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House Panel Approves Measure to Dismantle Risky Firms
By Alison Vekshin
Nov. 18 (Bloomberg) -- A House committee approved giving the U.S. authority to break up healthy, well-capitalized firms whose size threatens the economy, a step Republicans said would create a “huge accumulation” of power.
The House Financial Services Committee voted 38-29 today on an amendment that would let regulators dismantle a firm, limit mergers and acquisitions and force an end to activities deemed systemically risky. The financial industry opposed the measure, which is part of legislation to overhaul Wall Street rules.
“I recognize this is extraordinary power,” Representative Paul Kanjorski, a Pennsylvania Democrat who proposed the amendment, said during debate. “Hopefully it will never have to be used because it is displayed and because it does exist.”
The House Financial Services Committee is considering legislation that would create a council of regulators, including the Federal Reserve, to monitor large, interconnected firms for risks they pose. It’s part of the effort in Congress to overhaul financial rules to prevent a repeat of the worst financial crisis since the Great Depression.
Republicans opposed Kanjorski’s plan as giving too much authority to regulators.
“That’s a huge accumulation of power that we’re going to give to five or six people that are on this council,” said Representative Randy Neugebauer, a Texas Republican. “We’re already imposing the federal government substantially on these entities.”
Industry Opposition
Representative Spencer Bachus of Alabama, the committee’s top Republican, said the plan entrusts regulators to decide “what the financial industry should look like” and those agencies failed to anticipate the crisis, “let alone do anything to prevent it,” Bachus said.
The Financial Services Roundtable, representing the biggest financial firms, and the Financial Services Forum also opposed the legislation.
Kanjorski’s measure would empower the council to break apart firms considered well-capitalized if they are “so large, interconnected or risky that their collapse would put at risk the entire American economic system,” according to a bill summary released by Kanjorski’s office.
The measure requires the council to consult with the president before taking “extraordinary” actions. The amendment doesn’t cap the size of financial firms, the summary said.
The council would give Congress an annual report showing the size, concentration and links with other firms for the 50 largest U.S. financial institutions based on assets.
Kanjorski has met some of the heads of firms that would be covered by the council and said he are is aware of the controversy the proposal has stirred.
‘Contentious Amendment’
“I don’t want to kid anybody,” Kanjorski said. “This is a contentious amendment.”
Kanjorski’s proposal will discourage financial firms from expanding, said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, representing many large U.S. financial firms in Washington.
While a policy of having government prop up systemically important firms must be eliminated, targeting an institution’s size isn’t the solution, said Rob Nichols, president of the Financial Services Forum.
“More effective supervision, coupled with the authority to seize and wind down large firms, is the appropriate remedy,” Nichols said.
Lawmakers are seeking to prevent further taxpayer bailouts after last year’s rescues of American International Group Inc., Citigroup Inc. and Bank of America Corp. under the $700 billion Troubled Asset Relief Program.
The committee plans to vote on Kanjorski’s amendment later today. The legislation must be passed by the House and Senate and signed by the president to become law.
House Panel Approves Measure to Dismantle Risky Firms
Moderator: Super Moderators
House Panel Approves Measure to Dismantle Risky Firms
Republican - re·pub·li·can (r-pbl-kn) - political party, which will control part of Congress 2011-2012, undermining the strength of the country - on purpose, in public, without apology or shame - simply for a campaign advantage in 2012.
Ambitious bills could remake financial regulatory landscape
Hey, Rom. Just reading a similar article in the Washington Post. Seems progress is moving along on various fronts.
...from Washington Post - Nov 19th, 2009
With each vote, lawmakers step closer to rewriting the rules
As lawmakers on Capitol Hill inch closer toward overhauling the nation's fractured financial regulatory system, each hour of debate, each tweak of legal language, each tedious roll call carries the potential to generate colossal changes in the relationship between Washington and Wall Street.
One proposal, spearheaded by Rep. Ron Paul (R-Tex.) would usher in unprecedented scrutiny of the Federal Reserve by allowing auditors to examine every aspect of the central bank's actions. That measure could come to a vote in the House Financial Services Committee on Thursday, though its prospects for success remain uncertain.
Another provision, pushed by Rep. Paul E. Kanjorski (D-Pa.), would empower federal regulators to dismantle financial firms before they grow so large that their failure could endanger the entire financial system -- even if those firms appear to be healthy and well-capitalized.
The proposals are among scores of ideas floated on bill after bill in recent months. Thus far, Rep. Barney Frank (D-Mass) has steered his version of financial reform through that legislative minefield, navigating past Republican opposition, unrelenting pressure from industry lobbyists and consumer advocates, occasional discord among some Democrats -- all while trying to emerge with a bill that can both pass the entire House and still resemble the original blueprint.
He is moving closer to that goal.
Frank's committee so far has approved legislation to create a new agency to oversee mortgages, credit cards and other loans to consumers, as well as measures to oversee the largely unregulated derivatives market, improve investor protections and impose stricter rules on credit-ratings agencies.
More Here
...from Washington Post - Nov 19th, 2009
With each vote, lawmakers step closer to rewriting the rules
As lawmakers on Capitol Hill inch closer toward overhauling the nation's fractured financial regulatory system, each hour of debate, each tweak of legal language, each tedious roll call carries the potential to generate colossal changes in the relationship between Washington and Wall Street.
One proposal, spearheaded by Rep. Ron Paul (R-Tex.) would usher in unprecedented scrutiny of the Federal Reserve by allowing auditors to examine every aspect of the central bank's actions. That measure could come to a vote in the House Financial Services Committee on Thursday, though its prospects for success remain uncertain.
Another provision, pushed by Rep. Paul E. Kanjorski (D-Pa.), would empower federal regulators to dismantle financial firms before they grow so large that their failure could endanger the entire financial system -- even if those firms appear to be healthy and well-capitalized.
The proposals are among scores of ideas floated on bill after bill in recent months. Thus far, Rep. Barney Frank (D-Mass) has steered his version of financial reform through that legislative minefield, navigating past Republican opposition, unrelenting pressure from industry lobbyists and consumer advocates, occasional discord among some Democrats -- all while trying to emerge with a bill that can both pass the entire House and still resemble the original blueprint.
He is moving closer to that goal.
Frank's committee so far has approved legislation to create a new agency to oversee mortgages, credit cards and other loans to consumers, as well as measures to oversee the largely unregulated derivatives market, improve investor protections and impose stricter rules on credit-ratings agencies.
More Here
