United States: Treasury’s Financial Regulatory Reform Initiative And Related Proposals

This article was originally published 24 April, 2009

On March 26, 2009 the U.S. Department of the Treasury ("Treasury") outlined its framework for financial regulatory reform in a release (the "Treasury release") and through Secretary of Treasury Geithner's testimony before the U.S. House of Representatives Committee on Financial Services.

Earlier the same week, Senator Collins and Representative Castle introduced the "Financial System Stabilization and Reform Act of 2009" (the "Stabilization and Reform Act") as S. 664 and H.R. 1754 in the Senate and House, respectively, companion bills that would create a new federal systemic risk regulator to oversee regulation of the U.S. financial markets.

Concurrently with its outline for financial regulatory reform, Treasury proposed the "Resolution Authority for Systemically Significant Financial Companies Act of 2009" (the "Resolution Authority Act"), which would grant the Federal Deposit Insurance Corporation (the "FDIC") the power to take over and resolve systemically important financial companies under statutory provisions similar to the Federal Deposit Insurance Act provisions applicable to the resolution of insured depository institutions.

In a reversal of his earlier support for the expedited adoption of the Resolution Authority Act, House Financial Services Committee Chairman Barney Frank recently stated in an interview that legislation relating to the resolution of systemically important financial companies should be folded into broader legislation that would include the creation of a new systemic risk regulator. Representative Frank stated in the interview that he was hopeful that such broader legislation could be passed by the House of Representatives in the fall, later than Treasury and the administration's hoped for adoption date.

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