CCH Financial Reform News Center

OCC Seeks Comments on Alternatives to the Use of External Credit Ratings

This story appeared in Bank Digest.

The OCC is seeking comment on alternatives to the use of credit ratings as measures of creditworthiness in its regulations governing bank-permissible investment securities and certain other activities. Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires federal agencies to review, no later than one year after enactment, any regulation that requires use of an assessment of creditworthiness of a security or money market instrument and any references to, or requirements in, regulations regarding credit ratings. The agencies are also required to remove references or requirements to rely on credit ratings and to substitute an alternative standard of creditworthiness. Credit ratings are currently used in a variety of ways to help determine credit quality, liquidity and marketability of an asset, and appropriate concentration levels of investment securities purchased and held by national banks. The OCC Advance Notice of Proposed Rulemaking:

 

• describes the areas where the OCC’s regulations, other than those that establish regulatory capital requirements, currently rely on credit ratings;
• sets forth the considerations underlying such reliance; and
• requests comment on potential alternatives to the use of credit ratings.

Conference Committee Base Text, First Day Schedule Announced

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guide and Bank Digest.

As part of the work of the House-Senate conference committee of financial regulatory reform legislation, the “base text” that will be the committee's starting point has been released. House Financial Services Committee Chairman Barney Frank, D-Mass., who is the conference committee chairman, also has issued a summary of provisions from the House version of H.R. 4173 that are included in the base text.

Frank and Senate Banking Committee Chairman Christopher Dodd, D-Conn., also have announced the planned schedule for the first day of substantive committee debate. On June 15, 2010, the committee will consider provisions on merging the Office of Thrift Supervision with the Office of the Comptroller of the Currency, insurance, private investment funds and credit rating agencies.

Issa Demands GM Change Document Destruction Policy

This story appeared in Bank Digest.

Saying that he is “deeply disturbed” to learn that General Motors has been routinely destroying electronic documents after 60 days, Oversight and Government Reform Committee Ranking Member Darrell Issa, R-Calif., has joined in a letter demanding that the policy be changed. “Until such time as U.S. taxpayers have been divested of all financial interests in GM, we request that you immediately stop destroying documents and begin preserving all records and communications referring or relating to GM's status as a taxpayer-owned company, its relationship or interaction with government officials, and any issue that could be relevant to public policy,” the letter said. It added that “any further destruction of relevant material is evidence of criminal misconduct. We would then have an obligation to report such conduct to the U.S. Department of Justice for prosecution.

Pelosi Praises House Passage of FHA Reform

This story appeared in Bank Digest.

The 406-to-4 passage of the Federal Housing Administration (FHA) Reform Act will ensure that the FHA will continue to help Americans “achieve the dream of homeownership,” according to House Speaker Nancy Pelosi, D-Calif. Stabilizing the housing market is critical to economic recovery, Pelosi added.

Treasury Addresses Possible General Motors IPO

This story appeared in Bank Digest.

The Treasury Department has provided guidance on its role in the exploration of a possible initial public offering of the common stock of General Motors Company. Treasury owns 60.8 percent of the common stock of GM, which was acquired under the Troubled Asset Relief Program in connection with the restructuring of GM during the summer of 2009. The IPO would be a significant step in carrying out the Treasury's previously announced intention of disposing of TARP investments as soon as practicable.

Financial Reform Conferees Hold First Public Meeting

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

House and Senate conferees opened their first public meeting on H.R. 4173, the Restoring American Financial Stability Act of 2010, with Republicans complaining of being shut out of the negotiating process.

Senate Banking Committee Ranking Member Richard Shelby, R-Ala., said the conference appeared to be “off to a rocky start” because the base text was negotiated and compiled behind closed doors, without any Republican participation. “I suspect, and I hope I’m wrong, that there have been a number of private meetings where legislative language has been coordinated and drafted without any public access or Republican input,” Shelby asserted.

House Passes Legislation Ending Carried Interest; Measure Now in Senate

This story appeared in Jim Hamilton's World of Securities Regulation.

The House has passed legislation that would prevent investment fund managers from paying taxes at capital gains rates on investment management services income received as carried interest in an investment fund. To the extent that carried interest reflects a return on invested capital, the American Jobs and Closing Tax Loopholes Act, HR 4213, would continue to tax carried interest at capital gain tax rates. However, to the extent that carried interest does not reflect a return on invested capital, the measure would require investment fund managers to treat seventy-five percent of the remaining carried interest as ordinary income (50% for taxable years beginning before January 1, 2013). The provision will be effective for taxable years ending on or after January 1, 2011. The House passed the measure by a vote of 215 to 204.

Congressional Oversight Panel Examines AIG Rescue and Its Impact on Markets

By Serena Lynn, Editor, the CCH Federal Banking Law Reporter and Bank Digest.

The Congressional Oversight Panel (COP) has released its June oversight report, “The AIG Rescue, Its Impact on Markets, and the Government's Exit Strategy.” The panel found that the Federal Reserve Board and Treasury Department failed to exhaust all other options before undertaking their unprecedented, taxpayer-backed rescue of American International Group (AIG) and its creditors. The COP conducted a comprehensive overview of the AIG transactions based on a review of thousands of documents. After reviewing the federal government's actions leading up to the AIG rescue and the actions of the Treasury, the panel identified several major concerns:

House Conferees to Wall Street Reform Legislation Named

This story appeared in Bank Digest.

House members to the conference committee have been named by Speaker of the House Nancy Pelosi, D-Calif., and House Minority leader Rep. John Boehner, R-Ohio, to complete comprehensive Wall Street reform legislation. These conferees will work to send a strong bill to the President for his signature that achieves several key principles: strong consumer protections; transparency and accountability for the financial sector; an end to taxpayer-financed bailouts; and tough oversight of Wall Street.

Frank Calls for C-SPAN Coverage of Conference

This story appeared in Bank Digest.

“I believe it is vital that after the financial crisis of 2008, the American people are able to view the public proceedings,” House Financial Services Committee Chairman Barney Frank, D-Mass., stated in a letter to C-SPAN CEO Brian Lamb. Frank is calling for the open portions of the House-Senate conference on the Wall Street Reform and Consumer Protection Act to be carried on C-SPAN.