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Financial Services Update – September 16, 2011

Geithner Meets with Eurozone Finance Ministers

On Friday, Treasury Secretary Timothy Geithner met with seventeen European finance ministers in Poland to discuss the eurozone’s debt crisis. Jean-Claude Juncker, president of the Eurogroup, announced the group decided to delay till October a decision on whether to pay out the next tranche of a multi-billion euro loan to Greece. The two-day meeting of Europe’s Economic and Financial Affairs (ECOFIN) Council — hosted by Polish Finance Minister Jacek Rostowski and the president of the National Bank of Poland — comes ahead of G20 and IMF meetings later this month. The European Central Bank, along with the Fed, the Bank of England, the Bank of Japan and the Swiss National Bank, also announced that three U.S. dollar auctions would be held between October and December.

Senate Committee Passes Increased Funding for SEC and CFTC

On Thursday, the Senate Appropriations Financial Services Subcommittee passed its FY 2012 funding bill giving banking and commodities regulators large budget increases to help them implement sweeping new financial regulations. The bill, which will now go to the full U.S. Senate for a vote, gives the Securities and Exchange Commission a fiscal 2012 budget of $1.407 billion, an increase of roughly 19 percent from its current fiscal 2011 budget of $1.185 billion and the Commodity Futures Trading Commission an estimated 19 percent increase in its funding, jumping from $202 million to $240 million for fiscal 2012. That bill would also split oversight of the nearly $600 trillion over-the-counter derivatives market between the two regulators and give the SEC greater authority to regulate hedge funds, credit-rating agencies and municipal advisers. However, the fate of the bill remains uncertain because House Republicans oppose many of the Dodd-Frank provisions which increase the need for expanded SEC and CFTC budgets. Earlier this year, the House Appropriations Financial Services Subcommittee passed a bill that would reduce the CFTC’s budget to $171.9 million but maintain the SEC’s funding at its FY 2011 level. With the end of the year approaching, House and Senate leaders are bracing themselves for another omnibus bill that combines all the unpassed appropriations bills into one major bill. The House and Senate will most likely fail to pass similar Financial Services Appropriations bills which will cause the bill to be wrapped into the omnibus thereby reducing the chance of large increases for the SEC or CFTC.

Fitzpayne Nominated for Treasury Legislative Affairs Chief

On Wednesday, the White House announced that President Obama intends to nominate Alastair Fitzpayne as the next assistant secretary of Treasury for legislative affairs. Fitzpayne has been Treasury’s deputy chief of staff since January 2009. He was a legislative assistant to former Sen. Evan Bayh (D-Ind.) from 2001 to 2006. From 2007 to 2009, he served as a senior policy adviser to Rep. Rahm Emanuel (D-Ill.).

House Republicans Introduce Disaster Funding Bill

On Wednesday, House Republican leaders introduced a stopgap spending bill to keep the government operating though mid-November and provide $3.65 billion in short-term federal assistance to replenish strained disaster reserves. The funding resolution would impose a 1.4 percent cut on most agencies and Cabinet departments, including Defense, to stay within 2012 spending caps set in August. FEMA and the Corps of Engineers would immediately benefit from a first installment of $1 billion in emergency funds to avoid any disruption in aid for these last weeks of the 2011 fiscal year ending September 30. The second $2.65 billion represents a down payment toward FEMA’s 2012 budget. With two weeks left in fiscal 2011, FEMA’s disaster reserve fund has dwindled to $377 million and the agency has been operating since late August on an “immediate needs” basis, forcing delays in longer-term recovery projects around the nation. Senate Democrats, who have been pursuing their own much larger $6.9 billion disaster aid package, said they did not support the current House approach, but left open the possibility of agreement if House Republicans consider more disaster aid. The House is schedule to vote on its bill next week.

FDIC Approves New Systematic Risk Rules

On Tuesday, the FDIC approved new sets of rules that the largest banks will have to follow in drafting plans in the event of their own collapse. The panel also approved contingency planning guidelines for insured banks. The new rules, which were authorized in the Dodd-Frank Act, are designed to eliminate the need for bailouts by giving the FDIC power to liquidate large firms whose failure could threaten the financial system. Banks with at least $50 billion in assets will have to file such plans, as will any firm designated as systemically important by the Financial Stability Oversight Council. The final rule changes the filing timeline from an April draft proposal released by the FDIC and Fed, moving toward a tiered phase-in based on the total of non-bank assets held by firms. Companies with more than $250 billion in non-bank assets are required to file the plans by July 1, 2012. Firms with non-bank assets between $100 billion and $250 billion would be required to file by July 1, 2013, and all other firms would be required to submit plans by December 2013. The agency also approved unanimously a separate rule dictating resolution plans for FDIC-insured banks with more than $50 billion in assets. The rule, which the agency began drafting before the completion of the Dodd-Frank Act, would apply to 37 banks and thrifts. Thirty four of those firms would be required to file resolution plans with the Fed because of the size of their parent company. The rule takes effect January 1, 2012, and would be subject to a 60-day public comment period.

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

Matt Jessee, Policy Advisor
matt.jessee@bryancave.com
1 314 259 2463

 

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Financial Services Update

Financial Services Update

November 12, 2010

Authored by: Matt Jessee

Obama Trade Mission to Asia

On Friday, President Obama landed in Japan, the last leg of his 10-day, four-nation trade mission which included previous stops in India, Indonesia, and South Korea. The most recent stop in Seoul was marred by negotiators’ failure to finish a long-delayed U.S.-South Korea free trade agreement and squabbling at a G-20 summit over U.S. monetary policy. In Japan, Obama will attend an Asia-Pacific economic summit in Yokohama, which will set the stage for the next APEC summit scheduled for 2011 in Hawaii. He will also meet with Japan’s new prime minister, Naoto Kan, to discuss Japan’s potential membership in the U.S.-backed Transpacific Partnership free-trade initiative. However, Kan faces opposition from Japan’s politically powerful farm groups who oppose Japan’s membership in the trade measure.

Axelrod on Taxes and Healthcare

On Wednesday, White House Senior Advisor David Axelrod acknowledged during an interview that President Obama might agree to extend the Bush tax cuts for all income brackets. In the interview with the Huffington Post, Axelrod said ” we have to deal with the world as we find it. The world of what it takes to get this done. There are concerns that Congress will continue to kick the can down the road in the future by passing temporary extensions for the wealthy time and time again. But I don’t want to trade away security for the middle class in order to make that point.” Axelrod also said that President Obama would veto repeal of the recently passed health care reform law, which was the first time that a top Administration figure had issued such a threat on the record.

Deficit Commission Releases Preliminary Report

On Wednesday, Deficit Commission co-chairs former Clinton White House Chief of Staff Erskine Bowles and former Sen. Alan Simpson (R-WY) unveiled their preliminary report that would cut $200 billion in spending by 2015, raise taxes by $100 billion, and continue deficit cutting until 2020. However, Bowles and Simpson did not bring the report to a vote of the 16 other members of the commission because they acknowledged its passage was unlikely. The 18-member commission appointed by President Barack Obama earlier this year was supposed to produce a 14-vote majority around a deficit reduction plan – a margin that would have required Congress to vote on the package unchanged. But the commission was dominated by current Members of Congress who staked out inflexible partisan positions. The seven Republicans office-holders, including Sen. Judd Gregg of New Hampshire and Rep. Jeb Hensarling of Texas said they would not support a plan that raises taxes. The Democratic lawmakers on the commission, including Sen. Dick Durbin, D-Ill., said they would not agree to Social Security adjustments or Medicaid benefit cuts.

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Financial Services Update

Financial Services Update

October 25, 2010

Authored by: Matt Jessee

G20 Finance Ministers Meet in South Korea

On Friday and Saturday, global finance ministers from the G20 countries were to meet in South Korea to discuss international currency tensions, exchange rates, and broader concerns about the global economy.  The meeting comes just two weeks after the G20 met in Washington but were unable to resolve currency differences.  At the outset of the meeting, U.S. Treasury Secretary Timothy Geithner called for limits on trade imbalances, in an effort to broker an international compromise on exchange-rate tensions.  Britain, Canada and Australia expressed immediate support, as well as France and Japan, but Germany and China have yet to formally weigh in.  Geithner’s plan called for the biggest industrialized economies to keep their current-account balance — whether a surplus or a deficit — below 4 percent of gross domestic product.

Federal Probe into Mortgage Servicers

On Wednesday, Housing and Urban Development Secretary Shaun Donovan announced that a federal probe investigating five large mortgage servicers has found improper foreclosures, but officials have yet to find systemic, “structural” problems with processing.  HUD’s 5-month probe of the Federal Housing Administration-insured loans acknowledged that the agency has been aware of problems at some servicers for months and that HUD will “take actions” against those firms to ensure that homeowners are made “whole and protected.”  While Donovan declined to give specifics on which specific servicers were identified, Donovan said the lack of evidence of widespread structural problems reinforces the Administration’s decision to oppose a nationwide moratorium on foreclosures.  Pressure has been mounting to figure out whether banks, processors and courts have improperly foreclosed on thousands of homeowners.  All 50 state attorneys general have already announced investigations, and the FHA probe is expected to be completed in nine weeks.

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Financial Services Update – Issue 21

June 4, 2010 Issue 21 

Financial Regulatory Reform Bill 

The House and Senate were out of session this week due to the Memorial Day District Work Period. Consequently, the debate on financial reform remained mostly quiet, although committee staffers began the process of working with the White House and the Treasury Department to reconcile the differences between the House and Senate bills. On Tuesday, House Financial Services Committee Chairman Barney Frank (D-MA) said he was confident that a bill will be on President Obama’s desk by the Fourth of July. He also said he would like to see as many as seven conference committee meetings – broadcast by C-Span, ideally – with amendments voted on individually in open sessions. The initial work of the committee is expected to start next week and last through the end of the month. 

May Jobs Report Released 

On Friday, the Department of Labor released the May jobs report showing the U.S. economy added 431,000 jobs in May. However, only 41,000 of those jobs were from the private sector, and the remaining 411,000 were a result of temporary government jobs in the U.S. Census Bureau. The unemployment rate fell from 9.9% to 9.7%. Taking into account revisions to prior months, the U.S. economy added an average of nearly 200,000 jobs per month in the January-May period. In May, employment in professional and business services rose by 22,000. Manufacturing continued to trend up, rising by 29,000. Construction, a sector of the economy that remains soft, lost 35,000 jobs in May.

G20 Meeting In South Korea 

On Friday, the meeting of the G20 finance ministers and central bank governors began in South Korea’s southeastern port city of Busan. The meeting’s agenda focuses on global cooperation to improve financial and fiscal soundness. At the meeting’s outset, sources indicated the ministers would delay the implementation of tougher international banking regulations known as “Basel III,” which were due to be finalized by November. Disagreements over the regulations include the scale, scope, and timing of the increases in capital and liquidity banks will be required to hold, as well as the leverage they will be allowed. The U.S. and U.K. are pushing for tougher standards, but western and central European countries are opposing the stricter measures. Sources indicated that the U.K. and the U.S. are offering to delay the implementation of the Basel III reforms in a bid to ensure that the principles do not get watered down. Sources also indicated that France and Germany are seeking to reopen arguments thought to be settled last year in a bid to dilute capital requirements for their banks by allowing them to include deferred tax assets and minority interests in tier one capital. The Basel III rules were originally expected to be phased in by the end of 2012, but sources familiar with the discussions said that the new rules are now likely to be put in place between 2014 and 2016.

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