–In Two-Hour Session, Hill Panel Approves Revised Bill, 27 to 16
–House Financial Services Chief Franks: Sees House Vote Wednesday
–Senate Banking Chief Dodd: Expects Senate Vote After July 4th Recess
By John Shaw
WASHINGTON (MNI) – The House-Senate conference committee on
regulatory reform Tuesday evening passed the same bill that it approved
Friday morning, except that it includes a different package of offsets
to pay for the bill.
After a two-hour debate, the revised bill was approved Tuesday on a
party line, 27 to 16 vote.
House Financial Services Committee Chairman Barney Frank and Senate
Banking Committee Chairman Chris Dodd told reporters after the vote that
they believe the package now has enough support to clear Congress soon.
Frank said he expects the House to vote on the package Wednesday.
Dodd said the Senate is likely to take up the measure after the upper
chamber returns from its July 4th recess.
Dodd said it was necessary to change the funding package because
there was a “strong reaction” by several Republicans to the offsets that
were approved Friday.
Initially, Dodd and Frank offered a $22 billion package of offsets
to pay for the cost of the bill over a decade as estimated by the
Congressional Budget Office.
Under their first plan, about $19 billion over five years would be
raised through assessments on large financial institutions and hedge
funds. Firms with assets of $50 billion or more and hedge funds managing
assets over $10 billion would have to pay into the fund.
Both Dodd and Frank said they still believe this was a good plan,
but Dodd said several Republican senators whose support is necessary for
passage of the bill did not like the fees.
So Dodd offered a revised package that uses technical changes in
the TARP and an increased assessment in the FDIC’s DIF fund to pay for
“It is a proper offset,” Dodd said, adding that he believes it will
meet the concerns of several Republican senators whose support is
“It’s been vetted,” he said, but added that he had no iron-clad
guarantees by pivotal GOP senators.
Frank said he was reluctant to change the bill but has been given
assurances by Senate leaders that these changes would help the bill pass
in the Senate.
But congressional Republicans blasted the offset during Tuesday
evening’s deliberations, saying it was little more accounting gimmicks.
“This is fraud on the American taxpayer,” said Republican Sen. Judd
“It’s not responsible … . It’s not even honest,” Gregg added.
The overall legislation provides for the most sweeping changes in
the U.S.’s regulatory system since the Great Depression. It creates a
council of regulators to monitor to economy against systemic threats. It
institutes new regulations on hedge funds and over-the-counter
derivatives. The bill 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.
The package 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
Under congressional rules, a conference committee report can not be
amended on the floor of the House and Senate.
While it will only require 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.
** Market News International Washington Bureau: 202-371-2121 **