from Financial Regulatory Forum:

ANALYSIS-US ‘dark pools’ marketplace may face pruning

February 25, 2010

   By Jonathan Spicer
   NEW YORK, Feb 24 (Reuters) - The surprising growth of U.S. stock trading venues is set for a pruning as regulators prepare to tighten controls on so-called dark pools and as brokers, still pinching pennies, look to narrow where they send orders.
   Dark pools are a type of alternative trading system, or ATS, that allow investors to anonymously trade larger blocks of stock without tipping their hand to the wider market.
   At more than 40, they've exploded in the last five years to meet investors' growing demand, fragmenting and complicating the marketplace like never before.
   While the U.S. Securities and Exchange Commission is worried this fragmentation could harm public prices and long-term investors, others are concerned about the mounting costs associated with routing orders to the most appropriate of many destinations.
   This all suggests that some ATSs -- particularly the smaller, independent ones -- could disappear in a consolidation, marking a significant shift from the regulation-inspired explosion that has siphoned trading volume from New York Stock Exchange, Nasdaq Stock Market and other traditional exchanges.
   "It makes sense and it's made some sense for a while," said Jamie Selway, managing director of institutional broker White Cap Trading, and a BATS Exchange board member.
   "Potentially the operating costs go up for (ATSs) with the regulatory tightening. There is decreasing marginal return for people running these things, and an even harder market in terms of ... less money for technology projects," he said. "Budgets are tight, particularly technology and regulatory budgets."
   The last industry-wide consolidation came between 2000 and 2006 with the various mergers of alternative venues BRUT, Instinet, Island, and Archipelago, which all ended up acquired by what are now NYSE Euronext <NYX.N> or Nasdaq OMX <NDAQ.O>.
   But new rules in 2005 known as Regulation National Market System (Reg NMS) forced exchanges to electronically route orders to the venue with the best price, sparking another growth spurt that the SEC hoped would curb exchange monopolies, and inspire innovation and diversity in the marketplace.
   It certainly had the desired effect. Perhaps too much so.
   "After having favored ATSs by exempting them from exchange requirements, the commission is now considering whether the success of the ATSs has had another effect of creating (unwanted) fragmentation," and whether they should be brought more in line with the requirements of exchanges, Robert Colby, former deputy director of the SEC's trading and markets division, told the Capital Markets Consortium this week.
   Reg NMS has brought "significant fragmentation of orders and high search costs for large orders," said Colby, who is now counsel at law firm Davis Polk & Wardwell LLP.
  
   DARK POOLS UNDER THE GUN
   The public comment period ended Monday on the SEC's three dark pool proposals: to ban private electronic messages known as indications of interest, or IOIs; lower the threshold at which the ATSs must display quotes for a single stock; and require them to report trading in real time. [ID:nN04224658]
   The SEC also devoted much space to dark pools in a 74-page paper on market structure and high-frequency trading that it issued last month, which also requests public comment. "Whether fragmentation is in fact a problem in the current market structure is a critically important issue ..." the SEC said.
   "Undisplayed" trading accounts for about a quarter of all volume, according to the regulator. Most of that is executed in-house at banks such as Credit Suisse Group AG <CSGN.VX>, Goldman Sachs Group Inc <GS.N> and other broker-dealers that "internalize" orders in their own dark pools.
   Any consolidation, rather, is likely to occur among the independent or consortium-owned ATSs that have a less stable flow of orders, and that are more vulnerable to rule changes.
   "If it's a fragmented dark pool with no electronic liquidity provider, then, standing alone, it may be hard for them to gain a lot of market share," said George Hessler, an industry veteran and former executive vice president at Lime Brokerage.
   There are mixed signals as to whether an ATS consolidation has begun.
   NYFIX, a trading technology firm bought last year by NYSE Euronext, agreed separately in November to sell its Millennium dark pool to BNY ConvergEx Group. Headed in the other direction, trading systems provider Pragma Securities launched the ONECROSS dark pool earlier this month. [ID:nN09189539]
   Big advances in brokerages' order-routing technology is probably why consolidation has not occurred over the last few years, Whit Conary, president of dark pool LeveL ATS, said of the industry in general. "It is unlikely that regulatory changes will bring about consolidation in ATSs."
   But Conary, whose Level launched in 2006 and is backed by five financial companies including Citigroup Inc <C.N> and mutual fund giant Fidelity, added that mergers could work from a business perspective if the ATS models are substantially different and can expand on the offering to the customer. (Editing by Steve Orlofsky) ((jonathan.spicer@thomsonreuters.com; +1-646-223-6253; Reuters Messaging: jonathan.spicer.reuters.com@reuters.net))
   Keywords: TRADING/DARKPOOLS CONSOLIDATION 
  
Wednesday, 24 February 2010 18:22:58RTRS [nN24149666] {C}ENDS

from Financial Regulatory Forum:

U.S. SEC delays plan to adopt IFRS

February 25, 2010

   By Rachelle Younglai
   WASHINGTON, Feb 24 (Reuters) - U.S. securities regulators on Wednesday delayed plans to allow domestic companies to use international accounting standards because it will take businesses at least four years to switch to new rules.
   The soonest U.S. companies could start using the International Financial Reporting Standards, or IFRS, would be in 2015 instead of 2014, but even that date is not certain.
   The Securities and Exchange Commission is grappling with how to move to one set of high-quality, globally accepted accounting standards.
   Under the previous plan, the SEC would have allowed U.S. companies to use the international rules as early as 2014. But industry and investors told the SEC that U.S. companies would need about four to five years to implement the changes successfully, thus pushing the date out to 2015.
   A host of issues remain, such as whether the international rules are sufficiently developed, whether the United States is prepared to convert to IFRS and ensuring that the international rules are set by an independent standard setter.
   "We do not have all the information necessary to make these decisions today," said SEC Chairman Mary Schapiro at a public agency meeting.
   Next year, the SEC will decide whether to incorporate IFRS into the U.S. financial reporting system. The agency will only proceed if it is satisfied that progress is being made on issues such as improving IFRS.
   The U.S. audit and business community said it was pleased that the SEC reiterated support for a single set of high-quality global accounting standards. However, the vagueness of the plan frustrated some foreign accountants.
   "The current cautious approach does not offer the much-needed certainty required by U.S. companies and the many jurisdictions still in the process of making final decisions about switching to IFRS reporting," said the Institute of Chartered Accountants in England and Wales.
   U.S. companies are required to use U.S. Generally Accepted Accounting Principles, or U.S. GAAP, which are considered more prescriptive than the international rules.
   Meanwhile, the rest of the world is adopting the international standards, which could potentially leave the United States and global companies at a disadvantage if they have to comply with two sets of rules.
   Financial centers such as Hong Kong and the European Union already require international accounting rules.
 (Reporting by Rachelle Younglai; Editing by Andre Grenon and Steve Orlofsky)
 ((rachelle.younglai@thomsonreuters.com; +1 202 898 8411)) Keywords: SEC IFRS 
  
Wednesday, 24 February 2010 22:00:18RTRS [nN24108779] {C}ENDS

from Financial Regulatory Forum:

US’ Geithner repeats call for financial reform bill

February 24, 2010

    WASHINGTON, Feb 24 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Wednesday repeated his call for Congress to pass financial reform legislation that curbs risk-taking by big financial firms and ensures they can absorb their own losses.
   Geithner, in prepared testimony on the Obama administration's fiscal 2011 budget plan that was identical to earlier written remarks, told the U.S. House of Representatives Budget Committee that comprehensive reforms were needed to ensure growth and ensure Americans' financial safety.
   "We need a financial system that is safer, in which financial firms, especially large ones, have more capital to absorb their own losses and cannot take risks that threaten the whole economy," Geithner said. "Consumers need to be given the information they require to make the decisions that are right for them and they need to be protected from unfair and fraudulent practices."
   He added that the government needs to have the authority that it did not have during the financial crisis to "break apart and unwind failing firms in ways that limit damage to the system as a whole."
   But his testimony did not provide any specifics on the mechanisms for providing such protections. Geithner is scheduled to meet later on Wednesday with U.S. senators Christopher Dodd, the Connecticut Democrat who heads the Senate Banking Committee, and Republican Bob Corker, who has taken a lead role in negotiations on a Senate financial reform bill, to hash out details of the bill.
   Key sticking points are Republican opposition to curbs on proprietary trading by Wall Street banks and to the creation of a new consumer financial protection agency. (Reporting by David Lawder, Editing by Chizu Nomiyama)
 ((david.lawder@thomsonreuters.com; +1 202 898 8395; Reuters Messaging: david.lawder.reuters.com@reuters.net))
   Keywords: USA BUDGET/GEITHNER 
  
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 Wednesday, 24 February 2010 15:00:00RTRS [nNYS007798] {EN}ENDS

from Financial Regulatory Forum:

W.House recommits to ‘Volcker rule’ bank trade ban

February 24, 2010

   By Kevin Drawbaugh
   WASHINGTON, Feb 23 (Reuters) - The Obama administration said on Tuesday it is still committed to the "Volcker rule" to ban risky trading by banks, although Congress looks increasingly unlikely to adopt the rule as proposed.
   The White House's forceful support for the rule came after the Treasury Department said earlier in the day that it backed "mandatory limits" on banks trading for their own account.
   President Barack Obama had originally framed the proposed Volcker rule on Jan. 21 as an outright ban, which stunned markets and complicated extended negotiations in Congress over legislation to tighten bank and capital market regulation.
   "We're not walking away from and we're not watering down that proposal one bit," White House spokesman Robert Gibbs told reporters when asked about the outlook for the rule authored chiefly by White House economic adviser Paul Volcker.
   "We're not walking away from what the president outlined on the Volcker rule," Gibbs said at a briefing.
   As he spoke, the U.S. Senate Banking Committee continued negotiating long-awaited regulatory reform legislation. Release of a bipartisan bill by two key lawmakers had been expected this week, but lobbyists said it may wait until next week.
   The committee is considering including a watered-down version of the Volcker rule in the bill, which will also propose new rules to protect financial consumers, rein in derivatives markets and tackle the "too big to fail" problem.
   Financial services industry lobbyists said senators may add language to their bill from a bill approved in December by the House of Representatives.
   The House bill would allow, but not require, regulators to restrict proprietary trading at firms judged to pose a risk to the stability of the financial system. Regulators could also order firms out of the hedge fund business under the Democratic House bill, which got no votes of support from Republicans.
   Obama's January proposal was tougher. He proposed that banks "no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers."
   The Volcker rule could affect as much as 10 percent of net revenues at Goldman Sachs <GS.N>, said a senior executive of the Wall Street giant earlier this month.
   In response to questions about the administration's commitment to the proposal, the Treasury Department on Tuesday restated its position that simply allowing regulators to act to curb banks' proprietary trading was not enough.
   "We believe that rather than merely authorize regulators to take action, we should impose mandatory limits on proprietary trading by banks and bank holding companies."
   The statement, which was in keeping with testimony from a top Treasury official on Feb. 2, also reiterated the Treasury's support for "related restrictions on owning or sponsoring hedge funds or private equity funds, as well as on the concentration of liabilities in the financial system."
   Former New York Federal Reserve official Ernest Patrikis, a foe of the Volcker rule, said the Treasury's language suggested a shift in the stance of the administration, which has still not released draft legislative language for the Volcker rule.
   "They realize they are off track and that the original proposal was misdirected, too strong and ill-advised," said Patrikis, a specialist in bank regulatory issues at the law firm White and Case in New York.
   Senate Banking Committee members are considering giving regulators the power to impose limits on a bank's proprietary trading only if the regulator thinks the bank's activities threaten its safety and soundness. The rules would apply only to banks with assets over $50 billion, the sources said.
  
   HOUSE BILL CLOSELY SIMILAR
   Those parameters align closely with the House bill. One of its chief authors, Representative Paul Kanjorski, chairman of the House Capital Markets Subcommittee, told reporters on Tuesday he would support keeping the "measured" language in the House bill or the White House's proposal.
   Either way, he said, "I don't think that it hurts anybody except those who want to speculate very quickly. ... Let's be honest, some of these people just don't learn.
   "When your dog just keeps wetting the carpet, there's only one thing to do, you've got to whack him on the nose to let him know that's not what he's supposed to do. Maybe the regulators have to whack the banks a little bit to make them respond."
   The U.S. government reported on Tuesday that the number of "problem" U.S. banks jumped 27 percent during the fourth quarter of 2009 to 702, the highest level since 1993.
   At the same time, the New York State comptroller reported that bonuses on Wall Street rose 17 percent last year to $20.3 billion even as the industry faced a public backlash over pay.
   Average taxable bonuses on Wall Street rose to $123,850 in 2009. Compensation at Goldman Sachs, JPMorgan Chase & Co <JPM.N> and Morgan Stanley <MS.N> rose 31 percent.
   Separately, Senate Agriculture Committee Chairman Blanche Lincoln said on Tuesday the panel will unveil a draft bill in the next couple of weeks to crack down on over-the-counter derivatives, an area also addressed in the House-passed bill.
   In another financial regulation issue, a senior Treasury official on Tuesday said at a conference that it is vital to set up a separate financial consumer watchdog agency.
   Obama's proposed Consumer Financial Protection Agency is a major obstacle to bipartisan Senate agreement on reforms.
   Michael Barr, the department's assistant secretary for financial institutions, said the Treasury was well aware that lobbyists were trying to "slow progress or weaken reform."
  
   * Wall St not heeding anger over exec pay -W.House, double-click on [ID:nWEN0591]
   * W. House says not watering down "Volcker rule," double-click on [ID:nWEN0588]
   * US Senate ag committee to soon unveil OTC bill, double-click on [ID:nN23105612]
   * US Senate panel mulls narrow, weak Volcker rule, double-click on [ID:nN23104224]
   * US FDIC reports 27 pct jump in problem banks, double-click on [ID:nN23103175]
   * US Treasury pushes call for consumer watchdog, double-click on [ID:nN23248516]
   * US Treasury says backs limits on bank trading, double-click on [ID:nN23246650]
   (Additional reporting by Matt Spetalnick, Glenn Somerville, Rachelle Younglai, Caren Bohan, Karey Wutkowski and David Lawder, with Steve Eder and Jonathan Stempel in New York) (Reporting by Kevin Drawbaugh; editing by Carol Bishopric)
 ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax)) Keywords: FINANCIAL REGULATION/ 
  
Wednesday, 24 February 2010 00:26:44RTRS [nN23101102] {C}ENDS

from Financial Regulatory Forum:

Financial watchdog’s power crucial — Obama aide

February 23, 2010

   By Kevin Drawbaugh and Caren Bohan
   WASHINGTON, Feb 22 (Reuters) - An Obama administration spokesman on Monday stressed the importance of "independent authority" for a proposed U.S. financial consumer watchdog and said where it was "housed" was another issue.
   The comment from Robert Gibbs, spokesman for the White House, came as two U.S. senators tried to forge a bipartisan agreement on tighter financial regulation, with analysts watching closely for signals of compromise.
   The biggest obstacle to a Senate deal is President Barack Obama's proposed U.S. Consumer Financial Protection Agency.
   Democrats want a powerful, independent financial consumer watchdog, saying it is needed to shield Americans from predatory mortgages and abusive credit cards.
   Republicans want to block the CFPA or weaken it, an objective shared by the financial industry, whose profits would be directly threatened by the proposed agency.
   Two disputes remain on the CFPA proposal. One is whether it will be an independent agency, or a division of some larger  regulatory body. Another is how much power it will have, either as a stand-alone organization or as a unit of something else.
   "The elements of this ... have to include the independent authority of a CFPA," Gibbs told reporters at a briefing.
   "Whether it's housed some place, I think, is one thing.  But does that -- does the office of the CFPA have the independent authority to act without the permission of wherever that is housed?" he said.
   After the worst banking and capital market crisis since the 1930s, Obama in mid-2009 proposed the CFPA. The House of Representatives endorsed the idea, reducing its scope somewhat, in December as part of a sweeping financial reform bill.
  
   DODD-CORKER BILL IMMINENT
   Senate Banking Committee Chairman Christopher Dodd, a Democrat, is working closely with Republican Senator Bob Corker, a committee member, on a broad financial reform agreement. Its release is expected within days.
   "I'm very optimistic we can get a bill, a good bill," Dodd told reporters on Monday, adding he believes the pending measure would win Senate passage.
   Senator Richard Shelby is leading other Republican banking committee colleagues on drafting substitute legislation. That proposal and whatever Dodd and Corker produce are expected to collide in early March at a committee working session that will likely lead to a decisive vote.
   "It's unclear whether the proposal will include language on enhanced consumer protection, although Shelby's alternative bill -- which Dodd may ultimately have to steer close to -- will almost certainly reject the notion of creating an independent" CFPA, said policy analyst Charles Gabriel at investment advisory group Capital Alpha Partners.
   Shelby told reporters, "Conceptually, we are probably very close together on all the main issues," except for the proposed creation of an independent consumer watchdog agency.
    Treasury Secretary Timothy Geithner said on Monday the administration is still fighting "to consolidate the fragmented authority of seven separate agencies into a single, independent and accountable Consumer Financial Protection Agency."
   His remarks came in a statement marking implementation on Monday of new rules for the credit card industry, signed into law last year by Obama as his first financial reform victory.
   As originally proposed, the CFPA would centralize consumer protection laws and staffs now located and managed within the Federal Reserve, the Federal Deposit Insurance Corp and other agencies criticized for doing a poor job ahead of the crisis.
   Seeking compromise, Dodd in recent weeks has discussed multiple options with Republicans, but has not struck a deal.
  
   OPTION STILL ON TABLE
   The only compromise proposal still in play, aides said, is one that would make the CFPA a unit of a new bank super-cop that Dodd favors, the Financial Institutions Regulatory Administration (FIRA). Still disputed, however, is how much autonomy and rule-writing power to give the CFPA director.
   Corker has said that failure to work out the CFPA issue could prevent Congress from producing any reform bill.
   On another issue, the Dodd-Corker bill was expected to call for formation of an inter-agency council of regulators to monitor financial risk to the stability of the economy. Its chairman would be the Treasury secretary, with the head of the Fed as vice-chairman. Other details are being worked out.
   "Dodd has endorsed the idea of a systemic risk council chaired by the Secretary of the Treasury, with the Fed chairman serving as vice chair," said Dodd spokeswoman Kirstin Brost.
   The same approach was backed by the House in December. In a similar approach, Dodd had initially proposed forming a new agency governed by a council to oversee systemic risk.
   Substantive disagreement remains among lawmakers over the  council's powers, said Senate aides.
   Dodd initially proposed allowing the council to mandate existing regulators to take specific policy actions.
   Some Republicans agree that the Treasury should chair the council, but want to limit its power to issuing recommendations regulators could reject, subject to congressional oversight.
  
   RELATED NEWS
   * TAKE A LOOK-Global changes in financial regulation, please double-click on [ID:nLDE61F22A]
 
 (Additional reporting by David Lawder and Jeff Mason, and Thomas Ferraro; Editing by Chizu Nomiyama) ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax))
       Keywords: FINANCIAL REGULATION/ 
  
Tuesday, 23 February 2010 00:19:10RTRS [nN22150585] {C}ENDS

from Financial Regulatory Forum:

State Street says U.S. requested info on funds

February 23, 2010

   By Svea Herbst-Bayliss
   BOSTON, Feb 22 (Reuters) - State Street Corp <STT.N> reported on Monday that federal securities regulators and federal prosecutors had asked it to supply information about several of its funds.
   The requests were made public only a few weeks after State Street, the world's second largest institutional money manager with $1.9 trillion in assets under management, settled other federal and state charges related to investments in sub-prime mortgages.
   In the filing, State Street said the U.S. Attorney's office in Boston has requested information in connection with State Street's active fixed income strategies.
   The company did not say when the federal prosecutor asked for the information or give any other details about what may happen next.
   In the same filing, State Street also said the U.S. Securities and Exchange Commission had requested information regarding two registered funds that invested in sub-prime securities.
   It also did not say when the U.S. financial regulator asked for the information.
   The company said these funds were not covered by the settlement announced earlier this month and added that the SEC has "declined to advise us of the status of its inquiry."
   Earlier this month the company agreed to reimburse investors over $300 million to settle federal and state charges that the company had misled clients about its investments in sub-prime mortgages.
   The commission charged that the Boston-based company's investment arm had selectively disclosed information to investors in its Limited Duration Bond Fund about the portfolio's plunging returns in 2007.
   The fund, which had managed $1.4 billion, was aimed at pension funds and other investors who wanted slightly better returns than what money market funds were paying, but with only slightly more risk. The fund's returns tumbled about 37 percent during the first three weeks of August 2007.
   State Street, an icon in the investment industry since its founding 218 years ago, had already paid out about $350 million to settle lawsuits brought by private investors.
   The payments under the settlement announced earlier in the month will be covered by State Street's legal reserve fund, which it originally set up in 2007 and stocked up last year.
   In the regulatory filing made on Monday, State Street sad that of the seven seven lawsuits filed, the company settled three, including an $89.75 million Employee Retirement Income Security Act (ERISA) class action settlement. (Reporting by Svea Herbst-Bayliss; Editing by Richard Chang) ((Svea.Herbst@Reuters.com; +1 617 856 4331; Reuters Messaging: svea.herbst.reuters.com@reuters.net)) Keywords: STATESTREET/ 
  
Tuesday, 23 February 2010 00:55:21RTRS [nN22221054] {C}ENDS

from Financial Regulatory Forum:

US Treasury says consumer watchdog benefits banks

February 23, 2010

    WASHINGTON, Feb 23 (Reuters) - Setting up a separate U.S. consumer financial watchdog will not only improve regulation of banks but also be more efficient for taxpayers, a senior U.S. Treasury Department official said.
   Assistant Treasury Secretary Michael Barr, in remarks prepared for delivery on Tuesday to the Credit Union National Association, said banks would benefit from having consumer protection responsibilities handled by an agency separate from those that handle banking regulation.
   "Dedicating consumer markets regulation to a fully accountable agency will give banks and credit unions a more predictable regulatory environment," he said. "Institutions will have more certainty, which will make it easier to build a sustainable business."
   Excerpts from Barr's remarks to the credit union group were made available under embargo on Monday night.
  His comments come as the Treasury tries to urge Senate lawmakers to look for common ground on tightening financial regulation in the wake of the crisis that helped drive the United States economy into recession in late 2007.
   One obstacle to an agreement is the Obama administration's proposal for a Consumer Financial Protection Agency, envisioned as a powerful, independent agency that could shield consumers from predatory mortgages and abusive credit cards.
   Republicans dispute the need for such a new agency, as do some participants in the U.S. financial industry for fear that it might threaten profits.
   Barr said that existing practices, in which banking agencies also handle consumer protection, leads to overspending to ensure that banks and credit unions follow the rules but lets non-bank financial firms off the hook.
   "The federal government spends at least 15 times more on consumer compliance and enforcement for banks and credit unions than for nonbanks, even though there are at least five times as many nonbanks as there are banks and credit unions," he said.
   "Separating consumer market oversight from bank supervision will go a long way toward correcting this misallocation of federal resources."
   Barr said it might also help correct situations in which regulators, reluctant to take actions that might damage bank profits, delay steps against questionable consumer practices until public outrage forces their hand.
   "Delays in addressing failures of consumer markets is deeply damaging to banks and credit unions, not just consumers," Barr said. "Separating consumer market and bank prudential functions would help resolve these structural problems and, ultimately, strengthen safety and soundness."
   In pressing their case for a separate consumer watchdog agency, Democrats are aiming to undermine Republican opposition by pointing to similar proposals made by the George W. Bush administration.
   A March 2008 proposal, for example, envisaged three separate agencies to look after market stability, prudential regulation and consumer protection. (Reporting by Glenn Somerville; Editing by Jan Dahinten) ((glenn.somerville@thomsonreuters.com; +202-236-1498; Reuters Messaging: glenn.somerville.reuters.com@reuters.net))
Keywords: US FINANCIAL/REGULATION
  
Tuesday, 23 February 2010 05:00:13RTRS [nN22220991] {C}ENDS

from Financial Regulatory Forum:

US’ Geithner pushes for independent consumer agency

February 22, 2010

WASHINGTON, Feb 22 (Reuters) - The Obama administration is still fighting for a single, independent consumer financial protection agency, U.S. Treasury Secretary Timothy Geithner said on Monday as lawmakers haggled over a financial reform bill.

from Financial Regulatory Forum:

Bank of England’s King says UK, US closer than EU on regulation

By Reuters Staff
February 12, 2010

It's closer across the Atlantic

It's closer across the Atlantic

 (Updates with more quotes, details from report)

LONDON, Feb 12 (Reuters) - Britain and the United States are more convinced of the need to force banks to hold more capital than some big European nations, Bank of England Governor Mervyn King told the Council for Financial Stability last month.

from Financial Regulatory Forum:

Senators lift US financial reform talks back on track

February 12, 2010

Dodd snubs Shelby

Dodd snubs Shelby

   By Kevin Drawbaugh
   WASHINGTON, Feb 11 (Reuters) - In an unusual move that cut a senior Republican out of the loop, bipartisan U.S. Senate negotiations resumed on Thursday on financial regulation reform, a top priority of the Obama administration.
   Restoring momentum to an initiative that had begun to lose headway, Senate Banking Committee Chairman Christopher Dodd, a Democrat, said he was now discussing legislation with Senator Bob Corker, a first-term Republican member of the panel.
   "I am more optimistic than I have been in several weeks that we can develop a consensus bill to bring about the reforms the financial sector so desperately needs," Dodd said in a statement on his dealings with Senator Corker.
   Just six days ago, Dodd said he had hit an impasse with Senator Richard Shelby, the committee's top Republican, in talks that had dragged on for more than a year over tightening oversight of banks and capital markets.
   President Barack Obama has made financial regulation a top priority for 2010, along with governments in the European Union, which are also hammering out new rules meant to prevent a recurrence of the recent global financial crisis.
   One of Obama's key proposals -- creating an independent U.S. Consumer Financial Protection Agency (CFPA) to regulate mortgages and credit cards -- had torpedoed the Dodd-Shelby talks.
   Giving no ground in response to Dodd's move, Shelby drew a firm line on the issue in a statement late on Thursday.
   Shelby supports reforms to end the notion that some financial firms are "too big to fail," to find new ways for the government to deal with failing firms and to regulate derivatives, Shelby spokesman Jonathan Graffeo told Reuters.
   He said Shelby also wants to enhance consumer protection "without subordinating the safety and soundness of our financial institutions," a position that the senator has staked out before in opposing Obama's watchdog agency.
  
   CORKER SAW 'TRAIN WRECK'
   The U.S. Treasury Department said it welcomed Corker's decision to work with Dodd to pass financial reform.
   Senate Majority Leader Harry Reid told reporters, after Dodd's announcement, that he was "comfortable we are going to be able to do a really good financial regulation bill."
   Corker said on Thursday he wants to cooperate with Democrats on finding bipartisan agreement. He told Reuters Insider in an interview that the Dodd-Shelby impasse would have led to "a legislative train wreck."
   But Corker has also opposed the CFPA. Last year, when Obama recommended creating it, the Tennessee Republican called the proposed agency "a tremendous overreach ... way out of bounds."
   In a statement late on Thursday, Corker said the CFPA "is probably the hot-button issue and Senator Dodd and I have agreed to set that topic aside for now."
   Echoing Shelby, Corker added: "Our goal should be trying to ... enhance consumer protection without negatively impacting the safety and soundness of our financial system."
   The CFPA would be a new agency centralizing consumer protection laws and staff that are now scattered across several existing government agencies, including the Federal Reserve.
   Democrats back the idea because they say the Fed and other agencies did a poor job of protecting Americans from abusive mortgages in the run-up to the financial crisis of 2008-09.
   Banks and financial firms oppose the agency as a threat to their profits and a red-tape burden. Republicans say it would be an unneeded intrusion on business, and that separating consumer protection from bank supervision would be a mistake.
  
   HOUSE APPROVED WATCHDOG
   Adopting many proposals made by Obama in mid-2009, the U.S. House of Representatives in December approved a reform bill, calling for the most sweeping changes since the 1930s, over the objections of Republicans and Wall Street lobbyists. The bill included a provision establishing the watchdog agency.
   Dodd and Republicans have discussed, as a possible compromise, downgrading the CFPA to less than an independent agency, perhaps as a Treasury Department division. Consumer advocates and senior House Democrats oppose this approach.
   Democratic Senator Mark Warner, a banking committee member, told CNBC on Thursday that the debate on the consumer protection proposal is "a little bit thorny."
   He said financial reform is "too important to fail," and that he and Corker agree on 98 percent of another issue -- setting up a new government body to monitor and manage "systemic risk" in the economy and the financial system.
   Senator Tim Johnson, the second-ranking Democratic committee member after Dodd, said in a statement that Dodd's announcement on talks with Corker shows "there is bipartisan interest in completing financial services regulatory reform."
   He called the initiative "too important to push off or to become the target of political games."
  
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   * FACTBOX-20 ways US Senate, House financial reforms differ, please double-click on [ID:nN11153798] ((Additional reporting by Rachelle Younglai, Karey Wutkowski, Glenn Somerville, Donna Smith and Kim Dixon, Editing by Gary Crosse)) ((kevin.drawbaugh@thomsonreuters.com, +1-202-898-8390, +1-202-488-3459 fax)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com
    * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com)) Keywords: FINANCIAL REGULATION/ 
  
Thursday, 11 February 2010 23:21:00RTRS [nN11240299] {C}ENDS