When the 112th Congress convenes in January banking issues—broadly defined—will remain front-burner issues.
As the new Congress organizes you can be sure of one thing: The Senate Banking Committee will look very different then than it does today, with at least five (and possibly more) members of the 23-member committee not returning for the new Congress. Chairman Chris Dodd, D-Conn., and committee members Evan Bayh, D-Ind., Jim Bunning, R-Ky., and Judd Gregg, R-N.H., are retiring, and Sen. Robert Bennett, R-Utah, was defeated in his primary bid for reelection. With Dodd retiring the gavel of the Senate Banking Committee will pass to a new chairman.
Regardless of who chairs the Senate Banking and the House Financial Services Committees, count on the following issues to be the subject of hearings and legislative action:
1. Revisions to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Even before House and Senate conferees had completed work on the conference agreement on what has been described as the single most sweeping piece of financial reform legislation since the Great Depression, the Dodd-Frank Wall Street Reform and Consumer Protection Act, House Financial Services Committee chairman Barney Frank, D-Mass., noted the need for a “technical corrections” bill to follow—conceding that some of the corrections might be more “technical” than others. Precisely how sweeping reform of the Dodd-Frank Act will be remains to be seen; the answer to that question will be determined in large measure by the magnitude of Republican pick-ups in the House and the Senate, and whether one of both chambers flips from Democratic to Republican control. Having passed the House by a vote of 237 to 192—with only three Republicans voting in favor of the bill—a Republican majority in the House will trigger a far more thorough review of the Dodd-Frank Act than in the Democrats retain control of the House.
2. Dodd-Frank Act Studies. By any standard the Dodd-Frank Act is a sweeping piece of legislation which according to the Congressional Research Service will spawn at least 240 new regulations. Not only that, but it also mandates that 67 one-time studies or reports and 22 periodic or recurring studies or reports be submitted to Congress. Plan on seeing the regulators appearing repeatedly before the Senate Banking and House Financial Services Committees to deliver these studies and reports, to present their findings and recommendations, and to be grilled by skeptical members of both committees.
3. Fannie Mae, Freddie Mac and the Federal Home Loan Banks. A major building block toward financial recovery not addressed in the Dodd-Frank Wall Street Reform and Consumer Protection Act was the government-sponsored enterprises. What to do with Fannie Mae, Freddie Mac and the Federal Home Loan Banks will be at the top of the agenda of both Committees when the 112th Congress is sworn in next January. Privatization, nationalization, dismantling and all other conceivable options will be on the table, and the stakes will be high with the nation’s mortgage finance system hanging in the balance.
4. FHA Reform. During our nation’s mortgage meltdown the FHA was catapulted into the position of being the single largest insurer of residential mortgage loans in the country. The strength and sustainability of the FHA programs will be the subject of extensive hearings and legislation very possibly redefining its mission will be offered and considered in the next Congress.
5. National Flood Insurance Program. Unable to enact a long-term extension of the National Flood Insurance Program, the 111th Congress merely authorized a short-term extension of the program to carry it into the new Congress, guaranteeing that flood insurance issues will be on the table when the new Congress convenes in January.
6. Expansion of the Community Reinvestment Act. The last day Congress was in session before recessing for the election the chairman of the House Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit, Rep. Luis Gutierrez, D-Ill., along with three of his colleagues, introduced the “American Community Investment Reform Act of 2010.’’ If enacted into law as introduced, the bill would expand the reach of CRA to national securities exchanges, clearing agencies, security-based swap execution facilities, boards of trade designated as contract markets, derivatives clearing organizations and swap execution facilities or a swap data repositories registered with the Commodity Futures Trading Commission.
William Donovan is a partner with Venable LLP.
