Financial Crisis News Center

House Passes Corporate Governance Legislation with Say-on-Pay Mandate

James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The House passed legislation mandating shareholder advisory votes on executive compensation as part of the overall reform of financial regulation. Final House passage is expected later this week. The vote was 237-185. The legislation builds on the SEC’s executive pay disclosure rules to require that public companies include in their annual proxy to investors the opportunity to vote on the company's executive pay plans. The Corporate and Financial Institution Compensation Fairness Act would also require independent board compensation committees and independent compensation consultants. The legislation further requires all financial institutions, including brokers, dealers and investment advisers, to disclose compensation structures that include any incentive based elements. The measure also requires federal financial regulators to proscribe inappropriate or imprudently risky compensation practices as part of solvency regulation.

Committee Chairmen Announce Derivatives Legislation Outline

This story appeared in Bank Digest.

Financial Services Committee Chairman Barney Frank, D-Mass., and Agriculture Committee Chairman Collin C. Peterson, D-Minn., have released a concept paper that is intended to guide the two committees as they develop legislation to regulate derivatives. The paper calls for oversight of dealers and markets by either or both the Securities and Exchanges Commission and the Commodities Futures Trading Commission, mandatory use of approved clearinghouses, stronger capital requirements and greater attention to speculation.

Press release at http://www.house.gov/apps/list/press/financialsvcs_dem/pressbfder_073009.shtml

Oversight and Government Reform Committee to Further Examine Executive Pay

This story appeared in Bank Digest.

The House Oversight and Government Reform Committee is planning a September hearing to review how executive compensation restrictions imposed by the financial services bailout programs are being implemented, according to Chairman Edolphus Towns, D-N.Y. Towns said that the information on executive pay included in a recent report by New York Attorney General Andrew Cuomo is “shocking and appalling.”

FHFA Director Outlines Continuing Challenges for Agency

This story appeared in Bank Digest.

The Federal Home Loan Banks, Fannie Mae and Freddie Mac all face continuing challenges in dealing with the causes and results of the financial crisis, according to Federal Housing Finance Agency (FHFA) Director James Lockhart. Addressing the National Press Club in Washington D.C., on the anniversary of his agency’s creation, Lockhart noted that the institutions’ holdings of downgraded private label securities pose a threat to their financial health. The FHFA is looking into creating an insurance fund for the FHLBanks, he said. Referring to Fannie Mae and Freddie Mac, Lockhart said that “in the current economic environment their condition and function is critical.” He also discussed whether, in the future, the enterprises should become government agencies, be fully privatized or retain their current form in an improved manner.

http://www.fhfa.gov/webfiles/14715/FHFA1stAnnSpeechandPPT73009.pdf

Banks Reminded to Keep Records on Credit Card Rate Increases

This story appeared in Bank Digest.

The Office of the Comptroller of the Currency has reminded national banks that they must maintain information on many credit card interest rate increases that have been imposed since Jan. 1, 2009, for use in subsequent required reviews. The Credit CARD Act requires that lenders must review interest rate increases that resulted from factors such as the credit risk of the cardholder and market conditions every six months to determine whether a reduction is appropriate. Although the review requirement does not take effect until Aug. 22, 2010, the need to review increases since January 1 of this year means that information must be retained.

OCC 2009-25 at http://www.occ.treas.gov/ftp/bulletin/2009-25.html

Home Affordable Modification Program Agreement Released

This story appeared in Bank Digest.

The Treasury Department has posted the following Commitments to Purchase Financial Instrument and Servicer Participation Agreement for the Home Affordable Modification Program under the Emergency Economic Stabilization Act of 2008. The agreement is the first step servicers need to take to participate in the Home Affordable Modification Program for loans that are not owned, securitized or guaranteed by Fannie Mae or Freddie Mac.

Statutory Changes May Have Increased Government Risk from Reverse Mortgages

This story appeared in Bank Digest.

Changes made by the Housing and Economic Recovery Act to the Department of Housing and Urban Development’s Home Equity Conversion Mortgage Program have encouraged lenders to offer reverse mortgages, but also have increased HUD’s exposure to losses, according to a Government Accountability Office report. The agency noted that the decline in housing prices and the increased loan limit may combine to require that HUD subsidize the program.

GAO-09-836 at http://www.gao.gov/new.items/d09836.pdf

FTC Proposes Rule on Debt Relief Service Telemarketing

This story appeared in Bank Digest.

The Federal Trade Commission has proposed rules intended to combat deceptive and abusive telemarketing of debt relief services that purport to reduce consumers’ credit card and other unsecured debt. The proposed rules would:

House Financial Services and Ag Committee Chairs Reach Agreement in Principle on Derivatives Legislation

James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The important derivatives regulation piece of the Obama Administration’s proposed legislation to overhaul regulation of the financial markets came closer to fruition as the Chairs of the House Financial Services and the Agriculture Committees agreed on the basic principles of derivatives legislation. The joint concept paper defuses fears of jurisdictional conflicts as the legislation moves forward. The legislative approach agreed to by Chairs Frank and Peterson bridges the differences between those members who want to completely eliminate the OTC derivatives market and those who think that just greater transparency is all that is needed. The principles agreed to by the Chairs include harmonized SEC-CFTC regulation, the mandatory clearing of OTC derivatives, limitations on speculation, coordination with foreign regulators, and a dispute resolution role for the new Financial Services Oversight Council.

House Passes Legislation Allowing SEC to Sanction Former SRO Officials

James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The House has passed legislation, HR 2623, expressly authorizing the SEC to bring actions against persons formerly associated with a regulated or supervised entity, such as an investment company or an SRO, for misconduct that occurred during that association.  The bill passed the House unanimously by voice vote. The legislation closes a loophole in the securities laws allowing those who engage in misconduct while working for an entity regulated by the SEC, like a stock exchange, to resign and avoid being held accountable for their wrongdoing.