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Legislative Updates: December 2009

 

Capitol Call

For the first week of November Congress maintained the fast pace it set in October, with a flurry of activity in the House Financial Services Committee (HFSC). There they continued marking up portions of the regulatory reform legislation they have worked on all year, including the Financial Stability Improvement Act. This section includes both the systemic risk council as well as the resolution authority portions of the legislation.

But things slowed down as Veterans Day brought with it a shortened work week and many returned home early for the Thanksgiving holiday. By the end of the month, most of the work of the HFSC had wrapped up and members were waiting to bring to the House floor the 1279-page regulatory reform bill that combined almost all of the work the Committee did this year.

The Senate Banking Committee (SBC) began to debate its own version of regulatory reform legislation this month, which, in its current form, is very different than the House version. After failing to gain bipartisan support for most of his proposals, SBC Chairman Chris Dodd (D-CT) created his own discussion draft and held a hearing at which members of the Committee gave their opening statements on the measure.

After hours of discussion, his measure had garnered tepid support at best and hostile opposition at worst, so he postponed further proceedings and went back to the drawing board, this time with the Republican members of the Committee at the other side of the negotiating table. It is expected that a more bipartisan measure will be considered by the SBC in the near future.

Meanwhile, the House Agriculture Committee (HAC) held a hearing on November 17th to discuss its perspective on both the systemic risk regulator and resolution authority. HAC Chairman Collin Peterson (D-MN) has expressed concern about giving the Federal Reserve additional authority to oversee the systemic risk regulator. Since the HAC has jurisdiction over the CFTC, there have been considerable negotiations between Chairman Peterson and HFSC Chairman Frank about the role of the CFTC and its supervision of derivatives transactions and clearing in the new regulatory landscape. All jurisdictional issues are expected to be resolved prior to the bill being debated by the full House of Representatives.

Also, the Senate Agriculture Committee (SAC) conducted a hearing on over-the-counter derivatives as part of their preparation for drafting legislation in this area. CFTC Chairman Gary Gensler testified at this hearing and encouraged the SAC to provide the CFTC with adequate authority to oversee and regulate OTC contracts. He outlined his support for moving many of these contracts onto clearinghouses to promote transparency.

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