On September 19, 2016, the Center for Capital Markets Competitiveness of the US Chamber of Commerce wrote a letter to Scott Alvarez, General Counsel of the Federal Reserve Board, requesting that the Federal Reserve Board withdraw its report, issued pursuant to Section 620 of the Dodd-Frank Act, advocating for a repeal of merchant banking authority for financial holding companies.
The letter noted that there was no opportunity for stakeholders to comment on the proposed removal of merchant banking authority, and alleged that the Federal Reserve Board, by presenting the contents of the letter as a policy recommendation to Congress, "short-circuited" the notice-and-comment procedure. The Center also alleged that the Federal Reserve Board failed to identify the benefits of repealing merchant banking authority in the report, unjustly presenting a one-sided case for its recommendations to Congress.
The Center also took issue with the substance of the proposal, arguing that repealing merchant banking authority would deny companies access to capital at a time when credit is already difficult to access, particularly in light of what the Center characterized as "hypothetical" risks in comparison to the "real" benefits of merchant banking. The letter concludes by recommending that the Federal Reserve Board withdraw its report and hold a series of public meetings to develop a "more robust" recommendation on merchant banking policy.
The text of the letter is available at: http://www.centerforcapitalmarkets.com/wp-content/uploads/2016/09/2016-9.19-Sec-620-Fed-Letter.pdf.
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