News & Events
The D.C. Update (Vol. IV, No. 1)
Click here for pdf
The Week Ahead: January 2-6
The House and Senate are not in session.
Banking & Financial Services
The House on Tuesday, December 20, cleared a bill that would direct the inspector general for the Federal Deposit Insurance Corporation (FDIC) to conduct a comprehensive study on the impact of bank failures following the 2008-2009 financial crisis. The bill also would direct the Government Accountability Office (GAO) to examine issues such as the causes of high bank-failure rates in 10 states, the community impact of bank failures and the overall impact of loss-sharing agreements, or LSAs. The FDIC and GAO studies would have to be submitted to Congress within one year of the bill’s enactment. President Obama is expected to sign the measure into law.
The House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises on Wednesday, December 14, advanced bills that would seek to encourage private investment in the mortgage market and revamp financial whistleblower rules. The proposal, as amended, would direct the Federal Housing Finance Administration (FHFA) and the Securities and Exchange Commission (SEC) to work together to create several categories of mortgages with uniform underwriting standards for each. The FHFA and the SEC also would be tasked with developing standard and uniform securitization agreements. Democrats objected to language in both measures that would roll back changes made by last year’s financial overhaul law. The most contentious debate came over the bill’s proposed repeal of credit risk retention provisions in the Dodd-Frank financial overhaul, with Democrats waging an ultimately unsuccessful attempt to strip that part of the draft bill.
On Saturday, December 31, President Obama signed the fiscal 2012 defense authorization bill into law. The bill would fund an independent assessment of the current and prospective situation in Afghanistan and Pakistan. The measure would provide $518.1 billion for the base defense budget, an increase of $5 billion from fiscal 2011 but $20.8 billion less than President Obama requested. The spending level was largely driven by the Budget Control Act, which placed caps on security spending in fiscal 2012 and fiscal 2013. The bill represents an agreement between the House and Senate defense spending subcommittees.
House Republicans are abandoning bipartisan talks about rewriting the federal education law known as No Child Left Behind, according to Rep. George Miller (D-Calif.), Ranking Member of the Education and the Workforce Committee. Miller’s spokesperson said they had been told that the majority intends to write a partisan bill without them. The architect of the Senate’s plan, Sen. Tom Harkin (D-Iowa), said in November that it would be difficult to find a path forward for sending the president a bill to overhaul the education law without bipartisan legislation from the House.
The House Oversight and Government Reform Committee’s top Democrat launched an investigation Monday, December 12, into the salaries of top executives at for-profit colleges. Rep. Elijah E. Cummings (D-Md.) sent letters to the CEOs of 13 for-profit schools seeking copies of compensation agreements for senior executives as part of an effort to determine whether salaries, bonuses and other compensation are tied to student performance. For-profit colleges have come under scrutiny by Congress and the Obama administration this year after numerous studies indicated that many schools get much of their revenue from federal financial aid but that large numbers of their graduates are unable to pay back their loans. In addition, deceptive marketing and recruiting practices were detailed in a series of Senate hearings and a GAO report.
The omnibus spending bill, signed by the President on Friday, December 23, would provide a modest spending increase for energy and water projects, while barring the federal government from implementing energy efficiency standards for light bulbs. The omnibus does not include another contentious rider that would have barred the Army Corps of Engineers from implementing a new joint Corps-EPA guidance on the jurisdiction of the federal Clean Water Act. Overall, the energy and water development title of the fiscal 2012 spending bill would provide $32 billion, a $328 million increase over fiscal 2011 levels but $4.5 billion less than the request. The bill would rescind $181 million in energy loan guarantees, including from the renewable loan program that supported the failed solar panel maker Solyndra. Nuclear energy research would get $769 million, a $43 million increase that includes funding to start a new program focused on developing small modular nuclear reactors.
Senators appeared no closer Wednesday, December 14, to an agreement on extending clean-energy tax incentives set to expire in 2011 and 2012, despite renewed industry pressure. Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) said after a Finance subcommittee hearing on the issue that senators are urging Majority Leader Harry Reid (D-Nev.) to include the energy tax provisions in whatever tax legislation is brought up in the Senate. Bingaman also chairs the Finance subcommittee with jurisdiction over energy issues.
The Senate cleared a bill Tuesday, December 13, that would overhaul federal safety standards for pipeline infrastructure. HR 2845, the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011, passed by unanimous consent, comes after work by House and Senate lawmakers to respond to a number of high-profile pipeline accidents in recent years. President Obama is expected to sign the bill into law.
Featured Profile: John Bruno
John Bruno has more than 25 years of experience in the financial industry as a regulator, attorney and investment banker. With his in-depth knowledge of banking law, regulations, policies and procedures, he has provided legal and financial counsel to numerous boards and senior managements on transaction structure and general corporate matters and has completed several precedent-setting transactions in the area of financial institutions.
Bruno’s practice focuses on mergers and acquisitions, public and private offerings of equity and debt, general securities and corporate matters, compensation and tax matters and counseling clients on banking and financial institution regulations, legislation and policy. In connection with his representation of the U.S. Treasury Department, he drafted the documents utilized by Subchapter S banks to apply and participate in the TARP (Troubled Asset Relief Program).
As part of Locke Lord’s Bank Regulatory & Transactions, Corporate, and Financial Regulatory Reform Group practice areas, Bruno is well-versed in the national financial arena. He began his career as an attorney with the Office of the Comptroller of the Currency, the federal regulator and administrator of national banks, where he drafted Comptroller testimony before Congressional banking committees as well as proposed banking legislation and regulations.
Bruno also was former managing director of a Wall Street investment banking firm specializing in financial institutions, where he managed and structured corporate transactions, including debt and equity financings, mergers and acquisitions and mutual to stock conversions. He structured the first-ever conversion of a mutual thrift ($1.3 billion) and simultaneous stock for a stock merger with a publicly traded thrift ($400 million).
Rep. Paul D. Ryan (R-Wis.) and Sen. Ron Wyden (D-Ore.) introduced a proposal to overhaul Medicare while keeping the traditional program in place on Thursday, December 15, but have no plans to offer it as legislation. Pursuing a Medicare overhaul in a presidential election year would be a political non-starter, but the bipartisan effort is expected to at least open a discussion on how to preserve the program that provides health care to 48 million Americans. The plan would create a Medicare marketplace beginning in 2022, and anyone currently age 55 and older would not see a change to the current system. Under the proposal, seniors would choose between traditional Medicare or approved private insurance plans that the lawmakers say would offer equally comprehensive coverage.
The Senate Judiciary Committee endorsed legislation Thursday, December 15, to combat illegal tunnel activity on the Southwest U.S. border by giving law enforcement additional tools to locate tunnels, identify criminals and punish lawbreakers. The bill would make the use, construction or financing of a border tunnel a conspiracy offense.
A new effort from Sen. Michael Bennet (D-Colo.) would offer temporary student visas to young people brought to the country illegally as children who enroll in college. Bennet has been a proponent of granting legal status to this group, but legislation to that effect was blocked in the Senate last year, and the 112th Congress has been reluctant to take up the issue. He said his legislation would not replace the DREAM Act.
The Supreme Court announced on Monday, December 12, that it has decided to hear a challenge to Arizona's controversial immigration laws. Arizona asked the Court to allow the state to enforce legislation that has been blocked by lower courts after being challenged by the Obama administration, including provisions that would enable police officers to question a person's immigration status if they suspect they are in the country illegally. The law would also make it a crime to not carry proof of legal immigration status.
Under a threat of being held in contempt, the Department of Homeland Security submitted documents to the House Judiciary Committee which contained records of illegal immigrants who were brought to the attention of the department’s Immigration and Customs Enforcement (ICE) branch but were released under a new Obama administration policy that concentrates deportation efforts against those convicted of serious crimes. The documents will not be made public.
On Monday, December 5, Rep. Tim Johnson (D-S.D.) introduced S. 1940, the Flood Insurance Reform and Modernization Act of 2011. The bill would extend the National Flood Insurance Program (NFIP) for five years and reform the premium rate structure. The bill was referred to the Senate Banking Committee.
On Friday, December 23, President Obama signed the Fiscal Year 2012 omnibus appropriations bill that includes a provision extending the NFIP through May 31, 2012.
On Wednesday, December 7, the Federal Emergency Management Association (FEMA) issued a Bulletin regarding Write Your Own (WYO) companies selling and administering NFIP insurance. The Bulletin addresses “some confusion regarding the appropriate information sharing.” To clarify, FEMA encourages WYO companies to cooperate with interested State insurance commissioners and regulators with general flood insurance inquiries. The Bulletin further states FEMA continues to be responsible for company oversight and is required by statute to administer the NFIP claims appeal process. FEMA does not expect that WYO companies will share specific claims information with State regulators, and is not authorizing the release of specific claims information or documents.
On Wednesday, December 7, representatives of the NAIC, including NAIC President Susan E. Voss, concluded the second of two meetings with staff from the Federal Insurance Office (FIO). The meetings focused on financial regulation and market conduct.
Rep. Steve Stivers (R-Ohio) introduced HR 3559, the Insurance Data Protection Act on Monday, December 5. The bill prohibits the FIO and other financial regulators from collecting data directly from an insurance company. The bill was reported out of the House Financial Services Subcommittee on Insurance Housing and Community Opportunity on Thursday, December 8.
On Wednesday, December 7, Reps. Fred Upton (R-Mich.), Joseph Pitts (R-Pa.), Michael Burgess (R-Texas) and Cliff Stearns (R-Fla.) sent a letter to NAIC President Susan Voss, former NAIC President Jane Cline and Kansas Commissioner of Insurance Sandy Praeger. The letter requests information on the deliberations related to PPACA’s medical loss ratio (MLR) requirements. Specifically, the House Energy and Commerce Committee requests a response to the question, did HHS officials discuss the MLR regulations with Ms. Voss, Cline, Praeger or NAIC staff.
On Friday, December 9, the FIO held a conference entitled “Insurance Regulation in the United States: Modernization and Improvement.” The conference brought together regulators, federal government officials, consumer organizations and insurance industry representatives to discuss potential areas for insurance regulatory reform. The FIO has a January deadline for completing the report mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), on how to modernize and improve the country’s insurance regulatory system.
On Thursday, December 15, the House Small Business Subcommittee on Investigations, Oversight and Regulations held a hearing entitled “New Medical Loss Ratios: Increasing Health Care Value or Just Eliminating Jobs.” Witnesses included an insurance broker testifying on behalf of himself and the National Association of Health Underwriters and Timothy Jost, consumer representative to the NAIC.
On Tuesday, December 20, the Federal Reserve Board proposed rules to strengthen regulation and supervision of large bank holding companies and systemically important nonbank financial firms. The proposal, which includes a wide range of measures addressing issues such as capital, liquidity, credit exposure, stress testing, risk management, and early remediation requirements, is mandated by Dodd-Frank. The proposal generally applies to all U.S. bank holding companies with consolidated assets of $50 billion or more and any nonbank financial firms that may be designated by the Financial Stability Oversight Council as systemically important companies. The proposal does not include an exception for life insurers. Several life insurers are likely to be designated as systemically important companies. Comments on the proposal are requested by March 31, 2012.
President Obama on Friday, December 23, signed a two-month extension of a payroll tax cut and funding for jobless benefits, effectively ending weeks of conflict over the legislation and setting up another round of debate on those issues in early 2012. The House and Senate unanimously passed the bill during swift legislative sessions earlier Friday and Obama signed it into law before departing for Christmas in Hawaii.
Rep. Lamar Smith (R-Texas), Chairman of the House Judiciary Committee, is moving forward on a new version of his legislation that would crack down on the online piracy of music, movies and consumer goods. Smith unveiled a manager’s amendment late Monday afternoon, December 12, that would narrow the scope of his bill in several respects while leaving the basic thrust of it intact. The legislation, as well as a companion Senate bill, would give the Justice Department new tools to try to stamp out illegal sales of copyrighted material, including the ability to seek court orders to block domain names from domestic Internet users.
Transportation & Infrastructure
The Senate Commerce, Science and Transportation Committee approved several transportation safety and research measures Wednesday, December 14, despite strong Republican opposition to a provision in one of the bills that would create a grant program for various freight projects, such as port development and freight rail improvement. In a 13-11 party-line vote, the committee passed a bus and truck safety bill that includes language to direct the Transportation Department to require commercial trucks to be equipped with electronic recorders to improve compliance with hours-of-service rules.
Click here to learn more about Locke Lord Strategies®, Washington, D.C.
Shane Doucet, Douglas P. Faucette, Denise Hanna, Harriet Miers, Jim Moriarty, Phil Rivers, Mark Siegel, Walter B. Smith, Jr.
Comments & Suggestions
We welcome your comments and suggestions regarding the content of this newsletter so that we may continue to send you current and relevant information. Please email your comments and suggestions to Marissa Pallan at email@example.com. Thank you and we look forward to hearing from you.