Tuesday, May 18, 2010

Financial Regulatory Update; Reid filed for cloture Mon night

Financial Regulatory Update – from Politico, DJ, Reuters, Roll Call, WashPost, NYT
· The Dodd regulatory overhaul continues to work its way through Congress.  According to Politico, unlike most pieces of legislation, the measure isn't becoming watered down as it moves through the approval process - the amendments are making it a tougher bill for the financial services industry (two surprise votes last week concerned rating agencies and debit card interchange fees). 
· Reid filed for cloture Mon night (as expected), which could set the stage for vote (likely Wed) to limit further debate and could pave the way for a final vote on the bill by the end of the week.  However, there are still a handful of amendments still to be considered. 
· In addition to the cloture filing Mon, there a few relatively minor amendments passed Mon night – Senators unanimously approved an amendmenty from Sen Cornyn that could prevent US taxpayers from funding bailouts of foreign governments.  Also – Senators passed 1) an amendment from Sen Rockefeller that preserves the Federal Trade Commission's consumer protection powers, saying that the consumer regulator created by the current Senate bill threatened to inhibit the FTC's power to write rules governing non-financial entities and 2) an amendment from Sen Udall enabling consumers to get free access to their credit scores.
· no big amendment votes prob. to take place on Mon or Tues due to primary elections involving Dem Senators Lincoln and Specter (they could start Tues night)
· One of the last major amendments that would have a major impact on the industry and that has a decent chance of passing looks like it is going to be Merkley/Levin.  Press reports have indicated that more than 50 Senators are in support of the measure, although the GOP is threatening to filibuster the provision, which would mean it has to meet a 60-vote threshold.  A vote on this could be called for Tues night or Wed.
· Once/if the Senate passes the bill, it will have to be reconciled w/the House.  B Frank said in an interview today that the Senate bill is tougher than the legislation passed out of the House late in '09 and that the final version will prob. wind up favoring the Senate more than the House.  The goal had been to have a reconciled bill sent to Obama in time for Memorial Day, but its looking more likely that it will be Jul 4 before something gets to the president's desk.
Some of the amendments left to be voted on in the Senate:
· Merkley/Levin - would ban proprietary trading at banks and require the Federal Reserve to impose tougher capital requirements on large non-banks that engage in the same type of trading
· Whitehouse – would force credit card rates to abide by state limits.  Whitehouse told reporters on Mon that states should be able to impose rate caps regardless of where a credit card company is based.  Whitehouse said his measure has “bipartisan” appeal and will prob. come up for vote sometime this week.  Whitehouse said the odds for passage were “good”.   
· Dorgan - would ban naked CDS trading
· Brownback - would prohibit a proposed Consumer Financial Protection Bureau at the Federal Reserve from enforcing new rules against auto dealers
· Cantwell/McCain - would reinstate some of the rules crafted after the Great Depression that imposed a division between commercial banks and investment banks. 
· Vitter - would prohibit federal regulators from allowing the Federal Reserve to examine commercial companies that don’t earn at least 85% of revs from financial services
· Lincoln - would force banks to spin off their swaps trading activities; Lincoln and Dodd both said in an FT interview Mon that there was room for comprimise on this issue.

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