Lawmakers Agree on New Bank Capital Levels
Bottom line -- It's a five-year phase in process, and it only applies to banks with greater than $15 billion in assets. Still waiting for agreement on leverage limits.
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Source: WSJ
WASHINGTON—U.S. House and Senate negotiators pushing to finalize sweeping financial-overhaul legislation Thursday reached an agreement on controversial new capital requirements.
Under the deal, bank holding companies with less than $15 billion of assets will continue counting existing trust-preferred securities as Tier 1 capital, a key measure of a bank's strength. Larger banks will have five years to phase out their treatment of the hybrid securities as Tier 1 capital.
As they do so, these larger banks will likely be forced to raise billions in additional capital to make up for the loss of the trust-preferred securities.
The deal is a win for Senate Banking Committee Chairman Christopher Dodd, who needed to protect the capital standards provision in order to keep its author, Sen. Susan Collins (R., Maine), on board with the broader bill.
House lawmakers had pressed to grandfather all trust-preferred securities, regardless of a bank's size, which Mr. Dodd opposed after consulting Ms. Collins. Then the House side tried to give larger banks up to 10 years to phase in the new rules, but Mr. Dodd rejected that as well.
The $15 billion threshold to grandfather smaller banks was a concession designed to keep another key supporter happy: Sen. Blanche Lincoln (D., Ark.).
Ms. Lincoln pushed her Senate colleagues to raise the grandfather threshold to $15 billion from $10 billion. The move would benefit a bank in her home state, Arvest Bank Group Inc., of Bentonville, which is owned by the Walton family of Wal-Mart Stores Inc. Arvest could have been forced to raise about $115 million more for its capital cushion without the protection of the grandfather clause.
Meanwhile, the top House negotiator vowed that lawmakers would finish their work Thursday despite doubts from leadership and aides that such a deadline is achievable.
"We believe we can finish. A lot of progress is being made," said House Financial Services Chairman Barney Frank (D., Mass.), who is leading the House negotiators on the conference committee tasked with finalizing the sweeping legislation.
Mr. Frank said negotiators would delay consideration of the derivatives title of the bill, one of the biggest issues the panel must bridge, until after they "dispose of" the so-called Volcker rule, a provision that seeks to ban most banks from using their own capital to make market bets.
The two issues are closely linked, and the Senate is close to sending House negotiators an offer on the Volcker rule, Mr. Frank said. Many policymakers have suggested a stronger version of the Volcker rule could be added to the bill in exchange for stripping out a controversial derivatives measure that would force banks to spin off their swaps desks.
But Ms. Lincoln, the sponsor of the spin-off measure, has so far resisted efforts to take out the provision.
Jun 24, 2010 at 5:09 PM
Reader Comments (7)
http://online.wsj.com/article/SB10001424052748704911704575326582408224688.html?mod=WSJ_newsreel_business
The end game for financial reform.
http://online.wsj.com/article/SB10001424052748704853404575323032606552688.html?mod=loomia&loomia_si=t0:a16:g4:r1:c0:b35175110
wsj is freaking out about wall street reform...not surprising given their readership...
Lincoln believes a threshold for new bank capital standards should be high enough so that it does not apply to any banks in her home state of Arkansas, a spokeswoman said on Wednesday.
Among those banks is Arvest Bank Group Inc of Bentonville, Arkansas -- a bank predominantly owned by the Walton family of Wal-Mart Stores Inc.
"These banks did not cause the near-collapse of our financial system and should not be punished for Wall Street's actions," her spokeswoman Marni Goldberg said in a statement.
The Wall Street Journal first reported the attempt to exclude Arkansas banks from the new capital requirements -- a proposal that could have forced Arvest to raise about $115 million in capital.
Lincoln's attempt to shield Arkansas banks comes as she tries to preserve her controversial provision to force banks to loosen their ties to their swaps trading desks.
http://abcnews.go.com/Business/wireStory?id=10992566
Read more: http://www.businessinsider.com/the-scariest-financial-chart-in-the-united-states-bar-none-2010-6#ixzz0roPRkXhT
This is why banks are screwed....
http://www.chinadaily.com.cn/china/2010-06/24/content_10011366.htm
this is in China...not a good sign...
Read more: http://www.businessinsider.com/massage-therapist-al-gore-tried-to-jump-me-2010-6#ixzz0roQ17vyj
FOX News Gerald Celente World Riots USA Fascism
http://www.2012-doomsday-predictions.com/12575/fox-news-gerald-celente-world-riots-usa-fascism/
Gerald Celente on Jeff Rense Show 15 June 2010 - The Master Of Trends Right Again
http://geraldcelentechannel.blogspot.com/2010/06/gerald-celente-double-dip-recession.html