Financial Regulatory Reform Bill

The House and Senate conference committee on the Wall Street Reform Act met formally for the first votes on Tuesday and concluded for the week on Thursday. On Tuesday, conferees agreed to increase permanently the deposit insurance limit to $250,000 and retroactively cover the period between Jan. 1, 2008 and October 3, 2008, when the limit was first temporarily raised to $250,000. The retroactive change means that depositors with between $100,000 and $250,000 affected by 16 bank failures during the time frame will be entitled to some recovery. The conferees also agreed to eliminate the 1.50% hard cap on the Deposit Insurance Fund and give the FDIC full discretion to decide whether to rebate any excess over that amount. The provision also eliminates the automatic “brake” on the growth of the fund which required partial dividends after the reserve ratio exceeded 1.35 percent. However, conferees could not come to agreement on the Transaction Account Guarantee program. The House conferees proposed making the program permanent for all banks, while the Senate’s representatives would agree only to a two-year extension beyond the current Dec. 31, 2010 expiration date. House Financial Services Committee Chairman Barney Frank (D-MA) said the House would consult with the Congressional Budget Office to determine if making the program permanent would generate significant government cost savings. The conferees also agreed to grandfather mutual holding companies’ dividend waiver policies in place as of Dec. 1, 2009. Senate conferees, however rejected a House offer to establish a mutual national bank charter.

On Wednesday, the conference committee voted to permanently exempt companies with less than $75 million in market capitalization from compliance with the Sarbanes-Oxley Act’s Section 404(b) auditor attestation requirements. Conferees also agreed to remove Rep. Maxine Waters’ (D-CA) provision that would have enhanced investors’ ability to bring lawsuits against those who knowingly or unknowingly provided “substantial assistance” to primary violators in securities fraud.

On Thursday, the committee reconvened to consider titles regarding systemic risk regulation, resolution authority, and payments-clearing-settlement issues. Among other items considered, the conferees failed to reach an agreement on modifications to the Collins amendment, which would require banks to stop counting trust-preferred securities as part of their Tier I capital standard, and left the issue unresolved until their next scheduled meeting on Tuesday. House negotiators had earlier adopted by voice vote an amendment by Rep. Dennis Moore (D-KS) to grandfather bank holding companies’ existing trust-preferred securities from being subject to the Collins amendment.

Next Tuesday the conference will vote on provisions relating to predatory lending, risk retention, interchange fees, and access issues. On Wednesday and Thursday the panel plans to discuss derivatives, the ‘Volcker rule,’ and revisit the Collins amendment on capital requirements. While the Congressional leadership and the White House are pushing to wrap up the conference by the end of next week in order to have it to the President by the July 4th recess, it remains to be seen whether this will be possible in light of the many contentious issues yet to be resolved. House and Senate leaders are expected to work through the weekend with the White House to come to resolution on these issue before the conference resumes voting Tuesday.

More Information

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

Matt Jessee
Policy Advisor
matt.jessee@bryancave.com
1 202 508 6341 Washington

Dave Russell
Senior Policy Advisor
Dave.russell@bryancave.com
1 202 508 6353 Washington