FRW Goes to the Street (.com)

 Click on the link below to see comments by FRW team member Peter Peyser, Managing Principal of Blank Rome Goverment Relations, on how regulatory attention to institutions participating in the student loan program could impact the banking industry.

President Signs Into Law Small Business Jobs and Tax Package

With only 34 days remaining before the November 2nd mid-term elections, President Obama signed into law on Monday the Small Business Jobs and Credit Act of 2010 (H.R. 5297), a bill that represents Congress’s final legislative attempt at stimulating the sluggish economy before House and Senate lawmakers leave Washington this week to finish out their reelection campaigns.

The centerpiece of H.R. 5297—and the provision which drew the fiercest Republican opposition—is the creation of a $30 billion lending fund that allows Treasury to invest in small to medium-sized financial institutions that will, in turn, be encouraged to increase small business lending. The legislation also includes roughly $12 billion in tax breaks and incentives for small businesses.

Long stalled in the Senate, H.R. 5297 was unable to muster the 60 votes necessary to overcome a Republican filibuster in late July, as a party-line vote of 58-42 failed to invoke cloture and essentially halted the bill’s movement until after Congress returned from its August recess. Upon return in September, Senate Democrats reached 60 votes by picking off the support of Republican Senators George Voinovich (OH) and George LeMieux (FL), both of whom will be retiring from the Senate after this Congress.

Below is a summary of the key provisions included within H.R. 5297:

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Top Financial Regulators Set to Begin Examining Systemic Risk

Treasury Secretary Tim Geithner announced this morning that the newly-created Financial Stability Oversight Council (FSOC) will hold its inaugural meeting on October 1 at the U.S. Treasury Department.

A centerpiece of the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173), the FSOC consists of the nation’s top financial regulators and is charged with identifying and responding to systemic risks posed by large and interconnected bank holding companies and non-bank financial companies to the broader U.S. financial system. Proponents of the legislation believe that the FSOC’s broad oversight authority is necessary in order to eliminate the reoccurrence of “too-big-to fail” in the U.S. financial and political arenas.

Geithner, who will serve as the FSOC chairperson, will be joined in the meeting by seven voting members and three non-voting membership. Conspicuously absent from the list is Elizabeth Warren, who is serving in her new role as “Special Advisor” to the White House to help stand-up the Consumer Financial Protection Bureau (CFPB), and who presumably, cannot participate in the FSOC without the formal title of CFPB Director. Once a CFPB director is nominated and confirmed by the Senate, he or she will be voting member of the FSOC as pursuant to H.R. 4173. The law also states that the FSOC will meet at least on a quarterly basis.

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Warren Wins for Now

Seeking to avoid a bruising confirmation battle in the Senate, President Obama appears poised to create a post for consumer advocate Elizabeth Warren in which she would guide the creation of the new Consumer Financial Protection Bureau (CFPB). By making her a "special adviser" to the President and the Treasury Secretary, the President would avoid having to send Warren's name to the Senate for confirmation as the head of the CFPB. This end-run around the Senate is likely to cause consternation on both sides of the aisle. Whether the GOP takes over the Senate or not, the Senate Banking Committee is likely to keep a very close eye on Ms. Warren's activities. Numerous hearings and requests for information could well be in her future. Taking this post would complicate her chances of ever becoming the permanent head of the bureau, as the Senate would not likely be disposed to ratify this approach to installing leadership there. So this may be an effort by the Administration to reward her for her initiative in pushing for the bureau before they give the job to someone who is confirmable.