US House tackling historic financial reforms
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.
The core bill would give the government new powers over large banks, regulate over-the-counter derivatives for the first time, and set up a Consumer Financial Protection Agency.
It would create an inter-agency council to police systemic risks in the economy and crack down on hedge funds and credit rating agencies, among many other reforms backed by the Obama administration and most Democrats.
Amendments scheduled to come to the House floor in an evening session, would add important features, if approved, to a 1,279-page bill that has been solidly opposed by Republicans.
An amendment to be offered by Democratic Representative John Conyers would let bankruptcy judges change the terms of mortgages for distressed homeowners in bankruptcy court — a long-sought goal of homeowner advocates and one that has garnered more attention in a climate of soaring foreclosures.
The House had passed virtually the same measure — known as mortgage “cramdown” — over the opposition of bank lobbyists and Republicans in March, but it died in the Senate.
Another amendment, from Democratic Representative Stephen Lynch, would limit financial firms to 20 percent ownership stakes in over-the-counter derivatives clearinghouses to combat possible conflicts of interest. Some financial services industry interests oppose the measure.
Financial reforms are strongly backed by President Barack Obama and most congressional Democrats, who see them as crucial to preventing a repeat of last year’s financial crisis and the bailouts of firms such as AIG and Citigroup.
“We here can begin again to protect the American people from the rascality of a bunch of sharp-shooting MBAs interested only in grubbing money,” said Democratic Representative John Dingell in debate on a procedural rule for the bill.
“The American economic system is too precious to trust unattended to New York and to the big banks and the other wheelers and dealers up there. What we are doing today is seeing to it that that system is protected,” Dingell said.
An army of lobbyists from banks and Wall Street have worked for months to block, water down and delay the bill, which could crimp profits of many financial services firms.
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.
Both the Conyers and Lynch amendments were cleared to go to the floor under a deal settling differences among House Democrats over handling the massive financial reform bill.
Some other changes were incorporated into the bill by House Financial Services Committee Chairman Barney Frank.
One would reduce to 10 percent from 20 percent the potential “haircut,” or financial loss, that secured creditors could take in resolving the problems of large financial firms.
Others would create a mutual commercial bank charter, require banks to offer information in their branches explaining overdraft protection program fees, and cap the Federal Deposit Insurance Corp’s power to guarantee debts at $500 billion.
House leaders hoped to bring the overall bill, as revised by Frank and amended on the floor, to a final vote by Friday.
Debate in the Senate, which has moved more slowly than the House on reforms, will likely extend well into 2010.
BLACK CAUCUS SUPPORT WON
Frank has struggled in recent days to keep Democrats in line, with pro-business moderates seeking changes to the bill and the Congressional Black Caucus pursuing its own goals.
The support of the Black Caucus was cemented, aides said, by Frank’s pledge to put $4 billion in a revised bill for emergency mortgage assistance to unemployed homeowners and assistance for purchase and repair of foreclosed properties.
Moderate Democratic Representative Melissa Bean agreed to change and fold into Frank’s revised bill her amendment dealing with the proposed Consumer Financial Protection Agency’s power to preempt state consumer protection laws. As changed, the measure would modestly expand federal preemption of state laws, taking a more case-by-case approach, said House aides.
Democratic Representative Walt Minnick will offer a floor amendment that would scrap that agency and replace it with a council of regulators. Frank has said he expects it to fail.
(Additional reporting by Rachelle Younglai; Editing by Leslie Adler) ((email@example.com, +1 202 898 8390, +1 202 488 3459 (fax)))