Government Shutdown Looms

With the current temporary funding resolution set to expire April 8, House and Senate Appropriations committees worked toward crafting a six-month compromise bill, setting annual spending at $1.055 trillion, $28 billion more than the House-passed level but still a $33 billion cut from the original spending measure. However, House Republicans remain splintered over whether a shutdown would be good politically, or whether they should compromise with Democrats in order to move on to larger future battles such as next year’s budget and the debt ceiling increase. Meanwhile, Democrats also remain divided over whether to allow a shutdown to happen or acquiesce to Republican cuts. Whether a compromise can be reached to avoid a shutdown will be known next week.

Unemployment Rate Drops to 8.8%

On Friday, the Department of Labor announced that the unemployment rate dipped to 8.8% in March from 8.9% in February. Nonfarm payrolls gained 216,000, with private-sector employment rising by 230,000. Payroll employment stood at 130.7 million in March. There were gains of 199,000 jobs in services and 17,000 jobs in manufacturing in March. Government employment fell by 14,000 and 9,000 jobs were lost in education. Nearly half of the unemployed have been out of work for 27 weeks or more. Private-sector wages fell 2 cents an hour to $19.30.

Ally Financial Files for IPO

On Thursday, Ally Financial, the former finance arm of General Motors, filed for an initial public offering that would allow the federal government to begin selling off its 73.8 percent stake.  Ally said in its registration statement with the Securities and Exchange Commission (SEC) that it was seeking to raise $100 million.  Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley are the lead underwriters.  The company did not give an estimated date or share price for the offering.  The Treasury Department, which invested more than $17 billion in Ally, did not say how much of its stake it intended to sell.  In addition to common shares, the Treasury Department owns $5.9 billion in convertible preferred stock.  Earlier this month, the Treasury Department began unwinding its holdings in Ally, selling $2.7 billion in trust preferred securities.

NY Fed Rejects AIG Plan to Repurchase Mortgage-Backed Securities

On Wednesday, the Federal Reserve Bank of New York announced that it rejected American International Group’s (AIG) plan to repurchase a set of mortgage-backed securities.  AIG offered to buy back the Maiden Lane II portfolio for $15.7 billion.  Instead of selling the portfolio back to AIG, the Fed will sell it in pieces over a period of time through Blackrock.

SEC Votes on Executive Comp Rule

On Wednesday, the five members of the SEC voted unanimously to give their preliminary endorsement to a proposal that requires executive pay to be set by independent members of corporate boards.  However, the proposed rule would authorize the respective stock exchanges to exempt any category of company from all of the requirements of the new compensation committee listing standards.  In a related action earlier this month, the SEC proposed a rule meant to discourage irresponsible risk-taking by preventing top executives at big financial firms from immediately receiving any annual bonuses.

Bernanke Announces Delay of Durbin Amendment Rule

On Tuesday, March 29, Fed Chair Ben Bernanke wrote to the Chairmen and Ranking Members of the House and Senate Banking Committees to inform that the level of detail in the 11,000 comments received on the Durbin amendment will require the Fed to miss the April 21 deadline to issue final interchange fee standards.  However, Bernanke also said the Fed remains committed to issuing a final rule by July 21 as mandated by the Dodd-Frank Wall Street Reform Act.

SEC and DOJ File Insider Trading Charges Against FDA Employee

On Wednesday, the SEC filed civil charges against Cheng Yi Liang, 57, an FDA employee since 1996, alleging that he illegally traded in advance of at least 27 different FDA announcements involving 19 publicly traded companies.  The Justice Department (DOJ) filed related charges and also charged Mr. Liang’s son, Andrew Liang, in the case.  The SEC and DOJ said that the men traded shares of companies dating back to 2006 whose drugs were used for colon cancer, schizophrenia, insomnia, severe constipation, osteoarthritis and heart disease.

More Information

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

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