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Financial Reform Roundup

April 16, 2010 - by Donny Shaw

Lots of news from the Senate today on the financial reform front today. Here’s a roundup.

We Finally Have a Bill

The bill has finally been introduced. Sen. Chris Dodd’s [D, CT] comprehensive financial regulatory reform bill, the Restoring American Financial Stability Act of 2010, now has a bill number — S. 3217. This is the base bill that the Senate will start debating and voting on as soon as next week. It would create a process for the government to seize and break up failing financial firms, create a new consumer protection agency specifically for financial products, reform the derivatives market, and much more. An 11-page summary from the Banking Committee can be found here (.pdf).

We’ll have the full text up this weekend. For now, you can use the OpenCongress bill page to post comments, find news and blog coverage, and contact your senator. Check back this weekend for the full text and, of course, our bill text tools for commenting on and create permalinks to specific provisions.

Lincoln Drops Her Derivatives Legislation

Senate Agricultural Committee Chairwoman Blanche Lincoln [D, AR] has unveiled her much-anticipated derivatives reform bill. She’s calling it “The Wall Street Transparency & Accountability Act of 2010.” You can download the full bill text here, get a one-page overview here, or get an 11-page section-by-section summary here (all pdf). It would require all derivatives trades from financial companies to be conducted on public exchanges and force commercial banks to “spin off” their derivatives trading desks. People are just starting to dig into the bill, so we’ll have more information on what’s in it and how it would work tonight and over the weekend.

This bill is going to replace the derivatives reform language that is currently in the underlying bill (S. 3217) and will likely be incorporated by the rules that will govern the floor debate.

Mixed Message From the White House

Treasury Secretary Geithner ratcheted up the pressure on Democrats to produce a strong derivatives bill in a letter today to Sen. Lincoln, and Barack Obama went as far as issuing a veto threat of any bill without strong derivatives language. But neither ventured to endorse Sen. Lincoln’s aggressive “spin off” proposal.

WSJ:

Mr. Geithner, in a letter to Senate Agriculture Committee Chairman Blanche Lincoln (D., Ark.), said new financial rules must create restrictions on how over-the-counter derivatives are traded “in order to curb abuses that were at the very center of the financial crisis.” But he notably stopped short of endorsing a proposal from Ms. Lincoln to force large banks to spin off derivatives trading businesses entirely. […]

Mr. Geithner’s two-page letter also could be an attempt to steer Ms. Lincoln’s bill away from one of its most controversial elements – a requirement that large U.S. banks completely spin off their derivatives trading businesses. While he doesn’t address this requirement in his letter, he does specify the exact requirements White House officials believe would accomplish tighter derivatives trading requirements. That could give Democrats cover to scale back her proposal while still toughening rules.

 

Filibuster is On

According to Greg Sragent at Plum Line, all 41 Senate Republicans have now signed on to a letter distributed by Minortiy Leader Sen. Mitch McConnell [R, KY] pledging to vote against the bill. The letter reads, in part:

A bipartisan bill should address the damaging financial practices of big Wall Street firms and government-sponsored entities that led to unprecedented taxpayer bailouts and caused our government to take on enormous amounts of debt. We simply cannot ask the American taxpayer to continue to subsidize this “too big to fail” policy. We must ensure that Wall Street no longer believes or relies on Main Street to bail them out. Inaction is not an option. However, it is imperative that what we do does not worsen the current economic climate or codify the circumstances that led to the last financial crisis.

We are united in our opposition to the partisan legislation reported by the Senate Banking Committee. As currently constructed, this bill allows for endless taxpayer bailouts of Wall Street and establishes new and unlimited regulatory powers that will stifle small businesses and community banks.

The Republicans are asking for an open amendment process. Otherwise they will vote en bloc and sustain a filibuster of even bringing the bill to the floor for debate.

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