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Inside Washington (03/30/2011)
* WASHINGTON (3/31/11)--The House Financial Services subcommittee on capital markets and government-sponsored enterprises has scheduled a hearing today to study eight bills unveiled Monday and intended to provide immediate reforms to Fannie Mae and Freddie Mac. According to the hearing announcement, the subcommittee will examine legislative steps that can be undertaken by Congress to “rebuild a stable housing finance system based on private capital.” The titles of the bills scheduled for subcommittee scrutiny are GSE Credit Risk Equitable Treatment Act, The Equity In Government Compensation Act, The Portfolio Risk Reduction Act, The GSE Subsidy Elimination Act, The GSE Mission Improvement Act, The Fannie Mae and Freddie Mac Accountability And Transparency For Taxpayers Act, The GSE Risk and Activities Limitation Act, and The GSE Debt Issuance Approval Act … * WASHINGTON (3/31/11)--The chairmen of the House Financial Services Committee and its subcommittee on financial institutions and consumer credit have asked Elizabeth Warren if she wants to “clarify or correct” her recent testimony regarding the Consumer Financial Protection Bureau’s (CFPB) role in the ongoing mortgage servicing settlement negotiations. Warren has been appointed by the Obama administration to help set up the CFPB, which was created under the Dodd-Frank Wall Street Reform Act. Reps. Spencer Bachus (R-Ala.) and Shelley Moore Capito (R-W.Va.), heads of the committee and subcommittee respectively, noted in a letter to Warren that during a subcommittee hearing panel members questioned her about CFPB’s involvement in ongoing settlement discussions between mortgage servicers and state and federal authorities. The letters said Warren responded that CFPB had offered “advice" and “expertise” to the authorities. The letter alleged that recent reports indicate a more extensive role, and invited Warren to respond … * WASHINGTON (3/31/11)--In a largely symbolic gesture, the House of Representatives Tuesday voted to end the controversial Home Affordable Modification Program (HAMP)Politico March 30). In February 2009, President Barack Obama launched HAMP, saying it would help three million or four million American renegotiate the terms of their mortgages, but the program had only 522,000 ongoing mortgage modifications as of Dec. 31. Even with a 252-170 House vote, largely along political lines, to eliminate the program, the legislation will likely fail in the Senate. Also, the White House has said the president would veto the bill if it were to reach his desk … * WASHINGTON (3/31/11)--The Federal Reserve Board on Wednesday requested comment on a proposed rule that implements two provisions of the Dodd-Frank Act related to the supervision of financial market utilities (FMUs) designated as systemically important by the Financial Stability Oversight Council. FMUs, such as payment systems, central securities depositories and central counterparties, provide the essential infrastructure to clear and settle payments and other financial transactions. The proposed rule establishes risk-management standards governing the operations of payment, clearing, and settlement activities of FMUs, except those registered as a clearing agency with the Securities and Exchange Commission or as a derivatives clearing organization with the Commodity Futures Trading Commission. The proposed risk-management standards are based on the existing international standards that the Fed has incorporated previously into its policy on payment system risk. Second, the proposed rule establishes requirements and procedures for advance notice of material changes to the rules, procedures, or operations of a designated FMU for which the Board is the primary supervisor … * WASHINGTON (3/31/11)--Lenders would be required to offer mortgages with at least a 20% down payment if they want to securitize loans, according to a proposal released the Federal Deposit Insurance Corp. (FDIC) on Tuesday. Some observers fear the requirements will hamper the mortgage lending market (American Banker March 30). But FDIC Chairman Sheila Bair said the qualified residential mortgage requirement would apply to only a “small slice” of the mortgage market. While critics said the rule was narrow, Bair said the limitations were appropriate. Dodd-Frank requires issuers of securitized loans to retain a 5% interest in the risk of loss. The law provides an exception to that rule and directs the agencies to set a standard for underwriting and product features that result in a lower risk of default so risk retention is not necessary. Government-sponsored enterprises would be considered already in compliance because they retain all of the credit risk … * WASHINGTON (3/31/11)--The Federal Deposit Insurance Corp. (FDIC) on Tuesday issued a proposal requiring that the largest financial services companies provide plans for winding down in the event of a financial crisis (American Banker March 30). The draft rule requires companies to submit resolution plans, or “living wills,” with regular updates and reports on the firms’ credit exposures. The Federal Reserve, which co-wrote the rule, is expected to vote on it later this week. The proposal will then be open to public comment for 60 days, after which regulators will revise it and approve a final rule. The Dodd-Frank Act gave federal regulators authority to seize and break up troubled financial companies deemed “too big to fail” because of the risk their demise would present to the financial system. The proposal would require financial companies to provide information on credit exposures, funding, capital and cash flows. The plans are designed to help firms “rationalize” their business models and mitigate some of the risks that created the credit crisis in 2008. Under the proposal, part of a joint rulemaking with the Federal Reserve, plans would be required from U.S. bank holding companies $50 billion or more in assets and foreign-based lenders of similar size with U.S. operations …


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