When Congress passed the Dodd-Frank financial reform bill in 2010 they made quite a few dubious claims about what was in it, a couple of the most offensive being that the bill would end too big to fail and that it would bring transparency to the Federal Reserve. We’re still waiting for real action on ending too big to fail, but on real Fed transparency legislation there is some action. Tomorrow, the House Oversight Committee will vote on the Federal Reserve Act. The bill would eliminate the special audit protections that the Fed conducts its monetary policy under and mandate that the Comptroller General conducts a complete Fed audit within one year’s time.Read Full Article
Last year's Dodd-Frank financial reform bill didn't directly fix the too-big-to-fail problem that necessitated the 2008 bailouts. Instead, it allowed the big banks to grow even bigger, but gave regulators new authority to require the big banks to report more information to the government and force them to follow stricter rules. It also gave regulators new guidelines to consider when deciding whether or not to allow bank mergers that could create new too-big-to-fail entities. Basically, the bill took a noncommittal approach to addressing issues of bank size and interconnectedness. Congress punted the big decisions off to regulators and made it possible for regulators to take drastic action, but gave them a lot of leeway to maintain the status quo if they so choose.
These provisions of the bill are about to get their first test. Capital One, currently the ninth largest bank-holding company in the U.S., has reached an agreement with the Ducth ING Groep to purchase their U.S. arm, ING Direct. They are planning to then turn around and leverage assets gained in that deal to purchase HSBC's subprime credit card division. The acquisitions would make Capital One the fifth largest bank in the U.S., right behind such infamous too-big-to-fail giants as Bank of America, Chase, Citigroup, and Wells Fargo. It would mean that financial assets and power in the U.S. would become even more concentrated in a small group of top corporations.Read Full Article
Given how extreme the failure of Wall Street was that caused the 2008 crisis, the financial reform bill passed by Congress last year, Dodd-Frank, is pretty weak tea. It's riddled with giant loopholes, defers many of the biggest decisions to the same regulatory agencies who failed us in the first place, and, most significantly, allows the banks that needed a $4.6 trillion bailout because they were "too big to fail" to become even bigger. Dodd-Frank was largely an exercise in passing a bill for the sake of appearing to have done something. Unfortunately, Congress seem to have fooled a lot of people out there, especially those who work for popular newspapers, into believing that they have fixed the problems.Read Full Article
The banking industry lost a vote on Capitol Hill yesterday for what seems like the first time since the first TARP attempt was rejected in 2008. The question was if the Federal Reserve's new rules limiting how much banks can charge retailers for debit transactions, as mandated by last year's financial regulatory overhaul bill, should go into effect this summer as scheduled or be delayed for a year, giving banks more time to lobby against it. In the end, a majority of the Senate voted in favor of the delay (54-45) but it wasn't enough to overcome a procedural hurdle and it was ultimately rejected.Read Full Article
One of the foreclosure relief programs that House Republicans are looking to shut down this week has been a widely-recognized failure. It was supposed to provide incentives for mortgage lenders to voluntarily renegotiate loans for underwater homeowners, but it never caught on. The other program, however, hasn't gone into effect yet, but because it doesn't require the cooperation of lenders it's expected to be more successful when it does. The program, which is called Emergency Mortgage Relief, would provide government bridge loans to help unemployed homeowners avoid foreclosures. Since we can't evaluate it in action, here's a closer look at how's it's supposed to work once it starts up.Read Full Article
Last year, the independent, non-partisan Office of Congressional Ethics asked the House Ethics Committee to look into some fishy fundraising activity by three congressmen -- Rep. Joseph Crowley [D, NY-7], Rep. John Campbell [R, CA-48] and Rep. Tom Price [R, GA-6]. The allegation was that they held an unusually high number of campaign fundraising events with Wall Street types in the days leading up to the vote on the Dodd-Frank Wall Street Reform Act and that this may amount to soliciting funds "in a manner which gave the appearance that special treatment or access was being provided to donors or the appearance that the contributions were linked to an official act."
Well, the Ethics Committee has issued their findings, and though they found that staff members were involved in fundraising and fundraising consultants were involved in setting up lobbyist meetings, they didn't see anything wrong with any of it.Read Full Article
The Dodd-Frank financial regulatory reform bill that the Democrats passed last year didn't take an aggressive approach to fixing the too-big-and-interconnected-to-fail problem that necessitated the bank bailouts. The Senate rejected an amendment to the bill that would have broke up the biggest banks and, instead, created a "Systemic Risk Council" to determine which banks are too big and interconnected and make them follow tougher capital and leveraging requirements. It's supposed to keep the giant finance companies on a tight leash and avoid the shocks to the financial markets that would be caused by restricting the growth of a Goldman Sachs or Bank of America.
But it's not guaranteed to work, and I'd say the latest comments from Tim Geither, who is going to chair the council, do not inspire much confidence:Read Full Article
The graphic at right shows, in aggregate, the explosion of the Federal Reserve's balance sheet during the financial crisis. Today, thanks to the Dodd-Frank financial reform bill (exact provision here), we get to begin learning which companies benefitted from these subsidies, how much they got, when they got it, and what the Fed got/is expected to get in return. The law also asks for "the specific rationale for each such facility or program." Click through for links to dig in yourself or to find the best breaking analysis.Read Full Article
Incoming Financial Services Chairman Rep. Spencer Bachus [R, AL-6] is using the leverage he gained Tuesday night to try to weaken how regulators implement the already-weak derivatives reform provisions in the Dodd-Frank Act.Read Full Article
About a week after the Dodd-Frank financial reform bill was signed into law, government transparency watchdogs found a heinous provision in the bill that seemed to allow the Securities and Exchange Commission (SEC) to deny Freedom of Information (FOIA) requests for information pertaining to an "examination, surveillance, or risk assessment” of banks and other financial comapnies. A group of groups wrote to the bills' sponsors, Sen. Chris Dodd [D, CT] and Rep. Barney Frank [D, MA-4], saying that the provision was "undermining the bill’s overarching goals of more transparency and accountability" and asking that they pass another bill to remove it.Read Full Article