The two Democrats leading the House-Senate conference working to hammer out a single financial regulatory reform bill stressed yesterday that conferees need to wrap up their work by tomorrow to ensure passage of the bill through each chamber next week, before lawmakers break for the July 4 recess.
“By finishing on Thursday, that’s what we need to get it done on the floor of the House and Senate next week,” said Rep. Barney Frank, D-Mass., chairman of the House-Senate panel. “If we are not able to finish by Thursday, this bill will not pass until the middle of July. We do not think that would be wise for economic stability.”
In aiming to wrap up their work by tomorrow night, the panel also is trying to ensure that President Obama has leverage to urge other countries to pass financial regulatory reforms when he attends the G-20 Summit in Toronto this weekend.
As the discussions neared their conclusion, lawmakers were saving some of the most controversial measures for last, including the regulation of over-the-counter derivatives. Among the issues to be debated Thursday is the imposition of a fiduciary duty on swap dealers requiring them to hold their counterparty’s interests ahead of their own when they enter into swaps with states, localities, public pension funds and other public entities.
The measure is opposed by many market participants who warn that it is legally unworkable.
Meanwhile, Senate Banking Committee chairman Christopher Dodd, D-Conn., said yesterday that he plans to soon offer amendments to three areas of Title 9 of the conference’s “base text,” revolving around a fiduciary duty for brokers when providing personalized financial advice, proxy access and self-funding for the Securities and Exchange Commission.
Conferees last week finalized the bulk of the muni provisions in the title, including a reconstituted Municipal Securities Rulemaking Board required to have “public” officials comprise a majority of its 15 members.
However, while the SEC would register municipal financial advisers, swap advisers, and investment brokers, it was unclear if conferees had finalized a tentative agreement they appeared to reach last week allowing the MSRB to write regulations for these advisers.
But conferees agreed to allow the SEC “or a designee” to enforce such rules as well as to impose a fiduciary duty on advisers.
It also was unclear if Dodd planned to push for an amendment that would authorize the SEC to direct the Financial Industry Regulatory Authority to collect assessments from muni dealers to fund the Governmental Accounting Standards Board. The board is currently funded through voluntary contributions from states and localities and the sales of its publications, but is constantly short of funds and its dependence on issuers is seen as a conflict. Dodd indicated last week that he would move forward with the amendment, at the request of Sen. Bob Corker, R-Tenn., and released a copy of the amendment.
A Dodd spokesman did not respond to requests for comment on the proposal, which dealers have called inappropriate and groups representing states and localities are mixed.
While the National Governors Association supports dedicated funding for GASB, the Government Finance Officers Association is opposed to the Dodd measure because it does not restrict the use of the new money to accounting and financial reporting, said GFOA executive director Jeffrey Esser.
“We’re not looking for any control over GASB or what is does within its prescribed mission of accounting or financial reporting — the problem we have is GASB has self-described its mission” beyond that, he said.
GASB officials have declined to comment on the proposal.