from Tales from the Trail:
Think brussels sprouts and cauliflower are agricultural commodities? Think again.
While the financial bailouts tossed to automakers, banks and other groups during the recent economic crisis left a funny taste in the mouth of some Americans, one former U.S. regulator hopes efforts to prevent another panic doesn't go rotten.
The U.S. Commodity Futures Trading Commission is immersed in drafting dozens of rules to assist it in increasing oversight of the once opaque over-the-counter derivatives market, widely blamed for exacerbating the recent financial crisis.
Among the rules it must craft is what the definition of an agricultural commodity is? Of course, corn, cotton, soybeans and livestock, among other items, fall into this realm.
But what about those "other foods" such as brussels sprouts, artichokes, cauliflower, or anything with curry? A former CFTC chairman says they are "abhorrent to American sensibilities" and should be banned.
"Like every U.S. citizen, there are certain agricultural commodities that are abhorrent to me," said Philip McBride Johnson, who is now with the law firm Skadden, Arps, Slate, Meagher & Flom.
In a comment letter to his former agency, he said there is a "natural link" between defining an agricultural commodity and a provision in a law that requires the regulator to protect the public by forbidding the listing of certain products that "are abhorrent to American sensibilities."
Clearly banned under this act are financial products based on wars, terrorism, and assassinations. If Johnson has his way, regulators will be able to protect consumers from a dozen foods that don't mesh with his palate.
PREVIEW-Final act begins in U.S. Congress on Wall St reform
By Kevin Drawbaugh
WASHINGTON, June 7 (Reuters) – Negotiators from the U.S. Senate and House will begin meeting this week to craft a final Wall Street reform bill, with banks facing changes that threaten their profits, if not their business models.
Some congressional Democrats want to fashion a bill that forces a basic banking industry restructuring, but leaders will have to balance that agenda against the need to forge compromise legislation that retains some Republican support.
Analysts are expecting that fundamental restructuring will be avoided, “This bill is more about profitability and less about viability. That means the legislation will hurt the banking sector, but it will not sink it,” said Jaret Seiberg, a policy analyst at investment firm Concept Capital.
The delicate task of crafting a winning compromise will fall to Representative Barney Frank, who will chair the “conference committee” getting under way in a few days, and Senator Christopher Dodd, a consensus builder who will lead the Senate negotiating team.
Both lawmakers are old-school liberal Democrats with more than 60 years on Capitol Hill between them. They will need all of that experience to finish up a legislative project that is at the top of President Barack Obama’s priority list.
Disputes loom over banks’ lucrative dealings in derivative contracts, such as credit default swaps; the amount of capital they must set aside for hard times; and the trading they do on their own books unrelated to customers’ needs.
BREAKINGVIEWS-Is Obama losing control of U.S. financial reform?
– The authors is a Reuters Breakingviews columnists. The opinions expressed are his own –
By James Pethokoukis
WASHINGTON, May 3 (Reuters Breakingviews) – Is President Barack Obama losing control of financial reform? It is starting to seem that way. With the bill nearing its finale in the U.S Senate, Democratic legislators — and even some Republicans — seem to be scrambling to out-regulate each other while the White House keeps mum. The Obama administration defied its liberal base on nationalizing the banks last year and breaking them up this year. But as controversial amendments, such as those on derivatives, continue to emerge, it may be time to pipe up.
Of course, Team Obama would understandably prefer to lie low. It doesn’t want to backtrack entirely from the populist, get-tough-on-the-banks line. Arguing forcefully on behalf of letting banks keep their derivatives businesses, in particular, would risk message mismatch. That’s especially true after the Securities and Exchange Commission filed a lawsuit against Goldman Sachs over its involvement in a derivatives deal.
Such a hands-off political strategy might have worked if Republicans and Democrats on the Senate Banking Committee had agreed to a bipartisan bill capable of quick passage. But they didn’t, leaving room for the impaired legislation to drift and pick up lots of ill-considered amendments now that it is before the full chamber.
Obama needs to prevent this from happening. Lucky for him, he’s been given some political cover by Sheila Bair, head of the Federal Deposit Insurance Corp. There may be no financial official respected more on both sides of the aisle in Congress, than Bair.
In a three-page letter to Democrats Chris Dodd, chair of the Senate Banking Committee, and Blanche Lincoln, chair of the Senate Agriculture Committee, Bair outlined why it would be wrong-headed to require more derivatives activities to be conducted outside of banks and bank holding companies. Such a move, she argued, would hide the risky activities from federal regulatory oversight. A provision doing just that is currently in the bill and the subject of at least one possible amendment.
ANALYSIS – Obama tackles Wall Street reform in next big push
By Caren Bohan
WASHINGTON, March 25 (Reuters) – Fresh from his victory on landmark healthcare legislation, U.S. President Barack Obama is ready to take on Wall Street.
In the same week Obama signed into law his sweeping healthcare plan, his administration began a publicity blitz to sell his proposal to reshape the financial regulatory system.
Obama held a strategy session on Wednesday with two Democrats, Senate Banking Committee Chairman Christopher Dodd and House of Representatives Financial Services Committee Chairman Barney Frank, who are leading the effort to pass the plan in Congress.
Democrats hope the healthcare win will lend momentum to the push on financial reform, an issue the White House hopes will be a political winner as the party seeks to stave off potential losses in the November congressional elections.
“The good news is that, whereas the Republican message machine managed to convince a lot of Americans that the healthcare bill was bad for them, I think they will have a harder time with the financial reform,” said Princeton University professor Alan Blinder. “Rightly or wrongly everybody hates Wall Street and the banks right now.”
The White House has sought to tap into public fury over Wall Street’s excesses to push its case for financial reform.
ANALYSIS – Dodd bill takes pass on key U.S. broker reforms
By Helen Kearney
NEW YORK, March 23 (Reuters) – As Senator Christopher Dodd’s financial regulatory reform bill heads to the full Senate, brokerages for now have escaped tougher regulation thanks largely to fierce lobbying by insurers.
A bill approved by the Senate Banking Committee on Tuesday took a pass on two big issues affecting financial advisers — a uniform fiduciary standard for all professionals advising investors and rules that mandate brokerage customers take disputes to an industry arbitration panel.
While the terms of the legislation are likely to change during debate by the full Senate and when Rep. Barney Frank’s House Financial Services Committee weighs in, both issues for now will only be the subject of further study.
“The provision for another study is not warranted or wanted,” said Knut Rostad, chairman of the lobbying group Committee for the Fiduciary Standard.
Rostad, who is also regulatory and compliance officer at Falls Church, Virginia, investment advisory firm Rembert Pendleton Jackson, said he was disappointed Dodd’s committee only recommended that the Securities and Exchange Commission conduct a one-year study of the impact of a common fiduciary standard.
“We’re worried that by postponing action for one or two years, it will be very difficult to bring it back,” he said.
SCENARIOS-How U.S. financial regulation fight might play out
March 23 (Reuters) – The financial regulation debate has a long way to go in the U.S. Congress, with the action shifting to the full Senate and big headlines unlikely until April.
The Senate Banking Committee approved a sweeping Democratic bill by a party-line vote on Monday. That bill is now headed for the Senate floor, but not before lawmakers try again to hash out a bipartisan deal in closed-door negotiations.
With Congress adjourning on Friday for a two-week holiday break, the off-line financial reform talks probably will not produce results before lawmakers return next month.
Here is a look at what could be coming for Democrats and Republicans as they craft possibly the biggest regulatory changes for banks and capital markets since the 1930s, based on discussions with analysts, aides and lawmakers.
CLOSED-DOOR DEAL
Between now and mid-April, Senate Banking Committee Chairman Christopher Dodd and top committee Republican Senator Richard Shelby will try again to find compromise on reform.
The two failed to cut a deal last year after months of discussions. Dodd gave it another shot with Republican Senator Bob Corker in January and February, but they failed, as well.
BREAKINGVIEWS-U.S. financial reform process takes risky turn
– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By James Pethokoukis
WASHINGTON, March 23 (Reuters Breakingviews) – The effort to reform the U.S. financial regulatory system was supposed to show the Senate working more or less as intended — bipartisan up to a point, and largely non-confrontational. But it’s starting to follow the healthcare bill’s more contentious path.
Hundreds of Republican and Democratic amendments to the legislation authored by Democrat Chris Dodd, the panel’s chairman, were supposed to be hashed out by the relatively expert Senate Banking Committee this week. Instead, Republicans yanked their proposed changes, and the bill was approved with just Democratic support. Now it will be hashed out on the Senate floor. Democrats will need to bring at least one Republican across the aisle to hit the 60 votes needed to be certain of passage.
How might that happen? The bulls’ case is that the surprise move was OK with both sides. It permits continued closed-door chats between Dodd and key Republican Senators Richard Shelby and Bob Corker. The result could be a compromise that sails through the full Senate. That’s what happened last year with credit card legislation.
But this round of financial reform is far more wide-ranging and complicated. One look at the discarded committee amendments shows huge differences. Take Dodd’s proposed $50 billion bank-funded reserve that would backstop troubled institutions. Key Republicans want no fund at all, arguing it would encourage risky bank behavior and anyway wouldn’t be big enough. Some Democrats, on the other hand, want to make the fund $150 billion.
So it looks as if senators on both sides may be shunning compromise in the hope of scoring a clear political win. Some think they can get a better deal amidst the controlled chaos of the Senate floor. Others would prefer to kill the bill. Still others hope the debate will provide fodder to portray Democrats as promoting bailouts or Republicans as soft on bank regulation in elections later this year.
Spreadsheet of the offered amendments (download available):
http://www.editgrid.com/user/cate_long/D odd_amendments_as_of_March_22,_2010
More at Riski: http://freerisk.org/wiki/index.php/Main_ Page
COLUMN-Volcker Rule unexpectedly revived by Dodd bill: John Kemp
– John Kemp is a Reuters columnist. The views expressed are his own –
By John Kemp
LONDON, March 16 (Reuters) – Paul Volcker’s proposed ban on banks’ proprietary trading or owning hedge funds or private equity funds has been unexpectedly revived in the financial regulation bill published by Senate Banking Committee Chairman Christopher Dodd yesterday.
The Volcker Rule’s surprise survival comes despite fierce opposition from the banking industry and after many commentators had written it off as a short-term political gimmick in the wake of the shock election defeat in Massachusetts. Dodd himself had appeared lukewarm.
In fact, Section 619 of the bill (“Restrictions on Capital Market Activity by Banks and Bank Holding Companies”) would give legislative effect to the proposals almost exactly as outlined by President Barack Obama at the press conference in January.
BANS ON PROP TRADING, HEDGE FUND SPONSORSHIP
Section 619 (b) instructs the new Financial Stability Oversight Council (FSOC) to issue rules that “prohibit proprietary trading by an insured depository institution, a company that controls an insured depository institution or is treated as a bank holding company”.
Bipartisan US financial reform deal uncertain – Sen. Dodd
By Kevin Drawbaugh
WASHINGTON, March 5 (Reuters) – Senator Christopher Dodd, chief negotiator for the Democrats in U.S. Senate talks on financial regulation reform, said on Friday he was uncertain whether bipartisan support for a compromise bill could be achieved.
With one of the Obama administration’s top domestic policy priorities in the balance, Dodd sounded wary but hopeful following weeks of discussions that have snagged on a proposal to create a new financial consumer watchdog.
“While we do not have a bipartisan agreement yet at all, we’re getting there, we’re trying. I don’t know if it will happen or not,” Dodd said in remarks on the Senate floor.
“I’m optimistic it can happen, but I’ve been around here long enough to know these things can fall apart very easily. It’s fragile, it’s complex … It’s one of the hardest tasks I’ve ever been asked to undertake,” he added.
Embracing most of the recommendations for tighter bank and capital market regulations made in mid-2009 by President Barack Obama, the House of Representatives in December approved a bill proposing the biggest U.S. regulatory changes since the 1930s.
But the Senate has yet to act and almost a year and a half since a severe banking crisis tipped the U.S. economy into a deep recession, financial regulation has changed little.
U.S. Senator Shelby counters on financial consumer watchdog
By Kevin Drawbaugh and Rachelle Younglai
WASHINGTON, March 1 (Reuters) – A senior Republican U.S. senator has made at least two counter-offers to Democrats on creating a new government watchdog for financial consumers, Reuters learned on Monday from aides and documents.
Senator Richard Shelby proposed making the watchdog a division of the Federal Deposit Insurance Corp, with some rule-writing power and a director who is appointed by the president and confirmed by the Senate, documents showed.
Shelby, the top Republican on the Senate Banking Committee, also has proposed setting up a three-member consumer protection council, said a congressional aide.
Both offers show that negotiations between Shelby and Senator Christopher Dodd, the committee’s Democratic chairman, on a bipartisan financial regulation reform bill are in full swing, but still have some ground to cover.
After marathon talks over the weekend, lawmakers remained snagged on how much rule-writing power the new watchdog should have, no matter where it is located within the government.
“We are at the start of a political dance between Dodd and Shelby. We expect more draft language — and more headlines — throughout the week,” said financial services policy analyst Jaret Seiberg at investment advisory firm Concept Capital.
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