Banking/Financial Institutions

Lawmakers finalizing the Wall Street overhaul bill are considering new assessments on big financial firms to cover the costs of $4 billion in housing aid.

House Financial Services Committee Chairman Barney Frank (D-Mass.) was originally looking to redirect money from the $700 billion financial bailout to support $3 billion in housing assistance and $1 billion for city and state efforts to ease foreclosure problems.

A Frank spokesman said an assessment could now fall on banks with at least $50 billion in assets and hedge funds with at least $10 billion in assets.

Rep. Maxine Waters (D-Calif.) has pushed hard for the $3 billion in housing assistance for unemployed homeowners to make their mortgage payments.

"If we pass this bill without doing anything to prevent foreclosures--if we fix Wall Street and ignore Main Street--we will have done a disservice to our country," Waters said in a statement on Tuesday.

More than 80 House Democrats are pushing Congress to support a strong exemption for commercial users of derivatives in the Wall Street overhaul bill.

In a series of letters, the lawmakers argue for a broad exemption for "end users" in the $600 trillion derivatives market that many blame for exacerbating the financial crisis in 2008. Manufacturers, financial firms and others have pushed for the exemption for companies that use derivatives to hedge a variety of business risks. 

The lawmakers back the exemption that passed the House in December and argue that the Senate version of the bill could hurt local business and bigger manufacturers. A group of House and Senate lawmakers finishing the Wall Street bill in conference plan to take up the derivatives measures on Wednesday or Thursday.

The section has been one of the most heavily lobbied parts of the 2,000-page financial overhaul effort that Congress aims to pass before the July 4 recess.

The letters were organized by the centrist New Democrat Coalition, the New York congressional delegation, lawmakers on the House Agriculture Committee and Rep. G.K. Butterfield (D-N.C.).

"It is imperative that we recognize the unique needs of the end users that are the economic engines our local communities," House Agriculture members wrote. "We have serious concerns that the Senate passed derivatives title will impose higher costs on end users who had nothing to do with the financial crisis. This will significantly impair the ability of small and medium sized businesses to expand and will drive up consumer prices during these difficult economic times."

New Democrats and members of the New York congressional delegation have also raised concerns about a provision backed by Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) that would require banks to push out their derivatives trading desks. That provision has been stridently opposed by banks and other business interests.

Key lawmakers said Tuesday they plan to complete by Thursday evening final conference negotiations on the Wall Street overhaul bill.

Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) said completing talks on the 2,000-page bill this week will allow Congress to pass the legislation before the July 4 recess. 

"If we are not able to finish on Thursday, we won't be able to pass the bill by the middle of the month," Frank said, referring to July. Frank and Dodd said it is important for President Barack Obama to have legislation in hand when he goes to the meeting of the G-20.

Treasury Secretary Timothy Geithner will testify Tuesday on Capitol Hill on the federal government's bailout of financial institutions. 

The Congressional Oversight Panel, created to oversee how Troubled Asset Relief Program (TARP) funds are spent, is meeting at 10 a.m. Tuesday. 

The Treasury Department on Friday announced that repayments to the TARP have for the first time surpassed the total amount of TARP funds that remain outstanding. 

The most recent report from Treasury shows that TARP repayments have hit $194 billion, exceeding the outstanding funds of $190 billion.

Treasury's sale of 1.5 billion shares of Citi stock that provided gross proceeds of $6.18 billion helped surpass the outstanding balance. Treasury expects additional sales of Citi stock to bring in additional cash. 

So far, taxpayers also have received $23 billion from dividends, interest and other income through TARP.

The Treasury Department on Monday announced that 12 broker-dealers will work with Morgan Stanley in the Treasury's sale of Citigroup common stock. 

As the investigation continues into the May 6 "flash crash," market regulators will hear first-hand accounts on Tuesday from exchanges representatives. 

The Joint SEC-CFTC Advisory Committee on Emerging Regulatory Issues is still gathering information about what happened nearly two months ago when the market dropped nearly 1,000 points in a matter of minutes. 

At Tuesday's meeting and at another scheduled for July, market participants such as representatives from brokerage houses, issuers, institutional traders and retail investors are expected to provide the bulk of information about the market slide. 

Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler co-chair the committee.

"The insights and views of these market participants will provide the Committee and CFTC and SEC staff with valuable information to aid our regulatory efforts going forward," Gensler said in a release Monday.

Nearly half a million borrowers have exited a federal program that provides trial mortgage modifications, more than the total number of people who have received long-term help, a report showed Monday. 

Approximately 430,000 homeowners fell out of the $75 billion plan through the end of last month, representing more than one-third of those who started the program in March 2009, the Treasury Department said in a report Monday.

So far, about 340,500 trial modifications have been made permanent, about 27 percent of the 1.24 million who enrolled more than a year ago as the housing crisis gripped the economy. 

Although the drop-outs could signal additional foreclosures, about half of those borrowers received other help, holding down the foreclosure rate to about 7 percent, according to figures from the Obama administration. 

In May alone, about 153,000 modifications were canceled as part of the Home Affordable Modification Program (HAMP) for various reasons, including an inability to document income or income that exceeds the program's limits, compared with 122,467 in April. 

The new rules would represent a significant defeat for banks lobbying on the Wall Street reform bill.

Goldman Sachs will have more time to respond to an April 16 government lawsuit alleging the firm defrauded investors while selling securities linked to subprime mortgages. 

In New York on Monday, U.S. District Judge Barbara Jones agreed to give Goldman an extra month, extending the deadline to July 19 from June 21, according to news reports. 

The Securities and Exchange Commission, which filed the suit about two months ago, signed off on the extension.

The SEC has accused Goldman employee Fabrice Tourre of not disclosing the role the hedge fund Paulson & Co. played in selecting and betting against mortgage securities. 

Congress should make a revamp of Fannie Mae and Freddie Mac its next financial priority after finishing the Wall Street overhaul bill, a top government regulator said Friday.

Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation (FDIC), said in speech that the two firms should not remain as quasi-governmental entities. The two government-sponsored enterprises (GSEs) were bailed out by taxpayers in 2008 and continue to rely on billions of dollars in aid.

"After the financial reform package becomes law, GSE reform should rise to the top of the agenda," Bair said.

Republicans have criticized the Democratic financial bill for leaving out the question of how to remake Fannie and Freddie. Democrats have pledged to take up the issue in separate legislation.

The Obama administration has yet to lay out its views on the two firms' futures.