Banking/Financial Institutions

Sen. Susan Collins (R-Maine) is looking to use the financial reform bill to create a fiduciary standard for broker/dealers but is having trouble narrowing the scope of her proposal to only apply to her intended targets. 

"I'm trying to come up with language that would make it clear that large investment banks do have a legal duty to act in the interest of their clients, [but] it's more difficult to draft than you might think," she told reporters. "You start sweeping in anyone who sells any kind of financial product, which is not my goal." 

Sen. Robert Menendez (D-N.J.) recently teamed up with Sen. Daniel Akaka D-Hawaii) to introduce a proposal that toughens up a fiduciary standard as it applies to brokers. Collins thinks the Menendez amendment would be applied too broadly.

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An amendment that would close half a dozen loopholes should be approved early in the amendment process, Sen. Bob Corker (R-Tenn.) said Tuesday. 

Language is still being worked out on an amendment co-authored by Senate Banking leaders Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.) that would end 'too big to fail' by closing loopholes used by the Federal Reserve and FDIC to to help failing firms. 

Closing the loopholes would lead to a process by which the federal government and firms would follow in cases of failure. It would essentially end the 'too big to fail' mentality perpetuated by the 2008 financial crisis. 

"If we can get that behind us I think it moves us on to a lot other issues, "Corker told reporters. 

Corker said there are about six loopholes, including one where creditors would have to return federal government funds above what they would have received if a firm had gone straight to bankruptcy. 

"This makes sure we're getting that money back from those creditors," said Corker, who hadn't seen final language as of lunch time today.

For example, Goldman Sachs collected millions it was owed from AIG after the firm received federal bailout money. When questioned by lawmakers last week, Goldman CEO Lloyd Blankfein said AIG owed them the money and he doesn't know from which account it was drawn. 

Treasury Secretary Timothy Geithner on Tuesday told a Senate panel that he opposes the creation of a bailout fund because it could prompt some firms to take extraordinary risk knowing that they would be saved by the government if those investments became toxic and lost value. 

"The disadvantage of doing that is it may create an impression, however designed, that there is a pool of money there that could help fund future bailouts and that, some people have argued, could add to moral hazard rather than reduce it," he said. 

Senate Democratic Whip Dick Durbin (D-Ill.) said amending the financial reform bill could begin as early as today, but he was unsure on how many votes would be required for a proposal to be added to the legislation. 

"There hasn't been a formal agreement or UC on the exact votes that will be necessary," he told reporters. "I'm just speculating that some will require 60 votes, but perhaps not all of them." 

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More than 20 of the nation's largest healthcare associations are warning Congress that they would fall under sweeping new financial regulations aimed at Wall Street.

In a letter on Monday, the groups said the scope and reach of a new consumer financial protection office are too broad and that they would face new regulations designed for banks and other financial companies.

Congressional Democrats and the White House have repeatedly argued that the Wall Street bill does not apply to non-financial industries. A wide range of business lobbyists say the agency's power is too vague in the legislation, even if lawmakers say they are not targeting dentists, grocers or other non-financial industries.

The letter was signed by the American Dental Association, American Medical Association and American Society of Plastic Surgeons, among others.

"Given the scope and reach of the bill’s language, health care practitioners would, we believe, be covered by the legislation leading to unnecessary costs and increased administrative burdens for practitioners without any benefit for our patients," the organizations wrote on Monday.

The groups are: Academy of General Dentistry, American Academy of Dermatology Association, American Academy of Ophthalmology, American Academy of Oral & Maxillofacial Pathology, American Academy of Otolaryngology-Head and Neck Surgery, American Academy of Pediatric Dentistry, American Academy of Periodontology. American Association of Endodontists, American Association of Neurological Surgeons, American Association of Oral & Maxillofacial Surgeons, American Association of Orthodontists, American College of Emergency Physicians, American College of Prosthodontists, American College of Surgeons, American Dental Association, American Medical Association, American Osteopathic Association, American Physical Therapy Association, American Podiatric Medical Association, American Society of Cataract and Refractive Surgery, American Society of Plastic Surgeons, Hispanic Dental Association and Medical Group Management Association.

Sen. Bill Nelson (D-Fla.) is looking to repeal the preferential treatment of complicated financial derivatives when they enter bankrutpcy proceedings.

Nelson submitted an amendment and is circulating a letter to senators urging them to support the change as part of Wall Street financial overhaul legislation now under debate.

In the letter, Nelson took aim at the "backdoor bailout" of major financial firms that had derivatives deals with the crippled insurer AIG. Banks, notably Goldman Sachs, received billions of dollars from taxpayers because of the oustanding derivatives contracts with AIG.

"Under current law, credit default swaps and other derivative contracts are entitled to special, preferred treatment in bankruptcy proceedings. Unlike other contracts, a derivative is not automatically terminated when a bankruptcy petition is filed," Nelson said in the letter, dated April 21.

"Unfortunately, pending financial reform proposals would preserve the derivative safe harbor provisions available in bankruptcy law and extend the safe harbors to the new regime for resolving large, failed financial institutions," Nelson said.

Nelson said his amendment would end the safe harbors.

The world’s top-earning hedge fund managers have bankrolled almost exclusively Democratic campaigns.

G20 members from Korea, Canada, the U.S., the U.K. and France issued the following joint statement on the decision by the European governments and the International Monetary Fund to give Greece $145 billion in emergency loans to help stem the country's economic crisis. 

"We welcome the strong economic program Greece is putting in place with the financial assistance of the Member States of the Euro-Zone and the IMF. This program merits the support of the international community. In addition to the financial assistances being provided by the Euro-Zone members, we pledge support for the IMF's exceptional financing for Greece on an expeditious basis. Determined and consistent implementation of the program by Greece, combined with this exceptional assistance from the Member States of the Euro-Zone and IMF, will help restore financial stability in Greece and promote market confidence."

Senate Democratic Whip Dick Durbin (D-Ill.) on Monday sharply criticized the Republican financial reform proposal that was billed as an alternative to the Democratic bill the Senate will begin to amend on Tuesday.

"We've been waiting to see if they would come forward with their own plan to determine whether or not it would be as tough on the banks on Wall Street as the bill that is on the floor," he said. "The verdict is in: it's not even close." 

Reviewing a summary of the Republican bill, Durbin said it lacks adequate capital requirements for banks and provides no oversight of "shadow" banks that operate outside the reach of regulators. 

Wall Street needs to change its behavior and executives asking for government support should feel financial pain, billionaire Warren Buffett said today. 

Besides voicing support for financial reform, Buffet was upbeat on the economic recovery and the future of Goldman Sachs CEO Lloyd Blankfein, who he said should keep his job despite civil charges and an ongoing criminal case against the investment firm.

"I think you have to do something to change behavior of CEOs and directors," said Buffett, CEO of Berkshire Hathaway and Goldman's largest shareholder, Monday on ABC's "Good Morning America." 

"I think it's disgusting that you've got all of these failures of major institutions that the government has had to step in for society reasons to help and, basically, all the CEOs that caused all the trouble went away rich."

Buffett suggested new policies that would require "the CEO and his wife go broke" if a company needs help from the federal government. 

"That would change behavior."