Financial Services

As a Member of the exclusive House Committee on Financial Services, I play a part in reviewing and exercising jursidiction over such wide ranging issues as securities, insurance, banking, and housing. The Committee also oversees the work of the Federal Reserve Bank, the U.S. Treasury, the Securities Exchange Commission, and other financial services regulators. I am also a Member of the Subcommittee on Housing and Community Opportunity as well as the Subcommittee on Oversight and Investigations. 

In the recent past, Americans have faced the worst financial crisis since the Great Depression. Millions have lost their jobs, businesses have failed, housing prices have dropped, and savings were wiped out. The failures that led to this crisis require bold action. On Wednesday July 20, 2010 President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. I believe this law goes a long way toward restoring responsibility and accountability in our financial system and gives Americans confidence that there is a system in place that works for and protects them. After years of work, this lawcreates a sound foundation to grow the economy and create jobs.

The Dodd-Frank Wall Street Reform and Consumer Protection Act holds Wall Street responsible in the first major regulatory response to the banking crisis of 2008. This legislation addresses three major components thought to be most critical in our financial crisis: systemic risk, consumer protections, and derivative regulation. Years without accountability for Wall Street and big banks brought us the worst financial crisis since the Great Depression, the loss of 8 million jobs, failed businesses, a drop in housing prices, and wiped out personal savings. 

The failures that led to this crisis require bold action. We must restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them. We must create a sound foundation to grow the economy and create jobs.

HIGHLIGHTS OF THE LEGISLATION 

• Consumer Protections with Authority and Independence: Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices. 
• Ends Too Big to Fail Bailouts: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses. 
• Advance Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.
• Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated -- including loopholes for over-the-counter derivatives, assetbacked securities, hedge funds, mortgage brokers and payday lenders.
• Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes. 
• Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses. 
• Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.

Perhaps the major issue in financial reform has been how to address the systemic fragility that was revealed by the crisis. The Dodd-Frank Act creates a new regulatory umbrella group chaired by the Treasury Secretary—the Financial Stability Oversight Council—with authority to designate certain financial firms as "systemically significant" and subjecting them to increased prudential regulation, including limits on leverage, heightened capital standards, and restrictions on certain forms of risky trading. These firms will also be subject to a special resolution process similar to that used in the past to address failing depository institutions.

Other aspects of financial reform address particular sectors of the financial system or selected classes of market participants. The Dodd-Frank Act consolidates consumer protection responsibilities in a new Bureau of Consumer Financial Protection within the Federal Reserve. The act consolidates bank regulation by merging the Office of Thrift Supervision (OTS) into the Office of the Comptroller of the Currency (OCC). It requires more derivatives to be cleared and traded through regulated exchanges, and it mandates reporting for derivatives that remain in the over-the-counter market. Hedge funds have new reporting and registration requirements. Credit rating agencies are subject to greater disclosure and legal liability provisions, and references to credit ratings will be removed from statute and regulation. A federal office is created to collect insurance information. Executive compensation and securitization reforms attempt to reduce incentives to take excessive risks. Intermediaries who provide investment advice to retail investors and municipalities may be subject to a fiduciary duty. The Federal Reserve's emergency authority is amended and its activities are subject to greater public disclosure and oversight by the Government Accountability Office (GAO).

For more information concerning my work and views on Financial Services issues, please contact my Washington, DC office.

I look forward to your feedback.

Thank you.