Administration Unveils Housing Reform Plan

On Friday, Treasury Secretary Tim Geithner announced the Obama Administration’s recommendations to phase out Fannie Mae and Freddie Mac and to set minimum down-payments for buyers. The proposal includes a mandatory 10 percent down payment for home buyers and three options for Fannie and Freddie to be wound down but stopped short of recommending outright privatization or closure. However, critics were quick to point out that there are no specific timelines for action in the proposal, and regardless of Geithner’s recommendations, ultimately it will be up to Congress to enact legislation on the issue.

Kevin Warsh to Leave Fed

On Thursday, Federal Reserve Board Governor Kevin Warsh announced that he is stepping down from his position at the end of March. President Obama will now have the opportunity to replace Warsh, a Bush appointee, with his own nominee. President Obama currently has another nominee, Peter Diamond, pending before the Senate for confirmation. Once President Obama has filled these two vacant slots, he will have named six of the seven currently sitting Fed Governors.

Senate Banking Committee Sets First Dodd-Frank Hearing

On Friday, the Senate Banking Committee announced it will hold its first hearing of the 112th Congress on the Dodd Frank Wall Street Reform Act on February 17. The hearing will focus on the Administration’s progress report six-months after the bill’s passage. Witnesses will include Fed Chair Ben Bernanke, FDIC Chair Sheila Bair, SEC Chair Mary Schapiro, CFTC Chair Gary Gensler and Acting Comptroller John Walsh.

House Oversight Committee Hearing on State & Municipal Debts

On Wednesday, the House Oversight Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs conducted a hearing on state and municipal debts. Subcommittee Chairman Rep. Patrick McHenry (R-NC) blamed the wide-ranging budget problems chiefly on states’ huge pension obligations, citing “the looming burden of paying out trillions of dollars in lucrative public sector union pension and health care benefits that come at the expense of taxpayers.” The Ranking Democrat on the Subcommittee, Rep. Mike Quigley (D-IL) said states need to erase their deficits and face up to their long-term obligations such as pensions for government workers on their own. Quigley also criticized a proposal from some conservatives that Congress pass a law allowing states to reorganize their debts by declaring bankruptcy, an idea that opponents say would send state borrowing costs soaring. Lawmakers on both sides of the aisle said that the lack of clear reporting standards is contributing to a lack of awareness about the precarious state of some pension plans. A bill introduced in the House would require that pension plans report two sets of numbers. The first set would detail liabilities based on the plan’s own accounting methods. The second set would report the numbers based on a uniform standard that all plans would have to follow. Sponsors that did not publicly disclose their plan’s liabilities would lose the authority to issue federal tax-exempt bonds.

SEC Votes on Rating Agency References

On Wednesday, the Securities and Exchange Commission (SEC) voted 5-0 to propose that several of its key documents for securities offerings no longer require ratings references. The proposal would strip rating references from the conditions that the SEC places on companies seeking to qualify for “short form registration” when registering securities for a public sale. The SEC also proposed stripping out the rating requirement and replacing it with an alternative that investors can use to determine if a company is a “well-known, seasoned issuer.” Under the proposal, instead of relying on a high-investment grade rating, companies could file an S-3 or F-3 form if they have issued more than $1 billion in nonconvertible debt securities over a three-year period,

FDIC Endorses Exec Comp Deferral

On Monday, the Federal Deposit Insurance Corp (FDIC) endorsed a proposal requiring that executives at the largest financial institutions defer half of their bonuses for at least three years. The FDIC proposal would apply to compensation for top executives at financial companies with $50 billion or more in assets. The proposal also calls for a large financial company’s board of directors to identify employees other than top executives, such as top traders, whose activities could potentially endanger the institution or who pose a “material risk.”

More Information

For more information, please contact:

Matt Jessee, Senior Policy Advisor
matt.jessee@bryancave.com
1 314 259 2463