WASHINGTON WEEKLY
Keeping the Markets Informed from the Capital
June 26, 2009
The House Financial Services Committee Held a Hearing on Enhancing Consumer Financial Products Regulation.
The Senate Banking Subcommittee on Securities, Insurance and Investment Held a Hearing on Over-the-Counter Derivatives.
The House Education and Labor Committee Passed the 401(k) Fair Disclosure and Pension Security Act of 2009 (H.R. 2989).
Federal Reserve Board Chairman Ben Bernanke appeared before the House Oversight and Government Reform Committee to discuss the Bank of America/Merrill Lynch merger.
The Congressional Oversight Panel (COP) held a hearing on the Troubled Asset Relief Program (TARP).
The House Budget Committee Held a Hearing on PAYGO.
The Federal Reserve Announced Extensions and Modifications to Several Liquidity Programs.
The U.S. Supreme Court Denied Review of Capital One Bank v. Commissioner of Revenue.
SIFMA Released Its Semi-Annual Economic Forecast
HFSC Hearing on Consumer Protection
During this week’s House Financial Services Committee hearing on enhancing consumer financial products regulation, the Committee discussed the merits and jurisdiction of the proposed Consumer Financial Protection Agency (CFPA), as delineated in the Obama Administration’s proposal for regulatory modernization. The committee plans to consider legislation regarding the agency following the July Fourth recess. Chairman Barney Frank (D-MA) stated that there should be an agency that could give adequate response to consumer complaints, since he believes the Federal Reserve’s responsibility for systemic issues “crowds out” its responsibility for consumer issues. Frank questioned the argument that agency would become an “out of control entity.” When Frank shared his belief that investor protection is a bigger part of the Securities and Exchange Commission’s mission than consumer protection is for the Office of the Comptroller of the Currency, he asked if those protections should remain separate. Edward Yingling, president and CEO, American Bankers Association (ABA) said the ABA opposes the SEC retaining its investor protection authority, since banks compete against products the SEC regulates.
Ranking Member Spencer Bachus (R-AL) agrees that consumer protection is a legitimate concern of the government, and offered his support for the House Republican’s plan of consolidating consumer and systemic regulators into one agency, instead of creating a new agency. Bachus said he is concerned that a CFPA may limit consumer choice and exacerbate the credit crunch.
In his remarks, Rep. Bill Delahunt (D-MA) advocated the need for a consumer “watchdog” for financial products, which he proposed in the Financial Product Safety Commission Act of 2009 (H.R.1705). Delahunt stated that there are currently ten federal regulators that have some degree of responsibility for protecting consumers from predatory or deceptive financial products, but none have oversight as their sole objective.
Elizabeth Warren stated the CFPA would have four effects, which would help repair the credit markets, including: 1) reducing systemic risk, 2) reducing regulatory burdens, 3) fostering innovation, and 4) leveling the playing field by putting someone on the consumer’s side. She added that she believes the credit crisis was caused by financial products that were too complex for consumers to understand, regulations that helped large institutions and hurt smaller ones, and risky credit products.
Ellen Seidman, senior fellow, New America Foundation stated that confusion, for both regulated entities and consumers, was one of the main problems that contributed to the current crisis. Warren said that the best way to achieve clarity and understanding is to give the CFPA authority to “slim” disclosure mandates down in order to improve clarity. Rep. Donald A. Manzullo (D-IL) said he believes that a CFPA will add another layer of regulation to consumer products, further complicating their terms. Seidman disagreed, stating that by harmonizing consumer protection into the jurisdiction of a single agency, there will be layers of regulation taken away.
Yingling stated that more regulation can and has hurt local banks that never made subprime mortgage loans, and are overwhelmed with regulation and fees that have fallen disproportionally on community banks. He explained that small banks produce better, clearer products and these good products should be rewarded. Yingling expressed his concerns about duplicative organizations and agencies, questioning how the CFPA will interact with existing state regulated and unregulated agencies. He told Rep. Maxine Waters (D-CA) that regulators’ current authority can handle any problems concerning a financial product. Yingling also asserted that consumer regulation and safety and soundness regulation cannot be separated. Rep. Bill Posey (R-FL) asked if products should be banned if they are difficult to understand or risky, believing that “one size fits all” doesn’t seem realistic since consumers have different backgrounds and needs. Warren believes that the regulation of the CFPA will weed out bad products. In response to a question from Rep. Gary G. Miller (R-CA) regarding how good products will be rewarded and bad products weeded out, Warren stated that with clear understanding, it will be the market of consumers that will do so.
Derivatives hearing
During Monday’s Senate Banking Subcommittee on Securities, Insurance and Investment Hearing on over-the-counter (OTC) derivatives, Chairman Jack Reed (D-RI) said it was clear some level of regulatory reform of derivatives markets would be needed in response to the financial crisis. Sen. Mike Crapo (R-ID) explained that end-users would face higher costs for obtaining certain hedging agreements under the Treasury and the Commodity Futures Trading Commission’s (CFTC’s) plan for regulating the markets. Sen. Crapo said higher costs to end-users would come from the need to post cash collateral for instruments that would be required to clear through a central counterparty (CCP) or because of mandatory margin requirements.
SEC Chairman Mary Schapiro said the SEC supports efforts to standardize OTC derivatives to allow them to clear through a CCP, but acknowledged that achieving standardization would present significant challenges. She concluded by stating that the SEC should oversee derivatives with “securities-like characteristics”.
Gary Gensler, chairman, CFTC said four objectives will guide his efforts to reform the regulatory system for OTC derivatives: 1) lowering systemic risks; 2) promoting the transparency and efficiency of markets; 3) promoting market integrity by preventing fraud, manipulation, and other market abuses, and by setting position limits; and 4) protecting the public from improper marketing practices. Gensler said to achieve these objectives; he believes two complimentary regulatory regimes should be enacted with the assistance of Congress, where necessary. He said the first regime should target derivatives market participants and subject them to initial and ongoing margin requirements, reporting and recordkeeping requirements, position limits, and business conduct standards. Second, Gensler said all derivatives markets should be regulated through mandated clearing of all “standardized” contracts, encouraging exchange-trading for very standardized products, and the public dissemination of trade prices, volumes, and other key transaction details on a “timely” basis. To achieve these goals, Gensler said the Commodity Exchange Act and securities laws should be amended to provide the CFTC and SEC with clear authority to regulate OTC derivatives. He said the term “OTC derivative” should be defined, and clear authority should be given over all such instruments regardless of the regulatory agency. Gensler also said that under new reforms, care should be taken so not to call into question the enforceability of existing OTC derivatives contracts.
Patricia White, associate director of the Board of Governors of the Federal Reserve System, said new reforms to encourage clearing should allow for the participation of end-users. She said the Fed is very supportive of efforts to report all OTC transactions to centralized trade repositories like the Trade Information Warehouse.
Chairman Reed asked how policymakers can ensure regulatory reform of the derivatives markets will be comprehensive. Gensler said initial margining requirements should be imposed on all market participants. He added that customized contracts would face higher margin requirements because they are less liquid and to encourage clearing.
Ranking Member Bunning asked what information about OTC transactions should be reported, how frequently, and if any information should be withheld from the public. Gensler said all trades should be reported to a centralized data repository, regardless of whether they are cleared. He said a “real-time” trade reporting system similar to TRACE, used in the OTC corporate bond market, should be implemented. Gensler said some transactions might be considered commercially sensitive, and be exempt from “real-time” reporting requirements.
Sen. Mike Johanns (R-NE) said the regulatory reforms outlined in Gensler’s testimony would create a bureaucratic and financial burden on many corporate end-users of OTC derivatives. He said by requiring specific margin requirements on hard to value transactions, end-users would not have the same flexibility in hedging their risk exposures. Gensler said initial margin requirements would be determined according to certain general standards, and would not have to be determined on a case-by-case basis.
Ranking Member Bunning asked if CCPs should be subject to systemic risk oversight and have access to lending from the Federal Reserve in times of crisis. Gensler said he believes CCPs should be overseen by a systemic risk authority and thereby have access to Federal Reserve funding. Schapiro and White also agreed.
During the second panel, Kenneth Griffin, chief executive officer of Citadel Investment Group, said transactions that are not cleared should face significantly higher capital requirements. He said credit default swaps (CDS) and other derivatives play a crucial role in helping American businesses prudently manage their balance sheets as well as their interest rate and credit exposures. Griffin concluded by saying dealers should be required to post margin, and collateral segregation practices should be mandatory.
Robert Pickel, chief executive officer of ISDA, said the OTC derivatives industry has made a firm commitment to strengthen the resilience and robustness of the markets, and were working with regulators to implement a variety of measures.
In his testimony, Christopher Whalen, managing director, Institutional Risk Analytics, said CDS are a type of tax or lottery that subtract value from the global markets and society by increasing risk and then shifting that bigger risk to the least savvy market participants. He added that suitability requirements for OTC derivatives should be enforced to prevent retail and other investors from participating in certain markets.
BREAKING NEWS: In a related story, at the time of the SIFMA Washington Weekly publication, the House is considering the American Clean Energy and Security Act of 2009 (H.R.2454). If adopted, certain provisions of the bill would mandate central clearing of all OTC derivatives, and prohibit "naked" credit default swaps. It would also impose a variety of reporting requirements and position limits with respect to foreign-owned electronic derivatives trading platforms (closing the so-called "London loophole"); off-exchange energy commodities (the "Enron loophole"); and institutional investors (the "swaps loophole").
House Ed & Labor Markup
During the House Education and Labor Committee markup of the 401(k) Fair Disclosure and Pension Security Act of 2009 (H.R. 2989), Chairman George Miller (D-CA) said, in his opening statement, the ongoing economic collapse has created substantial losses in retirement savings and caused uncertainty and a loss of confidence for American workers, and H.R. 2989 will ensure clear and complete fee disclosure to plan participants, increase access to low-cost index funds, provide plan sponsors with greater information before enrolling in a retirement plan and ensure that employers are meeting their fiduciary obligations.
Chairman Miller offered a substitute amendment for H.R. 2989, which was adopted. The substitute amendment: 1) clarifies that investment advisers must be registered under the Investment Advisers Act of 1940; 2) clarifies the required inclusion of a low-cost index fund option in retirement plans; 3) enhances ongoing reporting requirements for plan servicers to the Secretary of the Department of Labor; 4) requires the inclusion of a fee disclosure chart which includes investment performance over defined periods among other modifications to the legislation; and 5) removes the safe harbor for advisory opinions and exemptions granted by the Department of Labor (DOL).
Rep. John Kline (R-MN) offered a substitute amendment to HR 2989 which would have limited the required disclosure (unbundling) of fees for services which are not offered at additional cost or offered on an individual basis, allowed plan servicers to provide comprehensive fee disclosure based on the total compensation they receive and limited the requirement to offer specific products among other modifications. The amendment failed.
The following amendments also failed to pass the Committee:
Rep. Rush Holt (D-NJ) and Rep. David Wu (D-OR) amendment to provide plan participants access to investment advice from “non-conflicted,” independent investment advisors;
Rep. Howard McKeon (R-CA) amendment to limit the required disclosure (unbundling) of fees for services which are not offered at additional cost or offered on an individual basis;
Rep. Tom Price (R-GA) amendment to strike legislative language requiring the inclusion of low-cost index funds from the portfolio of funds in a retirement plan;
Rep. Kline (R-MN) amendment to limit plan sponsor liabilities by substituting existing requirements enumerated under ERISA;
Rep. Kline (R-MN) amendment to provide relief to automotive dealers due to the ongoing economic crisis and dealership closures.
The Committee favorably reported H.R.2989, as amended, to the House.
Bernanke on BofA-Merrill Merger
During the hearing to examine the Bank of America-Merrill Lynch merger, House Oversight and Government Reform Committee Chairman Edolphus Towns (D-NY) announced that Former Treasury Secretary Henry Paulson would appear before the Committee to discuss the Bank of America/Merrill Lynch merger (the merger) in July. Towns indicated the Committee will continue to investigate the merger through hearings, which may include the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC). Towns underscored the importance of understanding the causes of the financial crisis and the Federal government’s response before considering the administration’s regulatory reform proposals, which include new authorities for the Federal Reserve.
Ranking Member Darrell Issa (R-CA) said that although good work has been done in response to the financial crisis, oversight of the steps taken is still necessary. Issa spoke of his concerns about the administration’s regulatory reform proposals including a systemic risk regulator with “vast authority” over systemically important institutions. If the Fed becomes that regulator, Issa questions if the Fed will have the appropriate oversight in that role, and if it would consult with other Federal regulators.
House Oversight Government Reform Subcommittee on Domestic Policy Chairman Dennis Kucinich (D-OH) questioned the Fed’s decision making process during the merger, and noted the process demonstrates a need for greater accountability at the Fed. Kucinich concluded a “super-regulator” could not be created without increasing transparency at the Fed.
Federal Reserve Board Chairman Ben Bernanke described his recollections of the discussions, which occurred when Bank of America considered invoking the Material Adverse Clause (MAC) of the merger agreement. Bernanke said he conveyed his concerns that invoking the MAC would create significant risks for Bank of America and the financial system. His concerns were based on: 1) the extreme fragility of the financial system at the time; 2) the invocation of the MAC at the late stage of the process would tarnish the perception of Bank of America’s due diligence and risk management processes; and 3) the Fed’s staff analysis found Bank of America would not be able to invoke the MAC successfully resulting in costly litigation.
Bernanke said after Bank of America opted not to invoke the MAC, the Fed, Treasury and other regulators worked to develop a package that would help support the combined entity, which included an additional $20 billion in capital from the troubled Asset Relief Program (TARP), and a loss-prevention arrangement, referred to as a “ring fence,” of $188 billion. The ring fence arrangement has not been consummated and since there are improvements in the financial markets, Bank of America believes the ring fence is no longer needed.
Bernanke repeatedly denied telling Bank of America management the Federal Reserve would remove the board or management if the MAC was not withdrawn, nor did he instruct anyone to convey that type of sentiment to Bank of America. In retrospect, Bernanke said he believes the actions taken were executed with the highest integrity, benefited the new entity, and protected the financial system. When confronted about an email by Jeffrey Lacker, president, Federal Reserve Bank of Richmond, Bernanke noted the email was a summary of many conversations, and that he never told Bank of America management invoking the MAC would result in the Fed removing the bank’s management or board.
Bernanke clarified for House Oversight Government Reform Subcommittee on Domestic Policy Ranking Member Jim Jordan (R-OH) that during the meeting with 9 of the largest banks, then-Secretary Paulson urged the companies to accept the capital from the TARP, but Bernanke did not play a role in the amounts of the capital injections, noting the Treasury Secretary has that discretion under TARP. When Jordan questioned the involvement of Timothy Geithner in the merger, Bernanke said he worked with Geithner until he recused himself when he was nominated for Treasury Secretary, and then Bernanke only provided general updates of recovery efforts during the confirmation process.
In response to Towns’ question regarding the lack of coordination with SEC, Bernanke noted the Federal Reserve worked closely with the appropriate bank regulators, and Bank of America was responsible to communicate with the SEC regarding any issues surrounding shareholder disclosure. Bernanke noted that the Emergency Economic Stabilization Act requires the Fed to disclose capital injections within 7 days, and the Fed complied with notification after the $20 billion injection.
When Towns noted FDIC Chairman Sheila Bair’s concerns about the merger, Bernanke said the FDIC’s concern was its potential financial exposure to Merrill Lynch debt, and noted the FDIC, after consideration, agreed to the plan. When Bank of America requested a letter detailing the arrangement, which supported the merger, the Federal Reserve could not provide a written description since the agreement was broad and in good faith with no specific details at the time.
Cop Hearing on TARP
During the Congressional Oversight Panel (COP) hearing to discuss the Trouble Asset Relief Program (TARP) with Herbert Allison, Assistant Secretary of Treasury for Financial Stability, Chair Elizabeth Warren announced the July COP report would review the protocol for the repayment of TARP funds, and also the process for the valuation and disposition of the warrants held. Allison explained to Rep Jeb Hensarling (R-TX), that under the Emergency Economic Stabilization Act (ESSA) TARP repayments are returned to the “general fund,” which frees up additional resources for new investment. Allison added the Treasury’s general counsel interpreted the law as Treasury will not distribute more than $700 billion at one time. Hensarling was curious if there are any industries or institutions that would not be covered by TARP. Allison noted that under ESSA the Treasury Secretary has discretion to use TARP funds, adding that all recipients of funds have met the qualifications for TARP.
Allison announced the Treasury would soon publish their approach to the valuation and disposition of warrants. When pushed by Warren, since the next COP report is on warrants and the deadline is July 5, Allison said he was “confident” Treasury would be able to provide COP with the warrant methodology in time for their next report.
In his testimony, Allison gave a general outline of Treasury’s responses to the financial crisis, the status of the Office of Financial Stability (OFS), and his background. Although there have been some improvements in the economy, he said that the financial system and the economy are still vulnerable; and the Treasury must stay vigilant against another crisis, while continuing the stabilization and recovery efforts. Allison identified his top priorities for OFS as: 1) reviewing the controls over taxpayers’ money, giving special attention to compliance; and working close with COP and other oversight panels; 2) maximizing the effectiveness of the financial stability programs; and 3) emphasizing transparency and interaction with Congress and the public.
Lending
Allison told Damon Silvers, member, COP the three steps, which would help increase lending to consumers, small businesses, and large businesses are: 1) assuring adequate capital for the banks; 2) restoring the securitization markets; and 3) assuring large banks will have access to additional capital in the event of a downturn. Throughout the hearing, Allison emphasized the importance of revitalizing the securitization markets, and assuring the banks of the availability of additional capital if needed. In addition, Allison said Treasury would continue to look for ways to increase lending, but that Treasury needs “headroom” in the financial stability program to provide additional program.
Neiman wanted to know if the Term Asset-Backed Securities Loan Facility (TALF) was a success and if it would help the pending problems facing the commercial real estate markets. Allison said the TALF is steadily helping increase securitization. He noted that Treasury would “soon” announce the first stage of the Public-Private Investment Program (PPIP), which would bring more liquidity into the securitization markets. Allison told Warren after the launch of PPIP Treasury will be able to see the demand of both buyers and sellers.
Home Loan Modification/Foreclosure Mitigation
Allison announced that Treasury and the Department of Housing and Urban Development (HUD) would soon be meeting with servicers to examine ways to increase the effectiveness of the program. He noted that Treasury is planning a 40 city tour to help educate lenders and borrowers about the program.
Noting that the mortgage “cramdown” proposals have failed in Congress, Warren asked if there were going to be any other plans to help address mortgages which were “underwater.” Allison said one possibility is incorporating the Help for Homeowners Program into the Making Homes Affordable Program. Allison said the Treasury is working with banks and looking at principle forbearance and extending the length of mortgages as modification options.
The Obama Administration kicked off a nationwide campaign, on Friday, to promote the Making Home Affordable Program. The campaign started in Miami and then travels to nine additional housing markets that have been hit hard by foreclosure, with the goal of "empowering local partners to connect homeowners with much needed relief under the Administration's housing program."
House Panel Hearing on PAYGO
During the House Budget Committee hearing on the statutory Pay-As-You-Go (PAYGO) Act of 2009, Chairman John Spratt (D-SC) said that he welcomed the PAYGO legislation because a similar law played a large role in creating a budget surplus in the 1990s. Ranking Member Paul Ryan (R-WI) said that statutory PAYGO is “little more than a distraction” from the major deficits the administration has been creating. Ryan said he did not agree with the bill because of the lack of caps on discretionary and emergency spending.
Peter Orszag, Director of the Office of Management and Budget (OMB), said that largely because of rapidly rising health care, the federal government is on an “unsustainable fiscal course.” Orszag said the PAYGO Act would help to remedy the problem by making sure that any new tax or entitlement legislation would be paid for. Orszag said that the OMB would maintain a PAYGO ledger to record the average ten-year budgetary effects of all legislation enacted through 2013 that affects governmental receipts or mandatory outlays relative to the baseline. He said the PAYGO act will enforce budget constraint through the threat of sequestration. He said that the law would force policymakers to pay for any new mandatory spending or tax reductions by triggering sequestration — automatic cuts in non-exempt mandatory programs — if they do not. Spratt asked Orszag to provide to the committee a list of programs that would be subject to sequestration under the PAYGO Act.
Orszag said the current debate over health care reform illustrates the importance of enacting the PAYGO Act. He spent considerable time during the hearing defending the administration’s budget plans to cut deficits, specifically in relation to cutting health care costs. He said that while no one can quantify out in 2040 or 2050 what specific effect cutting health care costs will do, he said it is the most auspicious policy that can bend the deficit curve over the long term. He said there is not a plausible way that “we are going to get our long-term fiscal structure under control” without changing the health care costs. When Ranking Member Ryan asked whether Orszag would be willing to combine discretionary spending caps in the Act, Orszag said the administration wanted to focus on mandatory spending.
Spratt asked why the administration chose a five-year timeframe for the bill and whether officials would be open to a longer time frame. Orszag said the administration decided much of the bill by mimicking what was done in 1990. Spratt asked why the legislation excluded the 2001 and 2003 tax cuts, if they are extended, from PAYGO rules. Orszag said that because it is likely that a significant part of those cuts will be extended, it was not viable to include them because Congress would likely find a way to waive them from the PAYGO rules regardless. He said that if Congress allows the tax cuts to expire, the new revenues produced would go toward paying down the deficit.
Rep. Mario Diaz-Balart (R-FL) asked whether the administration would be making recommendations on how to fund the highway trust fund that is expected to be depleted.
Orszag reiterated that the administration prefers an 18-month extension of current transportation programs but that it will pay for any general funds that need to be transferred to the trust fund under the PAYGO Act.
Rep. Rosa DeLauro (D-CT) asked Orszag whether the administration is supportive of a National Infrastructure Bank (NIB), such as the one she has proposed. Orszag said the administration is working with the relevant Congressional committees on a possible approach to an infrastructure bank and that discussions are ongoing. He said the administration does support an NIB.
Fed Announces Changes to Programs
Noting the improved conditions of the financial markets, the Federal Reserve announced that some of its liquidity programs have been extended or modified. Specifically, the Board of Governors approved extension through February 1, 2010, of the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF). The expiration date for the Term Asset-Backed Securities Loan Facility (TALF) currently remains set at December 31, 2009. The Term Auction Facility (TAF) does not have a fixed expiration date. Also, the temporary reciprocal currency swap lines between the Fed and other central banks have been extended until February 1, 2010.
Program modifications include decreasing the size of upcoming TAF auctions, suspending the TSLF Schedule 1 and the TSLF Options Program auctions, and decreasing the frequency and amount of TSLF Schedule 2 auctions. The Fed did not authorize an extension of the Money Market Investor Funding Facility (MMIFF).
Supreme Court Denied Reviews
On Monday, the U.S. Supreme Court declined to review the case, Capital One Bank v. Massachusetts Commissioner of Revenue. The Massachusetts Supreme Court found the states income-based excises taxes on out-of-state entities based on a substantial nexus test was constitutional, because the bank issued credit cards used by state residents. The U.S. Supreme Court also declined to review two other tax cases, including Geoffrey Inc. v. Massachusetts Commissioner of Revenue.
Immediately after the high court’s announcement, SIFMA issued a statement expressing its disappointment in the decision. “The Supreme Court’s decision not to hear this case is disappointing. SIFMA believes the state court’s decision is part of a disturbing trend by state taxing authorities and legislatures to impose taxes on out-of-state businesses based on in-state marketing activities without providing clarity or certainty as to whether and to what extent operations will create a tax liability in various states. Without a bright-line test, investment will be discouraged, litigation costs will rise, and compliance burdens for institutions will increase,” SIFMA said.
On April 17, 2009, SIFMA filed an amicus brief for the case in support of the bank's petition for U.S. Supreme Court review of the Massachusetts state court decision. SIFMA was joined on the brief by The Clearing House as well as several international trade associations.
SIFMA Released Economic Forecast
In Washington on Tuesday, SIFMA's Economic Advisory Roundtable released its semi-annual economic forecast. The report includes a forecast for interest rates, prior to the Federal Open Market Committee (FOMC) announcement. Also, forecasts for the overall economy, monetary policy, fiscal policy, consumer spending and other economic indicators were made.
“The general consensus of the Roundtable is that the U.S. economy will turn positive in the third quarter, although remain at a subpar pace until next spring,” said Kyle Brandon, managing director of research for SIFMA. “The U.S. economy remains afloat, although battered, with the passing of the financial market meltdown and the credit market freeze. This cautiously optimistic outlook is a result of the aggressive and unconventional central bank actions and the fiscal stimulus, which have somewhat alleviated the continuing housing sector weakness, tight credit markets, and widespread economic contraction.”
Bills Introduced this Week
Rep. George Miller (D-CA) introduced the 401(k) Fair Disclosure and Pension Security Act of 2009 (H.R.2989), which would amend the Employee Retirement Income Security Act of 1974 to provide special reporting and disclosure rules for individual account plans and to provide a minimum investment option requirement for such plans, to amend such Act to provide for independent investment advice for participants and beneficiaries under individual account plans, and to amend such Act and the Internal Revenue Code of 1986 to provide transitional relief under certain pension funding rules added by the Pension Protection Act of 2006. Refer to the Washington Weekly summary above for details on the House Education and Labor Committee markup of H.R.2989.
Rep. Earl Pomeroy (D-ND) released a “discussion draft” of defined-benefit plan funding proposals. The draft gives an overview of proposals for single employer pensions and multi-employer pensions. The proposals for single employer pensions address asset smoothing, interest rate elections, amortization, among other points. The proposals for multi-employer pensions including: 1) a one-time funding “fresh start,” 2) longer funding relief; and 3) creation of multi-employer pension alliances.
Rep. Michael Michaud (D-ME) introduced a bill (H.R.3012), which would require a review of existing trade agreements and renegotiation of existing trade agreements based on the review, to set terms for future trade agreements, to express the sense of the Congress that the role of Congress in trade policymaking should be strengthened.
Rep. Larry Kissell (D-NC) introduced a bill (H.R.3020), which would amend the Emergency Economic Stabilization Act of 2008 to provide for the treatment of dividends paid on shares of preferred stock, held by the Secretary of the Treasury, that were issued by financial institutions which received financial assistance under such Act.
Sen. Kay Hagan (D-NC) introduced a bill (S.1339), which would provide for financial literacy education. Rep. Emanuel Cleaver (D-MO) introduced a bill (H.R.3037), which would require the Secretary of Education to establish a pilot program to award grants to State and local educational agencies to develop financial literacy programs in elementary and secondary schools.
Sen. David Vitter (R-LA) introduced a bill (S.1344), which would temporarily protect the solvency of the Highway Trust Fund.
Rep. James Moran (D-VA) introduced a bill (H.R.3060), which would amend the Internal Revenue Code of 1986 to allow certain local tax debts to be collected through the reduction of Federal tax refunds.
Sen. Evan Bayh (D-IN) introduced a bill (S.1326), which would mend the American Recovery and Reinvestment Tax Act of 2009 to clarify the low-income housing credits that are eligible for the low-income housing grant election. Also, Rep. Artur Davis (D-AL) introduced the Disaster State Housing Recovery Act of 2009 (H.R.2995), which would amend the American Recovery and Reinvestment Tax Act of 2009 to clarify the low-income housing credits that are eligible for the low-income housing grant election.
Sen. Daniel Inouye introduced the Indian Reservation Bank Branch Act of 2009 (S.1316), which would amend the Federal Deposit Insurance Act to modify requirements relating to the location of bank branches on Indian reservations.
Sen. Bill Nelson (D-FL) introduced a bill (S.1371), which would amend the Internal Revenue Code of 1986 to provide for clean renewable water supply bonds.
Sen. Chuck Grassley (R-IA) introduced a bill (S.1381), which would amend the Internal Revenue Code of 1986 to provide additional tax relief for small businesses.
The Week Ahead
Congress will stand in recess for the Fourth of July holiday. The next publication date for SIFMA’s Washington Weekly will July 10.