Local Reps. working on financial regulations
BY CHRIS FREEMAN and KURT BEGALKA
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Shaw Suburban Media
Although much of the public attention since the summer has focused on the health care debate in Congress, that doesn’t mean the private work on other issues stopped.
U.S. Reps. Melissa Bean, a Barrington Democrat; Don Manzullo, a Republican from Egan; and Bill Foster, a Batavia Democrat, are members of the House Financial Services Committee that has been working on reforming financial regulations.
“Complex derivatives and credit default swaps were at the heart of the recent economic meltdown,” Foster said. “There is near unanimous agreement within the industry that regulation must be improved.”
Today, the committee will begin deliberations on four pieces of legislation that could cause sweeping change in how the financial industry operates: The Over-the-Counter Derivatives Markets Act of 2009, the Consumer Financial Protection Agency Act (CFPA) of 2009, an amendment to the Fair Credit Reporting Act, and an expedited CARD (Credit Card Accountability, Responsibility and Disclosure) Act of 2009.
Bean said the committee’s hard work on the issues had been overshadowed by the attention given to health care reform.
“Part of what people don’t understand about the committee process is that Congress gets on various committee assignments and works with experts in certain core areas,” Bean said.
“I’ve been in hearings on derivatives, capital markets, systemic risks, CFPA. ... We’ve been doing these for quite some time now. Other things don’t stop, but that’s what our constituents think every time they hear about health care.”
In February, the New Democrat Coalition, for which Bean is the vice chairwoman, issued a list of 21 principles needed to ensure proper regulatory reform.
Bean said 13 of those principles were included in the administration’s proposals that have been discussed by the House committee.
However, Manzullo fears many of the provisions – especially the Consumer Financial Protection Agency Act – go too far.
“It sets up another group of people to do what people in existing positions already do,” Manzullo said.
“There is no guarantee that the new agency will be any more diligent than those in the old agency. We don’t want to create more programs and more bureaucrats. ... You can’t destroy the nation’s economy in an effort to regulate the financial system.”
Manzullo said the CFPA and derivatives legislation, designed to curb such things as the bundling and selling of bad mortgages, will begin the “mark-up,” or amendment, process today.
Working out the details could take days, even weeks, said Foster spokeswoman Shannon O’Brien. Many of the derivatives and markets that Congress is looking to regulate were confusing to experienced traders when their exposure contributed to the bankruptcy of Lehman Brothers and the near-collapse of AIG last year.
Financial regulatory reform was one of the priorities that President Obama outlined when he took office this year. During a Friday news conference he reiterated his support for the CFPA and to rebuke national advertisements from the U.S. Chamber of Commerce that he said distorted the role of the agency.
“I’m not saying we need more government, but we need the right government,” Bean said. “That’s what all the oversight is. While you don’t want to stifle innovations or competition in global markets, you always want to prioritize consumer and investment protections. Those are our constituents who are suffering.
“On the Hill, for a long time, deregulation was the theme du jour. But you can take that to an extreme. And what does that get you? It gets you AIG, Lehman Brothers and the Madoff scandal.”
Financial Services Committee agenda
• Over-the-Counter Derivatives Markets Act of 2009: The bill proposes to amend a number of the securities laws (including the Commodity Exchange Act, the Securities Act of 1933 and the Securities Exchange Act of 1934), to regulate the OTC derivatives markets. The latter can be used constructively as a hedge against fluctuations in currency exchange rates and oil prices. But critics say poor regulation has led to speculation and the rampant sale of contrived financial products.
• The Sept. 25 Discussion Draft of the Consumer Financial Protection Agency Act of 2009 [H.R. 3126]: It would establish a Consumer Financial Protection Agency with the authority and accountability to supervise, examine, and enforce consumer financial protection laws. Financial transactions falling under the agency's jurisdiction would include mortgages, credit cards, student loans, auto loans, payday loans, and more.
• H.R. 3763, to amend the Fair Credit Reporting Act: The federal Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness, and privacy of information in the files of every consumer reporting agency.
• H.R. 3639, Expedited CARD _ Credit Card Accountability, Responsibility and Disclosure Act of 2009. Move up the Feb. 22, 2010 implementation date of provisions that will control bank fees, gift cards, interest rate hikes and canceling accounts.
