Financial Reform Breakdown: Part 2

We offered earlier today a look at some of the key provisions in the still-being-debated financial reform bill in Congress. Here’s a brief overview of some of the other components (full 1,300-plus-page bill here).

  • Bank Capital Standards – Under an amendment adopted unanimously with little fanfare, banks with more than $250 billion in assets are forced to meet higher risk- and size-based capital standards. The Treasury and Fed oppose the measure authored by Sen. Susan Collins (R-Maine), warning it could make it harder for U.S. officials to negotiate global capital standards with foreign regulators.
  • Mortgage Risk – Require firms that securitize mortgages and other loans to hold a portion of the risk on their own balance sheets, but under an amendment added on the floor also would direct regulators to establish a category of less-risky mortgage products – primarily fixed-rate, fully amortizing loans – that would be exempt from the risk-retention rule.
  • Hedge Funds – Requires hedge funds that manage more than $100 million to register with the U.S. Securities and Exchange Commission (SEC) as investment advisors and disclose to the agency information about their trades and portfolios.
  • Corporate Governance – Gives shareholders of public corporations a non-binding vote on executive pay and the SEC the authority to grant shareholders proxy access to nominate directors.
  • Insurance – Creates a new Office of National Insurance within the Treasury to monitor the industry, recommending to the systemic risk council insurers what should be treated as systemically important, as well as coordinate international insurance issues. The office would produce a study and recommendations to Congress on ways to modernize insurance regulation, but it is explicitly not a new regulator.
  • Credit Rating Agencies – Establishes a new self-regulatory organization for credit rating agencies designed to eliminate a conflict in the current system in which an institution pays for its rating and, at times, shops for the best rating it can get for the lowest price. The SEC will appoint members of the new regulatory body that will then assign credit-rating agencies to provide initial credit ratings of financial packages.
  • Investment Advice – Several Democrats had hoped to tighten regulations for broker-dealers who give investment advice, but they weren’t given a floor vote on their amendment despite near constant lobbying from consumer groups. As it stands, this provision makes recommendations and directs the SEC to study the differences between fiduciary standards for investment advisers and broker-dealers.