Financial Services Update

July 23, 2010

Authored by: Matt Jessee

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. 

The Choice for Consumer Financial Protection Bureau Director 

Debate has intensified over who should run the newly created Consumer Financial Protection Bureau. The longtime frontrunner has been Elizabeth Warren, but this week alternative names have emerged, including: former PCAOB Chair Bill McDonough, Treasury Deputy Secretary Michael Barr, and Justice Department official Eugene Kimmelman. 

Bachus Under Fire 

With the possibility that Republicans will take over the House of Representatives next year, the parlor games over who might chair the most powerful committees have already begun. This week, reports emerged that Financial Services Committee Ranking Member Spencer Bachus (R-AL) may face a challenge for the gavel from a number of colleagues, including Ed Royce (R-CA), Jeb Hensarling (R-TX), or Scott Garrett (R-NJ).  All three have been active conservatives on the committee, on which some members have expressed frustration over what they perceive as Bachus’s failure to adequately challenge Chairman Barney Frank during the debate over financial reform legislation. 

Bank Executive Compensation Report Released

On Friday, White House executive pay-master Kenneth Feinberg released his long awaited bank compensation report in which he cited 17 banks – including Goldman Sachs, JPMorganChase, Citigroup, and AIG – for awarding a total of $1.6 billion in “ill-advised” compensation during the height of the financial crisis in late 2008. The report is only advisory and has no force of law to recoup any of the money. Feinberg’s review, which covered 419 banks, will probably be his last act as pay czar, prior to shifting focus to the $20 billion BP compensation fund. 

Republicans Seek to Prevent Contingency Fee Tax Deductions 

On Friday, House Ways and Means Committee Ranking Member David Camp (R-MI) and Senate Finance Committee Ranking Member Chuck Grassley (R-IA) sent a letter to Treasury Secretary Timothy Geithner urging Treasury to make clear that the Department and the IRS do not support allowing lawyers to deduct “gross contingency fees,” which could cost the Treasury $1.6 billion annually. The Camp-Grassley letter was in response to a recent statement from Assistant Secretary Michael Mundaca that the Office of Tax Policy was considering issuing guidance to clarify the issue raised by Boccardo v. Commissioner

More Information 

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

Matt Jessee, Policy Advisor

Kip Wainscott, Associate Attorney