Financial Regulatory Reform Bill

On Tuesday, Sen. Blanche Lincoln (D-AR) won her state’s primary runoff over Lt. Gov. Bill Halter (D-AR), overcoming what many considered long odds for her campaign. Lincoln’s loss could have jeopardized the provision she sponsored to the Senate-passed bill that would require banks to spin off their derivatives desks. Those same sources are now predicting that Lincoln’s victory makes it much more likely for the provision to survive the conference committee. Supporters, including Senate Majority Whip Dick Durbin (D-IL) and Sen. Tom Harkin (D-IA), rallied behind Lincoln saying her primary election win Tuesday boosted her bargaining power. House Speaker Nancy Pelosi (D-CA) has also privately indicated support for Lincoln’s language. However, Lincoln’s provisions face opposition from the Administration, the Treasury Department and the Federal Reserve. In a meeting with House Democrats Wednesday, Securities and Exchange Commission Chairman Mary Schapiro expressed concern over Lincoln’s proposal. Shapiro argued that it could give a “false sense of security” to the marketplace.

 On Wednesday, Pelosi appointed Democratic conferees to the committee including Barney Frank (D-MA), the chair of the Financial Services Committee; Agriculture Committee Chairman Collin Peterson (D-MN), Energy and Commerce Committee Chairman Henry Waxman (D-CA), Judiciary Committee Chairman John Conyers (D-MI), Oversight and Government Reform Chairman Edolphus Towns (D-NY), and Small Business Committee Chairwoman Nydia Velazquez (D-NY). The non-chairmen level House Democrat appointees include Paul Kanjorski (D-PA), Maxine Waters (D-PA), Carolyn Maloney (D-PA), Luis Gutierrez (D-PA), Mel Watt (D-PA), Gregory Meeks (D-NY), Dennis Moore (D-KS), Mary Jo Kilroy (D-PA), Gary Peters (D-PA), Leonard Boswell (D-PA), Bobby Rush (D-PA), Elijah Cummings (D-PA), Heath Shuler (D-PA). House Minority Leader John Boehner (R-OH) also named GOP members including Spencer Bachus (R-AL), ranking member on the House Financial Services Committee; Joe Barton (R-TX), ranking member of the House Energy and Commerce Committee; Rep. Sam Graves (R-MO), ranking member of the House Small Business Committee; Darrell Issa (R-CA), ranking member of the House Oversight and Government Reform Committee; Frank Lucas (R-OK), ranking member of the House Agriculture Committee; and Rep. Lamar Smith (R-TX), ranking member of the House Judiciary Committee. The non-ranking member level House Republican conferees include Ed Royce (R-CA), Judy Biggert (R-IL), Shelley Moore Capito (R-WV), Jeb Hensarling (R-TX), and Scott Garrett (R-NJ). 

On Thursday, the conference committee began with all forty-two House and Senate members having the opportunity to make opening statements. Senate Banking Committee Chairman Chris Dodd (D-CT) opened his remarks by vowing to block attempts to weaken the bill during the proceedings. Republicans criticized Democrats for releasing a revised version of the base bill only hours before the conference committee was set to meet, saying the last-minute changes undermined Democratic pledges to make the committee’s work fully transparent. Among the last minute changes, Democrats added multiple restrictions on mortgage lending, swelling the package from nearly 1,500 pages to 1,974 pages. The newly added provisions would require that lenders increase scrutiny on borrowers, restrict prepayment penalties, and add restrictions to refinanced loans. The conference will be chaired by Frank, who acknowledged that part of the proceedings would take place behind closed doors. However, Frank also said nothing will be put into the final committee report that is not openly debated, subject to amendment, and voted on. However, the most important remarks of the day came after the committee adjourned, when Frank suggested conferees would use a tougher version of the “Volcker rule” similar to one crafted by Sens. Jeff Merkley (D-OR) and Carl Levin (D-MI) as the starting point for negations on efforts to ban proprietary trading. Merkley-Levin language goes well beyond the Senate version of the “Volcker rule” that would leave the matter to future regulators after a period of study. The committee resumes its deliberations next Tuesday and will likely continue through the end of the month.

 
Unemployment Benefits and Tax Credits Bill Remains Unfinished
The Senate recessed Thursday without passing the House-passed legislation to extend jobless benefits and expiring tax credits. Funding for extended unemployment benefits expired on June 2nd while Congress was in the middle of a ten-day district work period. Senate Democratic leaders have included the benefits in a $140 billion emergency spending bill, but a number of moderate Democrats are concerned that the bill includes too much deficit spending. The nonpartisan Congressional Budget Office estimates that the legislation would increase the budget deficit by $78.6 billion over the next 10 years. Late on Thursday, in an effort to gain Republican support, Senate Majority Leader Harry Reid (D-NV) introduced an amendment to the bill that would extend the transaction closing date for the “First-Time Homebuyer Tax Credit” from June 30th to September 30th. The Senate will resume consideration of the measure when it returns Tuesday. 

 If you have any questions regarding any of these issues, please contact:

 Matt Jessee, Policy Advisor
matt.jessee@bryancave.com
202.508.6341 – Washington

 Patricia Ross, Public Assistant
patricia.ross@bryancave.com
202.508.6054 – Washington