The House Financial Services Committee aims to "identify and remedy" any unintended consequences of the Dodd-Frank regulatory overhaul, with a focus on rules governing proprietary trading and derivatives, according to a draft of the panel's strategic plan.
The 20-page document, circulated by Chairman Spencer Bachus of Alabama to committee members and staff for comment, says that the panel will focus this year on overseeing implementation of Dodd-Frank's new rules for Wall Street. A copy of the draft oversight plan was obtained by Bloomberg News.
Committee members will monitor regulators who are writing language to enforce the so-called Volcker rule limiting proprietary trading by banks to "ensure that it does not result in unintended consequences" for jobs and markets, according to the draft. The panel also will "examine whether federal regulators will impose margin and capital requirements" on non- financial firms that use derivatives to hedge legitimate business risk.
"The committee will assess the results of the implementation of the Dodd-Frank Act to improve those parts of the act that work well while changing those parts that do not," according to the proposal. The panel will "identify and remedy unintended consequences."
House Republicans almost unanimously opposed the law during last year's congressional debate. Their oversight plans may complement lobbying efforts by Wall Street firms that are seeking to influence the language in rules being written by regulatory agencies. Lawmakers and firms including JPMorgan Chase & Co. and Bank of America Corp. have sent comment letters to regulators about specific provisions.
Should Republicans push for legislative changes, they will likely run into opposition in the Senate, where Democrats still hold the majority. President Barack Obama is also unlikely to approve any major changes in one of the signature laws of his first two years in office.
The Financial Services draft said the panel also will "conduct significant oversight" over the new Financial Stability Oversight Council created by the law. Treasury Secretary Timothy F. Geithner is chairman of the council, which is responsible for identifying firms that are "systemically significant" to the financial system.
The panel will be "monitoring among other things the extent to which its designation of systemically significant firms may create an expectation among market participants that the government will not permit these firms to fail," according to the draft.
Bachus and his senior colleagues, who took over the committee after Republicans secured control of the House in the November elections, have spent much of their first month in power dispatching letters to the federal agencies implementing the new law. The letters have voiced concern over draft rules, requested documentation for costs of contracts, staff and technology and questioned the power of the nascent Consumer Financial Protection Bureau.
Bachus already took aim at the Volcker rule in a Nov. 3 comment letter to the Federal Reserve. The rule, which aims to reduce the chance that banks will make investments with their own capital that put their federally insured deposits at risk, "may spark a mass exodus of clients from U.S. banks to banks based abroad," Bachus wrote.
The Securities and Exchange Commission and Commodity Futures Trading Commission will face committee scrutiny over new rules regulating the derivative markets. Both agencies are already under budget pressure, with Republicans considering cuts in non-defense discretionary spending. The committee will "carefully examine the SEC's budget requests to ensure that the agency deploys its resources effectively," the draft committee plan says.
Representative Barney Frank of Massachusetts, the senior Democrat on the Financial Services Committee, said last week that Republicans are trying to "cripple regulation by failing to fund it."
Bachus and Representative Randy Neugebauer, in a Jan. 28 letter, asked the U.S. regulators implementing the Dodd-Frank rules to provide a full account of their spending, hiring and contracting. Federal Reserve Chairman Ben S. Bernanke and Treasury's Geithner were among those sent the letter.
FANNIE AND FREDDIE
House committees are required to adopt oversight plans and submit them to the House Oversight and Government Reform and House Administration Committees by Feb. 15. Bachus has scheduled a committee meeting on Feb. 10 to consider the draft proposal.
The draft also discusses the committee's plans to oversee federally owned mortgage companies Fannie Mae and Freddie Mac. Bachus has already scheduled three hearings on mortgage finance. The committee, according to the document, "will examine proposals to modify or terminate Fannie Mae's and Freddie Mac's statutory charters."
Republicans and Democrats have battled for years over the dual role of Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, as publicly traded companies whose charters require them to help promote U.S. housing policy. The fight has intensified since the government placed the two companies in conservatorship, with some House Republicans arguing for full privatization of mortgage finance.
As the committee tackles an overhaul of mortgage finance, it will "consider the appropriate role, if any, for the federal government in the secondary mortgage market," according to the draft.