April 29, 2010

Financial Regulatory Reform

The focus in Congress recently has been on financial regulatory reform, which the House passed in December. The Senate finally began consideration of its financial regulatory reform legislation today, although a vote on final passage is likely a few weeks away. This comes after several Senate votes to proceed with debate failed to garner the necessary 60 votes to avoid a filibuster. Late Wednesday, Senate Republicans finally agreed to proceed with debate on this important issue.

Several changes to the current Senate bill may be offered now that debate finally looks likely, including removing the Consumer Financial Protection Agency (CFPA) and weakening provisions that make it easier to hold credit rating agencies accountable for neglecting to do their job. Many credit rating agencies gave their seal of approval to companies whose excessively risky practices led to the financial collapse. These same agencies have also forced municipal governments to pay billions of taxpayer dollars to insure bonds that have nearly no chance of defaulting. Last night, Senate Democrats, at the insistence of Senate Republicans, agreed to remove a provision for a pre-funded Systemic Dissolution Fund paid for by large financial companies to cover the cost of liquidating and closing failing institutions. These same Wall Street companies would still be taxed to pay for these costs, but would be taxed after an institution failed. It is imperative that Wall Street, and not taxpayers, pay to clean up its mess. It is my hope that there is enough support in the Senate to pass a strong reform bill, and that a Conference Report can be sent to the President soon. Congress has been considering solutions to these issues for a year. The House completed action months ago. Progress is long overdue.?

Special Update on TARP

As Congress works to reform Wall Street, I thought it would be interesting to show where the Troubled Asset Relief Program (TARP) money went and how that program stands today. Below is a chart prepared with information from a recent Congressional Quarterly chart showing the status of TARP and its investments as of March 31st. Last week, TARP recipient General Motors announced that they fully repaid their debt to taxpayers. I am encouraged that TARP repayments are continuing. Taxpayer dollars invested this way have proved to be an effective aid for our economy. The table copied below details how much money has been distributed to date, how much has already been repaid to the government, and how much revenue — in interest, dividends, and warrants — has been paid to the government. Because the figures listed are compiled monthly, the chart does not include the GM repayment. There is, of course, still money to be repaid to taxpayers but more and more companies are slowly getting to the point where they can do that.

Capital Purchase Program lent $205 billion to hundreds of viable banks to stabilize the financial system.

Targeted Investment Program provided an additional $40 billion in loans to Citigroup and Bank of America, which were deemed systemically significant to the financial system.

Asset Guarantee Program guaranteed select mortgage-related assets held by firms who also held illiquid assets which threatened market stability.

Consumer & Business Lending programs encourage lenders to provide more auto, student and credit card loans by increasing their demand — this is done by allowing these loans to serve as collateral for loans made to financial institutions.

Public-Private Investment Program purchases illiquid real estate assets from banks to help thaw frozen markets.

AIG, deemed systemically significant, received $47.5 billion in investments to prevent it from failing.

Auto Industry Financing Program provided loans to Chrysler and GM to prevent major disruption in the U.S. auto industry.

Home Affordable Modification Program provides incentives for mortgage servicers to modify homeowner loans which are delinquent or at immediate risk of default.

Here are additional materials on TARP investments which I encourage you to review:

• Treasury Department’s Monthly Status Report on TARP [PDF]
• Special Inspector General for TARP’s recent Quarterly Report [PDF]

Recent Votes

This week the House considered H.R. 5013: IMPROVE Acquisition Act of 2010. This legislation focuses on improving federal agency oversight to reduce instances of inaccurate payments. It requires agencies to report on how they are monitoring and recovering payments made in error; and requires all agencies that spend more than $1 million annually to perform regular recovery audits. I voted YES. H.R. 5103 passed and the entire vote is recorded below: