Financial Services Update – Issue 8

March 6, 2010

Authored by: Matt Jessee

 
Senate Financial Regulatory Reform Bill
 
On Friday, Senate Banking Committee Chairman Christopher Dodd (D-CT) said his Committee has not reached an agreement on the pending financial services regulatory reform bill, but he hopes one will be reached within days. Dodd also indicated that the independence of the proposed “Consumer Financial Products Agency” continues to be the major point of contention between Republicans and Democrats. Senate Banking Committee Republicans oppose making the watchdog an independent agency, but have said they could support it as a unit within an existing banking regulatory agency. Dodd has suggested putting the consumer protection division in the Federal Reserve as a possible compromise. However, Dodd has drawn the line at Republican demands that a banking regulator have veto power over the consumer entity’s rule-making authority. Meanwhile, the third ranking Senate Banking Committee Democrat, Jack Reed of Rhode Island, said he would still introduce an amendment at the Committee’s markup that will insert language into the bill that would establish the consumer protection watchdog as an independent agency.
 
February Jobs Numbers Announced
 
On Friday, the Bureau of Labor Statistics announced that the nonfarm payroll employment declined by 36,000 jobs, fewer than the 50,000 that analysts predicted. February’s statistics place the total number of people out of work at 14.9 million or roughly 9.7%. While the Bureau of Labor Statistics, White House Economic Advisors Larry Summers and Christina Romer all cited the impact of February’s bad weather as a possible contributing factor to the continued job losses, Republicans cited the Administration’s yearlong battle to pass a health care bill as a distraction from job creation.
 
House Ways and Mean Committee Shakeup

On Thursday, after now-former Ways and Means Chairman Charles Rangel (D-NY) indicated he would step aside temporarily, Rep. Pete Stark (D-CA), who was next in line behind Rangel, indicated that he would not pursue the Chairmanship. House Democrats installed Rep. Sander Levin (D-MI) as acting chairman of the powerful tax writing panel for the remainder of the year, or until Rangel is sufficiently cleared by the Ethics Committee. If Democrats retain their majority in the House, however, the Chairmanship of the Committee would reopen and sources indicate Massachusetts Rep. Richard Neal, Washington Rep. Jim McDermott, and Georgia Rep. John Lewis may challenge Levin for the top spot.

Citi CEO Testifies Before the Congressional Oversight Panel

On Thursday, Citigroup CEO Vikram Pandit testified before the Congressional Oversight Panel discussing the bank’s $45 billion federal bailout. During his testimony Pandit expressed support for several initiatives in the financial services regulatory reform bills currently making their way through Congress including the creation of a systemic risk regulator, resolution authority, and a consumer protection agency. Pandit said Citi has reduced its leverage from a ratio of 18 to 1 to 12 to 1 and has trimmed its balance sheet by $500 billion.
 
Frank Opposes Dodd’s Regulatory Reform Proposal

On Wednesday, House Financial Services Chairman Barney Frank called the latest reports of the Dodd-Corker proposal to create a consumer watchdog within the Federal Reserve ” a bad joke,” and indicated he would not support such a bill if it came back to the House. Frank went on to criticize Republicans for being critical of the Federal Reserve while simultaneously advocating that the new consumer protection division be placed within the same agency.

Kohn Announces Departure from Fed

On Tuesday, Don Kohn announced he will step down as vice-chairman and member of the Federal Reserve board in June, giving President Obama the opportunity to fill three vacancies on the seven-member Federal Reserve board of governors. Speculation is that Dan Tarullo, a Fed governor and the only Obama appointee currently on the board, will be elevated to Kohl’s vice-chairman slot. The three appointments will shape the Fed’s make-up and influence the Fed’s work on major issues in the near future including interest rates, consumer-protection rules, and new regulations affecting the nation’s largest financial institutions. Sources indicate that current White House Economic Advisors including Christina Romer, Janet Yellen, and Austan Goolsbee are among the potential candidates.