DATE: OCTOBER 2, 2009



DATE:               OCTOBER 2, 2009

TO:                   NCOIL LEGISLATORS

FROM:              SUSAN NOLAN

RE:                   THIS WEEK’S HOUSE FINANCIAL SERVICES COMMITTEE HEARINGS

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The following information is provided for your review:

• Bernanke Encourages Regulation of Large Firms Posing High Risk (10/1 The Hill)

• Bernanke Tells House Panel Mega Insurers Need U.S. Oversight (10/1 National Underwriter)

• U.S. House Financial Services Committee hearing testimony/video

The U.S. House Financial Services Committee this week held a hearing on a proposed Consumer Financial Protection Agency (CFPA) and later heard from Federal Reserve Chairman Ben Bernanke on the Administration’s regulatory reform plan. 

Hearing on the Consumer Financial Protection Agency (9/30)

The hearing comprised two panels of consumer and financial services industry representatives.  Consumer representatives—who included the NAACP, Center for Responsible Lending, National Council of La Raza, and the Service Employees International Union—strongly supported the CFPA, while a Heritage Foundation witness proposed a coordinating council to harmonize consumer protection.  Each of the four industry representatives opposed the creation of an independent consumer protection agency. 

Committee debate was largely a partisan one.  Democrats argued that banking regulators have not properly exercised or prioritized existing consumer protection authority and that the CFPA would streamline current consumer protection authority in one agency.  Republicans argued that a CFPA would create confusion, limit consumer choice and company innovation, and decrease access to credit, among other things.  

Hearing on the Federal Reserve’s Perspective on Reg. Reform (10/1)

Chairman Bernanke said that reform should include: (1) consolidated supervision of systemically important firms—including the possibility of large insurers—by the Federal Reserve; (2) a coordinating council of federal financial regulators to monitor systemic risk in the economy; (3) new resolution authority to wind down failing systemically significant institutions; (4) robust regulation of systemically significant clearing institutions; and (5) consumer protections against fraud/abuse. 

Responding to several questions from members regarding resolution authority, Chairman Bernanke clarified that the authority to wind down nonbank financial institutions in an FDIC-like process would eliminate the concept of “too-big-to-fail.”  He said that the process would protect taxpayers because resolution costs would be born by creditors and the financial services industry.  Deflecting member attempts to have him take a position on the CFPA, he said that the Federal Reserve—in recent years—has been more active in its consumer protection responsibilities.   

For more information, please contact Mike Humphreys by reply e-mail or at 202-220-3014.

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