Approaching the Home Stretch: Senate Passes "Restoring American Financial Stability Act of 2010"

On May 20, 2010, the Senate passed the "Restoring American Financial Stability Act of 2010" as amended ("Senate Bill"). Congressional leadership has indicated that conference committee proceedings will take place in June, making it likely that the legislation will be passed by the House and Senate before the July 4th Recess and signed into law by the President shortly thereafter.

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Background

By way of background, Senate Banking Committee Chairman Chris Dodd (D-CT) released a draft Senate Bill on March 15. The draft Senate Bill, which had been in development for months, was different in many respects from H.R. 4173, the "Wall Street Reform and Consumer Protection Act of 2009" ("House Bill"), which was passed by the House on December 12, 2009. Although 473 amendments were filed, the Senate Banking Committee's March 22 markup lasted only 21 minutes. The Committee passed only the Manager's Amendment and voted along party lines to favorably report the legislation to the full Senate. Please see Emerging Issues: Financial Regulatory Reform Legislation Moves to Senate Floor, Senator Dodd Releases Financial Regulatory Reform Legislation: The Home Stretch?, and House Passes Financial Regulatory Reform Legislation for additional information.

The Banking Committee bill was subsequently introduced as original measure S. 3217. Floor consideration began on April 28 and lasted over three weeks. 441 amendments were filed and 33 were adopted. Notably, Chairman Dodd and Senate Banking Committee Ranking Minority Member Richard Shelby (R-AL) were unable to come to an agreement on a package of non-controversial, bipartisan provisions for a comprehensive Manager's Amendment, leaving many significant issues unresolved. Procedurally, the Senate took up the House-passed H.R. 4173, inserted the text of S. 3217 as amended in lieu of the House's text, and passed the bill by a vote of 59 to 39. Four Republicans voted for the Senate Bill and two Democrats voted against the Senate Bill.

Depository Institutions

Both the House and Senate Bills would abolish the Office of Thrift Supervision ("OTS"), giving the Office of the Comptroller of the Currency ("OCC") supervisory authority over national banks and Federal thrifts. In contrast to the House Bill, the Senate Bill would abolish the Federal thrift charter, with a grandfather provision for existing thrifts.

The Senate Bill does not offer a national mutual bank charter, which was included in the House Bill. During the course of the Senate's consideration of the banking regulatory structure, the Senate Bill moved closer to the House Bill. As such, this is likely not to be an area of significant debate during the conference committee proceedings.

While both Bills modify the exceptions to the Bank Holding Company Act ("BHCA"), they do so differently. The House Bill would significantly narrow the exception to the BHCA for industrial loan companies ("ILCs"), lending companies that are subsidiaries of industrial companies whose primary purpose is to lend to customers, and require most companies that currently own ILCs to either register as bank holding companies or restructure their financial activities. New ILCs would not qualify for the BHCA exception. In contrast, the Senate Bill imposes a three-year moratorium on nonfinancial firms acquiring control of a credit card bank, ILC, or trust company. During the moratorium, a study would be conducted to evaluate eliminating many of the exceptions to the BHCA.

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