November 20th, 2009 | by admin |
WASHINGTON, Nov 19 (Reuters) - The U.S. House FinancialServices Committee on Thursday delayed a final vote on a billaddressing systemic risk in the economy and what to do aboutfinancial firms viewed as "too big to fail."
The bill is expected to face a final vote by the committeenext month, likely on Dec. 1, with a vote in the full Housecoming possibly two weeks later. [ID:nN19200951]
Here are the central elements of the legislation.
OVERSIGHT COUNCIL
* Creates inter-agency Financial Services OversightCouncil, with a staff and funding, that would monitor andintervene to prevent systemic risks in the economy
* Financial firms threatening economic stability could behit with heightened regulatory standards by council.
* Council decisions of this sort would be publiclydisclosed. Firms could appeal those decisions.
* Firms that still pose a "grave threat" to stability, evenunder higher standards, could be forced to break up. Councilcould order firms to end activities, stop offering someproducts, or divest units. Firms could appeal council actions.
* When deciding on such actions, council would evaluatefirms' size, liabilities, leverage, off-balance sheet exposureand interconnectedness with other firms.
* Council members: Treasury Secretary, Federal Reservechairman, Comptroller of the Currency, Securities and ExchangeCommission chairman, Commodity Futures Trading Commissionchairman, Federal Deposit Insurance Corp chairman, FederalHousing Finance Agency director, National Credit UnionAdministration chairman, Office Thrift Supervision director
* Firms subjected to stricter standards or found to beunder-capitalized would have to file "living wills" withregulators saying how firms could be unwound in emergencies.
FDIC
* Empowers FDIC to extend credit or guarantee obligationsof solvent financial firms to preserve economic stability
* Empowers FDIC to unwind insolvent financial firms inorderly manner, like it now can unwind failing banks
* FDIC's process for unwinding firms would ensureshareholders and creditors bear losses, not taxpayers.
* Sets up "systemic dissolution fund" of $150 billion, topay for FDIC actions. Another $50 billion could be raised.
* Dissolution fund would get money through fees charged tofinancial firms with more than $50 billion in assets.
* Fees would be adjusted based on firms' risk and size.FDIC could also borrow money from Treasury.
* FDIC dissolution authority would end on Dec. 31, 2013,unless extended by president and Congress.
* Dissolution fund would have to be managed separately fromthe FDIC's existing Deposit Insurance Fund.
* Assessments paid by banks into FDIC's Deposit InsuranceFund would be risk-based, cutting fees paid by small banks.
SECURITIZATION
* Requires lenders to retain 10 percent of credit risk fromloans securitized for sale onto secondary market
BANK SUPERVISION
* Abolishes Office of Thrift Supervision, transfers itsduties to Comptroller of the Currency's office (Reporting by Kevin Drawbaugh; Editing by Gary Hill)