Banking/Financial Institutions

Several large insurance trade associations are fighting legislation backed by Sen. Jeff Merkley (D-Ore.) that aims to ensure strong power for states on insurance matters.

Merkley sponsored his amendment to the Wall Street overhaul bill as an effort to prevent the Treasury Department from preempting state regulations. The insurance market is regulated primarily in states. The Wall Street bill sets up a new federal Office of National Insurance (ONI) that would monitor the industry and have a say on international insurance agreements.

It is Treasury's power over those international agreements that has split consumer advocacy groups and some property and casualty insurers from parts of the financial industry that support greater federal oversight on insurers. The National Association of Insurance Commissioners (NAIC) is among those supporting the Merkley amendment. The Hill wrote about the Merkley amendment here.

Eight large insurance trade associations said Wednesday they opposed the Merkley amendment.

"Adoption of Senator Merkley’s amendment, while well-intentioned, will undercut that goal and impair the ability of the United States to engage on important and pressing insurance regulatory matters," the associations wrote.

The groups include: American Insurance Association, The Financial Services Roundtable, The Council of Insurance Agents & Brokers, Association of Bermuda Insurers & Reinsurers, American Bankers Insurance Association, Risk and Insurance Management Society, Inc., American Council of Life Insurers and Reinsurance Association of America.

Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation (FDIC), said Wednesday that she backs a bipartisan Senate agreement aimed at ending Wall Street bailouts.

Senate Banking Committee Chairman Chris (D-Conn.) and Sen. Richard Shelby (R-Ala.) announced an agreement on how to deal with financial firms whose failure threatens the broader financial system. A key part of Wall Street overhaul legislation is an effort to prevent future taxpayer-funded bailouts.

Dodd had supported a $50 billion fund, paid for by the industry, that would have been used to help wind down a failing firm. Republicans strongly opposed the fund.

Bair had been a prominent support for creating a fund in advance of a failure.

On Wednesday, Bair said she supported the agreement between Dodd and Shelby.

"The agreement announced between Chairman Dodd and Ranking Member Shelby will assure bipartisan support for a credible liquidation mechanism that will do just that," Bair said in a statement. "When a large and complex financial institution fails, and bankruptcy is not the best option, the FDIC will have the ability to liquidate it in an orderly way and enforce market discipline by making the shareholders and creditors bear the losses. This is one of the most important steps we can take in response to the financial crisis – end bailouts and protect taxpayers from ever again bearing the costs of a bailout. I look forward to working with the Senate and House on the next steps to move a strong bill into law.”‬‪

Senate Banking Chairman Chris Dodd (D-Conn.) expects to offer an amendment sometime Wednesday that reflects an agreement with Republicans reached on 'too big to fail' provisions to the financial regulatory reform bill.

Dodd outlined the bill today saying that "most of the provisions stay intact, because we agree on the fundamentals of this bill." 

He said was willing to drop the $50 billion fund that was to be used to unwind failing financial firms, which he pointed out was not in his draft legislation. The White House opposed the fund and Republicans said it would allow taxpayer-financed bailouts to continue. 

Republican Sen. Bob Corker (R-Tenn.) urged his colleagues to support the amendment. 

Despite the agreement, Senate Banking ranking member Richard Shelby (R-Ala.) said the "overall legislation still has a long way to go to gain my support."

The provision will provide for an orderly liquidation mechanism for the FDIC to unwind "systemically significant" firms. 

Senate Budget Chairman Kent Conrad (D-N.D.) on Wednesday told The Hill that the financial reform bill will be $17 billion short in complying with paygo rules if leaders pull from the legislation the $50 billion reserve fund for liquidating failing firms.

Sen. Saxby Chambliss (R-Ga.) is circulating a 220-page bill substituting Democratic efforts to overhaul regulations of the multitrillion-dollar derivatives market.

The bill would be an amendment to the Wall Street overhaul effort now pending in the Senate. Chambliss had been negotiating with Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) prior to committee debate in April.

Lincoln moved to introduce her own legislation, which has since largely been incorporated into broader legislation by Senate Banking Committee Chairman Chris Dodd (D-Conn.). Lincoln's bill has drawn little Republican support, although Sen. Charles Grassley (R-Iowa) supported it in committee debate.

The Chambliss language has many differences with the Democratic bill. For example, a "swaps end user" has a broader defintion. An end user is defined as any person whose gross notional derivatives -- not including "bona fide hedging swaps" -- represent 5 percent or less of outstanding swaps and 7 percent or less of outstanding swaps and security-based swaps.

A bona fide swap is one that, "is economically appropriate to the reduction or offsetting of risks."

The Democratic National Committee's grassroots arm is organizing "Wall Street Action" events to gather support for financial overhaul legislation under debate in the Senate.

Organizing for America (OFA) is calling Thursday, May 6 a day of action on the legislation.

The group e-mailed supproters on Tuesday to drum up support for the Wall Street bill, which is now on the Senate floor. Senators are drafting potentially hundreds of amendments to a bill that aims to rein in big banks, boost consumer protections and regulate the multitrillion-dollar derivatives market.

"Wall Street reform is gaining steam in the Senate, and a vote could come very soon. But the big banks are ramping up their effort to carve out loopholes and exemptions -- or block the bill altogether. That's why, this week, we're organizing an urgent message from Main Street to Wall Street to show the widespread support for change," the group said in an email.

Senate Republicans are circulating substitute legislation to Democratic efforts to bolster consumer protection in the Wall Street overhaul bill.

According to a one-page summary of the Republican legislation obtained by The Hill, Senate Republicans are looking at creating a consumer protection office at the Federal Deposit Insurance Corporation (FDIC).

The division would be led by a presidentially appointed and Senate confirmed director. All rules, regulations and orders would need to be approved by the board of the FDIC, according to the summary. The division would have primary supervision and enforcement power over large non-bank mortgage originators and other financial services companies, "who have violated consumer protection statutes."

Primary supervision for banks, thrifts and credit unions would remain with prudential regulators. The substitute would retain current policies on federal preemption of state rules and regulations, according to the summary.

Bipartisan support is growing for an amendment to the financial regulatory reform bill that calls for an audit of the Federal Reserve.

Republican Sen. Orrin Hatch (R-Utah) joined 19 of his colleagues Tuesday, including 11 other Republicans in co-sponsoring an amendment that allows the nonpartisan General Accounting Office to dig into the central bank's balance sheet. 

"Since the Federal Reserve has shelled out more than two trillion taxpayer dollars to financial institutions during this financial crisis, it is past time for the American people and Congress to receive a full accounting of who is getting assistance, how much they are getting and how the money is being spent," Hatch said in a release. "Unfortunately, the Federal Reserve has not made the information transparent. That is wrong and needs to change."

To bolster the struggling housing market, the Fed has expanded its balance sheet to more than $2.3 trillion, buying up mortgage-backed securities. The Fed completed that program at the end of March. 

Sponsor Sen. Bernie Sanders (I-Vt.) called his amendment "conservative" but said he is concerned that lobbyists will successfully weaken the amendment. 

Still he expects the amendment to not only get a vote on the floor but garner at least 60 votes because it is backed by a coalition of moderate, progressive and conservative organizations, Sanders told reporters today. 

"We have the support," he said. 

The AFL-CIO, National Taxpayers Union, AARP, FreedomWorks and Americans for Tax Reform back the bill. 

The amendment was prompted by a conversation between Sanders and Federal Reserve Chairman Ben Bernanke who told him he wouldn't release a list of the financial institutions that received "trillions of dollars on near zero interest loans."

The Senate didn't take any votes on Tuesday on the financial regulatory reform bill and Senate Majority Leader Harry Reid (D-Nev.) wasn't happy about it. 

Reid came to the Senate floor tonight, blasting Republicans for continuing to stall the bill. 

Senate Republicans and Democrats have yet to reach an agreement on how to proceed on to votes on amendments.

Because of Republicans "we've been able to accomplish almost nothing," Reid said tonight after passing the "Collector Car Appreciation Day" bill. 

Republicans won't be able to offer all of their amendments because "we won't be on the bill that long," Reid said. 

He emphasized that there's a full agenda -- two supplemental appropriations bill, tax extenders and food safety legislation -- to complete. He warned earlier today that work could creep into the first week of the scheduled August recess. 

Senate Banking leaders Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.) reached an agreement tonight on 'too big to fail' language. The changes were expected to reach the floor as an amendment. 

Earlier today, Reid said he'd hoped to complete work on the bill by the end of next week if not sooner. Senate Minority Leader Mitch McConnell countered by saying the bill would take longer than that. 

Senate Democrats have agreed to nix a proposed $50 billion fund that would help failing financial institutions unwind from the financial regulation reform bill.

Removing the major sticking point from the bill could help clear the path for the measure, which still has a couple more high hurdles to jump, according to news reports. 

The bill's new language, crafted by Senate Banking leaders Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.) could reach the floor as one of the legislation's first amendments, probably within the next day or two. New language was expected to be released sometime tonight, according to Democratic aides.