Tags: Act | SEC | derivatives | Dodd-Frank

House Financial Services Committee Caves on Dodd-Frank Rules

By    |   Wednesday, 08 May 2013 02:17 PM

In the classic movie "Stagecoach," bandits try to steal a company's payroll, and in one scene, the town banker advises that it would be best to deposit the payroll farther in advance. The company rep responds that he supposed that would be good for the bank, and the banker shoots back that what's good for the bank is good for the town.

Nearly 100 years later, this issue arises again in the form of a package of nine cat-and-dog bills House Republicans approved in committee on Tuesday and plan to push through the House as non-controversial bills, perhaps as soon as next week.

It has been the style of Republicans, at least on the Financial Services Committee, to cut an industry relief bill into itty bitty pieces so that each statesman can gain the maximum political and fundraising benefit by presenting himself as the sponsor of one or more of the bills, rather than merely the sponsor or an amendment to a larger bill sponsored by the chairman. Presumably this strategy has been poll-tested and recommended by highly compensated consultants.

However, because some of the bills have goofy, innocuous, non-descriptive titles, it necessitates an explanation of what these individual bills propose to do. As a public service, the list follows:

H.R. 701 (McHenry/Scott): Requires the Securities and Exchange Commission (SEC) to complete rules to implement the Jumpstart Our Business Startups (JOBS) Act and to create an exemption for "small issue" offerings up to $50 million in a 12-month period.

H.R. 801 (Womack/Himes): Holding Company Registration Threshold Equalization Act – Amends Title VI of the JOBS Act to provide for savings and loan holding companies a registration exemption similar to that already provided for bank holding companies.

H.R. 742 (Huizenga/Moore): Swap Data Repository and Clearinghouse Indemnification Correction Act – Deletes the requirement that foreign regulators indemnify swap data repositories and U.S. regulators before being allowed to share data from the swap data repositories.

H.R. 1341 (Fincher): Financial Competitive Act – Requires the Financial Stability Oversight Council to study within 90 days the differences between the application by U.S. and foreign regulators of the derivatives credit valuation adjustment (CVA) capital requirement.

H.R. 634 (Grimm/Peters): Business Risk Mitigation and Price Stabilization Act – Exempts end users from the margin and capital requirements of Title VII of the Dodd-Frank Act.

H.R. 677 (Stivers/Moore): Inter-Affiliate Swap Clarification Act – Exempts inter-affiliate trades from the margin, clearing, and reporting requirements of title seven of Dodd-Frank.

H.R. 992 (Hultgren/Himes): Swaps Regulatory Improvement Act – Repeals most of the "pushout" requirement under sec. 716 of Dodd-Frank that requires swaps transactions of banks to be conducted by separate subsidiaries rather than within the banks.

H.R. 1256 (Garrett/Carney): Swap Jurisdiction Certainty Act – Requires the SEC and Commodity Futures Trading Commission to issue a single set of rules on swap transactions between U.S. and foreign entities.

H.R. 1062 (Garrett): SEC Regulatory Accountability Act – Directs the SEC to conduct more extensive cost/benefit analyses, as called for in the administration's Executive Order No. 13563.

Often, even usually, bills that pass the House, even when the same party controls the two legislative bodies, often languish in the Senate inbox. That may not be the case here, because at least some of the bills have the support of both Republicans and some Democrats, who have joined the industry's push to get free of regulation while continuing to enjoy the support of an array of federal subsidies, including quantitative easing (QE).

Thus, a battle is brewing on two fronts. One is the proposal by Sens. Sherrod Brown, D-Ohio, and David Vitter, R-La., to remove some of the subsidies in the interest of ending the policy of "too big to fail." The other is over the industry's effort to portray itself as the victim of the 2008 episode of the ongoing financial crisis on the ground that capital, margin and reporting requirements designed to reduce the risk of the next episode are a nuisance and serve only to impede job growth and hamper the ability of U.S. banks to compete against foreign banks over who can claim the biggest share of global subsidies.

As I wrote this, Richard Fisher, president of the Federal Reserve Bank of Dallas, an opponent of the too big to fail policy, told CNBC's Rick Santelli that QE cannot in fact grow to infinity and that the Fed must take steps to halt the growth of its balance sheet as it approaches $4 trillion.

Reality check: Nouriel Roubini followed and said what I have been saying: No way is the Fed going to end QE anytime soon; some day the market may force the end of QE.

Readers are invited to follow this developing struggle by watching this space.

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A battle is brewing on two fronts. One is the proposal by Sens. Brown Vitter to remove some of the subsidies in the interest of ending the policy of "too big to fail." The other is over the industry's effort to portray itself as the victim of the 2008 episode of the ongoing financial crisis.
Wednesday, 08 May 2013 02:17 PM
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