The Center for Public Integrity

Belt-tightening - Senate Republican Leader Mitch McConnell says starving financial regulatory agencies of the money needed to carry out the Dodd-Frank law would be a good thing for America.

"The less we fund those agencies, the better America will be," McConnell said at a breakfast hosted by the Christian Science Monitor. He said that Dodd-Frank followed health care reform as the “second worst” bill ever passed by Congress during his decades-long tenure. 

"I think anything we can do to slow down, deter or impede their ability to engage in this oppressive overregulation, which is freezing up our economy, would be good for our country,” McConnell said, according to accounts published by The Hill and the Financial Times.

Bank lobbying – The American Bankers Association spent $2 million in the 2011 first quarter lobbying the federal government to reform or repeal key parts of the financial reform law, a sharp increase from $1.4 million spent in the 2010 fourth quarter, the Associated Press reports.

The banking group is fighting regulators as they attempt to finalize rules to limit debit card swipe fees, report over-the-counter derivatives trading and to boost capital requirements. In the first quarter, the influential banking group met with officials at the Fed, Securities and Exchange Commission and Treasury Department.

The Consumer Financial Protection Bureau (CFPB) today indicated that it is focusing on debt collectors, auto-title lenders, consumer credit bureaus and prepaid card issuers as it prepares to take up its new regulatory powers.

A Debt Deception series of stories published by iWatch News is examining challenges facing the CFPB as it tries to rein in abusive and predatory lending practices that make it difficult for consumers to get out of debt. 

Last month, the iWatch News project investigated how unregulated credit bureaus largely determine whether most Americans can qualify for mortgages, car loans, insurance, credit cards and other financial transactions. Some payday lenders, also now unregulated by the federal government, have affiliated with Indian tribes to claim sovereign immunity from lawsuits and regulation. But auto loans – typically the second-biggest debt held by most Americans – are specifically exempt from any CFPB regulation because of heavy lobbying by car dealers.

The Dodd-Frank financial reform law gave the CFPB authority to oversee how large banks, thrifts and credit unions comply with federal consumer regulations, as well as supervision of residential mortgage brokers and servicers, private education lenders and payday lenders. But for other financial services, the CFPB can regulate only those that are “a larger participant” as defined by the agency.

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

Hedge fund regulations – The Securities and Exchange Commission adopted rules today that will require hedge funds and private equity funds that each manage more than $150 million in assets to register with the agency by March 30.

The move will subject funds to surprise examinations by the SEC, and require them to file reports about the size and strategy of their funds, any conflicts of interest, disciplinary history, and the identities of key gatekeepers such as auditors and prime brokers. "Our proposal will give the Commission, and the public, insight into hedge fund and other private fund managers who previously conducted their work under the radar and outside the vision of regulators," SEC Chairman Mary Schapiro said.

The commission’s two Republican members opposed a provision that requires some venture-capital managers to report information about their funds, saying that the costs of doing so would hinder capital formation and innovation. Venture capital funds "which by definition cannot be sold to the public, already provide meaningful disclosure to their investors because investors demand information, and fund investors perform their own diligence in evaluating whether to invest in a fund," said SEC Commissioner Troy Paredes.

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

From Goldman to CFTC – Gary Gensler spent 18 years working for Goldman Sachs Group Inc. and was among the Clinton administration officials who rejected any regulation of the derivatives market. Now, as chairman of the Commodity Futures Trading Commission after the near-collapse of global markets, “my thinking has evolved," Gensler tells Bloomberg Markets magazine.

Gensler is guiding the CFTC as it writes more than 50 rules on derivatives trading -- new regulations that face united opposition from his former Wall Street colleagues and banking lobbyists. He also faces an anti-reform sentiment on Capitol Hill, where House Republicans want to slash the CFTC's annual budget by 15 percent.

“Capital matters” – Raising how much capital U.S. banks must have on hand is “the most important reform moment since the financial crisis broke out three years ago” and surpasses the Dodd-Frank law in importance, says New York Times.columnist Joe Nocera.

Big banks should be obliged to hold capital equal to 14 percent of their assets to prevent future taxpayer bailouts, he says. Even if other countries do not follow the U.S. lead in raising capital standards, Nocera says American banks would still remain competitive because they are in better shape and can remain solvent.

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.