FEDERAL LEGISLATION
The House on Thursday began the amendment process for legislation that would overhaul the nation’s financial regulations, after negotiators worked out compromise language on several controversial provisions.
The Rules Committee made in order 36 amendments, including a manager’s package from House Financial Services Committee Chairman Barney Frank. D-Mass., that would make significant changes to the bill (HR 4173).
The manager’s package includes compromise preemption language that would modestly expand the bill’s federal preemption of state consumer laws. Business-friendly New Democrats, let by Rep. Melissa Bean, D-Ill., had pushed for the changes.
It also includes authorization to use $4 billion in bailout funds (PL 110-343) for housing relief and a narrowing of language that would require secured creditors of failing institutions to take losses when the failing company is being wound-down by the government.
The rule would allow for a total of 7 hours and 10 minutes of debate on the amendments, while prohibiting additional general debate.
Republicans will offer a substitute amendment and Agriculture Committee Chairman Collin Peterson, D-Minn., will offer language refining financial derivatives regulations in the bill.
Rep. Walt Minnick, D-Idaho, will offer an amendment that would replace the Consumer Financial Protection Agency with a council of regulators. Frank has said he expects to defeat the Minnick language.
Writedown Compromise
The decision to redraft language requiring secured creditors to take losses came after a week of negotiations between moderate Democrats and the amendment’s author, North Carolina Democrat Brad Miller.
Miller said the latest version should resolve differences over the provision, which has caused uproar in the investment community to have it attached the final legislation.
Miller has pushed language that would require secured creditors to take a 20 percent haircut before any losses could be recouped in the event of an institution’s failure. The amendment was attached during a Financial Services Committee markup, then stripped from the underlying bill in a manager’s amendment in an effort to give Miller the time to craft more amenable language.
After negotiations with moderates in his caucus, Miller has cut down the haircut to 10 percent, while limiting it to short-term debt and clarifying that the language does not apply to government securities being used as collateral.
“There are two concerns that the amendment gets to,” Miller said. “The collateral grabs by existing creditors and the lack of market discipline for systemically significant firms to be able to borrow money until the lights go out.”
The final language is included in a manager’s amendment to the financial overhaul bill (HR 4173). The House could vote on the amendment as early as Thursday.
“I’m reasonably pleased with it,” Miller said.
Sheila C. Bair, the chairman of the Federal Deposit Insurance Corporation, has pushed hard for the amendment, supporting its inclusion in public statements and lending her staff to Miller to help craft the final language.
“The FDIC is pleased with it,” Miller said. “They think that it accomplishes most of what they wanted to accomplish.”
By Kate Davidson, Charlene Carter and Phil Mattingly, CQ Staff
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