–House Passes Regulatory Reform Bill; Senate Vote In Mid-July
–House Speaker: Bill Has ‘Toughest Set of Wall Street Reforms’ In Years
–Rep. Bachus: Bill Doesn’t End Too Big To Fail, Fails To Fix GSEs

By John Shaw

WASHINGTON (MNI) – The House passed the most sweeping package of
financial regulatory reforms in decades Wednesday on a mostly party line
vote.

The bill was approved in the House 237 to 192.

The Senate will take up the same bill the week of July 12th. If the
Senate approves the bill, it will be sent to President Obama for his
signature.

During the two-hour House debate, Democrats and Republicans
repeated arguments that they’ve been making for months.

House Speaker Nancy Pelosi said the legislation represents “the
toughest set of Wall Street reforms in generations.” The bill, she said,
would “end recklessness on Wall Street that led to joblessness on Main
Street.”

House Financial Services Committee Chairman Barney Frank said the
bill includes a strong set of consumer protections for financial
products.

Rep. Spencer Bachus, the ranking Republican on the Financial
Services panel, said the bill would not prevent future bailouts. He also
said that the legislation failed to reform government-sponsored
enterprises.

The underlying bill would create a council of regulators to monitor
the economy for systemic threats. It would institute new regulations on
hedge funds and over-the-counter derivatives and creates a Bureau of
Consumer Financial Protection that will oversee mortgage, credit cards
and other credit products.

The bill provides for expanded regular audits of the Federal
Reserve by the Government Accountability Act. It includes a variation of
the Volcker-rule, banning banks from proprietary trading and limiting
them from investing in or sponsoring hedge funds and private equity
funds.

It limits bank investments in private equity or hedge funds to 3%
of a fund’s capital. Total investment in private equity and hedge funds
can’t exceed 3% of a company’s tangible common equity.

The bill would push most OTC derivatives through third party
clearinghouses and onto exchanges or electronic trading systems. It
would force banks to push some of their swaps trading into subsidiaries.

Under the bill, banks will be allowed to keep their derivative
trading operations as long as they are used to hedge risk or trade
interest rates or foreign exchange swaps.

The bill will give federally insured banks up to two years to send
instruments such as uncleared credit default swaps off to a separately
capitalized subsidiary.

While it will only required a majority vote in the House and Senate
to pass, Senate supporters will have to secure 60 votes to cut off the
debate in the upper chamber.

Senate Banking Committee Chairman Chris Dodd has said that he
believes he will be able to get 60 Senate votes for the package.

** Market News International Washington Bureau: 202-371-2121 **

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