House Financial Services Committee Chairman Barney Frank (D-Mass.) has decided to slow down on legislation requested by the Treasury Department that would empower a regulator to wind down huge non-bank institutions that pose a systemic risk to the financial system. Frank initially planned to act swiftly to designate an entity with authority over financial institutions not covered by the Federal Deposit Insurance Corporation (FDIC).
 
During testimony before Frank’s committee last month, Treasury Secretary Timothy F. Geithner announced the administration’s intention to establish such a “resolution authority,” even floating legislative language on Capitol Hill. The idea was to move such a measure quickly, if there was a way to separate it from a broader overhaul of the financial regulatory structure. Now, Treasury’s proposal will be considered as part of a broader regulatory overhaul of the financial industry.

Frank and Senate Banking Committee Chairman Chris Dodd (D-Conn.) have both indicated their goal is to pass comprehensive financial regulatory reform by the end of this year. But the Financial Services Roundtable, which represents the biggest financial services firms, has been trying to slow that down. Another factor that could impact the timetable: moves in the House and Senate to create committees to investigate the causes of the financial meltdown and recommend actions to prevent one from happening again.

April 28, 2009