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Financial Services Update – Issue 7

Financial Services Update – Issue 7

February 27, 2010

Authored by: Matt Jessee

Senate Set to Begin Debate on New Jobs Bill

Soon after Senate passage of the first “jobs” bill, on Friday it was announced that the Senate had reached an agreement to begin consideration of a second “jobs” bill on Monday, March 1.  Senate Finance Chairman Max Baucus is expected to offer a substitute amendment which will include the remaining items from the original Baucus/Grassley bill, namely extensions to tax credits, pensions amortization, unemployment insurance, COBRA, Small Business Administration stimulus extensions, state Medicaid aid, satellite television reauthorization, and a delay of cuts to physicians’ Medicare reimbursements.

White House Unveils New Rules on Financial Advisors

On Friday, Vice President Biden unveiled the annual report of the Middle Class Task Force which included new proposals designed to shield workers from potential conflicts of interest by financial advisers.  Under the proposed rule, financial advisers may give advice only if they do not receive a commission for directing investments to funds with which they are affiliated.  The rules will be available for public comment until May 5. The Department of Labor will then issue a final rule, which would apply to all financial institutions that both provide investment options such as 401(k)s to employers and offer financial advice to their employees

Geithner Pushes for Consumer Protection in Financial Reform Legislation

On Thursday, Treasury Secretary Timothy Geithner met with leading executives from the Chamber of Commerce, Private Equity Council, Financial Services Roundtable, American Bankers Association, Independent Community Bankers Association, Financial Services Forum, Managed Funds Association and SIFMA regarding the financial regulatory reform legislation currently pending in Congress.  According to sources, Geithner reiterated that the Administration’s strong support fora new consumer protection entity with rulemaking and enforcement authority in the legislation. However, sources also said Geithner is no longer insisting on the creation of a stand-alone consumer protection agency and is open to having the new consumer regulator inside the Treasury Department.  In response to this shift, the Chamber of Commerce announced this week it would oppose the new agency whether it becomes a stand-alone entity or if it is within an existing department.

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Financial Services Update – Issue 5

Financial Services Update – Issue 5

February 15, 2010

Authored by: Matt Jessee

Senate Financial Regulatory Bill

On Thursday, Senator Bob Corker (R-TN) announced that he had agreed to work with Senate Banking Chairman Chris Dodd (D-CT) to draft a bipartisan financial reform bill. Despite giving Senate Minority Leader Mitch McConnell notice prior to the announcement, Corker surprised many in his own party since Banking Committee Ranking Member Richard Shelby (R-AL) broke off negotiations with Dodd over disagreements about a new consumer protection agency. Sources indicate Dodd sees Corker as an “honest broker” because of his work with Senator Mark Warner on resolution authority issues.

On Friday, Corker released a statement saying that a new Consumer Financial Protection Agency was a “non-starter” and he was only committing to “working towards a bipartisan agreement.” Corker also stated that the effort to prohibit commercial banks from having proprietary trading businesses by White House Economic Advisor Paul Volcker would not be the focus of his talks with Dodd.

FirstEnergy to Buy Allegheny Energy

On Friday, FirstEnergy announced it would buy Allegheny Energy for $4.7 billion in stock. The deal would create a company with 10 utilities and six million customers stretching across seven states. The companies will still have to get approval from numerous state regulators before the deal can close. The companies said merger savings could top $530 million by the fifth year. As part of the deal, FirstEnergy also would assume $3.8 billion of Allegheny’s debt.

Senate “Jobs” Bill

On Thursday, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) circulated a $85 billion draft “jobs” bill that included many bipartisan items such as the much sought-after extension and creation of business tax credits. However, within a few hours, Senate Majority Leader Harry Reid (D-NV) announced he would instead offer his own scaled down $15 billion bill “jobs” bill that includes Build America bonds, a small-business tax program that allows quick expense write-offs, a one-year extension of highway construction funds and a new hires tax-credit which would waive the 6.2 percent Social Security tax for any employer who hires a worker who has been unemployed for at least 60 days. Senate Republicans were initially skeptical of Reid’s proposal and are likely to withhold their support.

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Financial Services Update – Issue 3

Financial Services Update – Issue 3

January 29, 2010

Authored by: Matt Jessee

Bernanke Confirmed

On Thursday, the Senate approved the nomination of Ben Bernanke to chair the Federal Reserve by a vote of 77-23. His confirmation nonetheless drew a record-breaking level of opposition, four years after he easily passed through the Senate. Seven lawmakers voted to end the filibuster then pivoted to vote against the confirmation itself, which required a simple majority. Two noteworthy ‘no’ votes on the Democratic side: Sens. Barbara Boxer (D-Calif.) and Arlen Specter (D-Pa.), who both face difficult reelection fights. Some have speculated that the closer than expected vote may make it harder for Bernanke to defend the Fed as Congress prepares to intensify its oversight of monetary policy and curb the Fed’s authority over the banking system.

Jobs Bill

As the Senate works towards a “jobs bill” expected to be released next week, disagreement remains among Democrats as to what the bill should include. The House already passed a $154 billion stimulus plan in December, including an expansion of unemployment and health-care benefits, as well as new infrastructure spending. Senate Democrats have met resistance from moderates who object to such a high cost. Senate Majority Leader Reid is expected to announce a new proposal next week incorporating ideas from the Administration including shifting $30 billion from TARP and sending it to community banks for lending.

Geithner Testifies on AIG

During testimony and questioning Wednesday before the House Oversight and Government Reform Committee, Treasury Secretary Timothy Geithner defended his own performance and the actions of federal officials during the financial crisis more generally. “I was there; I know what I was responsible for. I take full responsibility and take great pride in those judgments,” Geithner said in testimony. “I hope you will give the same care and judgment to looking at those decisions in retrospect and with benefit of hindsight that we gave in making those decisions at the time.”

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