The Center for Public Integrity

A daily round-up of analysis, commentary and news about the Dodd-Frank financial reform law.

In-house regulation – The Federal Reserve Bank of New York and the Office of the Comptroller of the Currency are increasing the number of examiners embedded in major U.S. banks such as Bank of America Corp., Goldman Sachs Group Inc. and others.

Similar to reporters embedded with the U.S. military, on-site regulators file through the same security turnstiles as bank employees and eat lunch at the company cafeteria. Such access allows them to more thoroughly inspect banks for safety and soundness, financial performance, and management quality, the Wall Street Journal reports.

The number of embedded regulators working for the New York Fed, currently at 150, will double by this fall, while their 500 peers at the Office of the Comptroller of the Currency will see their ranks grow by 10 percent.

Debit-card swipe fees – TCF Financial Corp. urged a federal appeals court to block the Federal Reserve’s proposed 12 cent cap on debit processing fees, calling the limit “discriminatory” and unconstitutional.

Timothy Kelly, a lawyer for TCF, said it needs to charge nearly 40 cents per debit card swipe to ensure a 4 percent profit on the service to customers. The Fed’s proposal will would cost TCF $80 million in the first year, Kelly said, and violates the Constitutional guarantee of equal protection under law.

An all-star panel of economists, fund managers, bankers and finance experts meets Tuesday to advise the Federal Deposit Insurance Corp. on some of the difficulties it will face the first time the agency has to unwind a Too Big To Fail bank.

Former Fed Chairman Paul Volcker, Standard & Poor’s President Deven Sharma, MIT economist Simon Johnson, and former Citigroup Inc. Chairman John Reed are among the 18 members of the FDIC Advisory Committee on Systemic Resolutions. Others include senior executives of BlackRock, Depository Trust & Clearing Corp., the California Public Employees’ Retirement System (CalPERS), Glass, Lewis & Co. LLC, and Freddie Mac.

Panel member Anat Admati of Stanford University recently rallied other influential economists to argue that tougher capital requirements were essential to reduce banks’ leverage and prevent future crises.

The Dodd-Frank financial reform law gave the FDIC new authority to step in when a giant financial institution is teetering and map out an orderly resolution plan to sell its assets without resorting to fire-sale prices. That was a key issue during the financial meltdown in 2008 when several large institutions such as Merrill Lynch, Countrywide, and Washington Mutual saw their liquidity and stock prices rapidly plunge, forcing the government to hurry to find a buyer.

The panel “brings together some of the best and brightest minds to augment the groundwork that the FDIC has already put in to place to handle an extremely large and complex failure,” FDIC Chairman Sheila Bair said earlier this month when announcing the creation of the advisory group.

A daily round-up of commentary, analysis and news about the Dodd-Frank financial reform law.

Reform stalled by Obama campaign? – President Barack Obama is conceding too many tough financial regulations as he tries to woo Wall Street donors for his 2012 reelection campaign, writes TIME commentator Roya Wolverson. 

By allowing banking lobbyists and Republican lawmakers to delay countless Dodd-Frank provisions, the president is weakening the reforms mandated by Congress last year. Even his likely nominees to head key regulatory agencies – Martin Gruenberg and Raj Date – share Obama’s “conciliatory” views towards banks, the columnist says. Worse, Obama’s actions aren’t “just putting reforms on hold; it’s washing them all away,” Wolverson claims.

SEC gets tough with credit raters – Some credit-rating companies face possible civil fraud charges for their role in developing the mortgage-bond deals that helped fuel the financial crisis, the Wall Street Journal reports.

A daily round-up of commentary, analysis and news about the Dodd-Frank financial reform law.

Anti-competitive? - Wall Street has seized upon a new argument to fight new regulations required by Dodd-Frank:  Tougher rules will weaken banks and hurt the U.S. economy.

The reform law requires changes in some of the banking industry's biggest profit centers such as derivatives trading and debit card fees, reports the New York Times' Dealbook. JPMorgan Chase & Co., Morgan Stanley and other big banks are complaining that the new regulations mean they will lose customers to European competitors which have less-stringent regulations.

The European Commission is not expected to take up stricter derivatives rules until 2012 or later, while the Commodity Futures Trading Commission plans to finalize its derivatives rules by the end of this year.

Cost-benefit analyses requested – Senate Republicans are demanding that regulators carefully analyze the economic impact of dozens of Dodd-Frank rules to determine how much they will cost banks and Wall Street, reports Reuters.

Congress has many millionaires, but the chairmen of the powerful House and Senate committees that regulate banking and Wall Street aren’t among them, according to both lawmakers’ annual disclosure forms.

Members of Congress are required to file annual forms listing their major sources of income, assets, liabilities and gifts.  Most lawmakers, except for members of leadership, were paid $174,000 in 2010. Each is allowed to earn up to $26,100 in annual income for work performed outside Congress.

However, the chairman of the House Oversight and Government Reform Committee -- which has a subcommittee dedicated to monitoring the roll-out of the Dodd-Frank financial reform law and repayment of federal bailouts -- is a different story. He listed assets totaling at least $150 million.

Following are the 2010 disclosures made by the chairmen of the House and Senate committees that regulate financial services, and by the chairman of the House Oversight and Government Reform Committee, as reported by the Associated Press:

Rep. Spencer Bachus, R-Ala., chairman, House Financial Services Committee

Earned income: $174,000

Major assets: Accounts with Congressional Federal Credit Union, Fidelity Investments and Regions bank, each less than $1,000.

Major sources of unearned income: Earnings on credit union, Fidelity and Regions accounts, less than $200 each.

Major liabilities: Loan from BBVA Compass Bank, $15,001-$50,000

A daily round-up of analysis, commentary and news about the Dodd-Frank financial reform law.

Derivatives delay - The Commodity Futures Trading Commission agreed on Tuesday to delay for six months, until Dec. 31, the effective date for derivatives registration and other requirements.

Certain derivatives-related requirements were mandated by the Dodd-Frank law to automatically take effect on July 16, on the assumption that the CFTC would have completed writing rules to police the multi-trillion-dollar market. The CFTC and the Securities and Exchange Commission, which has a smaller regulatory role,- have fallen behind in rule-writing.

More than half of the 387 sets of all Dodd-Frank rules have yet to be proposed, according to the Wall Street Journal. Some Obama administration officials, including Treasury Secretary Tim Geithner, are worried that delays could sap the momentum to carry out financial reforms as the 2008 global crisis recedes farther into the past, the newspaper said.

Funding for SEC, CFTC - Funding for the Securities and Exchange Commission would be flat at $1.2 billion in fiscal 2012 under a bill approved on Wednesday by the Republican-controlled House Appropriations Committee. The lawmakers rejected a request from the Obama administration to boost SEC funding by $222 million to help pay for its new responsibilities under the Dodd-Frank law.