Financial Regulatory Reform Act (Law'd)

[Southern Senator North Carolina Yankee]

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Sponsor: North Carolina Yankee

[Southern Senator North Carolina Yankee]

Summary for the financially illiterate

Okay. As Fritz suggested

Section 1 is basically establishing a gov't agency that will step in when certain companies that are

1. Large and have the potential to bring down the entire economy were they to collapse

2. Are in bankruptcy or on the verge of bankruptcy.


This agency will then be able to do one of three things or a combination of the three.

1. Find a buyer and sell the company to someone else.

2. Organize a debt(loans and bonds outstanding) for equity(shares of stock) swap. Where the debtors are given shares at a certain price to prevent them for calling there bonds/loans and putting the company under.

3. Liquidate the company and then sell off the healthy parts on the open market to companies that want them and then creating a shell company to house the bad assets and previous liabilities) and the judges can deal with tying up the loose ends.

No taxpayer funded bailouts would be used, while at the same time systemic risk is avoided.

In the future we need to look at modifying anti-trust laws to break up companies that get too large no matter there economic condition like AIG being broke up in say 2005, before any bad stuff could happen.

Section 2 just finishes up the establishment of this Resolution authority, creates guidlines for administration, and paying for the agency.


Section 3 Is explained here: https://uselectionatlas.org/FORUM/index.php?topic=105674.15


Section 4 removes a loophole created in the 2000 passage of the Commodity Futures Modernization Act of 2000 that left the derivitives at the heart of the collapse unregulated.

Section 5 Creates a Consumer Protection Agency similar to the one proposed in RL but in a much more limited role and all the basically do is offer an "un-biased" rating of secruities, deritives etc and regulate companies that are in the financial ratings industry. Part of the reason for the widespread proliferation of all this junk paper(bad assets) was that it was rated as AAA by the likes of Moody's, Standard and Poors, etc. The ratings industry is also lightly regulated and to make matters worse most of the formulas used to grade financial instruments are proprietary and thus secret. So this will provide an objective agency from from financial or political influence to grade securities and regulate the existing ratings industry.

Section 6 removes the "Morale Hazard" created in the legislation passed by Senator Hans, which basically amounted to corporate welfare and had the risk of encouraging risky investment on the taxpayers dime if they didn't pan out. No offense to the Senator, but the risk of failure is what reduces and restricts risky investments in the market, take away the risk and it will create a rash of corporate irresponsibility. I will note that it just amends that act, it doesn't repeal it.

[Southern Senator North Carolina Yankee]

Well this Senate certainly is active. If there are no objections I intend to bend the time limits on this to ensure we have a good bill. I will review it once again and try and propose some amendments. If anybody has any ideas feel free to offer them. I would like to strengthen the consumer protection agency also I would like Hans input on Section 6 and removal of the corporate welfare portion of his bill(note that I left his tax on short selling in place which I beleive was the primary component of his bill anyway.) Still I would like his input.

[Southern Senator North Carolina Yankee]

From last sessions thread:

Thank you for doing this, Yankee.  This is much clearer.

Overall, good work.  Badger had raised some concerns regarding section 3 that still need to be addressed.  He ascertains that you have the right ideas, but your numbers are off.  I am certainly in no position to determine what the numbers should be.  The GM's response was not helpful, either.  I believe we need to determine specifically what amendments to make to section 3 before moving forward.  Badger, you out there?

I would also like to hear a response from Hans regarding section 6.

I am. FWIW from a mere Senator-elect:

The 10-1 cash to loan ratio proposed isn't as vast a change from current law as I thought; NCY pointed out the standard leveraging limit was recently as low as 13-1, whereas I'd (mis)recalled it being higher. Still, that's a huge drop. A bank with a million in assest could previously extend $13 million in loans and credit, but now is limited to $10 million they can loan. While I agree the standards need tightened, I don't believe a near 25% reduction in available credit is what the economy needs now.

I know my vote probably isn't needed on this proposal as it'll likely be passed or defeated before my swearing in, but is there some room for compromise on these numbers NCY?

RE: Section 5, in what specific ways is the proposed consumer protection agency more limited than the real life proposal? Just as importantly, why?

I would also like to hear from Franzl on Section 6 and review the original law before stating an opinion.

I don't believe these questions were ever resolved.

The question is no longer relevant because the section was miswritten on my part. The 25% refers to the 10% in the above clause. Meaning 2.5% of total assets. It now reas 100% of the those reserve assets. So an investment bank must have 10% of its assets in liquid capital. Its not a huge drop especially when you consider that many of these banks are now bank holding company's and have vast reserves of over a Trillion at the Fed.

[Southern Senator North Carolina Yankee]

Okay, thanks for that explanation.

Senator Hans, could you please comment on section 6?  I believe your work is being un-done here.

Only the lesser part of it, I kept his short selling tax in place but stripped the corporate Welfare provision to remove potential moral hazzard. Stop trying to insite strife.

[Southern Senator North Carolina Yankee]

From last sessions thread:

Thank you for doing this, Yankee.  This is much clearer.

Overall, good work.  Badger had raised some concerns regarding section 3 that still need to be addressed.  He ascertains that you have the right ideas, but your numbers are off.  I am certainly in no position to determine what the numbers should be.  The GM's response was not helpful, either.  I believe we need to determine specifically what amendments to make to section 3 before moving forward.  Badger, you out there?

I would also like to hear a response from Hans regarding section 6.

I am. FWIW from a mere Senator-elect:

The 10-1 cash to loan ratio proposed isn't as vast a change from current law as I thought; NCY pointed out the standard leveraging limit was recently as low as 13-1, whereas I'd (mis)recalled it being higher. Still, that's a huge drop. A bank with a million in assest could previously extend $13 million in loans and credit, but now is limited to $10 million they can loan. While I agree the standards need tightened, I don't believe a near 25% reduction in available credit is what the economy needs now.

I know my vote probably isn't needed on this proposal as it'll likely be passed or defeated before my swearing in, but is there some room for compromise on these numbers NCY?

RE: Section 5, in what specific ways is the proposed consumer protection agency more limited than the real life proposal? Just as importantly, why?

I would also like to hear from Franzl on Section 6 and review the original law before stating an opinion.

I don't believe these questions were ever resolved.

The question is no longer relevant because the section was miswritten on my part. The 25% refers to the 10% in the above clause. Meaning 2.5% of total assets. It now reas 100% of the those reserve assets. So an investment bank must have 10% of its assets in liquid capital. Its not a huge drop especially when you consider that many of these banks are now bank holding company's and have vast reserves of over a Trillion at the Fed.

I still have questions re: Section 5. Why not make the consumer regulatory watchdog more effective?

As I said before. If you want to strengthen, by all means offer an amendment. The only reason I did not spend more time on that section was what I felt was a sense of urgency to get it done.

[Southern Senator North Carolina Yankee]

From last sessions thread:

Thank you for doing this, Yankee.  This is much clearer.

Overall, good work.  Badger had raised some concerns regarding section 3 that still need to be addressed.  He ascertains that you have the right ideas, but your numbers are off.  I am certainly in no position to determine what the numbers should be.  The GM's response was not helpful, either.  I believe we need to determine specifically what amendments to make to section 3 before moving forward.  Badger, you out there?

I would also like to hear a response from Hans regarding section 6.

I am. FWIW from a mere Senator-elect:

The 10-1 cash to loan ratio proposed isn't as vast a change from current law as I thought; NCY pointed out the standard leveraging limit was recently as low as 13-1, whereas I'd (mis)recalled it being higher. Still, that's a huge drop. A bank with a million in assest could previously extend $13 million in loans and credit, but now is limited to $10 million they can loan. While I agree the standards need tightened, I don't believe a near 25% reduction in available credit is what the economy needs now.

I know my vote probably isn't needed on this proposal as it'll likely be passed or defeated before my swearing in, but is there some room for compromise on these numbers NCY?

RE: Section 5, in what specific ways is the proposed consumer protection agency more limited than the real life proposal? Just as importantly, why?

I would also like to hear from Franzl on Section 6 and review the original law before stating an opinion.

I don't believe these questions were ever resolved.

The question is no longer relevant because the section was miswritten on my part. The 25% refers to the 10% in the above clause. Meaning 2.5% of total assets. It now reas 100% of the those reserve assets. So an investment bank must have 10% of its assets in liquid capital. Its not a huge drop especially when you consider that many of these banks are now bank holding company's and have vast reserves of over a Trillion at the Fed.

I still have questions re: Section 5. Why not make the consumer regulatory watchdog more effective?

As I said before. If you want to strengthen, by all means offer an amendment. The only reason I did not spend more time on that section was what I felt was a sense of urgency to get it done.

Will do.

I will take that to mean you are drafting an amendement, correct?
Can you tell us, when you will have this amendment ready? Will it be before you go on your leave of absence?

[Southern Senator North Carolina Yankee]

From last sessions thread:

Thank you for doing this, Yankee.  This is much clearer.

Overall, good work.  Badger had raised some concerns regarding section 3 that still need to be addressed.  He ascertains that you have the right ideas, but your numbers are off.  I am certainly in no position to determine what the numbers should be.  The GM's response was not helpful, either.  I believe we need to determine specifically what amendments to make to section 3 before moving forward.  Badger, you out there?

I would also like to hear a response from Hans regarding section 6.

I am. FWIW from a mere Senator-elect:

The 10-1 cash to loan ratio proposed isn't as vast a change from current law as I thought; NCY pointed out the standard leveraging limit was recently as low as 13-1, whereas I'd (mis)recalled it being higher. Still, that's a huge drop. A bank with a million in assest could previously extend $13 million in loans and credit, but now is limited to $10 million they can loan. While I agree the standards need tightened, I don't believe a near 25% reduction in available credit is what the economy needs now.

I know my vote probably isn't needed on this proposal as it'll likely be passed or defeated before my swearing in, but is there some room for compromise on these numbers NCY?

RE: Section 5, in what specific ways is the proposed consumer protection agency more limited than the real life proposal? Just as importantly, why?

I would also like to hear from Franzl on Section 6 and review the original law before stating an opinion.

I don't believe these questions were ever resolved.

The question is no longer relevant because the section was miswritten on my part. The 25% refers to the 10% in the above clause. Meaning 2.5% of total assets. It now reas 100% of the those reserve assets. So an investment bank must have 10% of its assets in liquid capital. Its not a huge drop especially when you consider that many of these banks are now bank holding company's and have vast reserves of over a Trillion at the Fed.

I still have questions re: Section 5. Why not make the consumer regulatory watchdog more effective?

As I said before. If you want to strengthen, by all means offer an amendment. The only reason I did not spend more time on that section was what I felt was a sense of urgency to get it done.

Will do.

I will take that to mean you are drafting an amendement, correct?
Can you tell us, when you will have this amendment ready? Will it be before you go on your leave of absence?

Iffy whether I can do so before vacation, I'm afraid. Stomach flu laid me and the whole family out the last 2 days, and now I have even more to catch up on at work before leaving. Plus some emergency legislation re: Haiti I'm submitting momentarily...

I wouldn't presume to ask the bill be stalled until my return. If debate is still ongoing then, I'll introduce an amendment at that time. Otherwise I may submit an amendment as separate legislation in the future.

Okay sure.

[Southern Senator North Carolina Yankee]

This bill has waited long enough. With each passing day, the dollars flow more and more into the Swiss accounts of several Senators from interests who oppose this, making it harder to pass with each day.

If  I don't come up with any amendments by tomorrow I will open up a final vote on this.

[Southern Senator North Carolina Yankee]

Its not perfect but I am going to open up a final vote on this bill. Senators please vote AYE, NAY, or ABSTAIN.

[Southern Senator North Carolina Yankee]

AYE

[Southern Senator North Carolina Yankee]

Please fix the thread title.

You know, I think I won't change this one, just to piss you off.

[Southern Senator North Carolina Yankee]

Please stop trolling in official Senate business threads.

Despite repeated requests, we never heard from Senator Hans regarding section 6.  Oh well......

AYE

Yea, that kind of bothers me, but I am sure he is alright with it, otherwise he would have said something by now.

[Southern Senator North Carolina Yankee]

Nay.

You know, I wasn't going to say anything but this bill has been on the Senate floor for since the fourth. More then enough time to voice any concerns with the bill and yet nothing but the sound of silence. Would it kill you to add a sentence explaining why you voted no considering your lack input in the debate?

[Southern Senator North Carolina Yankee]

This bill was a lot cause from the start and is only going to further complicate financials in the future. Not only that, but why should the conservator be able to seize records without any authorization from anyone else? Not even the police can do that ordinarily. i could go on and on. The point is we have plenty of regulations on the books, the problems we have now mostly have to do with favoritism and lack of transparency more so than lack of control.

If you had brought that issue about the records up, it could have been changed. We have debates for a reason. This is not a parliament, this is not a House of Representatives. This is a Senate and in a Senate you are supposed to debate and not just be Yes, No, Maybe on everything. You could have offered amendments on each one of your issues however long or however many. We could have actually did what has been done in previous Senates.

I just guess activity is too much to ask for these days.

[Southern Senator North Carolina Yankee]

Did you not read what I wrote? I said I viewed it as a lost cause from the start. I am well aware that I am the odd man out in this body when it comes to this issue.

Jeff Flake, Ron Paul and Dennis Kucinich offer amendments every day that go down to defeat overwhelmingly. But they offer them anyway and make arguements for them everytime some of them pretty good. You should do the same or seriously consider a different job. You definately aren't going to get any closer to achieving your goals by not fighting for them in the Senate.

[Southern Senator North Carolina Yankee]

Senators voting in the Affirmative: Fritz, Hans-im-Gluck, Hashemite, MaxQue, NC Yankee, and Tmthforu94.

Senators voting in the Negative: Mint

Senators not voting: Afleitch, Badger, and Duke


With 6 Ayes and 1 Nay this bill has enough votes to pass, Senators have 24 hours to change their votes. 

[Southern Senator North Carolina Yankee]

Senators voting in the Affirmative: Fritz, Hans-im-Gluck, Hashemite, MaxQue, NC Yankee, and Tmthforu94.

Senators voting in the Negative: Mint

Senators Abstaining: Badger

Senators not voting: Afleitch, and Duke

With 6 Ayes, 1 Nay, 1 Abstention, and 2 Senators not voting the bill is passed and presented to the President for this Signature.