from Financial Regulatory Forum:

FACTBOX-5 financial reforms missing from US Congress bills

January 6, 2010

    Jan 6 (Reuters) - The U.S. Senate will resume debate this
month on financial regulatory reform, but a handful of changes
some see as crucial are not on the table.
    Below is a summary of five proposals excluded from a bill
approved last month by the House of Representatives, and from a
draft bill being debated in the Senate Banking Committee.
   
    * MORTGAGE 'CRAMDOWN':
    In a proposal backed by homeowner activists and many
Democrats, bankruptcy law would be rewritten to allow judges to
change the terms of mortgages for distressed borrowers in
bankruptcy court. Known as mortgage "cramdown," the idea is
opposed by the banking industry, which won a victory last month
when an amendment that would have added "cramdown" to the
House's financial regulation reform bill was defeated.
    The House had approved a "cramdown" measure in March over
the objections of Republicans, but it died in the Senate.
    Under present law, bankruptcy courts may reduce many forms
of debt for struggling borrowers -- including for a boat, car,
vacation home or family farm -- but not a primary residence.
    Cramdown would help stem the home foreclosure wave
continuing across the United States, its advocates say. But
opponents say it would raise costs for everyone and divert
capital from the mortgage debt market.
   
    * NEW CREDIT RATING AGENCY BUSINESS MODEL:
    Tighter regulation of credit rating agencies -- such as
Moody's Corp <MCO.N>, Standard & Poor's <MHP.N> and Fitch
Ratings <LBCP.PA> -- is proposed by both the House bill
approved last month and the bill under debate in the Senate.
    But neither calls for basic change in the so-called "issuer
pays" business model that critics say presents credit rating
agencies with a glaring conflict of interest.
    Most of the agencies' revenue comes from the issuers of
bonds and other debt instruments that the agencies evaluate and
issue ratings on. Critics say that can mean that ratings are
colored by the agencies' need to win and keep business.
    Congressional aides said lawmakers could not find a way to
change that business model without destroying the industry.
    Rating agencies were widely blamed for failing to spot
problems in the subprime mortgage market and other areas ahead
of the 2008 global financial crisis.
   
    * MERGING SEC AND CFTC:
    The Securities and Exchange Commission and the Commodity
Futures Trading Commission regulate financial markets so
inextricably linked that critics for decades have said the two
agencies should be one.
    A year ago, when the Obama administration took over and the
financial crisis was in full swing, a CFTC-SEC merger looked
like a possibility. But as the House of Representatives began
hammering out a politically realistic set of post-crisis
financial reforms, the merger slipped from view.
    Neither agency wanted it since it would threaten jobs and
turf. Financial services industry lobbyists were divided, with
some favoring a merger and others against it. Some policymakers
saw virtue in preserving competition between the agencies.
    In the end, legislators said, in a perfect world, the two
agencies would be combined, but that just isn't Washington.
   
    * FIXING FANNIE MAE AND FREDDIE MAC:
    The two giants of U.S. mortgage finance -- Fannie Mae
<FNM.N> and Freddie Mac <FRE.N> -- need a major overhaul. That
much both political parties in Congress can agree on.
    But the consensus pretty much ends there.
    The Obama administration has said it will sketch out a
reform plan for the two agencies in February.
    So contentious is the struggle over fixing Fannie and
Freddie that Democrats opted to shelve it for now, excluding
the issue from financial regulation reform bills in the House
and Senate. They pledged to deal with it later.
    Fannie and Freddie together own or guarantee half of all
U.S. mortgages. Both were seized by the U.S. government and put
into conservatorship in September 2008 at the outset of a
financial crisis that rocked capital markets worldwide.
   
    * USURY CAPS:
    Several congressional Democrats have introduced a bill to
cap credit card interest rates, but the measure is not included
in either of the main House or Senate packages.
    Another bill offered in the Senate last year would cap
rates at 36 percent for all consumer credit -- mortgages,
payday loans, car title loans -- not just credit cards. It is
not included in the two main legislative packages either.
    Some states have usury laws. Both the main House and Senate
reform packages have provisions saying how often and how far
federal regulators may preempt, or block, state consumer
protection laws, which can affect state usury statutes.
   
    RELATED NEWS:
    * Global financial regulation overhaul seen in 2010,
double-click on [ID:nN0570162]
    * U.S. Senate panel nears agreement on role of Fed,
double-click on [ID:nN0536508]
    * US Senator Dodd wades into financial reform fight,
double-click on [ID:nN0547658]
    * FACTBOX-Major U.S. financial regulation reform proposals,
double-click on [ID:nN21200792]
    * FACTBOX-20 ways US House, Senate financial reforms
differ, double-click on [ID:nN29194836]
    * FACTBOX-Key players in reshaping U.S. financial
regulation, double-click on [ID:nN29198438]
   
 (Reporting by Kevin Drawbaugh; Editing by Andrew Hay)
 ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202
488 3459 (fax)))
     
Keywords: FINANCIAL REGULATION/GAPS 
   
   
Keywords: FINANCIAL REGULATION/GAPS 
   

from Financial Regulatory Forum:

ANALYSIS-US Senator Dodd wades into financial reform fight

January 6, 2010

Dodd shaping up for the fight

Dodd shaping up for the fight

    By Kevin Drawbaugh
   WASHINGTON, Jan 6 (Reuters) - As Round Two of the U.S. Congress' punishing fight over financial regulation gets under way this month, one big question is whether Senate Banking Committee Chairman Christopher Dodd will lead with his left.
   Down in the opinion polls ahead of November's elections,  Dodd has every reason to press a populist attack on big banks and financial interests as he seeks votes back home in Connecticut and support for reform on Capitol Hill.
   As chairman of the Senate Banking Committee, he will be the leading player in early 2010 for Democrats and President Barack Obama on sweeping regulatory reforms they want to push through to prevent a repeat of 2008's global financial crisis.
   Dug in deeply in opposition are Republicans and the "fat cat bankers on Wall Street," as Obama has labeled them. They suffered a defeat on Dec. 11, when the House of Representatives approved a bill loaded with reforms that the bankers opposed.
   Now they are throwing everything they've got into blocking reforms in the Senate, knowing it is an arena where millionaire lawmakers often look after their own, and where the slimmest of Democratic majorities means change comes very hard.
   Dodd is a centrist. He has long-standing ties to Wall Street, having raised millions of dollars over the years from employees of firms such as Goldman Sachs <GS.N> and Citigroup <C.N>, many of whom go home to Connecticut from New York City every night.
   How he handles the situation will go a long way toward determining the outcome, as well as Dodd's legacy, said policy analysts who expect the Senate debate to last well into 2010.
   Dodd introduced an 1,139-page reform bill in November that was in some ways more ambitious than the 1,279-page bill pushed through the House last month by Representative Barney Frank, who had to make some key compromises to win passage.
   The Dodd measure was slammed immediately by Senator Richard Shelby, the top Republican on the banking committee. Dodd responded by setting up four bipartisan teams of two committee members each to work on controversial issues.
   The Senate will not fully reconvene until Jan. 20. To get his legislation through, most analysts say, Dodd, too, will have to make compromises.
   "The legislation must get more moderate in order to clear the Senate in 2010," said Jaret Seiberg, financial services policy analyst at investment firm Concept Capital.
  
   RELATED NEWS:
   * Global financial regulation overhaul seen in 2010, double-click on [ID:nN0570162]
   * U.S. Senate panel nears agreement on role of Fed, double-click on [ID:nN0536508]
   * FACTBOX-Major U.S. financial regulation reform proposals, double-click on [ID:nN21200792]
   * FACTBOX-20 ways US House, Senate financial reforms differ, double-click on [ID:nN29194836]
   * FACTBOX-5 financial reforms missing from US Congress bills, double-click on [ID:nN30220023]
   * FACTBOX-Key players in reshaping U.S. financial regulation, double-click on [ID:nN29198438]
   (Reporting by Kevin Drawbaugh; Editing by Jan Paschal) ((kevin.drawbaugh@thomsonreuters.com; Tel: +1 202 898 8390; Fax: +1 202 488 3459; Reuters Messaging:
  kevin.drawbaugh.reuters.com@reuters.net )) Keywords: FINANCIAL REGULATION/DODD 
  
Wednesday, 06 January 2010 05:01:19RTRS [nN0547658 ] {C}ENDS

from Financial Regulatory Forum:

Westlaw Business Analysis: SEC Cracks Down on Holdback of Material Schedules

December 23, 2009

WLB-logoWestlaw  business applies a legal lens to the SEC's latest moves
By J. G. Ballard
Perhaps influenced by the controversy over Bank of America’s forgotten bonus schedule from Merrill, the SEC seems to be cracking down in incomplete submission of agreements. Of over 50 such requests by the regulator since 2002, more than half have been from the past year.  As companies are now thinking through how to disclose their deals, including those with particularly sensitive commercial terms, they should keep the SEC’s newest disclosure mandate sharply in mind, in a quest to hold down comments and the time and costs they impose.
In one example of the SEC’s recent action, the Commission asked Abitibi to re-file multiple agreements, this time with all schedules, annexes and exhibits attached. The agreements ranged from restructuring agreements to purchase agreement to credit agreements.
Abitibi is not the only distressed issuer to receive this request from the SEC. XL Capital recently saw a request for a previously filed agreement in July. In XL’s case, the request was for a complete copy of the master commutation, release and restructuring agreement filed a year previously in relation to XL spinning off Syncora. While reviewing XL’s 10-K, the SEC noticed some irregularities in the accounting concerning the spin-off transaction; namely, where XL recorded the loss due to the completed transaction. This lead to additional staff comments and a request for the agreement in its entirety.
Unlike Abitibi and XL, some issuers, such as Cenveo, Inc. a paper manufacturer, try to reason their way out of the additional disclosure. Cenveo had filed an amended credit agreement with several exhibits omitted. The SEC noticed the omission and requested that the agreement be filed in its entirety. The issuer responded to the request by notating that the missing forms were not material in and of themselves as their use was contingent on events that might not even occur. The SEC stuck to its guns and again requested the complete agreement in their reply at the end of July.
While not unheard of, such requests by the SEC are also not common. This recent trend may have been triggered by the past year’s infamous Bank of America/Merrill Lynch bonus scandal. As was revealed in subsequent litigation, bonus payments were disclosed on a schedule to the merger agreement. While the merger agreement was filed, the bonus payment schedule was not.
The SEC staff appears to have a renewed interest in Item 601 of Regulation S-K, judging from the increase in requests for complete agreements. What remains to be seen is if this recent trend will continue into next year.

from Financial Regulatory Forum:

US House tackling historic financial reforms

December 10, 2009

By Kevin Drawbaugh

WASHINGTON, Dec 10 (Reuters) - As the U.S. House of Representatives moved closer on Thursday to debating the most sweeping changes to financial regulation proposed since the Great Depression, a raft of late amendments were headed to the floor as lawmakers wrangled over the legislation.

from Financial Regulatory Forum:

U.S. House to debate financial regulation overhaul

December 10, 2009

Rep Bachus: Socialism

Rep Bachus: Socialism

    By Kevin Drawbaugh
   WASHINGTON, Dec 10 (Reuters) - The U.S. House of Representatives will debate on Thursday the most sweeping changes to financial regulation proposed since the Great Depression, including broad new government powers over large banks and tighter regulation of capital markets.
   President Barack Obama and congressional Democrats see the reforms they are backing as crucial to preventing a repeat of last year's financial crisis that led to taxpayer bailouts of companies such as AIG <AIG.N> and Citigroup <C.N>.
   Legislation before the House would set up an inter-agency council to police systemic risks in the economy and create new protocols for dealing with large, troubled financial firms to prevent such debacles as last year's Lehman Brothers collapse.
   For the first time, the $450-trillion over-the-counter derivatives market -- dominated by firms such as Goldman Sachs <GS.N> and JPMorgan Chase <JPM.N> -- would be regulated, including credit default swaps at the root of AIG's problems.
   Curbs would be imposed on executive pay that encourages unwise risk-taking, while lenders would have to retain risk in loans they securitize for sale on the secondary debt market.
   The insurance industry would for the first time be monitored by a federal office, while a new agency would be formed to protect financial consumers, and hedge funds would be forced to register with federal regulators.
   "Wall Street melted down and Main Street paid the price. This cannot happen again," said Democratic Representative Scott Murphy in debate that began late on Wednesday evening.
   Republicans have attacked the bill as a measure that would codify bailouts in law and destroy jobs, while setting up new government bureaucracies and piling costs on businesses.
   "Call it what you want to, but it's socialism," said Representative Spencer Bachus, top Republican on the House Financial Services Committee, during floor debate.
   LOBBYISTS PUSH BACK
   An army of lobbyists from banks and Wall Street have worked for months to block, water down and delay the bill, which would threaten the profits of many financial services firms.
   Reformers have reduced their goals since earlier this year, abandoning a wholesale reorganization of existing regulatory agencies as too politically difficult, for instance.
   But the 1,279-page House bill proposes steps that would have been seen as radical not long ago, such as exposing Federal Reserve monetary policy to unprecedented congressional scrutiny, and empowering regulators to break up even solvent financial firms if they threaten economic stability.
   Democratic Representative David Scott said charges of "socialism" were unfair. Republicans made the same accusations decades ago, he said, when the Roosevelt administration set up the Securities and Exchange Commission and other reforms during the Great Depression. "This isn't socialism," Scott said.
   In a 235-177 vote late on Wednesday, Democrats pushed through a procedural rule for the bill, hammered out over months of discussion and compromise. All Republicans voting on Wednesday opposed the procedural rule.
   As many as 30 amendments were expected to be debated on Thursday, said House aides, with leaders hoping to bring the measure to a final vote by Friday. House approval, which analysts widely expect, would move the reform agenda to the Senate, where debate will probably go well into 2010.
   RELATED NEWS
   * FACTBOX-Keys to US House financial regulation reform bill, please double-click on [ID:nN09158043] (Editing by Tomasz Janowski) ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax)))
Keywords: FINANCIAL REGULATION/HOUSE
  
Thursday, 10 December 2009 05:27:33RTRS [nN10165265] {C}ENDS

from Financial Regulatory Forum:

US bailout fund left many problems unsolved-watchdog

December 9, 2009

    By David Lawder
   WASHINGTON, Dec 9 (Reuters) - The U.S. government's $700 billion bailout program helped stabilize the financial system, but has done little to boost lending or stave off millions of home foreclosures, a government watchdog group said on Wednesday.
   In its new monthly report on the Troubled Asset Relief Program (TARP), the Congressional Oversight Panel declined to take a stand on whether U.S. Treasury Secretary Timothy Geithner should extend the program beyond the end of 2009.
   The 14-month-old bailout fund, which has propped up banks, automakers and insurer American International Group <AIG.N>,has failed to resolve key problems in the financial system, including toxic assets still weighing down bank balance sheets, a sharp contraction of credit and the moral hazard associated with bailouts, the panel said.
   "Consequently, the United States continues to face the prospect of banks too big to fail and too weak to play their role adequately in keeping credit flowing throughout the economy. The foreclosure crisis continues to grow," the panel said in its report.
   The report concluded that the stability that markets have enjoyed this year was not solely due to TARP, but to an extraordinary mix of government support, including Federal Deposit Insurance Corp and Federal Reserve asset guarantees.
   "The removal of this support too quickly could undermine the economy's nascent stability," it said, without concluding whether Geithner should continue the program through Oct. 2, 2010.
   The Obama administration has signaled an extension by considering the use of TARP funds to spur small business lending and possible other programs to boost job creation, a move opposed by many Republicans.
   The oversight panel's lone sitting member of Congress, Rep. Jeb Hensarling, a Texas Republican, voted against approval of the panel's report but agreed with certain criticisms. He called for TARP to be shut down at year-end.
   "One can not help but conclude that TARP is failing its mandate," Hensarling said in a statement. He added that the Treasury's bailout of General Motors, Chrysler and GMAC were "abuses", while TARP's foreclosure mitigation efforts were "misguided."
  
    MOUNTING FORECLOSURES
   Indeed, the report from the oversight panel, headed by Harvard Law School professor Elizabeth Warren, also criticized TARP programs aimed at stemming foreclosures, saying they "have not yet achieved the scope, scale and permanence to address the crisis."
   It said that foreclosure starts over the next five years were projected to range from 8 million to 13 million, excluding many more homeowners that have lost homes to short sales or simply walked away from their mortgages.
   That number is far larger than the 3 million to 4 million homeowners that the TARP foreclosure mitigation program aims to aid.
   "Even if every best-case scenario that Treasury has made came true, we're dealing with only about a third of the foreclosures," Warren told reporters in a conference call.
   She added that the Treasury was far from reaching its goals, with less than 5 percent of mortgage modifications having achieved permanently lower payments. The risk of these loans redefaulting remained high as long as the homes remain worth less than their mortgages, she said.
   "Reducing loan principal is the only way to eliminate negative equity, so Treasury should consider how its existing programs might be adapted in ways that result in principal reductions," the panel said in the report.
   Another panel member, New York state banking superintendent Richard Neiman, said in a separate opinion that the Treasury should expand its foreclosure prevention program and TARP funds should support state emergency mortgage assistance programs to help unemployed borrowers make their payments.
   "Looking ahead, TARP needs to close the book on large institution support and focus all of its energies on addressing the problems of foreclosures, small business credit, and commercial real estate," wrote Neiman, who voted to approve the report. (Reporting by David Lawder; editing by Carol Bishopric) ((david.lawder@thomsonreuters.com; +1 202 898 8395; Reuters Messaging: david.lawder.reuters.com@reuters.net)) Keywords: USA BAILOUT/
  
Wednesday, 09 December 2009 06:00:12RTRS [nN08214292] {C}ENDS

from Financial Regulatory Forum:

Banks, policymakers spar over new rules

November 17, 2009

   By Huw Jones and Eva Kuehnen
   LONDON/FRANKFURT, Nov 17 (Reuters) - Big banks stepped up warnings on Tuesday that tightening capital rules too soon could stall economic recovery, but policymakers said the bailed out sector cannot rely on taxpayers again in future.
   Regulators are drafting tough rules that will force banks to hold far more capital and lessen the need for the kind of  public rescues seen during the credit crunch.
   Bankers said the new rules spearheaded by the G20 group of leading countries also need better coordination and timing to avoid a patchwork of implementation emerging.
   "There is once again a real danger that the cumulative impact of doctrinaire policy could have some perverse and unintended effects on the economy and for wider society," said Stephen Green, chairman of HSBC <HSBA.L>, Europe's biggest bank.
   "Cumulative enhancement of capital ratios at the wrong stage of the economic cycle could easily withdraw credit from the economy and cause a new credit crunch. This in turn would interrupt and delay a fragile economic recovery," Green said.
   Banks, despite public outrage at bonuses and huge bailouts that have wrecked government finances, appear more willing to question new rules that are expected to dampen profitablity.
   This is in spite of the G20 reassuring them that the bulk of new requirements will not take effect until the end of 2012 so that economic recovery has enough time to find its feet.
   The Basel Committee on Banking Supervision, a global body that is mapping out new bank capital rules, will also test their combined impact next year before fixing tougher levels.
   Major banks like HSBC face a plethora of changes, ranging from higher and better quality basic capital to new caps on leverage and possible liquidity and capital surcharges because of their sheer size and cross-border reach.
   Britain's government is due on Wednesday to unveil plans for a sweeping new law to crack down on bank bonuses, beef up enforcement of financial rules and make it easier for investors to group together to seek compensation.
   Andrew Bailey, Chief Cashier at the Bank of England, told a banking conference in Spain the sector cannot justify relying on public money to douse the fire during a crisis.
   "And we also cannot allow conditions to exist where risks are taken on the basis that this backstop exists," Bailey said.
   "Regulation seeks to re-build fire prevention systems with action on capital and liquidity requirements. Prevention might also involve re-drawing the financial landscape, its structure," Bailey added.
   Some policymakers fear that topping up capital and liquidity levels won't be enough to avoid a public bailout in future and that big banks should be split up to ringfence deposits.
   The Financial Services Forum of top banks urged the U.S. Congress on Monday not to pursue big bank break-up legislation, saying it could lead to long term damage to the economy.
   Spain's Banco Santander <SAN.MC> echoed this on Tuesday.
   "Limiting or penalising the size of banks through greater regulatory capital requirements will not solve the problem," Santander chairman, Emilio Botin, said.
   Bankers said not all countries are singing from the same regulatory hymn sheet despite the G20's coordinating efforts.
   "We're at risk of pursuing so many different complicated subjects that we make slow progress on all of them. I would be prioritising capital and liquidity," Peter Sands, chief executive of Standard Chartered <STAN.L> told the Financial Times.
   HSBC's Green said more capital for bank trading books would certainly happen in Europe as Brussels and Basel are pressing so hard, but he said it was uncertain if it will be implemented more broadly across G20.
   Credit Agricole <CAGR.PA>, France's biggest retail bank, said that changes in rules for banker pay had been felt in London more than anywhere else.
   "There is an impact, but a small one," Credit Agricole Chief Executive George Pauget said at the Reuters Finance Summit on Monday. "It's mainly in London, where it can be difficult to hire specialists in specific businesses. We'll see rules converging, but before that it can cause some difficulties," he said.
   A top EU insurance watchdog urged regulators to stand firm.
   "This is the moment of truth. There are clear measures in there, in the list of G20 recommendation, and surely they need to come to life on both sides of the Atlantic," Gabriel Bernardino, chairman of pan-EU insurance regulatory body, CEIOPS, told a financial conference in Frankfurt. (Writing by Huw Jones; Additional reporting by Steve Slater; Editing by David Cowell) ((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326; huw.jones@thomsonreuters.com))
 Keywords: REGULATION 
  
Tuesday, 17 November 2009 13:20:08RTRS [nLH575675 ] {C}ENDS

from Financial Regulatory Forum:

Taiwan, China ink financial pact, to take effect soon

November 17, 2009

Chairman of Taiwan's Financial Supervisory Commission Sean Chen speaks during a news conference in Taipei County November 16, 2009. Taiwan has signed a financial service pact with China, allowing its banks to tap China's massive market and paving the way for banks on both sides to invest in each other, a source said on Monday. The much-anticipated pact, or memorandum of understanding (MOU), will mainly cover cross-border financial supervision. REUTERS/Stringer (TAIWAN BUSINESS POLITICS) TAIWAN OUT. NO COMMERCIAL OR EDITORIAL SALES IN TAIWAN By Faith Hung
TAIPEI, Nov 16 (Reuters) - Taiwan has signed a financial service pact with China, the Taiwan government said on Monday, allowing its banks to tap China's massive market and paving the way for banks on both sides to invest in each other.

from Financial Regulatory Forum:

U.S. looks to cut deficit with unused TARP funds- WSJ

November 12, 2009

    Nov 12 (Reuters) - The White House is looking to cut its budget deficit by using some unspent funds from the the U.S. government's Troubled Asset Relief Program (TARP), the Wall Street Journal said, citing people familiar with the matter.
   Members of the Obama administration are still debating the idea, the paper said, adding that the administration would still like to keep some of the unspent money in case of emergencies.
   A U.S. Treasury source told Reuters that it was shifting the focus of the TARP program toward helping small business and the housing sector rather than large banks.
   "As that focus shifts, we expect to use significantly less TARP funding than authorized," the source said. "We will maintain the flexibility to deal with a future crisis, and uninvested TARP money is dedicated to reducing the debt."
   The U.S. budget deficit soared to a record $1.4 trillion in the fiscal year that ended on Sept. 30 and is expected to be about the same this fiscal year as the economic slump caused tax revenues to plunge and spending soared.
   Budget experts project deficits will remain stubbornly high over the next 10 years even as the economy improves, which could lead to increased borrowing costs, further weakness in the U.S. dollar and runaway inflation.
   The Journal added that the projected long-term cost of TARP will likely be lowered from $341 billion to as little as $200 billion.
 (Reporting by Ajay Kamalakaran in Bangalore and Glenn Somerville in Singapore; Editing by Kim Coghill)
 ((ajay.kamalakaran@reuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800 +1 646 897 1898; Reuters Messaging: ajay.kamalakaran.reuters.com@reuters.net)) Keywords: USA DEFICIT/TARP
  
Thursday, 12 November 2009 05:45:31RTRS [nBNG147589] {C}ENDS

from FaithWorld:

Orthodox Patriarch Bartholomew meets Obama on U.S. visit

November 4, 2009

bartholomewGreek Orthodox Ecumenical Patriarch Bartholomew, the "green patriarch" who leads 300 million Orthodox Christians, spoke with President Barack Obama on Tuesday about the fight against climate change.