House Passes Financial Regulatory Reform Legislation

House Passes Financial Regulatory Reform Legislation

by Dan Crowley, Karishma Shah Page, Bruce Heiman, Collins R. Clark and Justin D. Holman

Excerpt:

On December 11, the House of Representatives passed H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009 (see H.R. 4173 as introduced), by a vote of 223 to 203. Twenty-seven Democrats voted against the bill and no Republicans voted in favor of the bill.

House passage came quickly after the House Financial Services Committee ("HFSC") reported the last bills in the regulatory reform package on December 2. Over 240 amendments were filed with the House Rules Committee ahead of Floor consideration (see Rules and Committee Reports). Nearly 60 of the amendments were incorporated into the Manager's Amendment and 35 of the amendments were considered on the Floor.

Systemic Risk

The legislation would create a Financial Services Oversight Council ("FSOC"), which would be responsible for identifying and regulating systemic risk. The FSOC and the Federal Reserve would be jointly responsible for imposing higher regulatory and capital standards on financial institutions identified as posing a systemic risk. Several amendments were filed pertaining to H.R. 4173's more controversial systemic risk provisions; the amendments, however, were not included in the rule governing the Floor debate and amendment of the bill. In the bill as passed, the FSOC would have the authority, in certain cases of serious systemic risks, to limit the size of and dismantle financial institutions. Additionally, the legislation would establish an enhanced authority for the Federal Deposit Insurance Corporation ("FDIC") to resolve failing financial institutions that pose a systemic risk. The legislation would create a $150 billion resolution fund, which would be funded by an assessment on financial firms with at least $50 billion in assets.

Consumer Financial Protection Agency

The legislation would create a Consumer Financial Protection Agency ("CFPA") to protect consumers from unfair and abusive financial products and services. The Manager's Amendment, which was adopted, included provisions that clarified the authority of the CFPA. Specifically, the bill as passed would prohibit the CFPA from exercising authority over merchants, retailers, and sellers of non-financial services. Additionally, the bill as passed would clarify that the CFPA would only be able to issue product-specific rules for non-bank products.

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Dan Crowley is a partner in the firm's Washington, D.C. office. His practice is focused on public policy issues relating to financial services and capital markets. He also provides research on public policy matters to institutional investors.

Bruce Heiman engages in a wide ranging federal counseling and lobbying practice. He has represented leading companies and trade associations in technology, trade, postal, financial services, transportation and manufacturing industries. He is one of two Practice Area Leaders of K&L Gates' Policy and Regulatory Practice and serves on the firm's Management Committee.

Karishma Shah Page is an associate in the Washington, D.C. office of K&L Gates. Ms. Page concentrates her practice on federal policy and legislative affairs, focusing on tax and financial services.

Collins R. Clark is an associate in the Washington, D.C. office of K&L Gates. He works in the investment management practice group, advising depository institutions, trust companies, and other financial institutions. He also works on public policy issues relating to the financial services industry and assists with immigration matters.

Justin D. Holman is an associate in the Washington, D.C. office of K&L Gates. Mr. Holman practices in the area of investment management, primarily focusing on open and closed-end registered funds, investment advisers, hedge funds and other private funds. Mr. Holman also works on federal financial services public policy issues, with a particular emphasis on derivatives, hedge funds and private equity funds.