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.

The Lincoln provision, the Volcker Rule (which limits banks’ ability to own hedge funds and engage in proprietary trading), and the new Consumer Financial Protection Agency have emerged as the most controversial issues in the bill for the financial industry. However, a divide is beginning to emerge within the industry between firms generating more revenue from trading (Goldman Sachs and Morgan Stanley) and those with more traditional consumer banking businesses (Citibank, Bank of America, Wells Fargo, etc). The trading banks presumably would be more negatively impacted under the Volcker Rule and the consumer banks would be more negatively impacted under the Lincoln derivatives provision. On the other hand, the commodities exchanges such as the Chicago Mercantile Exchange and the New York Mercantile Exchange could see significant benefit given the near certainty that most derivatives will now have to trade through such organizations.

House Set To Pass Business Tax Credits and Unemployment Benefits Extensions and Tax Increases on Fund Managers

After failing to reach a compromise on the revenue and spending provisions of a major tax credits and unemployment benefits extension bill, House Democratic leaders on Thursday agreed to cut roughly $31 billion more from the $145 billion package in an attempt to secure enough votes before Members leave for the Memorial Day recess on Friday. The bill that the House will likely vote on Friday will eliminate extensions of COBRA subsidies for unemployed workers and a renewal of additional state Medicaid funding as well as delay the effective date of the tax on so-called “carried interest” until January 1, 2011. An earlier version of the bill would have imposed the tax as of Jan. 1, 2010. The bill would tax fund managers’ carried interest at ordinary income rates up to 39.6%, instead of the current capital gains rate of 15%. The Senate has already recessed for the Memorial Day break and plans to take up the bill upon its return.

A summary of the original House bill, “The American Jobs and Closing Tax Loopholes Act of 2010”

H.R. 4213, can be found at:

A summary of the amendments to the House bill, “The American Jobs and Closing Tax Loopholes Act of 2010” H.R. 4213, can be found at: Information

If you have any questions regarding any of these issues, please contact;

Matt Jessee, Policy Advisor
(202) 508-6341

Dave Russell, Senior Policy Advisor
(202) 508-6353