Geithner Fails To Provide Information On Financial Regulatory Reform Legislation Submitted To Congress
Dec 1, 2009 -
- More than a month after Treasury Secretary Tim Geithner submitted legislative language to Congress to improve the stability of the financial system, he has failed to provide responses to a number of fundamental questions Ranking Member Spencer Bachus sent to him after the October 29th hearing of the Financial Services Committee on the Administration's proposal. The questions were intended to facilitate a thorough understanding of the legislation and potential unintended consequences.
At the hearing, Treasury Secretary Geithner agreed to Ranking Member Bachus' request that the responses to the questions would be provided before the Committee was asked to vote on the bill. However, less than a day before the Committee votes to report the legislation to the full House, Secretary Geithner has yet to provide any explanations or perspectives on the bill.
Among the questions Ranking Member Bachus asked are:
•· Can you explain how the authority to file involuntary petitions for bankruptcy in Section 1105 will interplay with the emergency financial stabilization authority of Section 1109?
•· Section 1110 seems to grant the FDIC examination authority for resolution purposes. Why is this authority necessary? What is intended?
•· Why has the Administration abandoned its plan for a national bank regulator?
•· What is a systemically important financial market utility?
•· A number of observers during the debate of H.R. 1728 criticized credit risk retention structures as unworkable. Does Subtitle F address those concerns? How? If not, why not?
•· The bill prohibits creditors from directly or indirectly hedging the credit risk they have retained, but on page 159 you give the Federal banking agencies and the SEC the ability to allow the direct and indirect hedging of retained credit risk. Which is your position? Why prohibit something you don't feel strongly about?
•· Can the Secretary and the FDIC determine that a resolution is necessary to protect the system and have the result be a firm that is preserved largely intact, even if the preservation of the firm is not the purpose or goal?
•· What is the rationale for appointing the Treasury Secretary as Chairman of the Financial Services Oversight Council?
•· Can you please describe how you arrived at the decision to identify systemically significant firms?
•· Why is the Council not required to testify before Congress?
•· Section 1102 (b) seems to imbue each Federal Financial regulatory agency with the authority to evaluate systemic risk for the firms it regulates. Section 1103 empowers the Federal Reserve to apply heightened prudential standards only to "identified financial institutions." The result of these provisions would seem to mean that certain institutions could be subject to different heightened prudential standards from separate authorities. Was this intended? If yes, how will this work? If no, how can these provisions be reconciled?
•· Why do you need to tell the Federal Reserve Board to use "realistic assumptions" in determining the strength of a firm's capital restoration plan? Is there a reason to believe the Federal Reserve would use unrealistic assumptions?
•· Please confirm that only an "identified financial company" subject to heightened prudential standards are set forth in Section 1104, can be resolved through "Enhanced Resolution authority" set forth in Subtitle G, and that a firm that is not an "identified financial company" cannot be resolved through the "Enhanced Resolution Authority" set forth in Subtitle G.
•· What is the public policy justification for Section 1109? What sort of firms would be ineligible for assistance under this section? Click here to view the questions Ranking Member Bachus sent to Secretary Geithner.