Lucas (R-OK), ranking member of the House Agriculture Committee; and Rep. Lamar Smith (R-TX), ranking member of the House Judiciary Committee. The non-ranking member level House Republican conferees include Ed Royce (R-CA), Judy Biggert (R-IL), Shelley Moore Capito (R-WV), Jeb Hensarling (R-TX), and Scott Garrett (R-NJ). 

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , . By Matt Jessee - Sunday, June 13, 2010

Financial Services Update – Issue 21

June 4, 2010 Issue 21 

Financial Regulatory Reform Bill 

The House and Senate were out of session this week due to the Memorial Day District Work Period. Consequently, the debate on financial reform remained mostly quiet, although committee staffers began the process of working with the White House and the Treasury Department to reconcile the differences between the House and Senate bills. On Tuesday, House Financial Services Committee Chairman Barney Frank (D-MA) said he was confident that a bill will be on President Obama’s desk by the Fourth of July. He also said he would like to see as many as seven conference committee meetings – broadcast by C-Span, ideally – with amendments voted on individually in open sessions. The initial work of the committee is expected to start next week and last through the end of the month. 

May Jobs Report Released 

On Friday, the Department of Labor released the May jobs report showing the U.S. economy added 431,000 jobs in May. However, only 41,000 of those jobs were from the private sector, and the remaining 411,000 were a result of temporary government jobs in the U.S. Census Bureau. The unemployment rate fell from 9.9% to 9.7%. Taking into account revisions to prior months, the U.S. economy added an average of nearly 200,000 jobs per month in the January-May period. In May, employment in professional and business services rose by 22,000. Manufacturing continued to trend up, rising by 29,000. Construction, a sector of the economy that remains soft, lost 35,000 jobs in May.

G20 Meeting In South Korea 

On Friday, the meeting of the G20 finance ministers and central bank governors began in South Korea’s southeastern port city of Busan. The meeting’s agenda focuses on global cooperation to improve financial and fiscal soundness. At the meeting’s outset, sources indicated the ministers would delay the implementation of tougher international banking regulations known as “Basel III,” which were due to be finalized by November. Disagreements over the regulations include the scale, scope, and timing of the increases in capital and liquidity banks will be required to hold, as well as the leverage they will be allowed. The U.S. and U.K. are pushing for tougher standards, but western and central European countries are opposing the stricter measures. Sources indicated that the U.K. and the U.S. are offering to delay the implementation of the Basel III reforms in a bid to ensure that the principles do not get watered down. Sources also indicated that France and Germany are seeking to reopen arguments thought to be settled last year in a bid to dilute capital requirements for their banks by allowing them to include deferred tax assets and minority interests in tier one capital. The Basel III rules were originally expected to be phased in by the end of 2012, but sources familiar with the discussions said that the new rules are now likely to be put in place between 2014 and 2016.

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , . By Matt Jessee - Wednesday, June 9, 2010

Financial Services Update – Issue 20

Financial Regulatory Reform Bill

On Tuesday, the Senate appointed seven Democrats and five Republicans from the Banking and Agriculture Committees to the conference committee on H.R. 4173, the Wall Street Reform Act, which will negotiate a compromise between the House and Senate versions of the bill. The seven Senate Democrat conferees are Sens. Chris Dodd (D-CT), Tim Johnson (D-SD), Jack Reed (D-RI), Charles Schumer (D-NY), Blanche Lincoln (D-AR), Patrick Leahy (D-VT), and Tom Harkin (D-IA). The five Senate Republican conferees are Sens. Richard Shelby (R-AL), Mike Crapo (R-ID), Bob Corker (R-TN), Judd Gregg (R-NH), and Saxby Chambliss (R-GA).

Also on Tuesday, House Majority Leader Steny Hoyer (D-MD) said the House would not appoint conferees until the week of June 7-11, after the Memorial Day congressional recess. Speculation is that the House’s delay is intended to prevent House Republicans from offering politically painful motions ‘to instruct conferees’ on the floor prior to the appointments. House Financial Services Committee Chair Barney Frank (D-MA) also circulated a memo saying he would pick himself and Reps. Paul Kanjorski (D-PA), Luis Gutierrez (D-IL), Maxine Waters (D-CA), Mel Watt (D-NC), Gregory Meeks (D-NY), Dennis Moore (D-KS) and Rep. Carolyn Maloney (D-NY) as the Democratic representatives from the House to the financial reform conference committee. In the memo, Frank also laid out this proposed timeline, which could include coverage of open meetings on C-SPAN: Tuesday, June 8th: conferees appointed … Wednesday, June 9th: first open meeting of the conference, organizational matters and opening statements only. Tuesday, June 15th, Wednesday, June 16th, Thursday, June 17th: conference meets on substantive issues. Tuesday, June 22nd, Wednesday, June 23rd: conference meets on substantive issues. Thursday, June 24th: conference concludes with formal signing ceremony; conference report filed shortly thereafter. Monday, June 28th: Rules Committee meets to grant rule. Tuesday, June 29th: House passes conference report which gives the Senate three days to pass it before the beginning of the July 4th recess.

On Wednesday, Michael Barr, Assistant Treasury Secretary for Financial Institutions and Diana Farrell, Deputy Director of the National Economic Council, held a joint press conference about the Administration’s position on the financial regulatory reform bill. Both Barr and Farrell repeatedly deflected questions on the derivatives’ desk spinoff provision, authored by Sen. Blanche Lincoln (D-AR), which has drawn fierce opposition from business groups, Republicans and some Democrats. Lincoln, chairwoman of the Senate Agriculture Committee, faces a tough fight in the conference committee to persuade the House and Senate to maintain the provision. Along with the administration, Frank and Dodd have also not indicated they will support the provision in the conference.

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , . By Matt Jessee - Friday, May 28, 2010

Financial Services Update – Issue 17

Financial Regulatory Reform Bill

On Wednesday, the Senate began its formal debate of amendments to the Restoring American Financial Stability Act of 2010 with nearly unanimous support for an amendment by Senator Barbara Boxer (D-CA) clarifying that taxpayers would not bear any losses from the liquidation of bankrupt firms. The Senate moved to consider a bipartisan proposal by Senators Dodd (D-CT) and Shelby (R-AL) to strip the bill of a $50 billion fund which would be filled upfront by the financial industry, that would cover the cost of closing down failing firms. Under the Dodd-Shelby deal, the Federal Deposit Insurance Corporation would liquidate faltering firms by borrowing money from Treasury to cover initial costs. The government would recover the costs by selling off the firm’s assets, with creditors and shareholders incurring losses. Other large banks could be assessed to pay for additional costs as a last resort. Also, creditors of a failing firm would be forced to pay back the government any money they received above what they would have gotten under a bankruptcy proceeding. Any seizure of a large, failing firm would require court approval to ensure that the government not shut down a company inappropriately. In addition, Congress would have to approve the use of federal debt guarantees, and regulators also would be able to ban management and directors of failed firms from working in the financial sector for a minimum of two years.

After voting on the Dodd-Shelby changes, lawmakers quickly approved two amendments put forward by Senator Olympia Snowe (R-ME), aimed at preserving the ability of small-business owners to use their homes as collateral and lightening regulatory burdens on small banks. The Senate then passed an amendment from Senator Jon Tester (D-MT) and Senator Kay Bailey Hutchison (R-TX.) that instructs the FDIC to set the premiums that banks pay based on an assessment of their overall risk.

After approval of these bipartisan measures, the Senate moved to consider more contentious amendments. Senator Shelby (R-AL) offered an amendment to curb the reach of the new consumer protection agency. The amendment was defeated along party lines. Under the Shelby plan, the FDIC would have had to sign off on the consumer rules, and funding for the division would come from fees assessed on nonbanks. And unlike the underlying bill, Republicans would maintain federal pre-emption of state consumer protection laws, which would prevent the financial industry from having to beat back proposals in 50 different states.

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , , , , . By Matt Jessee - Friday, May 7, 2010

Financial Services Update – Issue 12

March Jobs Report Released

On Friday, the U.S. Department of Labor said in its March jobs report that non-farm payrolls rose by 162,000, the largest gain since March 2007. Despite the gains, economists were expecting payrolls to rise by as much as 200,000. The Census accounted for 48,000 of the employment boost. Another 40,000 of the increase came in other temporary jobs. The unemployment rate stayed at 9.7%, in line with economists’ expectations. The U.S. economy has lost nearly 8.5 million jobs since the recession began. With stock markets closed for Good Friday, the report’s full impact will be more apparent next week. Total government employment, which includes state and local jobs, rose by 39,000. Beyond government jobs, the report showed that manufacturing jobs continued to trend up, rising by 17,000, as well as jobs in the construction industry which added 15,000 jobs in March.

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , , , . By Matt Jessee - Monday, April 5, 2010

Financial Services Update – Issue 10

 
Senate Financial Regulatory Reform Bill
On Monday, Senate Banking Committee Chairman Chris Dodd (D-CT) introduced his latest draft financial regulatory reform bill. The bill creates a new consumer protection agency, which will be located within the Federal Reserve, with regulatory authority over financial products such as mortgages and credit cards. The legislation also creates a resolution authority framework to liquidate failed financial firms, imposes stricter capital and leverage requirements on banks, creates a systemic risk council, requires shareholders be allowed a non-binding vote on executive compensation, and imposes new rules and standards for credit rating agencies. The bill also alters the banking regulatory structure by giving the FDIC regulatory oversight of state banks with assets below $50 billion, giving the OCC authority over national banks and federal thrifts with assets below $50 billion, eliminates the Office of Thrift Savings, and gives the Federal Reserve authority over national banks and thrift holding companies with assets of over $50 billion. Finally, the bill contains language regarding the regulation of over-the-counter ”OTC” derivatives that is identical to Dodd’s November draft bill, but Dodd has indicated his desire to replace those provisions with language currently being negotiated between Senator Jack Reed (D-RI) and Senator Judd Gregg (R-NH). Sources indicate Reed and Gregg may be unable to reach an agreement on such language, and with the markup scheduled to begin next Monday and hundreds of amendments expected to be filed, it remains to be seen how Dodd will handle these provisions.
 

Dodd and Bernanke Exchange Criticism Over Proposed New Fed Role
On Wednesday, Federal Reserve Bank Chairman Ben Bernanke and former Fed Chairman Paul Volcker testified before the House Financial Services Committee at a hearing examining the central bank’s regulatory duties. During his testimony and under questioning by Committee members, Bernanke criticized Senate Banking Chairman Dodd’s draft regulatory reform bill for its provisions which remove the Fed’s supervisory role over small banks, saying it will deprive the central bank of key information it uses to execute monetary policy. On Thursday, Dodd’s staff countered Bernanke’s criticism by citing former Fed Vice Chair Alice Rivlin’s statement from a July 2009 Senate Banking Committee hearing in which she stated, “I don’t think that supervising individual banks is important to making monetary policy. I know that was said around the table when I was at the Fed, but I didn’t really experience that we learned a lot from supervising particular banking institutions that was useful to monetary policy.”

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Email This Content Email This Content Posted in Financial Services Update. Tagged with , , , , , . By Matt Jessee - Monday, March 22, 2010