June Jobs Report

On Friday, the U.S. Department of Labor reported that the economy added 83,000 private-sector jobs in June but lost 125,000 jobs overall because of the loss of temporary workers hired by the federal government to help with the census. The unemployment rate, based on a different survey, declined to 9.5 percent in June from the previous 9.7 percent.

Financial Regulatory Reform Bill

On Tuesday, House and Senate conferees met after Senator Scott Brown (R-MA) said he opposed the conference report because of a $19 billion “bank tax” on large financial firms and hedge funds used to cover the bill’s costs. Brown had provided key support to pass the Senate version of the legislation, and his opposition, along with the death of Senator Robert Byrd (D-WV), could have left Senate Democrats short of the 60 votes needed to end debate on the conference report. After reconvening, the conference voted to strip out the bank tax and fund the measure by ending the Troubled Asset Relief Program and increasing premium rates to raise the Federal Deposit Insurance Fund’s (FDIC) minimum reserve ratio from 1.15 percent to 1.35 percent by Sept. 30, 2020. However, banks with consolidated assets less than $10 billion would be exempt from the increased premiums. Based on Congressional Budget Office and FDIC estimates, the extra assessment is projected to raise more than $5 billion and would likely be implemented by extending the current premium rates for an extra five quarters, beginning the last quarter of 2017.

On Wednesday, the House passed the financial regulatory reform conference report on a 237-192 vote. Three Republicans crossed the aisle to support the measure, while nineteen Democrats voted against the bill. The conference report now goes to the Senate, which plans to take up the measure the week of July 12th. However, Senator Brown still remains uncommitted despite the removal of the bank tax. In a statement Wednesday, Brown said “I appreciate the conference committee revisiting the Wall Street reform bill and removing [the tax]. Over the July recess, I will continue to review this important bill.” Among the other three Republican supporters of the bill’s Senate version, Senator Susan Collins (R-ME) and Senator Olympia Snowe (R-ME) have now indicated they will vote to end debate on the conference report. However, Senator Charles Grassley (R-IA), the fourth Republican to support the original Senate bill, remains uncommitted. Late Thursday, Senator Maria Cantwell (D-WA), who voted against the Senate bill, announced she would support the conference report leaving Senator Russ Feingold (D-WI) as the only Democrat opposed to the measure.

Below is a summary of the House-passed conference report of the Dodd-Frank Wall Street Reform and Consumer Protection Act by title:

Title I

  • Creates a Financial Stability Oversight Council charged with recommending to the Federal Reserve rules on capital, leverage, liquidity, and risk management intended to prevent companies from posing a risk to the financial system. The council could require a nonbank financial company to be regulated by the Federal Reserve and/or divest certain holdings if it determines that failure of the company would pose a risk to the financial system.
  • Creates an Office of Financial Research (within Treasury Department) to support the council through collection of financial data/economic analysis.

Title II

  • Establishes a process by which the Secretary of the Treasury and two other officials may initiate the “orderly liquidation” of a company to prevent financial instability in the U.S. financial system.
  • Allows the FDIC to borrow from the Treasury to establish a liquidation fund. The FDIC would be appointed receiver of a company and would be allowed to asses fees on financial firms with assets above $50 billion to pay for the process.

Title III

  • Requires every federal financial agency to establish an Office of Minority and Women Inclusion. The legislation also requires each agency to consider the race, ethnicity, and gender of an applicant in reviewing and evaluating contract proposals.
  • Makes permanent the federal deposit insurance increase to $250,000.
  • Transfers the functions of the Office of Thrift Supervision to the Office of the Comptroller of the Currency.
  • Authorizes the Federal Reserve Board to supervise thrift holding companies and the FDIC to supervise state-charted thrifts.

Title IV

  • Eliminates the “private advisor” exemption from the Investment Advisors Act of 1940.

Title V

  • Creates a Federal Insurance Office within the Treasury Department to collect information about the insurance industry. The Office has the authority to preempt state insurance measures if its Director determines certain criteria are met.
  • Places new regulations on non-admitted insurance and reinsurance companies.

Title VI

  • Prohibits investments beyond 3% of a bank’s Tier 1 capital in hedge and private-equity funds.

Title VII

  • Requires most derivatives to be traded through exchanges or clearinghouses and imposes other new regulations on derivative firms.
  • Bans insider trading by federal officials who acquire information from their position in the government.
  • Establishes a ten-member Interagency Working Group to report on the study of existing and prospective carbon markets.

Title VIII

  • Requires the Federal Reserve, SEC, and CFTC to establish and enforce risk-management standards for financial market utilities and payment, clearing, and settlement activities.

Title IX

  • Creates an Office of Investor Advocate and Ombudsman to assist investors in their dealings with the SEC. The legislation also authorizes the SEC to promulgate rules imposing a fiduciary duty on broker-dealers and investment advisers.
  • Gives the SEC broader authority to regulate nationally recognized statistical rating organizations (NSROs) and creates a new Office of Credit Ratings.
  • Requires securitizers to retain an economic interest in a material portion of the credit risk for any asset that securitizers transfer, sell, or convey to a third party.
  • Requires an advisory vote of shareholders, every three years, on approving the compensation of executives. The legislation also requires federal financial regulators to monitor incentive-based payments of federally-regulated financial institutions larger than $1 billion. Further, the conference report requires regulators to prohibit incentive-based payment arrangements that regulators determine could harm financial stability.
  • Allows shareholders to nominate candidates for an issuer’s board of directors and to have the candidate listed on the issuer’s proxy materials.
  • Requires the registration of municipal financial advisors and requires the Municipal Securities Rulemaking Board (MSRB) to create rules concerning their activities.

Title X

  • Creates a Consumer Financial Protection Bureau as an independent bureau within the Federal Reserve System. The bureau would have wide latitude to write rules for banks and non-banks alike. The bureau is given “consumer protection” responsibilities currently held by the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, the Department of Housing and Urban Development, and the Federal Trade Commission.
  • Creates the Office of Fair Lending and Equal Opportunity, within the Consumer Financial Protection Bureau, that will be intended to enforce nondiscriminatory access to credit for individuals and communities under the Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA). The two other offices created are the Office for Financial Education and the Office for the Financial Protection of Older Americans.
  • Requires the Federal Reserve to issue new regulations on interchange fees. The bill instructs the regulations to be directed as “an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.”

Title XI

  • Requires the Government Accountability Office (GAO) to conduct an audit of Federal Reserve emergency lending since December 1, 2007. The legislation provides additional, ongoing audits of Federal Reserve authority over the discount window, emergency lending, and open market transactions.

Title XII

  • Authorizes a program to help low income individuals open low-cost checking and savings accounts, a program to increase access to financial advice for consumers, and a program to create a pool of capital for community development financial institutions to establish alternatives to payday loans.

Title XIII

  • Reduces the amount authorized under the TARP program by $11 billion to $475 billion to offset part of the cost of the new spending authorizations included in the bill.

Title XIV

  • Imposes a series of new regulations on mortgage lenders to prevent predatory lending. In addition, this title also creates a new $1 billion “Emergency Market Relief program” and provides $1 billion for a third round of Neighborhood Stabilization Program funding.

Title XV

  • Instructs the U.S. Executive Director of the International Monetary Fund (IMF) to reject loans to a country that has a public debt in excess of economic output and is not eligible for assistance from the International Development Association.
  • Includes a “Sense of the Congress” resolution that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict.
  • Establishes new mine safety reporting requirements on mine operators.
  • Creates new requirements for the disclosure of payments by resource extraction issuers.
June Jobs ReportOn Friday, the U.S. Department of Labor reported that the economy added 83,000 private-sector jobs in June but lost 125,000 jobs overall because of the loss of temporary workers hired by the federal government to help with the census. The unemployment rate, based on a different survey, declined to 9.5 percent in June from the previous 9.7 percent.

Financial Regulatory Reform Bill

On Tuesday, House and Senate conferees met after Senator Scott Brown (R-MA) said he opposed the conference report because of a $19 billion “bank tax” on large financial firms and hedge funds used to cover the bill’s costs. Brown had provided key support to pass the Senate version of the legislation, and his opposition, along with the death of Senator Robert Byrd (D-WV), could have left Senate Democrats short of the 60 votes needed to end debate on the conference report. After reconvening, the conference voted to strip out the bank tax and fund the measure by ending the Troubled Asset Relief Program and increasing premium rates to raise the Federal Deposit Insurance Fund’s (FDIC) minimum reserve ratio from 1.15 percent to 1.35 percent by Sept. 30, 2020. However, banks with consolidated assets less than $10 billion would be exempt from the increased premiums. Based on Congressional Budget Office and FDIC estimates, the extra assessment is projected to raise more than $5 billion and would likely be implemented by extending the current premium rates for an extra five quarters, beginning the last quarter of 2017.

On Wednesday, the House passed the financial regulatory reform conference report on a 237-192 vote. Three Republicans crossed the aisle to support the measure, while nineteen Democrats voted against the bill. The conference report now goes to the Senate, which plans to take up the measure the week of July 12th. However, Senator Brown still remains uncommitted despite the removal of the bank tax. In a statement Wednesday, Brown said “I appreciate the conference committee revisiting the Wall Street reform bill and removing [the tax]. Over the July recess, I will continue to review this important bill.” Among the other three Republican supporters of the bill’s Senate version, Senator Susan Collins (R-ME) and Senator Olympia Snowe (R-ME) have now indicated they will vote to end debate on the conference report. However, Senator Charles Grassley (R-IA), the fourth Republican to support the original Senate bill, remains uncommitted. Late Thursday, Senator Maria Cantwell (D-WA), who voted against the Senate bill, announced she would support the conference report leaving Senator Russ Feingold (D-WI) as the only Democrat opposed to the measure.

Below is a summary of the House-passed conference report of the Dodd-Frank Wall Street Reform and Consumer Protection Act by title:

Title I

* Creates a Financial Stability Oversight Council charged with recommending to the Federal Reserve rules on capital, leverage, liquidity, and risk management intended to prevent companies from posing a risk to the financial system. The council could require a nonbank financial company to be regulated by the Federal Reserve and/or divest certain holdings if it determines that failure of the company would pose a risk to the financial system.

* Creates an Office of Financial Research (within Treasury Department) to support the council through collection of financial data/economic analysis.

Title II

* Establishes a process by which the Secretary of the Treasury and two other officials may initiate the “orderly liquidation” of a company to prevent financial instability in the U.S. financial system.

* Allows the FDIC to borrow from the Treasury to establish a liquidation fund. The FDIC would be appointed receiver of a company and would be allowed to asses fees on financial firms with assets above $50 billion to pay for the process.

Title III

* Requires every federal financial agency to establish an Office of Minority and Women Inclusion. The legislation also requires each agency to consider the race, ethnicity, and gender of an applicant in reviewing and evaluating contract proposals.

* Makes permanent the federal deposit insurance increase to $250,000.

* Transfers the functions of the Office of Thrift Supervision to the Office of the Comptroller of the Currency.

* Authorizes the Federal Reserve Board to supervise thrift holding companies and the FDIC to supervise state-charted thrifts.

Title IV

* Eliminates the “private advisor” exemption from the Investment Advisors Act of 1940.

Title V

* Creates a Federal Insurance Office within the Treasury Department to collect information about the insurance industry. The Office has the authority to preempt state insurance measures if its Director determines certain criteria are met.

* Places new regulations on non-admitted insurance and reinsurance companies.

Title VI

* Prohibits investments beyond 3% of a bank’s Tier 1 capital in hedge and private-equity funds.

Title VII

* Requires most derivatives to be traded through exchanges or clearinghouses and imposes other new regulations on derivative firms.

* Bans insider trading by federal officials who acquire information from their position in the government.

* Establishes a ten-member Interagency Working Group to report on the study of existing and prospective carbon markets.

Title VIII

* Requires the Federal Reserve, SEC, and CFTC to establish and enforce risk-management standards for financial market utilities and payment, clearing, and settlement activities.

Title IX

* Creates an Office of Investor Advocate and Ombudsman to assist investors in their dealings with the SEC. The legislation also authorizes the SEC to promulgate rules imposing a fiduciary duty on broker-dealers and investment advisers.

* Gives the SEC broader authority to regulate nationally recognized statistical rating organizations (NSROs) and creates a new Office of Credit Ratings.

* Requires securitizers to retain an economic interest in a material portion of the credit risk for any asset that securitizers transfer, sell, or convey to a third party.

* Requires an advisory vote of shareholders, every three years, on approving the compensation of executives. The legislation also requires federal financial regulators to monitor incentive-based payments of federally-regulated financial institutions larger than $1 billion. Further, the conference report requires regulators to prohibit incentive-based payment arrangements that regulators determine could harm financial stability.

* Allows shareholders to nominate candidates for an issuer’s board of directors and to have the candidate listed on the issuer’s proxy materials.

* Requires the registration of municipal financial advisors and requires the Municipal Securities Rulemaking Board (MSRB) to create rules concerning their activities.

Title X

* Creates a Consumer Financial Protection Bureau as an independent bureau within the Federal Reserve System. The bureau would have wide latitude to write rules for banks and non-banks alike. The bureau is given

“consumer protection” responsibilities currently held by the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, the Department of Housing and Urban Development, and the Federal Trade Commission.

* Creates the Office of Fair Lending and Equal Opportunity, within the Consumer Financial Protection Bureau, that will be intended to enforce nondiscriminatory access to credit for individuals and communities under the

Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA). The two other offices created are the Office for Financial Education and the Office for the Financial Protection of Older Americans.

* Requires the Federal Reserve to issue new regulations on interchange fees. The bill instructs the regulations to be directed as “an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.”

Title XI

* Requires the Government Accountability Office (GAO) to conduct an audit of Federal Reserve emergency lending since December 1, 2007. The legislation provides additional, ongoing audits of Federal Reserve authority over the discount window, emergency lending, and open market transactions.

Title XII

* Authorizes a program to help low income individuals open low-cost checking and savings accounts, a program to increase access to financial advice for consumers, and a program to create a pool of capital for community development financial institutions to establish alternatives to payday loans.

Title XIII

* Reduces the amount authorized under the TARP program by $11 billion to $475 billion to offset part of the cost of the new spending authorizations included in the bill.

Title XIV

* Imposes a series of new regulations on mortgage lenders to prevent predatory lending. In addition, this title also creates a new $1 billion “Emergency Market Relief program” and provides $1 billion for a third round of Neighborhood Stabilization Program funding.

Title XV

* Instructs the U.S. Executive Director of the International Monetary Fund (IMF) to reject loans to a country that has a public debt in excess of economic output and is not eligible for assistance from the International Development Association.

* Includes a “Sense of the Congress” resolution that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict.

* Establishes new mine safety reporting requirements on mine operators.

* Creates new requirements for the disclosure of payments by resource extraction issuers.

Below is a link to the text of the House-passed conference report of the Dodd-Frank Wall Street Reform and Consumer Protection Act:

http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/Conference_report_final_3.pdf