The Obama Transition and the 110th Congress
By: Daniel F.C. Crowley, Karishma Shah Page
The U.S. Department of Treasury (“Treasury”) is conferring with the Obama transition team, led by former Clinton Chief of Staff John Podesta, on policy decisions in order to ensure continuity between administrations. The transition team has also turned its attention to selecting the next Treasury Secretary. The new Secretary is likely to have been involved in the development of programs under the Emergency Economic Stabilization Act of 2008 (EESA, H.R. 1424, P.L. 110-343, click GPO’s PDF Display for EESA text). Possible choices include New York Federal Reserve President Timothy Geithner, Federal Deposit Insurance Commission Chairwoman Sheila Bair, former Federal Reserve Chairman Paul Volcker, and former Treasury Secretaries Larry Summers and Robert Rubin.
President Bush hosted the G-20 summit on November 15 in Washington, D.C. to discuss a globally coordinated response to the financial crisis. European Union leaders have urged the President to join them in devising international regulatory measures to govern the banking industry. In his remarks on November 12, U.S. Treasury Secretary Henry M. Paulson, Jr. underscored the importance of reaching a consensus on a broad-based reform agenda during the meeting. Although President-elect Obama was not expected to formally participate, some delegates were planning to engage with him while in Washington, D.C.
Congress is scheduled to reconvene for one week, beginning November 17. House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) would like to pass a stimulus package, but the Majority Leader has said there may not be enough support. President-elect Obama has stated that if a bill does not pass in the lame-duck session, he will make it his first order of business upon being sworn in. The stimulus bill may be a vehicle for legislative directives relative to the Troubled Asset Relief Program (“TARP”) , especially in the area of preventing mortgage foreclosures. The FDIC has proposed using $50 billion of TARP funds for a loan modification and guarantee program. Senate Banking Committee Chairman Christopher Dodd (D-CT) and House Financial Services Committee Chairman Barney Frank (D-MA) are supportive of the proposal.
As expected, congressional oversight of EESA implementation has continued apace. On October 24, Senators Charles Schumer (D-NY), Jack Reed (D-RI), and Robert Menendez (D-NJ) wrote a letter recommending Treasury adopt guidelines to ensure that institutions use bailout funds to restart lending activities rather than acquisitions or dividends. On October 29, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid sent a letter urging Treasury to strengthen the interim final rules on executive compensation for CPP institutions. In addition, the following congressional hearings have recently taken place or are planned to take place:
Private Sector Cooperation with Mortgage Modifications
Wed., Nov. 12, 10:00 a.m., 2128 Rayburn Bldg.
House Financial Services Committee
Regulation of Hedge Funds
Thurs., Nov. 13, 10:00 a.m., 2154 Rayburn Bldg.
House Oversight and Government Reform Committee
Oversight of Emergency Economic Stabilization Act
Thurs., Nov. 13, 10:00 a.m., 538 Dirksen Bldg.
Senate Banking Committee
Is Treasury Using Bailout Funds for Foreclosure Prevention, as Congress Intended?
Fri., Nov. 14, 10:00 a.m., 2154 Rayburn Bldg.
House Oversight and Government Reform Committee’s Subcommittee on Domestic Policy
Troubled Asset Purchase Program Oversight
Tues., Nov. 18, 10:00 a.m., 2128 Rayburn Bldg.
House Financial Services Committee
Collapse of Fannie Mae and Freddie Mac
Tues, Dec. 9, 10:00 a.m., 2154 Rayburn Bldg.
House Oversight and Government Reform Committee
Congress is preparing to consider comprehensive financial services reform legislation early next year. Senator Schumer, a member of both the Senate Finance and Banking Committees, has outlined six principles that he believes should guide the deliberations:
- A key focus should be on controlling systemic risk and ensuring stability.
- The regulatory structure should be unified under a single regulatory authority, or at a minimum, simplified.
- Complex financial instruments should be subject to regulation under clear regulatory authority.
- Global financial markets require globally coordinated solutions.
- Increased transparency should be a central goal.
- The laissez-faire view of regulation must come to an end.
For more details on the impact of the recent election on current and future policy initiatives relating to the financial services industry, please see the recent K&L Gates Public Policy and Law Alert, “Financial Services Reform: What Comes Next?”
The K&L Gates Public Policy & Law group consists of senior, bipartisan policy professionals who are closely monitoring these developments in order to provide insights to and effective advocacy on behalf of firm clients.
