WASHINGTON — The House Financial Services Committee plans to examine state and local government budget shortfalls and the possibility of bond defaults in the municipal market, according
The chairman’s plans for the committee surfaced as the House Oversight and Government Reform Committee’s panel on TARP and financial services and House Judiciary Committee staff have already announced plans to hold hearings on the state and local fiscal problems and municipal debt.
“In light of concerns over potential defaults by state, county, city, and local governments, the committee will monitor the health of the United States municipal securities marketplace and consider reforms to increase transparency in that segment of the capital markets,” the draft stated.
The chairman’s plans are in line with those of the Securities and Exchange Commission, which has been conducting a broad inquiry of the municipal market with the goal of improving muni disclosure and ensuring it is more in line with corporate disclosure, while recognizing the differences between the two markets.
The committee also plans to examine the trend in the municipal market for issuers to sell more revenue bonds than general obligation bonds and the implications of that trend for possible bond defaults, according to the draft.
It will examine provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that are designed to strengthen oversight of the muni securities industry and to extend regulatory oversight to market participants and transactions that are currently unregulated, the draft stated.
The Municipal Securities Rulemaking Board’s initiatives, activities, and operations will also be reviewed by the committee, according to the draft.
The committee plans, in particular, to review provisions of Dodd-Frank that expand the MSRB’s mission to “include the protection of state and local government issuers, public pension plans, and others whose credit stands behind municipal bonds, in addition to protecting investors and the public interest,” the draft stated.
It will also review the MSRB’s regulator of municipal advisers.
As for the SEC, the chairman said the committee “will carefully examine the SEC’s budget requests to ensure that the agency deploys its resources effectively.”
It also will review the role of the Government Accounting Standards Board, which sets financial accounting and reporting standards for state and local governments.
The committee plans to “ensure that regulators carefully and transparently assess the costs and benefits of regulations called for by the Dodd-Frank Act in order to strike and appropriate balance between prudent regulation and economic growth,” the draft stated, adding, “The committee will assess the results of the implementation of the Dodd-Frank Act in order to improve those parts of the act that work well while changing those parts that do not and to identify and remedy unintended consequences.”
In the housing arena, the committee will review the Department of Housing and Urban Development budget “with the goal of identifying program spending cuts or eliminating inefficient and duplicative programs,” according to the draft.
The committee also will “consider ways to scale back the community development block grant program,” the draft stated.
