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Financial Services Committee Votes to Create the Consumer Financial Protection Agency
Committee strengthens regulation to protect consumers from deceptive and abusive financial products
October 22, 2009-- Today, the Financial Services Committee approved legislation that will establish a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services. As called for by President Obama, the Consumer Financial Protection Agency (CFPA) represents one of the most significant efforts by Congress to bring about long overdue financial reform and ensure that Americans are able to take advantage of capitalism’s benefits without falling victim to industry abuses. As last year’s crisis demonstrated, deceptive financial products – such as predatory mortgages and hidden credit card fees – not only damage the livelihoods of American families, but can destabilize the entire economy.
The creation of the CFPA will finally put the interests of consumers at the forefront of the federal government’s attention and enforcement efforts. As outlined in H.R. 3126, the agency’s mission will be to promote a fair and transparent marketplace for financial products and to safeguard the American public from abusive industry tactics. In an unprecedented move, the bill also extends federal supervision to a host of financial industries, such as payday lenders and mortgage originators, which have long escaped oversight.
A summary of the bill, which was approved by a vote of 39-29. The committee today also defeated a large number of Republican amendments intended to prevent or weaken the CFPA.
“The Committee vote today is a rifle shot at abusive financial practices, not a shotgun blast that would hit community banks making an honest living from fair lending practices. It’s no surprise that the lenders with the worst practices are still fighting tooth and nail against this bill. The last thing they want is to have to make an honest living,” said Rep. Brad Miller (D-NC).
“Protecting consumers is a must in any new financial regulatory system, and the Consumer Financial Protection Agency will help make that happen. I commend Chairman Frank for his leadership on these issues, and I look forward to working with him and other Members as we move forward in the process to improve not only CFPA, but the rest of the financial regulatory reform package so we can strengthen protections for all consumers, investors and taxpayers,” said Rep. Dennis Moore (D-KS).
“We need a brand new agency with consumer protection as its sole mission. A Consumer Financial Protection Agency that looks after the interests of consumers will also benefit responsible lenders and safeguard the safety and soundness of our financial system,” said Rep. Keith Ellison (D-MN).
Currently, consumer protection rule-making and authority is spread across several different agencies, all of which have failed repeatedly to use the tools provided by Congress to protect Americans. H.R. 3126 addresses this inaction by transferring consumer protection authority from the Federal Reserve and other banking regulators to the CFPA. The consolidation of these powers at the CFPA also ensures that financial firms will no longer be able to shop around for the weakest regulator to supervise their products.
In addition, the agency will closely monitor the marketplace for any new financial products or services that could potentially harm consumers as well as the larger economy. Once the agency identifies these threats or abuses, it will have the power to write rules that can regulate, restrict or ban them. It will also have the power to establish guidelines so that companies issue clear and fair disclosures to customers on products such as credit cards and mortgages.
For more information on Summary of H.R. 3126
Assistant Secretary Barr before the House Judiciary Committee
October 22, 2009--Thank you Chairman Conyers, Chairman Cohen, Ranking Member Smith, and Ranking Member Franks. I appreciate the opportunity to testify today.
The topic before the committee today is central to the task of reform. Just over a year ago, the collapses of Washington Mutual, Wachovia, and Lehman Brothers, and the extraordinary interventions in AIG, severely tested our collective ability to respond to the financial crisis. In the panic that followed, our financial system nearly ground to a halt.
A swift response prevented a truly catastrophic collapse. But last September's events revealed deep weaknesses in our financial system.
It did not take long for the financial contagion to infect the real economy. When President Obama took office, America's growth rate had hit negative 6.3 percent, and monthly job losses had reached 741,000 - the worst in decades.
There are indications that we have moved back from the financial brink and are headed toward economic recovery. Important parts of the financial system are back to functioning on their own. Some of the damage to people's savings has been repaired. We have taken the first steps towards both reducing the government's direct involvement in the financial system and reducing the risks that taxpayers are bearing.
But we cannot ignore the urgent need for action: our regulatory system is outdated and ineffective, and the weaknesses that contributed to the financial crisis persist. Our citizens are paying the price everyday for the failures in our financial system. The progress of recovery must not distract us from the project of reform.
The Administration has put forward comprehensive reforms and we are working closely with Congress to enact legislation by the end of this year.
Our goals are simple: to give responsible consumers and investors the basic protections they deserve; to lay the foundation for a safer, more stable financial system, less prone to panic and crisis; and to safeguard American taxpayers from bearing risks that ought to be borne by shareholders and creditors.
Allison Written Testimony before the Congressional Oversight Panel
October 22, 2009--Chair Warren, Members of the Panel, thank you for the opportunity to testify today regarding Treasury's efforts under the Emergency Economic Stabilization Act of 2008 (EESA) and the Troubled Asset Relief Program (TARP). You have asked me in particular to describe the progress of our efforts and to assess the effectiveness of our strategy in stabilizing the financial sector. You have also asked me to discuss the findings and recommendations of your recent report on our foreclosure mitigation efforts. I am happy to address these subjects and look forward to engaging in a dialogue with you after my testimony.
TARP - Progress to Date and Effectiveness
One year ago, we were in the midst of one of the worst periods in our financial history. Immediate, strong action was needed to avoid a complete meltdown of the financial system.
On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of 2008, recognizing the need to take difficult but necessary action and giving the Treasury Department unprecedented authority to stabilize the U.S. economy by creating TARP.
The actions of the Treasury Department under TARP last fall must be viewed together with many other actions taken by the government to address the crisis, including Treasury's Money Market Mutual Fund Guarantee Program, the Federal Reserve's liquidity programs that support both financial institutions and the commercial paper market, and the FDIC's Temporary Liquidity Guarantee Program. These efforts collectively succeeded in preventing a catastrophic collapse of our financial system. However, when President Obama took office, the financial system remained extremely fragile and the Administration faced a rapidly evolving set of grave challenges.
In January 2009, what America faced was no longer just a financial crisis; it was a full-blown economic crisis. In January alone, we lost 741,000 jobs, the largest single month decline in 60 years. Home foreclosures were increasing at a rapid rate. Businesses and families were struggling to find credit. It was feared that those banks that remained standing had too little capital and too much exposure to risky assets. Secondary markets for credit had essentially come to a halt; and liquidity in a broader range of securities markets had fallen sharply. Overall, American families had lost $10 trillion in household wealth.
In short, the economy was in a free fall and there was increasing concern we were headed towards a second Great Depression. Christina Romer, the Chair of the President's Council on Economic Advisors, recently gave a speech outlining just how close we came to a second Great Depression. She noted that the decline in household wealth from December 2007 to December 2008 was 17% - five times the decline that occurred in 1929.
The Administration confronted this situation by taking forceful action on several fronts. A comprehensive strategy was put in place to stabilize the financial system and the housing market, to stimulate economic activity, and to provide help to those in most need. We still have a way to go before complete recovery takes hold, but we have stepped back from the brink.
Setback for US crackdown on oil speculation
October 21, 2009--US plans for an aggressive crackdown on energy speculation are in danger of unravelling, with leaders at the US commodity regulator raising doubts about proposed reforms.
Two of the Commodity Futures Trading Commission’s five commissioners have voiced worries that proposals to cap investors’ holdings in oil and commodities futures could drive trading from US exchanges.
Thomson Reuters and Alpha to Address Market Data Fragmentation in Canadian Equities Market
October 21, 2009--Thomson Reuters and Alpha today announced a new suite of initiatives to address market data fragmentation. Leveraging the two organizations’ combined expertise in the Canadian markets and Alpha’s technology facilities, Thomson Reuters will provide an independent consolidated tapeand hosted direct feeds.
The new suite of services will allow traders to see share prices offered across the various exchanges and alternative trading facilities in Canada, including Alpha ATS, Pure, Chi-X and the TMX Group.
The fully integrated and enhanced consolidated data offering will be derived from order and trade data from the various Canadian equity marketplaces, and will include access to pre- and post-trade market data.
Thomson Reuters feed handlers will be placed adjacent to most information sources including Alpha Trading Systems, providing market data access at the lowest possible latency. Clients will be able to access all best bid and offer data from and across all contributing marketplaces. In addition they will have full order book access attributed by dealer and marketplace. Furthermore the Thomson Reuters offering will include time and sales data from the sources.
Jon Robson, President of Enterprise, Thomson Reuters, said: “In today’s evolving market, accessing a complete real-time view of liquidity is a challenge. This is a significant breakthrough for the Canadian marketplace, delivering a consolidated view of all liquidity across multiple venues, enabling each individual trader to operate with absolute confidence that they are trading at optimum levels for their clients. Well managed consolidated data is a key means to help drive efficient trading and market liquidity. We are delighted to be working with Canadian participants in Alpha to provide this benchmark standard for the market.”
“Access to adequate consolidated market data is an issue of major concern in the Canadian marketplace. Without it, market participants cannot discover and exploit the best trading opportunities. Working in close collaboration with Thomson Reuters will enable us to provide the Canadian marketplace with a competitive solution that is driven by the industry and addresses key concerns around cost, reliability, low-latency and quality,” noted Jos Schmitt, CEO of the Alpha Group.
Speech of Commissioner Bart Chilton before the Argus Media Summit, Houston, Texas
October 21, 2009-- Thank you for that kind introduction. It is a pleasure to be with you today. I thank Argus for bringing us all together. There is a lot going on in energy markets and in financial markets. There also is a lot going on in government aimed at affecting markets in a positive way.
Passing financial regulatory reform this year is key to ensuring market and economic integrity. The House Financial Services Committee approved legislation last week addressing financial regulatory reform. The House Agriculture Committee, which passed a bill back in February, is marking-up a revised version of that legislation today. Numerous conversations took place this past week on the Senate side about moving forward expeditiously. While there are myriad critical issues facing Congress and the Administration, I believe that regulatory reform is too important for markets, for traders, consumers and the overall economy. It needs to be done. Concurrently, the CFTC and other financial regulators need to continue to move forward thoughtfully on issues such as position limits and hedge exemptions.
The Experiment
Before we get too much into the meat of the remarks, I’d like to share a survey. Abbreviated, it consists of five questions that are to be ranked from one to five. If you disagree strongly with the statement, record a 1. If you agree strongly, record a five. If you are neutral, record a three, etc. There are no right or wrong answers, no right or wrong numbers.
1. “Most people are basically good and kind.”
2. “Never tell anyone the real reason you did something unless it is useful to do so.”
3. “Generally speaking, people won’t work hard unless they are forced to do so.”
4. “One should take action only when sure it is morally right.”
5. “The best way to handle people is to tell them what they want to hear.”1
Tally your numbers and remember the total. We will circle around to it again, I promise, and think you will find it interesting.
Renaissance Men
We are fascinated with Renaissance men. They were those iconic figures that appeared to be masters of many disciplines. They sailed to foreign shores, hunted exotic animals and met those of other cultures, learning and teaching alike.
Speech By SEC Commissioner Luis A. Aguilar: Market Structure Reform Should Be Guided By Values Of Fairness, Transparency, and Efficiency
October 21, 2009-Thank you, Chairman Schapiro.
As you have heard today, the Commission is undertaking a comprehensive review of market structure. It is important that this review be done with investors in mind. Investors, particularly long-term investors, need to know that the Commission will vigilantly oversee how securities are traded — and that it will step in and take action when markets lack fairness, transparency, and efficiency.
Today’s proposals address just one of the many market structure issues the Commission must evaluate in the coming months. Among the others are flash orders, high frequency trading, co-location, and direct market access (also known as sponsored access). Recent technological changes in the markets may have spawned their own glossary of new terms, but it is important that we evaluate these changes according to our long-standing principles, starting with the protection of investors. Analyzing these market structure issues and the suitable response will require a great deal of work, and the bulk of that will be done by our staff. To all of you who have worked so hard, I too want to recognize you. I also want to thank you, in advance, for the labors to come.
Fortunately, Congress foresaw that the Commission would need to effectively oversee dramatic changes in the markets. Thus, when Congress empowered the Commission to regulate the National Market System, it provided us with broad authority to regulate competition among brokers, dealers, exchanges, and other trading venues, and it gave us a clear standard to uphold: “the public interest, the protection of investors, and the maintenance of fair and orderly markets.” This broad mandate enables the Commission to act now — motivated by the right principles — without having to ask Congress for more authority.
Standard & Poor's Announces Changes In The S&P/TSX Canadian Indices
October 21, 2009--Standard & Poor's Canadian Index Operations announces the following index changes:
The shareholders of Canadian Hydro Developers, Inc. (TSX:KHD) have accepted the $CDN5.25 cash per share offer from TransAlta Corporation (TSX:TA). Canadian Hydro Developers will be removed from the S&P/TSX Composite and Capped Composite, the S&P/TSX Equity and Capped Equity, the S&P/TSX Completion and Equity Completion, the S&P/TSX SmallCap and Equity SmallCap and the S&P/TSX Capped Utilities Indices.
The transaction will be effective after the close on Wednesday, October 28, 2009.
Company additions to and deletions from an S&P equity index do not in any way reflect an opinion on the investment merits of the company.
SEC Issues Proposals to Shed Greater Light on Dark Pools
Oct. 21, 2009 — The Securities and Exchange Commission today voted unanimously to propose measures intended to increase transparency of dark pools so investors get a clearer view of stock prices and liquidity.
Dark pools are essentially private trading systems in which participants can transact their trades without displaying quotations to the public. The largest dark pools are sponsored by securities firms primarily to execute the orders of their customers and proprietary orders of the firms.
"We should never underestimate or take for granted the wide spectrum of benefits that come from transparency, which plays a vital role in promoting public confidence in the honesty and integrity of financial markets," said SEC Chairman Mary Schapiro. "Today's focus on dark pools is just one part of our broader ongoing review of how the equity markets are structured."
The number of active dark pools transacting in stocks that trade on major U.S. stock markets has tripled since 2002. Given this growth of dark pools, a lack of transparency could create a two-tiered market that deprives the public of information about stock prices and liquidity.
To make trading through dark pools more transparent, the SEC's proposals generally would require that information about an investor's interest in buying or selling a stock be made available to the public instead of just a select group operating with a dark pool. The proposals also would require that dark pools publicly identify that it was their pool that executed the trade.
"Today's proposals are intended to prevent the development of a two-tiered market in access to pricing information, further promote displayed liquidity, and enhance transparency of trade information," said James Brigagliano, Co-Acting Director of the Division of Trading and Markets.
The SEC's proposals address three specific concerns related to dark pools:
The first proposal would require actionable Indications of Interest (IOIs) — which are similar to a typical buy or sell quote — to be treated like other quotes and subject to the same disclosure rules.
The second proposal would lower the trading volume threshold applicable to alternative trading systems (ATS) for displaying best-priced orders. Currently, if an ATS displays orders to more than one person, it must display its best-priced orders to the public when its trading volume for a stock is 5 percent or more. Today's proposal would lower that percentage to 0.25 percent for ATSs, including dark pools that use actionable IOIs.
The third proposal that would create the same level of post-trade transparency for dark pools - and other ATSs - as for registered exchanges. Specifically the proposal would amend existing rules to require real-time disclosure of the identity of the dark pool that executed the trade.
In its proposals, the Commission is seeking public comment and data on certain issues relating to dark pools. Dark pools of liquidity are one of several issues that the Commission is currently considering as part of its broad review of equity market structure.
Public comments on today's proposal must be received by the Commission within 90 days after its publication in the Federal Register.
The full text of the proposed rule amendment will be posted to the SEC Web site as soon as possible.
Remarks of Chairman Gary Gensler, OTC Derivatives Regulation, Futures Industry Association Annual Expo
October 21, 2009--Good morning. It is a pleasure to be in Chicago with you today at one of the defining moments in our nation’s financial history. As we speak, Congress is taking up broad regulatory reform. One year ago, the financial system failed the American public. The financial regulatory system failed the American public.
Congress swiftly committed more than $700 billion of taxpayer money to rescuing the financial industry – without which the financial system never would have stabilized. The crisis was not isolated to Bear Stearns, Lehman Brothers or AIG. It threatened the savings and livelihoods of every American. Let us recall, the financial bailout was only a means of getting a sinking ship back to port. It is now our responsibility to fix the ship before it can set sail again. We must ensure that this type of failure never threatens our nation again.
I speak to you today as someone who spent half my adult life working on Wall Street. I worked with talented individuals from around the world who operated at the highest levels of professionalism. More broadly, the industry plays a fundamental role in pricing and allocating capital and risk in our economy.
But being talented and working in such a critical industry doesn’t mean that individuals can’t make mistakes or that the system is flawless. The crisis eased only through strenuous effort and some considerable good fortune. Now we must ensure that the risks generated by the financial sector are never allowed to push us so close to the brink again. Some may accuse us of overreacting and overreaching. But the worst financial crisis in 80 years demands the most comprehensive regulatory reform in generations.
Though there are certainly many causes of the crisis, I think most would agree that the unregulated OTC derivatives marketplace played a central role. The time has come for comprehensive regulation.
In just the past week, two important committees in the U.S. House of Representatives – the Financial Services Committee and the Agriculture Committee – took up this reform. The House Financial Services Committee passed historic legislation that, for the first time, introduces comprehensive regulation to the OTC derivatives marketplace. The House Agriculture Committee is marking up a similarly historic bill later today.
Both of the committees’ bills include three important elements of regulatory reform: First, they require swap dealers and major swap participants to register and come under comprehensive regulation. This includes capital standards, margin requirements, business conduct standards and recordkeeping and reporting requirements. Second, the bills require that dealers and major swap participants bring their clearable swaps into central clearinghouses. Third, they require dealers and major swap participants to use transparent trading venues for their clearable swaps.
Claymore China All-Cap ETF Has Highest Volume of Any ETF Launch In 2009
YAO POSTS 1.3 MILLION SHARES IN FIRST DAY OF TRADING
October 20, 2009--The Claymore/AlphaShares China All-Cap ETF (NYSE Arca: YAO) which
launched on October 19th, posted trading volume totaling over 1.3 million shares on its first full day of
trading. This marks a record first-day volume for any US-listed ETF launched to date in 2009 and the 11th
largest first day volume for an US-listed ETF ever.1 “The popularity of this product acknowledges
investor interest in an all-cap China ETF that provides exposure to every sector, including Technology
and Consumer Discretionary,” said Christian Magoon, President of Claymore Securities, Inc. “We’re very
pleased with the robust investor interest so far in YAO, which gives investors access to the world’s
highest expected GDP growth opportunity for 2009 and 20102.”
YAO is Claymore’s third China-focused ETF, joining the Claymore/AlphaShares China Small Cap Index ETF
(NYSE Arca: HAO), a China small cap ETF, and the Claymore/AlphaShares China Real Estate ETF (NYSE
Arca: TAO), a China real estate ETF. YAO seeks to replicate the AlphaShares China All Cap Index (Index
Ticker: ACNAC) (the “Index”), an index that seeks to measure and monitor the performance of the
investable universe of publicly-traded companies based in mainland China of all capitalizations. As of
September 30, 2009 the Index included 99 securities from all market capitalizations with approximately
57% in large capitalization securities, 33% in mid capitalization securities and 10% in small capitalization
securities, based on free-float adjusted market capitalizations. In addition, YAO provides broad sector
diversification which includes exposure to all 10 S&P GICS sectors. At each reconstitution, the companies
included in the Index must have a float-adjusted market capitalization of $500 million or greater for
initial inclusion and $400 million or greater for ongoing inclusion. The Index utilizes a modified market
capitalization weighting methodology. For more information on YAO please visit
www.claymore.com/yao.
ASDAQ OMX Announces Enhancements to Daily Share Volume Statistics for Alternative Trading Systems or 'Dark Pools'
October 21, 2009---- The NASDAQ OMX Group, Inc.
(Nasdaq:NDAQ) today announced it will introduce enhancements to its
ACT(SM) trade entry for the FINRA/NASDAQ Trade Reporting Facility(TM)
(TRF(TM)) which will allow firms to separately report Alternative
Trading System (ATS) or 'dark pool' trading activity. That activity
will be posted before the end of day on the NASDAQ OMX Trader(R)
website. The new functionality will be effective in mid-November 2009.
"We recognized that the industry would benefit from separate reporting
of market share statistics for participants operating ATS dark pools.
If the regulatory environment becomes more demanding for dark pools,
NASDAQ OMX will be at the forefront to help firms meet their reporting
obligations," said Eric Noll, Executive Vice President of NASDAQ OMX
Transaction Services. "NASDAQ provides customer choice across multiple
trading platforms and with this functionality we are providing
additional choice and access to statistics with regard to reporting."
Participation for this reporting is free of charge and will be on an optional basis. Most broker dealers trading NMS stocks are already connected to NASDAQ's Automated Confirmation Transaction (ACT(SM)) system.
Currently, NASDAQ offers daily share volume publicly on the NASDAQ OMX Trader(R) website. These market share statistics are displayed by a market participant identifier (MPID) for broker dealers who have chosen to participate.
The FINRA/NASDAQ Trade Reporting Facility(TM) (TRF(TM)) is an automated
trade reporting and reconciliation service operated on the ACT(SM)
technology platform. The TRF(TM) electronically facilitates the
post-execution steps of price and volume reporting, comparison and
clearing of trades for NASDAQ-listed securities as well as for
transactions in NYSE- and other U.S. regional exchange-listed
securities that occur off the floor. The TRF(TM) handles transactions
negotiated broker-to-broker. The TRF(TM) is a facility of FINRA that is
operated by NASDAQ. Trades reported to the FINRA/NASDAQ TRF do not
reflect liquidity available on the NASDAQ book. FINRA(TM), Trade
Reporting Facility(TM) and TRF(TM) are trademarks of Financial Industry
Regulatory Authority, Inc.
U.S. International Reserve Position
October 21, 2009--The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets totaled $134,580 million as of the end of that week, compared to $134,257 million as of the end of the prior week.
view report
Report Examines Hidden Health and and Environmental Costs Of Energy Production and Consumption In U.S.
October 21, 2009-A new report from the National Research Council examines and, when possible, estimates "hidden" costs of energy production and use -- such as the damage air pollution imposes on human health -- that are not reflected in market prices of coal, oil, other energy sources, or the electricity and gasoline produced from them. The report estimates dollar values for several major components of these costs. The damages the committee was able to quantify were an estimated $120 billion in the U.S. in 2005, a number that reflects primarily health damages from air pollution associated with electricity generation and motor vehicle transportation. The figure does not include damages from climate change, harm to ecosystems, effects of some air pollutants such as mercury, and risks to national security, which the report examines but does not monetize.
Requested by Congress, the report assesses what economists call external effects caused by various energy sources over their entire life cycle -- for example, not only the pollution generated when gasoline is used to run a car but also the pollution created by extracting and refining oil and transporting fuel to gas stations. Because these effects are not reflected in energy prices, government, businesses and consumers may not realize the full impact of their choices. When such market failures occur, a case can be made for government interventions -- such as regulations, taxes or tradable permits -- to address these external costs, the report says.
The committee that wrote the report focused on monetizing the damage of major air pollutants -- sulfur dioxide, nitrogen oxides, ozone, and particulate matter – on human health, grain crops and timber yields, buildings, and recreation. When possible, it estimated both what the damages were in 2005 (the latest year for which data were available) and what they are likely to be in 2030, assuming current policies continue and new policies already slated for implementation are put in place.
The committee also separately derived a range of values for damages from climate change; the wide range of possibilities for these damages made it impossible to develop precise estimates of cost. However, all model results available to the committee indicate that climate-related damages caused by each ton of CO2 emissions will be far worse in 2030 than now; even if the total amount of annual emissions remains steady, the damages caused by each ton would increase 50 percent to 80 percent.
BM&FBOVESPA: Spot U.S. Dollar Trading Sets Record Financial Volume
October 20, 2009--The Brazilian Securities, Commodities and Futures Exchange – BM&FBOVESPA Spot U.S. Dollar trading set a historic financial volume record today. The 192 trades generated a financial volume of US$ 520,000,000.00 in today’s trading session.
The previous record of US$ 420,750,000.00 was registered on April 4, 2009.
The Spot U.S. Dollar closed today at BRL 1.7490.
