Federal Financial Reform Progress

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I had originally put this together last July and had it in Draft. I got busy doing a lot of reading and will start updating on more general topics. However, I am going to publish this to enable retention of the information and a future reference to see how we have progressed.

 This article is a bit wonky, but hopes to assist readers who have a interest in keeping current in Financial Regulation progress. A lot has been accomplished. This article points people to reference sources of information relevant to the discussion of Financial Reform. Initially this article was only planned to cover the Senate Hearing. However I soon found that

The Dodd-Frank Wall Street  Reform and Consumer Protection Act was signed into Law  by the President July 21 2010, Wikipedia gives a pretty good summary.   The law provided general guide line with organizations defined along with reporting responsibility.  The details of the law would be defined and implemented by the Financial Regulators. In general the Federal Reserve got an increased load as did Treasury who has a lot of the Federal Regulators. A key rogue dysfunctional regulator (Office of Thrift Supervision – OTS) was dissolved and the people were absorbed by OCC.

Regulating organizations have been set up to respond to the law, many have generated rules and issued “Request for Comment letters” to the public.

The Senate Banking Committee chaired by Tim Johnson (majority chairman) and Richard Shelby (Ranking Member) have held a hearing regarding Derivatives Regulation . The committee held a hearing on  http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=05607bb5-db07-4d22-9feb-e4a8acf981e8

The archived hearing can be seen via this website. Scrolling down page, the following people testified. Click on View File for each testimony

  • Honorable Neal S. Wolin [view testimony]
    Deputy Secretary
    U.S. Department of the Treasury
  • The Honorable Ben S. Bernanke [view testimony]
    Chairman
    Board of Governors of the Federal Reserve System
  • Honorable Sheila Bair [view testimony]
    Chairman
    Federal Deposit Insurance Corporation
  • Honorable Mary Schapiro [view testimony]
    Chairman
    U.S. Securities and Exchange Commission
  • Honorable Gary Gensler [view testimony]
    Chairman
    U.S. Commodity Futures Trading Commission
  • Mr. John Walsh [view testimony]
    Acting Comptroller of the Currency
    Office of the Comptroller of the Currency

The first part of the video is executive session on voting for nominee’s. The Hearing starts on the 41st minute

.This hearing is one of the first of status reports of the Dodd Frank Law. It was not a  normal hearing. Republicans had to go meet with President. One of them asked a question and left the Hearing. I printed all of each testimony and read them. They contained a lot of information. I would suggest Bernanke and Bair were informative,. The rest of the presenters were not complete and depended on insider knowledge. We might expect that because they are really jut getting started.

FSOC

Throughout the testimony, The Financial Stability Oversight Council (FSOC) was mentioned.  The FSOC is the new umbrella organization that will be the dominant determinant of regulation. It is composed of the representatives from the following voting organizations:

  1. Secretary of the Treasury – chairs the council
  2. Chairman of the Federal Reserve
  3. Comptroller of the Currency
  4. Director of the Bureau of Consumer Financial Protection.(E. Warren  ???)
  5. Chairperson of the U,S. Securities and Exchange
  6. Chairperson of the Federal Deposit Insurance Commission
  7. Chairperson of Commodity Futures Trading Commission
  8. Director of the Federal Housing Finance Agency
  9. Chairperson of the National Credit Union Administration Board
  10. Independent member from Insurance

Non voting advisory members able to attend Executive Sessions are:

  1. Director of the Office of Financial Research
  2. Director of the Federal Insurance Office
  3. A State Insurance commissioner appointed by State Insurance Commissioners
  4. State Banking Commissioner selected by State Banks.
  5. State Securities Commissioner designated by State Securities Commissioners

A quick survey of the Wikipedia document shows the major components that will be managed by FSOC., which has a website at: http://www.treasury.gov/initiatives/Pages/FSOC-index.aspx.   The website contains a lot of information going on regarding the direction for new regulations.

Appointment of Regulaters

Another tidbit in the Senate hearing was the problem of the Obama administration not making appointments to fill the vacancies available for Financial Regulation. This is critical in that decisions are being made in temporary assignments and carried out by others. Part of the problem is the fact that the Republicans will only pass people acceptable to the Finance Industry.

Push Back from Financial Industry

I have a copy of the new report written by the Senator Levin who is chair of the Permanent Subcommittee on Investigations. In this report,

http://levin.senate.gov/imo/media/doc/supporting/2011/PSI_WallStreetCrisis_041311.pdf

(1.5 inches thick) he documents in plain English how the regulating agencies were did not do their jobs and were in fact internally bickering regarding turf.  For example, OTS stopped FDIC from going on site for Washington Mutual to do their job as it was collapsing.  OTS has been dissolved and the people have been absorbed into OCC.

That said, there are some financial blog’s claiming that OCC is still serving the banks first and the population second. An example of this is at The Baseline Scenario article titled: O.C.C. Spells Trouble Again. The article cites several sources supporting its contention. This is explained at: http://baselinescenario.com/2011/05/19/o-c-c-spells-trouble-again

So the lobbyists try to affect the regulation first in Congress and get to the regulators later. .  We need to watch OCC with its acting administrator.

CFPB – Elizabeth Warren

At this senate hearing, very little was said about the Consumer Financial Protection Bureau (CFPB) http://www.treasury.gov/initiatives/Pages/cfpb.aspx  The new consumer protection agency being set up by Elizabeth Warren has a website at: http://www.consumerfinance.gov/.

The financial banks are against this bureau and are trying to eviscerate its formation. This is being done by the Republican Controlled House Financial Services Committee.

Conclusion

A phenomenal amount work done and is on display to be absorbed. Knowing about it can be a problem. Getting this information for the population to absorb is the role of the Financial Blogs. There still is a question how effective the new legislation is. We will only know when the next crisis comes.

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About fiscalliberal

New blogger primarily in financial and government issues. Retired male (71) who has followed lifetime of politics and read extensively on the financial crisis
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