Financial Services Update

November 5, 2010

Authored by: Matt Jessee

Election Day Implications

Based on this week’s election results, next year’s Senate ratio will be 51 Democrats, 47 Republicans, and 2 Independents who will most likely caucus with Democrats. Nine races have yet to be called in the House of Representatives, but the final Republican net gain will most likely be 64 seats. The House Republican leadership will most likely consist of John Boehner (OH) as Speaker, Eric Cantor (VA) as Majority Leader, Kevin McCarthy (CA) as Majority Whip, and Greg Walden (OR) as Chairman of the House Leadership. The Democratic leadership in the House has not been determined, but current-Speaker Nancy Pelosi (CA) has announced she will run for Minority Leader, current-Leader Steny Hoyer (MD) has announced he will run for Minority Whip, and current-Whip James Clyburn (SC) has also announced he will run for Minority Whip. The most important committee leadership change impacting the financial services industry will be Rep. Spencer Bachus (R-AL) as the next likely chairman of the House Financial Services Committee. Bachus has indicated his top priorities include GSE reform and oversight of the newly empowered CFTC and CFPA. The other important committee leadership changes for the industry will be Rep. Darrell Issa (R-CA) as the next chairman of the House Government Reform Committee, Rep. Dave Camp (R-MI) as the next chairman of the Ways and Means Committee, and Sen. Tim Johnson (D-SD) as the likely new chairman of the Senate Banking Committee.

Debt Panel Returns for Final Votes on Recommendations

Eight months ago President Obama created the bipartisan “National Commission on Fiscal Responsibility and Reform” charged with proposing spending cuts to Congress. Under the leadership of Erskine Bowles and former-Senator Alan Simpson (R-WY), the eighteen member panel will be reconvening next week to vote on final recommendations to Congress before the committee’s December 1st expiration date. However, expectations remain low that any plan can get the 14-vote supermajority required to send the spending cuts to Congress for a vote in December.

October Jobs Report Released

On Friday, the Department of Labor released its October jobs report showing the domestic economy added 151,000 jobs after four months of job losses. However, nearly 15 million people remain unemployed and actively looking, and the unemployment rate, which remained steady at 9.6 percent, has been relatively flat since May.

Lame Duck Session

On Wednesday, in his post-election address, President Obama indicated the upcoming “lame duck” session of Congress — set to begin on November 15 — will focus on extending a variety of tax cuts. The lame-duck session — so-called because it will include lawmakers who are retiring or were defeated on Tuesday — became necessary when Congress recessed for the election without passing necessary spending bills and expiring tax cuts. The list of action items includes the authorization for federal agencies’ Fiscal Year 2011 budgets, the extension of the Bush tax cuts, a patch on the Alternative Minimum Tax, the extension of unemployment benefits, and the extension of a delay in cuts to the Medicare reimbursement rates.

SEC Votes to Ban “Unfiltered Access”

On Wednesday, the Securities and Exchange Commission (SEC) voted to prohibit broker-dealers from providing customers with “unfiltered access” to an exchange, to mandating that brokers put in place risk management controls and supervisory procedures to help prevent erroneous orders, to ensure compliance with regulatory requirements, and to enforce preset credit or capital thresholds. Brokers will still be allowed to grant “sponsored” market access to their customers as long as the orders are filtered through the enhanced controls. The SEC estimates that maintaining the enhanced controls will cost the broker-dealer industry $100 million annually because of new compliance systems.

More Information

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

Matt Jessee, Policy Advisor
1 314 259 2463