Top federal judges in 49 states are urging lawmakers to avoid another round of automatic spending cuts that would have a "devastating and long-lasting impact" on the federal courts, The Associated Press reported today. The unusual letter from the chief judges of trial courts in every state but Nevada said that the $350 million reduction in the judiciary's budget for the current year has dramatically slowed court proceedings and put public safety at risk. The letter was sent this week to congressional leaders in both parties in the House and Senate.
A federal judge dismissed a constitutional challenge to the Consumer Financial Protection Bureau, finding the plaintiffs didn’t have standing to sue because they failed to show they suffered harm, the Legal Times reported on Friday. The plaintiffs argued the Dodd-Frank Act violated the separation of powers by “delegating effectively unlimited power” to the bureau and another entity created under the Dodd-Frank Act, the Financial Stability Oversight Council. U.S. District Judge Ellen Segal Huvelle found that the plaintiffs failed to allege actual injuries and that claims of future injuries were too speculative to meet the legal standard for being able to sue. Texas-based State National Bank of Big Spring, think tank Competitive Enterprise Institute and advocacy group the 60 Plus Association sued the U.S. Department of the Treasury and the bureau last June. They were later joined by the attorneys general of Alabama, Georgia, Kansas, Michigan, Montana, Nebraska, Ohio, Oklahoma, South Carolina, Texas and West Virginia. The case was one of several filed against the government over the creation of the Consumer Financial Protection Bureau. Earlier lawsuits focused on President Barack Obama’s recess appointment of Richard Cordray as the bureau’s director, but those cases were dismissed after the Senate confirmed his appointment last month.
The Democratic and Republican leaders of the Senate Finance Committee yesterday began a legislative push to simplify the tax code by asking all senators to identify what tax breaks, deductions and credits should be kept, the New York Times reported today. Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Orrin G. Hatch (R-Utah) said that they wanted to start the process by clearing the tax code of all special breaks. They gave their colleagues until July 26 to produce their so-called pardon list.
An increasingly vocal chorus of current and former U.S. regulators says that the biggest banks still have not provided adequate plans to safely wind down in bankruptcy and may need to be restructured to reduce the risk they pose to the financial system, Bloomberg News reported today. Jim Wigand, a Federal Deposit Insurance Corp. official responsible for planning for the potential failures of big banks such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., said that none have yet been able to draw up bankruptcy plans that wouldn’t threaten to detonate the financial system. The plans, known as “living wills,” were a core demand of the 2010 Dodd-Frank Act overhaul of financial oversight, and it gave regulators the authority to require systemically risky banks to restructure if their plans aren’t “credible.” Whether a global financial giant is able to go through an orderly bankruptcy using a living will is still “an open question,” Wigand said. The 11 largest banks filed the first draft of their living wills last year. The banks, which included Bank of America Corp., Barclays Plc and Deutsche Bank AG, are required to file new versions of their living wills on Oct. 1. Another tier of banks with smaller U.S. nonbank holdings, including Wells Fargo & Co. and HSBC Holdings Plc, must file their first plans by July 1.
The House Financial Services Subcommittee on Financial Institutions and Consumer Credit will hold a hearing today at 10 a.m. ET today titled “Qualified Mortgages: Examining the Impact of the Ability to Repay Rule.” Hearing witnesses include:
• Peter Carroll, Assistant Director for Mortgage Markets, Consumer Financial Protection
Bureau
• Kelly Cochran, Assistant Director for Regulations, Consumer Financial Protection
Bureau
Under pressure from Wall Street lobbyists, federal regulators have agreed to soften a rule intended to rein in the banking industry’s domination of the derivatives market, the New York Times DealBook blog reported yesterday. The changes to the rule to be announced today could effectively empower a few big banks to continue controlling the derivatives market, a main culprit in the financial crisis. The $700 trillion market for derivatives has operated in the shadows of Wall Street rather than in the light of public exchanges. Just five banks hold more than 90 percent of all derivatives contracts. Yet allowing such a large and important market to operate as a private club came under fire in 2008. Derivatives contracts pushed the insurance giant American International Group to the brink of collapse before it was rescued by the government. In the aftermath of the crisis, regulators initially planned to force asset managers like Vanguard and Pimco to contact at least five banks when seeking a price for a derivatives contract, a requirement intended to bolster competition among the banks. Now, according to officials briefed on the matter, the Commodity Futures Trading Commission has agreed to lower the standard to two banks. About 15 months from now, the officials said, the standard will automatically rise to three banks. And under the trading commission’s new rule, wide swaths of derivatives trading must shift from privately negotiated deals to regulated trading platforms that resemble exchanges.
The House Financial Services Oversight and Investigations subcommittee will hold a hearing today at 10 a.m. ET titled “Who Is Too Big to Fail: Does Title II of the Dodd-Frank Act Enshrine Taxpayer-Funded Bailouts?” The witness list includes Prof. David A. Skeel of the University of Pennsylvania Law School, Dr. John B. Taylor of Stanford University, Josh Rosner of Graham Fisher & Co. and Michael Krimminger of Cleary Gottlieb. For more information, please click here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=33…
ABI’s Commission to Study the Reform of Chapter 11 will hold its fourth public hearing of 2013 from 3-5 p.m. ET following ABI’s Bankruptcy Fundamentals: Nuts & Bolts for Young and New Practitioners Program in New York City. Two panels of expert witnesses will provide their testimony on chapter 11 issues before the Commission. Issues to be discussed include financial contracts, derivatives, safe harbor, orderly liquidation authority, chapter 14 and other alternatives. To watch a live webcast of the hearing, view the witness list and access the prepared witness testimony, be sure to visit http://commission.abi.org.
Nearly three years after Congress passed the Dodd-Frank financial law to limit risky activities on Wall Street, a series of bills could weaken regulation of derivatives, the Washington Post reported today. The House Financial Services Committee yesterday passed six bills that limit reforms in the complex market of derivatives, including adding more flexibility for financial services companies that deal in them. A bipartisan group of lawmakers hailed the measures as necessary repairs to statutes that could hinder U.S. firms in doing business. But the Obama administration has warned that the package of bills weakens critical reforms. A similar set of bills cleared the House last year but died in the Senate. The new legislation is likely to face a similar fate, but opponents have grown concerned that individual measures could be tucked into broader pieces of legislation that would be difficult to defeat. One hotly contested bill introduced this year would allow banks to keep certain types of derivatives trades in-house, rather than spin them off into separate uninsured subsidiaries as called for under the Dodd-Frank law.
"Too-big-to-fail" legislation unveiled yesterday is needed to rein in the biggest U.S. banks because the Dodd-Frank Act has failed to guard taxpayers against future bailouts, the bill’s sponsors said, Bloomberg News reported yesterday. The four largest banks—JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.—"are nearly $2 trillion larger than they were" before getting U.S. aid to help them weather the 2008 credit crisis, Sen. Sherrod Brown (D-Ohio) said yesterday. Sen. David Vitter (R-La.), whose plan is opposed by key lawmakers, proposes a 15 percent capital requirement for megabanks as a way to reduce risk and remove the perception that they would get bailouts in a crisis. Mid-size and regional banks, those between $50 billion and $500 billion in assets, would need to have 8 percent capital relative to assets.
