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Financial Services Update – September 23, 2011

September 23, 2011

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House Passes Government Funding Bill, Shutdown Looms Again

The fiscal year Continuing Resolution (CR) that funds the government in lieu of Appropriations bills expires on September 30th. Therefore, Congress is required to pass another funding resolution by October 1st in order to prevent a government shutdown. The House passed its CR late Thursday night after cutting an additional $100M from the Department of Energy program that backed the Solyndra loan. The House bill contains $3.65B in disaster relief, which is partially offset by a $1.5B cut to a Department of Energy loan program for manufacturers of fuel-efficient cars. On Friday, the Senate voted to reject the House’s bill by a vote of 59 to 36 because Senate Democrat leaders are seeking greater disaster relief funding. The most likely outcome is for the House and Senate to pass a “clean” CR that funds the government until November 18 and postpones the debate over increasing disaster funding. While Congress is scheduled to be in recess next week, the House and Senate must reach an agreement on a funding resolution before recessing.

Former SEC General Counsel Testifies About Madoff Ties

On Thursday, David Becker, the former general counsel of the Securities and Exchange Commission (SEC), testified before two Congressional panels regarding a report released this week by the SEC’s inspector general that referred Becker’s actions to the Justice Department for an investigation of possible violations of conflict-of-interest laws. Prior to Becker’s appearance before the committees, SEC Chairman Mary Schapiro and SEC Inspector General David Kotz also testified about their knowledge of the Becker matter. While Becker testified that he told numerous SEC officials about his financial connection to Madoff accounts, Schapiro told the Committee that she did not inform the other four SEC commissioners because Becker was cleared by the SEC’s ethics office. It is unclear if the Justice Department’s investigation will lead to any charges against Becker, but the SEC is already adopting several changes based on the inspector general’s report, including redirecting the top ethics officer to report directly to the chairman of the commission, rather than the general counsel.

House Subcommittee Passes First Postal Reform Bill

On Wednesday, the House Government Reform Oversight Subcommittee passed legislation to overhaul the U.S. Postal Service (USPS). The bill, sponsored by Rep. Darrell Issa, R-Calif., Chairman of the House Oversight and Government Reform Committee, would allow USPS to drop a delivery day and adjust labor costs. However, Rep. Dennis Ross, R-Fla., who chairs the House Oversight Subcommittee responsible for postal issues, introduced and passed a substitute amendment to the bill that also would cut back door-to-door delivery and reduce the postal workforce starting with retirement-eligible employees before laying off other staff. The bill now heads to the full Committee for consideration.

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Financial Services Update – September 16, 2011

September 18, 2011

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Geithner Meets with Eurozone Finance Ministers

On Friday, Treasury Secretary Timothy Geithner met with seventeen European finance ministers in Poland to discuss the eurozone’s debt crisis. Jean-Claude Juncker, president of the Eurogroup, announced the group decided to delay till October a decision on whether to pay out the next tranche of a multi-billion euro loan to Greece. The two-day meeting of Europe’s Economic and Financial Affairs (ECOFIN) Council — hosted by Polish Finance Minister Jacek Rostowski and the president of the National Bank of Poland — comes ahead of G20 and IMF meetings later this month. The European Central Bank, along with the Fed, the Bank of England, the Bank of Japan and the Swiss National Bank, also announced that three U.S. dollar auctions would be held between October and December.

Senate Committee Passes Increased Funding for SEC and CFTC

On Thursday, the Senate Appropriations Financial Services Subcommittee passed its FY 2012 funding bill giving banking and commodities regulators large budget increases to help them implement sweeping new financial regulations. The bill, which will now go to the full U.S. Senate for a vote, gives the Securities and Exchange Commission a fiscal 2012 budget of $1.407 billion, an increase of roughly 19 percent from its current fiscal 2011 budget of $1.185 billion and the Commodity Futures Trading Commission an estimated 19 percent increase in its funding, jumping from $202 million to $240 million for fiscal 2012. That bill would also split oversight of the nearly $600 trillion over-the-counter derivatives market between the two regulators and give the SEC greater authority to regulate hedge funds, credit-rating agencies and municipal advisers. However, the fate of the bill remains uncertain because House Republicans oppose many of the Dodd-Frank provisions which increase the need for expanded SEC and CFTC budgets. Earlier this year, the House Appropriations Financial Services Subcommittee passed a bill that would reduce the CFTC’s budget to $171.9 million but maintain the SEC’s funding at its FY 2011 level. With the end of the year approaching, House and Senate leaders are bracing themselves for another omnibus bill that combines all the unpassed appropriations bills into one major bill. The House and Senate will most likely fail to pass similar Financial Services Appropriations bills which will cause the bill to be wrapped into the omnibus thereby reducing the chance of large increases for the SEC or CFTC.

Fitzpayne Nominated for Treasury Legislative Affairs Chief

On Wednesday, the White House announced that President Obama intends to nominate Alastair Fitzpayne as the next assistant secretary of Treasury for legislative affairs. Fitzpayne has been Treasury’s deputy chief of staff since January 2009. He was a legislative assistant to former Sen. Evan Bayh (D-Ind.) from 2001 to 2006. From 2007 to 2009, he served as a senior policy adviser to Rep. Rahm Emanuel (D-Ill.).

House Republicans Introduce Disaster Funding Bill

On Wednesday, House Republican leaders introduced a stopgap spending bill to keep the government operating though mid-November and provide $3.65 billion in short-term federal assistance to replenish strained disaster reserves. The funding resolution would impose a 1.4 percent cut on most agencies and Cabinet departments, including Defense, to stay within 2012 spending caps set in August. FEMA and the Corps of Engineers would immediately benefit from a first installment of $1 billion in emergency funds to avoid any disruption in aid for these last weeks of the 2011 fiscal year ending September 30. The second $2.65 billion represents a down payment toward FEMA’s 2012 budget. With two weeks left in fiscal 2011, FEMA’s disaster reserve fund has dwindled to $377 million and the agency has been operating since late August on an “immediate needs” basis, forcing delays in longer-term recovery projects around the nation. Senate Democrats, who have been pursuing their own much larger $6.9 billion disaster aid package, said they did not support the current House approach, but left open the possibility of agreement if House Republicans consider more disaster aid. The House is schedule to vote on its bill next week.

FDIC Approves New Systematic Risk Rules

On Tuesday, the FDIC approved new sets of rules that the largest banks will have to follow in drafting plans in the event of their own collapse. The panel also approved contingency planning guidelines for insured banks. The new rules, which were authorized in the Dodd-Frank Act, are designed to eliminate the need for bailouts by giving the FDIC power to liquidate large firms whose failure could threaten the financial system. Banks with at least $50 billion in assets will have to file such plans, as will any firm designated as systemically important by the Financial Stability Oversight Council. The final rule changes the filing timeline from an April draft proposal released by the FDIC and Fed, moving toward a tiered phase-in based on the total of non-bank assets held by firms. Companies with more than $250 billion in non-bank assets are required to file the plans by July 1, 2012. Firms with non-bank assets between $100 billion and $250 billion would be required to file by July 1, 2013, and all other firms would be required to submit plans by December 2013. The agency also approved unanimously a separate rule dictating resolution plans for FDIC-insured banks with more than $50 billion in assets. The rule, which the agency began drafting before the completion of the Dodd-Frank Act, would apply to 37 banks and thrifts. Thirty four of those firms would be required to file resolution plans with the Fed because of the size of their parent company. The rule takes effect January 1, 2012, and would be subject to a 60-day public comment period.

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

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

 

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Financial Services Update – September 2, 2011

September 6, 2011

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August Job Report Shows No Growth

On Friday, the Department of Labor released the August jobs report showing no net new jobs for the month. The Department revised the July report to decrease to 85,000 the number of net new jobs reported as opposed to the original 117,000 figure. The unemployment rate remained unchanged from July at 9.1 percent with the total number of unemployed workers remaining 14 million.

Obama Rejects New EPA Air Rule

On Friday, President Obama directed the EPA to abandon its proposed new rules that would lower the nation’s air quality standards from 75 parts per billion (ppb) to between 60 ppb and 70 ppb. The current standard will now remain in place until a scheduled reconsideration of pollution limits in 2013.

DOJ Sues to Block AT&T/T-Mobile Merger

On Wednesday, Deputy Attorney General James Cole announced that the Justice Department was filing an antitrust lawsuit in U.S. District Court to block AT&T’s acquisition of T-Mobile because the Department believes the merger would result in “higher prices, fewer choices and lower quality products for their mobile wireless services.” Following Cole’s announcement, FCC Chairman Julius Genachowski also declared his opposition to the proposed merger.

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Financial Services Update – August 26, 2011

August 29, 2011

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Bernanke Signals No New Fed Stimulus

On Friday, Federal Reserve Chairman Ben Bernanke offered an upbeat assessment of the domestic economy that offered little indication of any immediate monetary stimulus by the Fed. However, Bernanke did acknowledge that the nation faces significant challenges, including high unemployment and an unsustainable federal debt. Bernanke also offered an unusual critique of the government’s fiscal policy, criticizing the political battle over raising the debt-ceiling. While Bernanke failed to signal any future Fed action, he did say the issue of potential action would be discussed at the next meeting in late September.

Treasury Department Announces OFAC Settlement with JPMorgan Chase

On Thursday, the Treasury Department announced that JPMorgan Chase has agreed to pay $88.3 million as part of a settlement over a series of transactions involving Cuba, Iran and Sudan. The Treasury Department’s Office of Foreign Assets Control (OFAC) said in a news release that JPMorgan processed wire transfers totaling around $178.5 million for Cuban nationals in late 2005 and early 2006, violating United States embargo laws. The bank was also fined for a 2009 incident in which it made a $2.9 million loan to a bank that had ties to Iran’s government-owned shipping line, a violation of United States sanctions against Iran. The third violation occurred in 2010 and 2011, when the bank failed to give up documents about a wire transfer that referred to Khartoum, the capital of Sudan. According to the release, the agency gave JPMorgan a list of documents believed to be possessed by JPMorgan. In response, JPMorgan, which previously said it had no such documents, produced more than 20 of the items in question.

S&P President Resigns

On Tuesday, McGraw-Hill, parent company of Standard & Poor’s (S&P), announced that S&P President Deven Sharma will step down from his position by the end of the year and be replaced by Douglas Peterson, the chief operating officer at Citigroup. McGraw-Hill said Sharma’s decision was not influenced by the United States’ credit rating downgrade or an investigation by the Justice Department over S&P’s rating of its subprime securities. The company said the decision to replace Sharma took place over six months ago when the Board of Directors decided to split the company into four divisions due to increasing pressure from investors.

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Financial Services Update – August 5, 2011

August 5, 2011

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Economy Adds 117,000 Jobs in July

On Friday, the Department of Labor announced that the United States economy added 117,000 jobs in July causing the unemployment rate to fall to 9.1 percent from 9.2 percent in June. The Labor Department also revised its estimate of job growth in June to 46,000 from the previously reported 18,000.

European and Asian Leaders Call for Global Economic Cooperation

On Friday, the leaders of Germany, France and Spain scheduled an emergency conference after China and Japan called for global policy cooperation in response to the selloff in international markets. On Thursday, the European Central Bank (ECB) reactivated its dormant bond-buying program in an attempt to halt the deepening sovereign debt crisis, but the ECB only purchased Portuguese and Irish debt. Japanese Finance Minister Yoshihiko Noda called on global policymakers to confront currency distortions, the debt crises and concerns about the U.S. economy. Chinese Foreign Minister Yang Jiechi also said U.S. debt risks were escalating and countries should step up cooperation on global economic risks.

Congress Passes and President Signs Debt Limit Deal Averting Default

On Monday, the House of Representatives approved a compromise deal to raise the debt limit by a vote of 269-161. The bill, which was brokered Sunday night in last-minute negotiations between the White House and congressional leaders, passed with the support of 174 Republicans and 95 Democrats. On Tuesday, the Senate passed the bill by a vote of 74 to 26, and President Obama signed the legislation into law. The compromise allows a debt ceiling increase by as much as $2.4 trillion in total, with an immediate increase of $400 billion. President Obama is permitted to request a $500 billion increase in the coming months, which Congress could vote to disallow by a veto proof two-thirds margin. The agreement calls for more than $900 billion over ten years in spending cuts from defense and non-defense related programs, agencies and day-to-day spending, however Medicare, Medicaid, and Social Security cuts are prohibited. A further increase of the debt ceiling between $1.2 trillion and $1.5 trillion would be available after the “Super Committee” of six Republicans and six Democrats identifies matching levels of additional spending cuts. The Committee must complete its work by November 23, and if the Committee passes by a simple majority vote a recommendation of cuts and/or tax increases matching the debt ceiling increase, Congress must hold an up or down vote on the Committee recommendations by December 23. The Committee could overhaul the tax code or find savings in Medicare or other entitlement programs, however Congress can not modify the Committee’s recommendation before voting. Should the committee deadlock or should Congress reject the Committee’s recommendations, automatic across the board spending cuts of at least $1.2 trillion would automatically go into effect. The agreement also requires that the House of Representatives and the Senate vote on a Balanced Budget Amendment to the Constitution. The deal also includes changes to Pell Grants and student loan programs. Pell Grants will receive a $17 billion increase for low-income college students, which will be financed by the elimination of subsidized student loans for most graduate students. The compromise does not include any immediate revenue additions or tax increases.

Temporary FAA Agreement Reached

On Thursday, Congressional leaders reached an agreement on a six week extension of funding for the Federal Aviation Administration (FAA), ending a stalemate over the agency’s reauthorization. It was uncertain after the bill’s passage if Congress would act to restore back pay to the furloughed FAA employees or other non-federal airport workers who have been laid off since July 23. Unless the House and Senate negotiators are able to reach an agreement on a new funding package within six weeks, they will again force the FAA to furlough employees.

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

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Financial Services Update – July 29, 2011

August 3, 2011

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Q2 GDP Announced

On Friday, the Commerce Department released its report on the country’s gross domestic product for the second quarter showing that the GDP grew at an annual rate of 1.3 percent, after having grown at an annual rate of 0.4 percent in the first quarter — a number that itself was revised sharply down from earlier estimates of 1.9 percent.

Senate to Hold CFPB Nomination Hearing

On Thursday, the Senate Banking Committee held a hearing on the nomination of Richard Cordray to be the new Director of the Consumer Financial Protection Bureau. While the nomination can be sent to the floor, Senate Republicans have vowed to block Cordray’s nomination and any other nominees for the directorship because they insist that the agency be run by a Commission rather than a Director and have its funding determined by Congress.

Carper/Blunt Introduce Consumer Data Security Bill

On Thursday, Sens. Tom Carper (D-Dela.) and Roy Blunt (R-Mo.) introduced legislation titled “The Data Security Act of 2011” which would require entities such as financial establishments, retailers, and federal agencies to safeguard sensitive information, investigate security breaches and notify consumers when there is a substantial risk of identity theft or account fraud. These new requirements would apply to retailers who take credit card information, data brokers who compile private information and government agencies that possess nonpublic personal information.

Senate Nomination Hearings for New Bank Regulators

On Tuesday, the Senate Banking Committee held a hearing to consider the pending nominations for Martin Gruenberg to head the FDIC, Thomas Curry to be Comptroller, and Roy Woodall to be a member of the Financial Stability Oversight Council. Senator Richard Shelby, the Banking Committee’s top Republican, said after the hearing that he would support Gruenberg’s nomination but would need more to review Curry’s record before offering his support. The nominations will now be sent to the floor for full consideration by the Senate.

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

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

 

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Financial Services Update – July 22, 2011

July 22, 2011

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Debt Limit Negotiations Continue

On Tuesday, the House passed its “Cut, Cap and Balance” legislation which would cut government spending now, cap it in the future and approve a constitutional amendment to balance the federal budget. On Friday, the Senate voted to table a motion to consider the measure. However, after another tense week of negotiations between the Senate Republicans, Senate Democrats, House Republicans, House Democrats, and the President Obama, the outline of a purported deal seemed to emerge late Thursday. Congressional Democrats reported that President Obama discussed with them a deal he had reached with Speaker John Boehner to raise the debt ceiling by $2.4 trillion, enough to get through the 2012 elections, with at least as much in immediate spending cuts and a promise of  “tax reform”  in 2012. On Friday, in response to the news of a “deal,” Speaker Boehner told the House Republican Conference there was “no deal,”  but that he will continue to negotiate with the White House over the weekend. The most important questions remaining are how many House Republicans will vote for a deal that does not include immediate tax increases but does include the promise of broader “tax reform” next year and how many House Democrats will vote for a deal with no tax increases.

Greece Gets Another Bailout

On Thursday, European finance ministers agreed to a new $157 billion financial aid package for Greece in exchange for forcing Greece’s bond holders to accept a bond exchange that gives them less than originally promised. The new plan for Greece will provide for the euro zone’s bailout fund and the International Monetary Fund to lend Greece $157 billion over the next three years at 3.5% interest. Private creditors who hold Greek debt that matures in the coming years will “voluntarily” turn in their bonds and accept new ones that mature far in the future.

The EU also agreed Thursday to an expansion of its bailout fund. That vehicle, once restricted to lending to countries near the brink of collapse, will now be able to buy euro-zone bonds on secondary markets to move prices and lend directly to countries even before they lose access to private funding and could even include lending to finance bank recapitalizations. The leaders also agreed to cut the once-lofty interest rates that the bailout fund charges and extend to as much as 30 years the maturities of the loans it provides. Ireland and Portugal, both currently receiving European aid, will get breaks on their interest rates to 3.5%. Ireland was paying around 6% on the EU portion of its euro 67.5 billion bailout.

Treasury Sells Off Remaining Stake of Chrysler

On Thursday, the Treasury Department sold its remaining stake in Chrysler losing a total of $1.3 billion. Italian automaker Fiat purchased the U.S. government’s remaining 6% stake in Chrysler for $560 million, formally concluding the $12.5-billion bailout.

Suit Against Goldman Dismissed

On Thursday, former Australian hedge fund Basis Yield Alpha’s legal challenge to Goldman Sachs’ infamous Timberwolf 2007-1 collateralized debt obligation was dismissed by Judge Barbara Jones of the U.S. District Court for the Southern District of New York. Jones cited a Supreme Court decision that held that U.S. securities-fraud laws apply only to domestic transactions.

Senate Banking Hearing on One Year Anniversary of Dodd-Frank

On Thursday, in a hearing before the Senate Banking Committee, federal banking regulators testified on the implementation of the Dodd-Frank Wall Street Reform Act. Regulators said they are moving fast enough to give markets certainty, but slow enough to get hundreds of new rules right. A handful of regulatory agencies are writing hundreds of new rules to police the swaps market, reduce risk at the biggest financial firms, and bring the so-called shadow banking system — which includes hedge funds and non-traditional lenders — into the traditional regulatory framework. The SEC and CFTC have struggled to keep pace with the swift rule-writing timeline laid out in Dodd-Frank, and are months behind schedule on many key rules. However, in a surprising move, Federal Reserve Chairman Ben Bernanke said federal bank regulators may rethink their crackdown on derivatives if a global agreement cannot be reached on margin requirements thereby acknowledging that U.S. banks would be at a significant competitive disadvantage if their foreign rivals do not have to demand margin, or collateral, for derivatives trades.

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

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Financial Services Update – April 22, 2011

April 22, 2011

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Japan Announces Disaster Relief Fund

On Friday, Japanese Finance Minister Yoshihiko Noda announced a 4 trillion yen ($48.5 billion) emergency budget for disaster relief in the wake of the nuclear crisis triggered by the March tsunami. Noda said the government would not issue new bonds to pay for the fund, and the cabinet plans to submit the emergency budget to parliament on April 28. Given that the material damage alone from the disaster could top $300 billion, the government is expected to seek additional future disaster funding that will likely require tax increases and debt financing.

Justice Department Examines NYSE/Nasdaq/ICE Merger

On Wednesday, Nasdaq-OMX CEO Robert Greifeld and ICE CEO Jeffrey Sprecher disclosed in a letter to NYSE Euronext’s board that they are in discussions with the antitrust division of the Justice Department (DOJ) after buying NYSE Euronext stock which triggered the DOJ’s antitrust review. The letter also disclosed that Nasdaq-OMX and ICE are willing to pay NYSE Euronext $350 million if DOJ blocks their proposed takeover, an offer they say is now based on “fully committed financing” of $3.8 billion.

On April 10, NYSE Euronext ’s board rejected the Nasdaq/ICE unsolicited $11.3 billion proposal and affirmed its February agreement to merge with Deutsche Boerse AG for $9.5 billion in stock. The agreement with Deutsche Boerse includes a payout of 250 million euros ($358 million) should that deal fall apart.  NYSE Euronext acknowledged that it had received the Nasdaq/ICE reverse break up free proposal and that its board is reviewing the matter.

S&P Changes U.S. Long Term Rating from Stable to Negative

On Monday, Standard & Poor’s Ratings Services (S&P) changed its outlook on the U.S. long-term credit rating from stable to negative because ” the U.S. has relative to its ‘AAA’ peers very large budget deficits, rising government indebtedness, and the path to addressing these is not clear.”  While the S&P affirmed the U.S. ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings, it also predicted at least a one-in-three chance that it could lower its long-term rating on the U.S. within two years because of the increased risk that the political negotiations over when and how to address both the medium and long-term fiscal challenges will persist until at least after the elections in 2012.

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Financial Services Update – April 15, 2011

April 18, 2011

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Shutdown Averted, House Passes Budget, Debt Ceiling Vote Next

Last Friday night, Senator Harry Reid (D-NV), Speaker John Boehner (R-OH), and President Obama came to an agreement to fund the federal government for the remainder of the fiscal year, averting a possible shutdown.  On Thursday, the House passed the legislation by a bipartisan vote of 260-167.  59 Republicans voted against the bill, and 81 Democrats voted for it.  Hours later, the Senate acted with far less suspense but again on a bipartisan 81-19 roll call.  With over six months of the current fiscal year already completed, the funding bill reduces the spending level by nearly $38 billion below what it was when the new Congress began in January, making it the largest one-year cut from the President’s budget request in the nation’s history.

This Friday, the House approved a fiscal year 2012 budget resolution drafted by Budget Committee Chairman Paul Ryan (R-WI), which imposes $5.8 trillion in spending cuts over the next decade.  The final tally was 235-193, with four Republicans and every Democrat opposing it.  The GOP resolution will not be approved by the Senate, and budget resolutions do not go to the president or hold the force of law.  However, Ryan has said that the GOP will deem his budget as the ceiling for spending for 2012.  For this reason, the most important aspect of the resolution is the allocation it gives to the Appropriations Committee for next year: $1.019 trillion in non-emergency spending.  This number will play a big role in a looming spending fight in the fall.  If Republicans and Democrats cannot agree on appropriations spending by September 30, the end of the current fiscal year, the government will shutdown. 

Congress will now turn to the issue of raising the so-called “debt ceiling,” or the statutory limit on federal debt.  The U.S. government had $14.216 trillion in total debt outstanding as of Monday, and the cap is $14.294 trillion.  The U.S. Treasury Department released a statement saying the ceiling is projected to be breached in the next 30 days, although it could make adjustments to postpone default until early July.  On Thursday, Majority Leader Harry Reid (D-NV) said he wants a clean vote to raise the debt ceiling, but Republicans have insisted they want the vote paired with other budget reform measures.

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Financial Services Update – April 8, 2011

April 9, 2011

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European Central Bank Announces Interest Rate Hike; Portugal Bailout Next

On Thursday, Jean-Claude Trichet, European Central Bank president, announced a 25 basis point rise in eurozone borrowing costs, to 1.25 percent. This will be the first of such an increase since the 2008 financial crisis. In response to the news, the euro initially dipped against the dollar but later appreciated to trade above $1.43. In his remarks, Trichet also said the ECB had encouraged Portugal to request an international bailout, which is estimated at 80 billion euros, roughly the same amount as Ireland but less than the 110 billion euro package offered to Greece. EU, European Central Bank and International Monetary Fund officials will meet in Lisbon next week to negotiate the cuts that are deeper than those that were rejected by Portuguese opposition politicians last month.

SEC Reviews Private Company Share Rules

On Wednesday, SEC Chairman Mary Schapiro sent a letter to House Government Reform Committee Chairman Darrell Issa (R-CA) saying that she had ordered a review of all the rules that affect share issues by privately held companies. According to the letter, the likely changes would include raising from 499 the number of shareholders private companies can have without being required to open their books, and also making it easier for such companies to publicize share offerings. The SEC review also will examine issues raised by the growing use of “special purpose vehicles” that allow a pool of investors to buy a stake in a company, while counting as only one shareholder for the purposes of the SEC rules. Shapiro’s letter also indicated that the SEC is considering relaxing a strict ban on private companies publicizing share issues, known as the “general solicitation” ban.

FDIC Introduces New Fed Borrowing Fee

Last Friday, the Federal Deposit Insurance Corp. (FDIC) issued a new rule that increases the fees on banks that borrow overnight funds from the Federal Reserve. The FDIC introduced the higher fees as called for in last year’s Dodd-Frank financial reform law. The higher fee has led some companies to step out of the short-term lending markets, exacerbating an already low supply of Treasury bills used to back borrowing. On Tuesday, the FDIC issued a response to criticism of the rule saying that the notice of proposed rulemaking was announced in November giving banks sufficient time to make adjustments and that the Congressionally-mandated change better reflect risks to the industry-funded Deposit Insurance Fund.

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