Banking/Financial Institutions

The White House opposes measure to limit states from pursuing tougher consumer regulations than the federal government.

Army Secretary John McHugh said beefed-up consumer regulations of auto dealers would allow soldiers to continue "protecting our great nation."

McHugh urged senators this week to oppose a carveout for auto dealers from a new consumer financial protection agency. The White House, consumer advocates and many Democrats have criticized the proposed carveout backed by Sen. Sam Brownback (R-Kan.)

"As auto loans are often the most significant financial obligations of our soldiers -- particularly within the junior enlisted grades -- we believe that greater government oversight of auto financing and sales of our soldiers will help protect them and reduce unnecessary financial strain on our already overburdened families," McHugh said.

"Protection from unprincipled auto lending enables our soldiers to concentrate on their primary mission -- protecting our great nation," he said.

The National Automobile Dealers Association (NADA) supports the Brownback amendment.

"Auto loans and leases are more affordable for consumers because dealers force lenders to compete for our customer's business," said NADA spokesman Bailey Wood on Wednesday. "Adding burdensome and expensive regulations on Main Street auto dealers will only make it harder and more costly for a family to buy a car."

Debate over tighter regulations on the multitrillion-dollar over-the-counter derivatives market continued today with manufacturing interests voicing concern after Republicans failed to change the financial regulatory reform legislation.

The Senate defeated a Republican alternative Wednesday offered by Senate Agriculture Committee ranking member Saxby Chambliss (R-Ga.) and Senate Banking Committee ranking member Richard Shelby (R-Ala.) by a 59-39 vote. Shelby, Chambliss and other Senate Republicans have argued that the new language would have ensured business end-users would be exempted from burdensome regulations. 

"Without this exemption, the cost of managing risk for manufacturers and other companies will increase by millions -- and in some cases billions --- of dollars, limiting their ability to drive economic growth and job creation," said Dorothy Coleman, vice president of Tax and Domestic Economic Policy at the National Association of Manufacturers (NAM) in a statement released after the vote. 

Two Republicans -- Sens. Chuck Grassley (R-Iowa) and Olympia Snowe (R-Maine) -- voted against the Republican proposal. 

NAM said it supports changes to prevent excessive speculation and improve transparency and stability in the derivatives market, but "we also want to see Congress preserve the ability of responsible companies to access OTC derivative products."

The Federal Deposit Insurance Corporation is proposing a rule that would require certain financial institutions provide a plan to unwind in case of failure. 

The firms would submit plans to the FDIC so the agency can assess risks to the deposit insurance fund in an effort to develop resolution strategies for "a period of severe financial distress," according to an FDIC release Wednesday.

The rule would further firm up a portion of the financial regulatory reform legislation under consideration in the Senate that aims to end the practice of taxpayer bailouts by closing loopholes used by the FDIC and Treasury Department to provide federal aid to failing financial firms.

Senate Republicans and Democrats reached an agreement last week on the bill's provisions aimed at smoothing the unwinding process of failing firms. 

The proposed rule would apply only to "covered insured depository institutions" with greater than $10 billion in total assets that are owned or controlled by parent companies with more than $100 billion in total assets.

The FDIC would require information about the operations, management, financial aspects and affiliate relationships of the eligible financial institutions. The firms would be required to submit a plan within six months of the rule's effective date on how it would separate from its parent company in the event of failure or bankruptcy.

The FDIC would then determine if the plan is workable and require an update at least once a year based on the risk profile and structure of the institution.

A top European Union lawmaker is urging the Senate to pass financial legislation with strong power for the federal government to preempt state insurance regulations.

Peter Skinner, a member of the European Parliament who focuses on financial issues, wrote to senators encouraging them to support a federal Office of National Insurance (ONI) that has strong power to agree to international insurance agreements.

"It is vital the insurance office be allowed to conclude necessary agreements in the insurance field," Skinner wrote to Senate Banking Committee Chairman Chris Dodd (D-Conn.). "Efforts to weaken the authority of the office seriously jeopardises the possibility of the USA being recognised within the international sphere for purposes of equivalence.

"I urge you to preserve the preemption authority of the insurance office," Skinner wrote.

Sen. Jeff Merkley (D-Ore.) is sponsoring an amendment to the financial overhaul that would preserve the current state-based system of insurance regulation. Consumer advocacy groups, including Consumer Watchdog and U.S. Public Interest Research Group (PIRG), support the Merkley amendment. Skinner did not refer to the Merkley amendment specifically.

The National Association of Insurance Commissioners (NAIC) also supports the Merkley amendment.

Some insurance financial and insurance trade associations oppose the Merkley amendment and favor the current Dodd bill. The associations include the Financial Services Roundtable, American Insurance Association and American Council of Life Insurers, among others.

President Barack Obama is urging the Senate to defeat an amendment to the Wall Street bill backed by auto dealers.

The Senate overwhelmingly Wednesday supported an amendment to allow the Federal Reserve to continue supervising small banks. 

In a 90-9 vote, the amendment offered by Sens. Kay Bailey Hutchison and Amy Klobuchar (D-Minn), retains the Fed's powers to oversee banks instead of adjusting the central bank's jurisdiction to supervise banks with more than $50 billion in assets, including Goldman Sachs and Morgan Stanley, as proposed in financial reform legislation. 

Senate Banking Chairman Chris Dodd (D-Conn.) opposed the amendment arguing that the Fed "didn't exactly live up to its reputation" and didn't step in to halt lending abuses that contributed to the financial crisis. 

Dodd's provision in the bill would've shifted oversight of smaller banks now under the central bank's purview to the Federal Deposit Insurance Corp., and the Office of the Comptroller of Currency, the regulator of national banks. Under Dodd's bill, oversight of small banks would've been reduced to a few or none for 11 of the 12 regional Fed banks. 

Federal Reserve Chairman Ben Bernanke has argued that setting monetary policy requires a view of the entire financial landscape and its supervision shouldn't be reduced. 

Hutchison echoed that argument, saying community banks can provide much-needed financial information to the central bank on monetary policy rather than creating an imbalance that would eventually lead to a shift in power to Washington. 

Several interest groups, including the Independent Community Bankers of America and the American Bankers Association supported the Fed retaining its powers. 

As the Senate continues its slog through dozens of amendments to the financial regulatory reform bill, Senate Banking Chairman Chris Dodd (D-Conn.) continued urging lawmakers to speed the process along. 

In an effort to package together agreed upon provisions, Dodd said Wednesday that he is still waiting to hear from Republicans on a list of technical and "bipartisan" amendments he submitted Saturday as a potential managers amendment. 

"It's now Wednesday and I've yet to hear back on whether we want to accept, or reject or add to that package of amendments that would help tremendously to clean out a lot of issues I think there's consensus on," Dodd said on the floor. 

No votes are expected in the Senate on Friday and leaders, including Reid and Dodd had aimed to complete the bill by the end of this week. 

Eventually Senate Majority Leader Harry Reid (D-Nev.) will eventually going to say "enough is enough," he said. 

Dodd asked his colleague Senate Banking ranking member Richard Shelby (R-Ala.) to respond to the request "so we can actually move forward with the legislation." 

"Let us complete the work as we have begun," he said, praising the work-together attitude between the parties. 

U.S. and European Union officials said Wednesday they have a "special responsibility" to overhaul financial regulations.

Treasury Secretary Timothy Geithner and European Commissioner Michel Barnier met on Wednesday to discuss global capital standards, financial regulations and ways to reduce the problem of "too big to fail" institutions, according to a readout of the meeting. 

The readout said the officials agreed they have, "a special responsibility," because of the United States and European Union represent the world's two largest economies and financial systems.

They said they would pursue "broadly equivalent" standards and laws in the U.S. and European Union in an effort to create a "level playing field," according to the readout. 

Approval seemed assured Wednesday for an amendment to exempt certain small businesses from additional regulations under a proposed consumer protection agency. 

Senate Banking Chairman Chris Dodd (D-Conn.) said the amendment "makes it abundantly clear" that small businesses won't be included in a new regulatory framework under a proposed financial reform bill. 

The provision "does strengthen this tremendously," Dodd said today on the floor. "The bill was never meant to include Main Street."

A major sticking point in the bill, Republicans and moderate Democrats have questioned the scope of provisions creating a consumer protection agency, arguing that any business that lends money to its customers would be caught in additional regulations. 

The amendment could move along negotiations on the consumer protection part of the measure. 

Senate Small Business and Entrepreneurship Chairwoman Mary Landrieu (D-La.) and the panel's ranking member Olympia Snowe (R-Maine) have teamed up to ensure that planned Consumer Financial Protection Bureau, doesn't include small businesses such as dentists.