I think the exemplarity and joint effortsIn London the FTSE 100 has dwindled by 0 Their failure is ours said Michel PatrySome professional experiences forge you more character than othersThe first reason of such gloom is in a word ratesIt hosts more than 6000 visitors each dayA centralized orders registerThis is not everythingWomen make their entry in the AfepMedef codeIt does not endanger economic recovery remains fragileYesterday the Allianz title progressed from 0"Never again the American taxpayer is to sign a cheque to rescue a financial institution systemic risk", assured the Democratic Senator Chris Dodd, Chairman of the Senate Banking Committee yesterday. The heart of its new reform provides for the "orderly liquidation" of institutions on which neither Treasury nor the Fed had previously of authority to organize their bankruptcy. Other key its text are the creation of a consumer protection authority, the creation of a systemic risk Council and the regulation of the dark side of the market (derivatives hedge funds and products). "We are still vulnerable to another attack, and do not know today if the US economy could survive him," insisted Chris Dodd seeks both to fill the gaps in the current regulation which has been one of the causes of the crisis, to establish warning systems and to better protect the consumer. "This text creates a new consumer protection agency to establish and enforce clear rules and it gives more supervision at the Federal Reserve on the largest financial firms," welcomed yesterday Barack Obama.
$ 50 billion
The "Too big to fail" syndrome is thus put to death, after 700 billions of dollars of public funds have been made to stabilize the financial system in 2008 and 2009. AIG or Citi will no longer expect to be saved in extremis by the public authorities. According to the text, the bankruptcy is now provided, and to avoid the "resolution" process will be painful enough for banks and other financial institutions are trying to avoid at all costs. Concocted by the Democrat Senator from Virginia, Mark Warner and Republican Senator from Tennessee, Bob Corker, this essential step of the reform will be funded by the banking industry which will have to pay $ 50 billion to pay the costs.
From the point of view of the Organization of the regulators, the changes are much less dramatic than in the first version of the text which had been published in mid-November 2009. The Federal Reserve, which has been highly criticized and by Chris Dodd, finally should retain most of its powers even if she loses some.
The text provides that the Central Bank will oversee the banks with over $ 50 billion of assets (total 35 institutions) and extends its authority over other financial institutions including non-bank. At the height of the financial crisis, the Fed had argued, with Treasury Board, that it lacked the authority to take the Lehman Brothers Investment Trust Bank. However, it will more oversee "state chartered banks" (commercial banks authorized by the Federated States) who are in the scope of the Federal Deposit Insurance Corporation. The Office of the Comptroller of the Currency (OCC) is more eliminated (as provided in the first version), and sees him also its powers increase as he will oversee national banks and savings banks with less than 50 billion of assets. Only the Office of Thrift Savings disappears. "It should be noted that all those who have received the TARP money will remain under the supervision of the Fed." Even if Goldman Sachs or Morgan Stanley wanted to change the status, they did not escape to there. It is the "Hotel california" provision. "Can enter, but cannot leave," notes Lawrence Kaplan, counsel for Paul Hastings.
A notable change is the Federal Reserve of New York. To reduce the influence of Wall Street, "the appointment of its President be now because of the President of the United States", said Chris Dodd, and not more than its Board which comprises representatives of the banks. Indeed, they won't have the right to sit, which suggests the departure of Jamie Dimon, CEO of JP Morgan Chase. On the other hand, the text will put in place a Council (Financial Stability Oversight Council) consolidating different regulators who monitor in the United States and abroad which could pose a systemic risk to the financial system.
Protect consumers
One of the most difficult to negotiate with the Republicans of the Senate Banking Committee has been the creation of a consumer protection agency. Bankers are strongly opposed and the final compromise led to the proposal to create an authority dedicated to the protection of consumers who will be housed in the Fed. But it should have real powers and a degree of autonomy. However, the rules that it enact may be opposed by a vote of two thirds of the members of the Board of regulators. Providing for the legislative fight that will not fail to explode on the "Consumer Financial Protection Bureau", the President Obama already warned that it would not accept "that attempts to reduce its independence or were excluded from its sphere of influence banks, credit card companies or non-bank financial institutions."
Finally, on the issue of derivatives, standard products will be traded through clearing houses. Those who sell more exotic products will need to have higher capital levels. Many companies that use these instruments would be nevertheless exempted from the new rules. In addition, hedge funds with at least 100 million under management will need to register with the Government. The Volcker rules, which prohibit brokerage account to commercial banks, they can be integrated, after review, in the Statute.
At the last moment, last week, Republicans continued their negotiations in the Senate Banking Committee. If the possibility of a bipartisan action is not entirely excluded, Chris Dodd hopes to move the text in Committee by the end of the month of March, before submitting it to the vote in the Senate. "Whenever we delay for a day, it is a day where we are unprepared for what are us", assured the Senator. If he could move his proposal for an act to the Senate, he will take unify it with the text voted by the House of representatives in December 2009 that the President can sign the law.
