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Summary Of Amendments In Senate Financial Stability Act
May 7, 2010
FEI Summary
On Thurs., May 6, 2010, after having adopted seven amendments on the bill, the United States Senate closed out two weeks of debate on S. 3217 - Restoring American Financial Stability Act of 2010. There will be no further votes on the bill until May 11, 2010 when the Senate will begin another three-day period of debate and voting on amendments. Next week, the Senate will take up amendments related to Proxy Access, Regulation of Over-the-Counter Derivatives, Auditing the Federal Reserve and many others, as more than 100 amendments have been filed on this bill. The following is a summary of floor action to date.
1. FDIC Assessments: Amendment by Tester/Hutchison which would assess Federal Deposit Insurance Corp. insurance on banks based on total average assets versus total average deposits passed by a vote of 98-0. This amendment will shift the FDIC premium burden to the larger banks.
2. Preventing Taxpayer Bailouts: Amendment by Sen. Barbara Boxer (D-Calif.) states no taxpayer funds shall be used to prevent the liquidation of any financial company passed by a vote of 96-1.
3. Eliminates Bank Bailout Fund (and Bank Tax): Amendment by Sen. Richard Shelby (R-Ala.) includes the following elements and passed by a vote of 93-5:
a. Eliminates the $50-billion bailout fund and the tax on the largest banks used to fund it.
b. he Federal Reserve can only use its 13(3) emergency lending authority to provide liquidity to the financial system in times of severe market distress.
c. Requires the approval of the Treasury Secretary before the Fed can undertake any emergency lending, and requires strict solvency, collateral and accountability standards for any emergency lending, also requires congressional approval for all debt guarantees.
4. Clarifying Amendments: Two clarifying Amendments by Sen. Olympia Snowe (R-Maine), #3755 and #3757, related to protecting the privacy of electronic banking transactions and preventing small businesses from losing access to credit if they have seasonal income. Both amendments passed by voice vote.
5. Consumer Protection Substitute: An amendment by Sen. Shelby, which failed by a vote of 38-61, would have put the FDIC in charge of consumer protection in the financial markets and limited the scope of the consumer protection mandates provided to the federal government.
6. Capital Ratio Requirements/Accounting Standards Substitute: An amendment by Sen. Sherrod Brown (D-Ohio), which failed by a vote of 33-61, would have changed the banking capital ratio requirements and required the break up of current banks based on their size and congressionally mandated new financial reporting standards.
FEI’s Committee on Corporate Treasury has been following debate on this bill for the past year, and in particular has been advocating for the safe and fair regulation of over-the-counter derivatives, citing a need to protect end-user transactions such as hedging foreign exchange risk, interest rate risk, or commodity hedges, while at the same time agreeing that additional transparency should be brought to the system.
Chatham Financial has put together a list of important issues that still must be addressed in the derivatives title of this bill. These changes are related to tying collateral charges to risk of loss, protecting end-users adequately in the bill’s definitions, ensuring there is sufficient grandfathering to prevent credit events due to a retroactive law and not requiring banks to spin-off their swaps desks, which would require hedging transactions to occur in a limited, non-competitive and risky environment amongst a few investment banks.
Prepared May 7, 2010 by Cady North (cnorth@financialexecutives.org) manager of Government Affairs, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted above.
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