Subcommittees to Examine Volcker Rule Impact on Economy, Jobs

Washington, Jan 11. A joint hearing in January held by two Financial Services subcommittees will evaluate the proposed Volcker Rule and its impact on the economy, jobs, businesses and investors.  Members of the subcommittees will also ask federal regulators about the costs of complying with the regulations as well as perceived benefits that will result from the regulations.

The Volcker Rule, a controversial part of the massive Dodd-Frank Act, directs regulators to write and issue rules prohibiting bank holding companies and their affiliates from engaging in proprietary trading and sponsoring and investing in hedge funds and private equity funds.  

Regulators have released a draft proposal of the Volcker Rule for public comment. In a sign of its complexity, the draft spans 298 pages and asks respondents to answer more than 1,300 questions. 

“From the beginning there have been serious concerns that this complex regulation will hinder American markets, competitiveness and job creation,” said Financial Services Committee Chairman Spencer Bachus.  “Despite claims from Dodd-Frank supporters that our foreign competitors would implement the same restrictions on proprietary trading, no other country has any plans to do so.  Therefore, we run the grave risk of creating an unlevel playing field that disadvantages the U.S. economy at a time when unemployment remains stubbornly high.  We must ensure that regulators take into consideration the Volcker Rule’s costs versus benefits as well as its impact on jobs, pensions, retirement savings and investment.”

The joint hearing to be held on January 18 continues the Financial Services Committee’s efforts to identify and correct job-destroying provisions in the 2,300-page Dodd-Frank Act.

Financial Institutions and Consumer Credit Subcommittee Chairman Shelley Moore Capito said, “This hearing will provide Members the opportunity to ask questions to clarify confusion surrounding the implementation of the proposed Volcker rules.  The proposed rules are extensive and the interplay between agencies fuels uncertainty about the end result.    Given the complexity and the broad impact of the proposed rules, it is imperative that Members of the Financial Institutions and Capital Markets Subcommittees have a better understanding of the potential consequences of implementing these rules.”

Capital Markets and Government Sponsored Enterprises Subcommittee Chairman Scott Garrett said, “Like much of Dodd-Frank, the Volcker Rule is a solution in search of a problem and raises more questions than it answers.  Job-killing government overreach is not what the doctor ordered for our struggling economy.  We need smart, sensible rules that foster economic growth and robust job creation, not unnecessary ones that hamstring our economy and send American jobs overseas.”

Time of hearing:  Wednesday, January 18 at 9:30 a.m.

Location:  2128 Rayburn House Office Building

Witnesses scheduled to testify:

Panel I:

Martin J. Gruenberg, Acting Chairman, Federal Deposit Insurance Corporation

Gary Gensler, Chairman, Commodity Futures Trading Commission

Mary Schapiro, Chairman, Securities and Exchange Commission

Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System

John Walsh, Acting Comptroller of the Currency, Office of the Comptroller of the Currency

Panel II:

Douglas Elliott, Fellow, Economic Studies, Initiative on Business and Public Policy, Brookings Institution

Scott Evans, Executive Vice President, President of Asset Management, TIAA-CREF

Alexander Marx, Head of Global Bond Trading, Fidelity Investments

Douglas J. Peebles, Chief Investment Office and Head of Fixed Income, Alliance Bernstein

Mark Standish, President & Co-CEO, RBC Capital Markets

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Dodd-Frank Rules Will Crush Employment

December 13, 2011.By Paul Sperry, for Investor’s Business Daily. Job-killing bank regulations threaten to wipe out all the gains in private-sector employment since the recovery began, the industry warns. Washington, however, is hiring thousands more bureaucrats to enforce the rules.

Signed into law last year, the Dodd-Frank Act is the biggest rewrite of financial regulations since the New Deal. It was intended to rein in Wall Street "excesses." But the banking industry says burdensome red tape is hurting economic growth and jobs in a still-sluggish labor market.


"The level of real GDP could be 2.7% less by the year 2015 than would otherwise be the case for the United States," said Stephen Wilson, outgoing chairman of the American Bankers Association. "This could result in 2.9 million fewer jobs being created.”

By comparison, the economy has created 1.78 million private jobs since the recovery officially began in June 2009.

Wilson says Dodd-Frank has resulted in more than 5,230 pages of proposed and final rules, which laid end-to-end would exceed the height of New York's Empire State Building — five times over.

Only a fourth of the rules have gone into effect so far, he says; yet the law in its first year has already imposed almost 20 million hours of paperwork on U.S. businesses. It took an estimated 5.5 million man-hours, in contrast, to build every iPhone sold.

Dodd-Frank compliance costs for the financial industry already top $12 billion. That is expected to swell as the remaining 77% of required rules are finalized.

Also, price controls imposed by Dodd-Frank will result in a 45% loss in debit card interchange revenue for banks, Wilson pointed out. Banks have laid off workers to raise revenue to meet higher capital reserves mandated under the law.

"In the end," he said, "it means fewer loans get made, slower job growth and a weaker economy.

Wilson, who also runs a small bank in Ohio, made the remarks last month during a speech on international finance in Tokyo.

The new regulatory regime, however, is a boon for lawyers and government workers.

A Government Accountability Office study this summer concluded that implementing Dodd-Frank rules would require 2,850 additional federal employees just through fiscal 2012 (which ends Sept. 30) — at a cost to taxpayers of $1.3 billion.

The Consumer Financial Protection Bureau will command the bulk of new hires and funding. Created by Dodd-Frank, the watchdog agency started with a staff of 1,225 and a budget of $330 million.

Patrice Ficklin, who heads CFPB's Office of Fair Lending, says she's hiring lawyers, statisticians, analysts and enforcement agents. These are high-paying jobs. In fact, the CFPB has hired at least a dozen employees at salaries of more than $225,000 a year.

The White House denies the financial regulations it championed are costing companies revenue and slowing hiring. It cites, for example, higher corporate profits.

"If you look at corporate profits, it's hard to make the case that regulations have caused companies to be scared about (hiring) or (that they're) hurting their job growth," argued Alan Krueger, President Obama's top economist.

"I think the main reason (for weak hiring) is that the companies feel that they could satisfy the demand that they face with the workers that they have," Krueger added in a recent CNBC interview. "Until they are more confident that consumers are coming back at a greater clip — that the demand will be there — I think we'll continue to see job growth at the kind of moderate pace that we've seen.

But analysts note that hiring still lags consumer spending. And they say profits are up mainly because businesses have slashed payrolls and other costs.

Even Rep. Barney Frank, D-Mass., admits the regulation he co-sponsored has cost jobs in the financial sector. But he says it's a "reasonable price" to pay to bring "greedy" bankers to heel. "If you lock up drug dealers," he said in a recent interview, "you're going to have fewer jobs.

U.S. Chamber of Commerce official David Hirschmann says employers remain uneasy about Dodd-Frank.

"Instead of creating jobs, the law has created uncertainty for job creators," he said. "The economic statistics bear that out.

Hirschmann added: "We are simply not going to see American companies spending capital until they can begin to navigate their way through this tangled web of regulation.

Dodd-Frank Hits Small Firms By forcing banks to increase the capital they have on hand to cover losses, Dodd-Frank has reduced capital available for small-business loans. This in turn has slowed hiring.

Tom Boyle of State Bank of Countryside in La Grange, Ill., says Dodd-Frank is "handicapping our ability to meet the credit needs" of small firms. "The consequences are real," Boyle said. "It means fewer loans get made. It means slower job growth.

Product marketer K&M of VA Inc., for one, wanted to expand this year but for the first time had trouble getting a line of credit. Owner Mike Bucci blames the new bank law. So does American Business Group, an Orlando, Fla.-based company that matches small-business buyers and sellers. If buyers can't access a loan thanks to Dodd-Frank, CEO Jessica Hadler Baines told IBD, "then the other option is to close the business down, putting more workers into unemployment.

The credit crunch could worsen if Dodd-Frank drives smaller banks out of business as predicted.

"Dodd-Frank and the related burdens are threatening not just our industry but our very banks," ABA's Wilson said. "The most conservative estimates predict that by the end of the decade, there will be 1,000 fewer banks in the United States.

That means fewer financial jobs in a sector that has already lost hundreds of thousands of workers.

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Committee Approves More Bills To Remove Regulatory Impediments to Job Creation

Press Releases.Washington, Nov 30. Financial Services Committee continued its efforts to promote job creation by easing the burden government regulations impose on the private sector with the approval today of three bills that fix derivatives provisions of the Dodd-Frank Act.

Since January, the Committee has led efforts to identify and fix job-killing provisions in the Dodd-Frank Act, as well as remove regulatory barriers standing in the way of an economic recovery. As the nation’s economy continues to struggle, the Committee has offered proposals to help the private sector grow and create jobs. To date, the Committee has approved 18 bills designed to encourage job creation and economic growth.

Chairman Spencer Bachus said, “The three derivatives bills approved today will bring much needed certainty to the over-the-counter derivatives market. They will help ensure that the U.S. is not placed at a competitive disadvantage with the rest of the world; that markets develop based on the needs of the participants and not on what Washington bureaucrats think a market should resemble; and that end-users are able to efficiently hedge their risks."

Capital Markets and Government Sponsored Enterprises Subcommittee Chairman Scott Garrett said, “With our economy on life support and the national unemployment rate at 9%, we need all hands on deck in Congress to bring much-needed relief to out of work Americans. I’m pleased that the Financial Services Committee answered the call today by approving several common-sense proposals that will help alleviate and clarify over-reaching regulations while breathing life into our economy and spurring main street job creation.”

In addition to the three bills dealing with derivatives provisions of the Dodd-Frank Act, the Committee also approved H.R. 3512, which revises the Abraham Lincoln Commemorative Coin Act to allow distribution of the surcharges collected on the sales of the coin.

The Full Committee approved the following bills to fix the derivatives provisions of the Dodd-Frank Act:H.R. 2586, the Swap Execution Facility Clarification Act:H.R. 2586 directs the CFTC and SEC to promulgate rules for swap execution facilities and security-based swap execution facilities (SEFs) to effectuate Congressional intent that SEFs can serve as an alternative to exchanges and provide an execution facility for illiquid or thinly-traded swaps. The legislation was approved by a voice vote.

H.R. 2586 ensures SEFs can serve as a platform for executing swaps and security-based swaps by:

• requiring immediate execution of matched trades;
• allowing market participants to receive and respond to a single quote;
• removing regulatory obstacles that require SEFs to have a minimum number of participants receiving bids or offers; and
• Ensuring that trading platforms executing swap transactions include voice-based and hybrid trading models.
• Does not allow the government to dictate market structure.

H.R. 2586 was introduced by Capital Markets Subcommittee Chairman Garrett and Rep. Robert Hurt. H.R. 2682, The Business Risk Mitigation and Price Stabilization Act The Business Risk Mitigation and Price Stabilization Act provides clarity to the derivatives title of the Dodd-Frank Act by reconfirming the end-user exemption from margin and capital requirements. End-users are firms and companies that use derivatives to manage their risks, not to speculate. H.R. 2682 was approved by a voice vote.

Through colloquies during the debate on Dodd-Frank and plain-language statute, legislators made their intent clear that the derivatives title was not meant to impose margin requirement on end users. Yet, regulators have interpreted the derivatives title to give them authority to impose margin requirements on end-users.

H.R. 2682 was introduced by Reps. Michael Grimm, Gary Peters, Austin Scott, and William Owens.H.R. 2779, introduced by Rep. Steve Stivers.H.R. 2779 provides an important clarification to the Dodd-Frank Act derivatives title, which treats inter-affiliate swaps the same as swaps between unrelated counterparties. Without correction, companies may face double the costs associated with hedging legitimate business risks. The legislation was approved unanimously by a vote of 53 to 0.

H.R. 2779 ensures entities under a common corporate ownership are able to appropriately manage risks without unnecessary costs. Under the legislation, inter-affiliate swaps will be exempt from the margin, clearing and reporting requirements of the Dodd-Frank Act.

H.R. 2779 was introduced by Reps. Steve Stivers and Marcia Fudge.                s