Posted on June 14, 2011 by Blank Rome Government Relations

A Tale of Two Regulators...And Missed Deadlines

What a difference a year makes. In July 2010, one year seemed to be a perfectly reasonable timeframe for regulators to develop more than 150 rules, conduct 47 studies, create several new government offices, and engage in extensive hiring and agency reorganization. With the first anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act rapidly approaching, however, it is becoming increasingly clear that more time will be necessary in order to implement the financial reform law’s sweeping provisions.

In particular, when it comes to derivatives regulations, it appears that Congress bit off more than either the CFTC or SEC could chew. On Friday, the SEC announced that it would delay implementation of some of the new derivatives regulations that were set to take effect next month, while the CFTC voted on Monday to delay certain swaps rules until Dec. 31, 2011, in anticipation of missing the July deadline for completing the rules.

SEC officials said they are taking the additional time to ensure the clarity of the new rules and minimize market disruption. However, some lawmakers on Capitol Hill believe that such delays—which have yet to be specified—may cause as much disruption by preventing market participants from planning accordingly.

On Friday, House Agriculture Committee Chairman Frank Lucas (R-OK) sent a letter to CFTC Chairman Gary Gensler calling on regulators to reduce market uncertainty by clarifying various definitions, including the definition of a swap, which becomes effective on July 16, though it has yet to be finalized. The CFTC and SEC have recourse under a provision in Dodd-Frank to delay implementing regulations for no more than 60 days after they are finalized.

Delays and missed deadlines are certainly not exclusive to the SEC and CFTC. More broadly, as of June 1, of the 87 total studies required under Dodd-Frank, 24 have been completed and two deadlines have been missed. Of the 385 total rulemakings required, 115 have been proposed, 24 have been finalized and 28 deadlines have been missed. With 17 studies and 109 rulemakings due in July 2010 alone, the coming month will be the true test of regulators’ progress—and it is a test they are not likely to pass.

DOWNLOAD:  CFTC Swap Regulation Factsheet (PDF)

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Posted on May 18, 2011 by Blank Rome Government Relations

Bipartisan Alarm Sounds on Capitol Hill over Proposed Derivatives Rules

Federal regulators are continuing to field an array of questions and concerns from lawmakers surrounding the implementation of Dodd-Frank’s derivatives provisions (Title VII) – and it’s not just coming from House Republicans.

In a letter sent on Tuesday to Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corporation (FDIC) Chairwoman Sheila Bair, Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and acting Comptroller of the Currency John Walsh, New York’s two Democratic Senators and 16 of New York’s 29 Representatives expressed concerns that a proposed rule applying margin requirements to derivatives between non-U.S. subsidiaries of U.S. entities and non-U.S. counterparties would create a significant competitive disadvantage for U.S. firms operating internationally.

The letter, signed by 12 Democrats and 6 Republicans, went on to state that “disparate treatment of U.S. firms will only encourage participants in the derivatives markets to do business with non-U.S. firms,” and asked that U.S. regulators work with their international counterparts to ensure that the international regulations “perfectly mirror the U.S. rules.” Senate Agriculture, Nutrition and Forestry Committee Chairwoman Debbie Stabenow (D-MI) expressed similar concerns during a Senate hearing on March 3, stating that “having a different set of rules that govern similar transactions [internationally] could have negative impacts in the markets.”

The New York delegation letter is just the latest in what has been an ongoing congressional debate over Title VII.

Earlier this month, House Republicans introduced H.R. 1573, which would delay any new derivatives rules from going into effect before December 2012. The bill’s chief sponsor, House Agriculture Committee Chairman Frank Lucas (R-OK) said the proposal – which passed the Agriculture Committee early last week, and is expected to go before the House Financial Services Committee when it returns from recess next week -- aims to grant regulators sufficient time to properly impose the new regulations. House Democrats contend that the GOP effort is an attempt to derail Dodd-Frank in case Republicans regain the Senate, the White House, or both following the 2012 elections.

Responding to the House GOP efforts, CFTC Chairman Gary Gensler testified before the Senate Committee on Banking, Housing and Urban Affairs last week that his agency was well on its way towards implementing Dodd-Frank. Gensler said that the proposal phase of the rule-writing is nearly completed, and that the public comment period on the proposed derivatives rules has been extended by thirty days, giving the public the opportunity to comment on the “whole mosaic of rules.” Acknowledging that there have been discussions of altering the implementation timeline for certain provisions of Dodd-Frank, Gensler reaffirmed his and the Obama administration’s view that “the public will not be adequately protected until the agency completes final rules.”

Concerns that the many of the proposed derivates rules could negatively impact commercial “end-users” – businesses who use derivatives contracts to hedge against anything from interest rates and gas prices to crop yields – have been ongoing since the early debates surrounding Dodd-Frank, but Gensler has repeatedly said that the CFTC, which has considerable latitude in determining which businesses will be exempted under the law, does not intend to target legitimate commercial end-users who are making healthy contributions to the market.
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Posted on February 25, 2011 by Blank Rome Government Relations

In the Shadow of a Shutdown, the Beat Goes On

Resolving a Federal budget impasse that threatens the first government-wide shutdown since 1995 will undoubtedly be Congress’s top priority when it returns on Monday following a week-long President’s Day recess. But who says lawmakers can’t walk and chew gum at the same time? Below is a preview of next week’s critical financial services hearings on Capitol Hill, as both chambers continue to oversee the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and discuss various proposals for reforming the housing finance sector.

GSE Reform

Treasury Secretary Timothy Geithner will make his first appearance of the year before the full House Financial Services Committee (HFSC) on Tuesday to discuss the Obama Administration’s long-awaited report to Congress—unveiled on February 11—that details both short-term administration initiatives and long-term options for reforming Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. House Republicans have targeted GSE reform as a key agenda item for the 112th Congress, as the HFSC has already conducted three separate hearings related to housing finance this Congress.

In addition, HFSC Chairman Spencer Bachus (R-AL) announced yesterday that his committee will be marking up four separate bills that will seek to terminate Obama administration foreclosure and housing assistance programs that Bachus argues are “doing more harm than good for struggling homeowners.” The Home Affordable Modification Program (HAMP), the Neighborhood Stabilization Program, the FHA Refinance Program, and the Emergency Homeowner Relief Program would all be terminated under the GOP proposals.

Republicans have been particularly critical of HAMP, a program spearheaded in March of 2009 by the Obama administration to assist struggling homeowners avoid foreclosure by providing federal incentives for borrowers, servicers and investors to modify delinquent home loans. HAMP has led to over 500,000 permanently modified home loans, yet has fallen far short of the Obama administration’s initial goal of 3 to 4 million modifications.

Consumer Financial Protection Bureau (CFPB)

On Wednesday, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit – chaired by West Virginia Republican Shelley Moore-Capito – will conduct a hearing entitled "The Effect of Dodd-Frank on Small Financial Institutions and Small Businesses.” The CFPB’s potential impact on U.S. job creation and commercial credit access are likely to dominate the discussion.

The hearing follows the House’s passage on February 19 of a Continuing Resolution (CR) – a bill to fund government operations through September 30, 2011—that would cap the Federal Reserve’s funding for the CFPB at $80 million, representing a steep cut from the $134 million the White House requested for the agency’s FY11 start-up costs. Under the Dodd-Frank legislation, once the CFPB is officially established in July 2011, its funding will derive from the Federal Reserve’s operating expenses budget and could be as high as $500 million in FY12.

During the House budget debate, Chairwoman of the Appropriations Subcommittee on Financial Services Jo Ann Emerson (R-MO) defended the hefty cuts. "Providing half a billion dollars a year without any congressional oversight to the bureau is, I believe, a very irresponsible abdication of a constitutional check and balance," said Emerson.

Derivatives

Newly-minted Chairwoman of the Senate Agriculture, Nutrition and Forestry Committee, Debbie Stabenow (D-MI) will hold a hearing on Thursday to review agency implementation of Dodd-Frank’s provisions related to the regulation of over-the-counter swaps markets.

The hearing will primarily focus on Dodd-Frank’s imposition of enhanced regulatory requirements on the derivative market and its participants, including a requirement for stringent margin and capital requirements for all derivative market participants. During a HFSC oversight hearing on February 15, Commodity Futures Trading Commission Chairman Gary Gensler attempted to alleviate lawmaker and industry concerns that the new derivatives regulations will negatively impact so-called commercial “end-users” – those businesses ranging from farm equipment manufacturers to breweries -- who seek to hedge against interest rates and raw material prices through derivatives contracts. Gensler testified that the CFTC, which has been given broad leeway in determining the businesses who will be exempted under the law, does not intend to target legitimate commercial end-users.

Stay tuned for hearing updates next week.
 

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Posted on July 28, 2010 by Blank Rome Government Relations

Watch the FRW Webinar: Adapting to the New Normal

On July 16, 2010, Blank Rome presented a webinar on The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010.

This legislation will affect everyone, from financiers working on Wall Street to publicly-traded companies in all industries to consumers on Main Street. To view a video presentation of the topics discussed during the webinar please click on the individual links below.

The Blank Rome team addressed the following provisions of the financial reform bill:

To download a PDF copy of the presentation, please click here.

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