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Financial Services Update – September 2, 2011

August Job Report Shows No Growth

On Friday, the Department of Labor released the August jobs report showing no net new jobs for the month. The Department revised the July report to decrease to 85,000 the number of net new jobs reported as opposed to the original 117,000 figure. The unemployment rate remained unchanged from July at 9.1 percent with the total number of unemployed workers remaining 14 million.

Obama Rejects New EPA Air Rule

On Friday, President Obama directed the EPA to abandon its proposed new rules that would lower the nation’s air quality standards from 75 parts per billion (ppb) to between 60 ppb and 70 ppb. The current standard will now remain in place until a scheduled reconsideration of pollution limits in 2013.

DOJ Sues to Block AT&T/T-Mobile Merger

On Wednesday, Deputy Attorney General James Cole announced that the Justice Department was filing an antitrust lawsuit in U.S. District Court to block AT&T’s acquisition of T-Mobile because the Department believes the merger would result in “higher prices, fewer choices and lower quality products for their mobile wireless services.” Following Cole’s announcement, FCC Chairman Julius Genachowski also declared his opposition to the proposed merger.

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Financial Services Update – August 5, 2011

Economy Adds 117,000 Jobs in July

On Friday, the Department of Labor announced that the United States economy added 117,000 jobs in July causing the unemployment rate to fall to 9.1 percent from 9.2 percent in June. The Labor Department also revised its estimate of job growth in June to 46,000 from the previously reported 18,000.

European and Asian Leaders Call for Global Economic Cooperation

On Friday, the leaders of Germany, France and Spain scheduled an emergency conference after China and Japan called for global policy cooperation in response to the selloff in international markets. On Thursday, the European Central Bank (ECB) reactivated its dormant bond-buying program in an attempt to halt the deepening sovereign debt crisis, but the ECB only purchased Portuguese and Irish debt. Japanese Finance Minister Yoshihiko Noda called on global policymakers to confront currency distortions, the debt crises and concerns about the U.S. economy. Chinese Foreign Minister Yang Jiechi also said U.S. debt risks were escalating and countries should step up cooperation on global economic risks.

Congress Passes and President Signs Debt Limit Deal Averting Default

On Monday, the House of Representatives approved a compromise deal to raise the debt limit by a vote of 269-161. The bill, which was brokered Sunday night in last-minute negotiations between the White House and congressional leaders, passed with the support of 174 Republicans and 95 Democrats. On Tuesday, the Senate passed the bill by a vote of 74 to 26, and President Obama signed the legislation into law. The compromise allows a debt ceiling increase by as much as $2.4 trillion in total, with an immediate increase of $400 billion. President Obama is permitted to request a $500 billion increase in the coming months, which Congress could vote to disallow by a veto proof two-thirds margin. The agreement calls for more than $900 billion over ten years in spending cuts from defense and non-defense related programs, agencies and day-to-day spending, however Medicare, Medicaid, and Social Security cuts are prohibited. A further increase of the debt ceiling between $1.2 trillion and $1.5 trillion would be available after the “Super Committee” of six Republicans and six Democrats identifies matching levels of additional spending cuts. The Committee must complete its work by November 23, and if the Committee passes by a simple majority vote a recommendation of cuts and/or tax increases matching the debt ceiling increase, Congress must hold an up or down vote on the Committee recommendations by December 23. The Committee could overhaul the tax code or find savings in Medicare or other entitlement programs, however Congress can not modify the Committee’s recommendation before voting. Should the committee deadlock or should Congress reject the Committee’s recommendations, automatic across the board spending cuts of at least $1.2 trillion would automatically go into effect. The agreement also requires that the House of Representatives and the Senate vote on a Balanced Budget Amendment to the Constitution. The deal also includes changes to Pell Grants and student loan programs. Pell Grants will receive a $17 billion increase for low-income college students, which will be financed by the elimination of subsidized student loans for most graduate students. The compromise does not include any immediate revenue additions or tax increases.

Temporary FAA Agreement Reached

On Thursday, Congressional leaders reached an agreement on a six week extension of funding for the Federal Aviation Administration (FAA), ending a stalemate over the agency’s reauthorization. It was uncertain after the bill’s passage if Congress would act to restore back pay to the furloughed FAA employees or other non-federal airport workers who have been laid off since July 23. Unless the House and Senate negotiators are able to reach an agreement on a new funding package within six weeks, they will again force the FAA to furlough employees.

More Information

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 – May 6, 2011

April Unemployment Rises to 9%

On Friday, the Department of Labor announced that the United States economy added 244,000 jobs in April, but the unemployment rate rose to 9 percent from 8.8 percent in March. The jobs numbers beat forecasts estimates of an expected gain of 185,000 jobs.

Bank Regulators to Testify on Dodd-Frank in Senate

The Senate Banking Committee announced that next Thursday, May 12, Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corp Chairman Sheila Bair, Commodity Futures Trading Commission Chairman Gary Gensler, Securities and Exchange Commission Chairman Mary Schapiro, Acting Comptroller of the Currency John Walsh and Deputy Treasury Secretary Neal Wolin will testify on the implementation of the Dodd-Frank financial oversight law. The hearing is slated to focus on monitoring systemic risk and promoting financial stability and will likely include questions over a recent settlement bank regulators entered into last month with large banks over mortgage servicing abuses.

Roemer Is Newest Rumor to be Next Commerce Secretary

As current Commerce Secretary Gary Locke prepares to depart for his new assignment as Ambassador to China, former Representative and current Ambassador to India Timothy Roemer’s name has surfaced as Locke’s possible successor. Roemer was an early backer of President Obama’s 2008 presidential campaign. Obama is also rumored to be considering current U.S. Trade Representative Ron Kirk and General Electric CEO Jeffrey Immelt for the position.

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Financial Services Update – April 1, 2011

Government Shutdown Looms

With the current temporary funding resolution set to expire April 8, House and Senate Appropriations committees worked toward crafting a six-month compromise bill, setting annual spending at $1.055 trillion, $28 billion more than the House-passed level but still a $33 billion cut from the original spending measure. However, House Republicans remain splintered over whether a shutdown would be good politically, or whether they should compromise with Democrats in order to move on to larger future battles such as next year’s budget and the debt ceiling increase. Meanwhile, Democrats also remain divided over whether to allow a shutdown to happen or acquiesce to Republican cuts. Whether a compromise can be reached to avoid a shutdown will be known next week.

Unemployment Rate Drops to 8.8%

On Friday, the Department of Labor announced that the unemployment rate dipped to 8.8% in March from 8.9% in February. Nonfarm payrolls gained 216,000, with private-sector employment rising by 230,000. Payroll employment stood at 130.7 million in March. There were gains of 199,000 jobs in services and 17,000 jobs in manufacturing in March. Government employment fell by 14,000 and 9,000 jobs were lost in education. Nearly half of the unemployed have been out of work for 27 weeks or more. Private-sector wages fell 2 cents an hour to $19.30.

Ally Financial Files for IPO

On Thursday, Ally Financial, the former finance arm of General Motors, filed for an initial public offering that would allow the federal government to begin selling off its 73.8 percent stake.  Ally said in its registration statement with the Securities and Exchange Commission (SEC) that it was seeking to raise $100 million.  Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley are the lead underwriters.  The company did not give an estimated date or share price for the offering.  The Treasury Department, which invested more than $17 billion in Ally, did not say how much of its stake it intended to sell.  In addition to common shares, the Treasury Department owns $5.9 billion in convertible preferred stock.  Earlier this month, the Treasury Department began unwinding its holdings in Ally, selling $2.7 billion in trust preferred securities.

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Financial Services Update – March 4, 2011

February Unemployment Falls to 8.9%

On Friday, the Department of Labor reported that the nation added 192,000 jobs in February, up from a gain of 63,000 in January. The unemployment rate was down to 8.9 percent, falling below 9 percent for the first time in nearly two years. Altogether, 13.7 million people are unemployed and actively looking.  A broader measure of unemployment, which includes people working part-time because they could not find full-time jobs and those so discouraged that they have given up searching, was listed at 15.9 percent in February, down from 16.1 percent in January.

Congress Passes Stopgap Funding Measure

This week the House and Senate passed a continuing resolution funding the government until March 18, thereby avoiding a government shutdown and cutting $4 billion from current fiscal year spending. House Majority Leader Eric Cantor (R-VA) said Thursday that House Republicans plan to keep cutting spending at a rate of $2 billion a week, through two-week spending bills, until the Senate makes clear its position on a budget for the rest of FY 2011. House Republicans last month passed a bill to finish out the fiscal year, cutting $61 billion from 2010 levels. However, President Obama has issued a veto threat on that bill, saying House Republicans’ cuts are unacceptable. Senate Democrats have said that the non-spending “policy” provisions of the House Republicans’ bill regarding the environment and healthcare will also have to be struck before an agreement can be reached.

SEC Votes to Restrict Bonuses

On Thursday, the Securities and Exchange Commission voted to pass new restrictions on bonuses at large brokers and investment advisers, including hedge funds. The new restrictions are nearly identical to rules proposed by the Federal Deposit Insurance Corp. (FDIC) last month that apply to the banks that the FDIC oversees. The Dodd-Frank Wall Street Reform Act, which mandates the bonus rules, requires seven federal banking regulators to write the rules jointly. The SEC’s proposal will require brokers and advisers with more than $1 billion in assets to disclose the bonus arrangements of their executives, directors and lower-rung employees to the SEC annually. The proposal will also require firms with at least $50 billion in assets to hold half of the bonuses of top executives and heads of business units for three years. Any bonuses would have to be adjusted for losses at the firm after the pay was awarded. A 45-day public comment period follows Wednesday’s vote. A second vote by the commission is required before the proposal can be made final.

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Financial Services Update – January 7, 2011

December Unemployment 9.4%

On Friday, the Labor Department announced that the United States economy ended the year with 9.4% unemployment in December. The agency also revised estimates from October and November saying that 210,000 jobs were created in October instead of 172,000 and 71,000 in November, instead of 39,000.

Obama Appoints Daley, Sperling To Key Posts

On Thursday, President Obama announced that William Daley will serve as his new chief of staff. Daley is the former U.S. Secretary of Commerce in the Clinton Administration and brother of Chicago Mayor Richard Daley. Daley replaces interim chief of staff Pete Rouse, who will become a Counselor to the President. Rouse replaced Rahm Emanuel, who stepped down to make a run for mayor of Chicago. On Friday, President Barack Obama also announced that Gene Sperling will be the new Director of the National Economic Council replacing Larry Summers. Sperling had previously served as Counselor to Treasury Secretary Tim Geithner and Deputy Director of the National Economic Council and National Economic Adviser for President Clinton.

Tax Reform Debate Gains Steam

On Thursday, Senate Majority Leader Harry Reid (D-NV) announced that the Senate Finance Committee would hold hearings on tax reform in the near future. Senate Minority Leader Mitch McConnell (R-KY) followed Reid’s comment by saying that he also welcomed discussions about how to improve the country’s tax code. House Majority Leader Eric Cantor (R-VA) also said that tax reform was one issue that he believes could garner bipartisan support and hopes the President addresses it in the State of the Union at the end of the month. While tax reform was initially thought to be a second or third tier issue, it could now become the next big issue for Congress to tackle this year after the debate on raising the national debt ceiling.

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Financial Services Update – December 30, 2010

Cuomo Announces Settlement with Rattner

On Thursday,  New York Attorney General Andrew Cuomo announced that Quadrangle Group principal Steven Rattner has agreed to pay $10 million and refrain from doing business with any New York pension funds for five years, however the settlement does not require Rattner to admit any wrongdoing. The settlement was in response to Cuomo’s investigation of Rattner’s alleged role in a scandal involving the state’s public employees’ pension fund. Rattner already agreed to pay $6.2 million to settle a separate Securities and Exchange Commission case related to its pay-to-play investigation. The SEC settlement also prevents Mr. Rattner from associating with any investment adviser or broker dealer for two years.

Treasury Announces Six More Banks Repaid TARP Loans

On Wednesday, the Treasury Department announced that six more banks had repaid the government loans received through the Troubled Assets Relief Program, or TARP. The Treasury also said that out of $389 billion disbursed through TARP, the government had received repayments of $235 billion plus dividends and other payments totaling $35 billion, for a grand total of $270 billion. Banks repaying the government on Wednesday included East West Bancorp of Pasadena, CA; Webster Financial of Waterbury, CT; 1st Source Corporation of South Bend, ID; Surrey Bancorp of Mount Airy, NC; Nationwide Bankshares of West Point, NE; Haviland Bancshares of Haviland, KS.

Christmas Week Jobless Claims Drop

On Thursday, the Labor Department announced that jobless claims for the week of Christmas dropped to a level that has not been seen since July 2008. The number of people filing for unemployment fell by 34,000 to a seasonally adjusted 388,000 the week ending December 25. The four-week moving average decreased by 12,500 to 414,000 from 426,500. New filings have been hovering below 450,000 a week since the beginning of November. The Labor Department reports next Friday on the number of jobs added and the unemployment rate in December which is based on a survey taken in mid-December.

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Financial Services Update – December 10, 2010

Senate to Vote on Tax Package Monday; House Passage Remains Uncertain

On Thursday, the Senate unveiled final details of its $858 Billion 10-year tax bill and will vote on the procedural motion to pass the bill Monday.  However, it is unclear whether the House can pass the bill in its current form.  Below is a summary of the provisions.  Click here for a copy of the entire bill.

Fannie and Freddie in Negotiations on Write Downs

Reports this week indicate that Fannie Mae and Freddie Mac are in negotiations with the Federal Housing Finance Agency (FHFA) on a plan to write down so-called “underwater loans” on their balance sheets. The Obama administration wants the firms to join a program run by the Federal Housing Administration that allows banks and other creditors, which agree to write down mortgages, to essentially hand off the reduced loans to the FHA. Unlike most loan-modification efforts, the FHA program is open only to borrowers who aren’t behind on their payments. Starting in October, banks were able to receive additional subsidies if they first write down loan balances for borrowers owing at least 15% more than their home’s current value.

House Financial Services Committee Announces New Members

On Thursday, the House Financial Services Committee announced the following leadership for the 112th Congress:

Rep. Spencer Bachus, Chairman

Rep. Jeb Hensarling, Vice Chairman, Financial Services Committee

Rep. Judy Biggert, Chairman, Insurance, Housing and Community Opportunity
Jurisdiction: Insurance generally, housing, urban development, and the Department of Housing and Urban Development.

Rep. Shelley Moore Capito, Chairwoman, Financial Institutions Subcommittee and Consumer Credit
Jurisdiction: Banks and banking, depository institutions, federal deposit insurance, and safety and soundness.

Rep. Scott Garrett, Chairman, Capital Markets and Government-Sponsored Enterprises Subcommittee
Jurisdiction: Capital markets, securities, and government sponsored enterprises.

Rep. Ron Paul, Chairman, Domestic Monetary Policy Subcommittee
Jurisdiction: Domestic monetary policy, currency, precious metals, valuation of the dollar, economic stabilization, defense production, commodity prices, financial aid to commerce and industry.

Rep. Gary Miller, Chairman, International Monetary Policy Subcommittee
Jurisdiction: International monetary policy, international finance and banking, international financial and monetary organizations, including the IMF and World Bank, and the promotion of international trade in financial services.

Rep. Randy Neugebauer, Chairman, Oversight and Investigations Subcommittee
Jurisdiction: Oversight of all matters within the jurisdiction of the full Committee.

While not yet formally announced, the expected new members on the committee are:

Rep. Blaine Luetkemeyer (R-MO), Rep. Lynn Westmoreland (R-GA), Nan Hayworth (R-NY), Rep. Michael Grimm (R-NY), Rep. Robert Hurt (R-VA), Rep. Steve Stivers (R-OH), Rep. Bob Dold (R-TX), Rep. Bill Huezienga (R-MI), Rep. Michael Fitzpatrick (R-PA), Rep. Steve Pearce (R-NM), Rep. Quico Canseco (R-TX), Rep. Sean Duffy (R-WI), Rep. Randy Hultgren (R-IL)

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Financial Services Update

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.

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Financial Services Update

Financial Services Update

October 16, 2010

Authored by: Matt Jessee

Bernanke Indicates New Fed Actions

Speaking Friday, Federal Reserve Bank Chairman Ben Bernanke indicated the central bank would take new actions to fight the high rate of unemployment.  The Fed’s most likely next move will be to resume large purchases of government debt to lower long-term interest rates but weaken the dollar.  Bernanke argued that by making credit even cheaper it will encourage businesses and consumers to borrow and spend which would eventually lower unemployment.  Bernanke’s comments suggest that the Federal Open Market Committee, which sets monetary policy, is likely to take new steps at its next meeting taking place November 2nd through 3rd.  Bernanke also indicated the Fed intends to keep short-term interest rates at nearly zero for even longer than the markets now expect.

Former Countrywide Executives Agree to Settlement with the SEC

On Friday, in a settlement with the SEC over charges of misleading shareholders, former Countrywide Financial CEO Angelo Mozilo agreed to repay $45 million in ill-gotten profits and $22.5 million in civil penalties, former president David Sambol agree to repay $5 million in ill-gotten profits and $520,000 in civil penalties, and former CFO Eric Sieracki agree to pay $130,000 in civil penalties.  Mozilo and the others were scheduled to face trial on the charges next week.  The civil complaint also accused Mozilo of acting on his inside knowledge of the company’s precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139 million.  Under the agreement, the three men did not admit wrongdoing.

Federal Regulators Order Lenders to Correct Foreclosure Errors

In response to recent media reports that lenders may have used fraudulent paperwork or “robosigners” to evict struggling borrowers, on Wednesday, the Federal Housing Finance Agency (FHFA), which was established during the financial crisis to regulate Fannie Mae and Freddie Mac, released a policy statement telling lenders to make sure that documents used as part of the foreclosure process were properly reviewed and signed.  On Tuesday, Sen. Robert Menendez (D-NJ) sent letters to three banks, JP MorganChase, Bank of America and Ally Financial, which have halted foreclosures in 23 states, after evidence surfaced that their employees or outside lawyers signed documents without reading them.  Sen. Al Franken (D-MN) joined Menendez in requesting that Congress’ investigative arm, the Government Accountability Office, examine whether federal regulators overlooked problems at mortgage companies.

More Information

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

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

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