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Inside Washington (12/02/2009)
* WASHINGTON (12/3/09)--The House Financial Services Committee approved legislation Wednesday that will put an end to “too big to fail” financial firms. The Financial Stability Improvement Act, H.R. 3996, aims to prevent the failure of large institutions from becoming a systemwide crisis and ensure that taxpayers are not responsible for the collapse of large banks. Under the bill, any costs for dismantling a failed financial company will be repaid from the assets of the failed firm at the expense of shareholders and creditors. Any shortfall would then be covered by a dissolution fund pre-funded by large financial companies with assets of more than $50 billion and hedge funds with assets of more than $10 billion. Big banks will be affected the most by the legislation, observers said. It requires big banks to retain more capital, hold convertible debt instruments, pay assessments to a systemic risk insurance fund and pay more in deposit insurance premiums. Karen Shaw Petrou, Federal Financial Analytics managing partner, said prior to the legislation’s approval that if such measures were enacted, some of the largest banking organizations would “pull themselves apart” because the legislation would force them to undergo “strategic reassessment” (American Banker Dec. 2) ... * WASHINGTON (12/3/09)--The Treasury Department has announced that it will sell its warrants for Capital One common stock today. The auction will begin at 8 a.m. EST and will end at 6:30 p.m. The Treasury is selling 12,657,960 warrants, all of which expire on Nov. 14, 2018. The Treasury will not receive any proceeds from the sale ... * WASHINGTON (12/3/09)--A longtime debate regarding industrial loan companies (ILCs) may be ended with the approval of a regulatory reform bill by the House Financial Services Committee The bill would prohibit new commercial owners of banks and subject existing ILCs to holding company restrictions (American Banker Dec. 2). The ILC issue surfaced two years ago when Wal-Mart submitted an application for an ILC. Opponents demanded legislation to prevent Wal-Mart from ownership of a depository institution. The bill, by House Financial Services Committee Chairman Barney Frank (D-Mass.), includes provisions that ban the creation of new ILCs. Commercial firms would not be able to apply to own depository institutions. Nonfinancial companies that own a bank could keep it, but ILC owners would be subject to tougher scrutiny ... * WASHINGTON (12/3/09)--Sen. Christopher Dodd (D-Conn.), head of the Senate Banking Committee, convened a meeting Saturday evening with his committee to try and revive legislation that would reform the financial regulatory system (The New York Times Dec. 2). Dodd assigned one Democrat and one Republican to each of the legislation’s main chapters to forge compromises and bring back the measure. Dodd said he hoped that the debate over financial regulation overhaul would reach a turning point. Dodd’s approach to financial legislation is opposite that of House Financial Services Committee Chairman Barney Frank (D-Mass.), who spent months going through each chapter of the legislation with his committee. He said in a recent interview that he hopes to take the legislation to the floor later this month. Dodd has been unable to earn support from Republicans and some Democrats with ties to industry groups affected by the bill ... * WASHINGTON (12/3/09)--The Federal Reserve Board issued a prompt corrective action against Bank of Illinois in Normal, Ill., to raise its capital ratios. The bank failed to submit a capital restoration plan to the Fed and now must raise its equity. Bank of Illinois is required to submit a progress report to the Fed within 30 days, detailing its plan to comply with the Fed’s directive ...


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