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House Financial Services Committee Chairman Barney Frank, D-Mass., was forced to delay the beginning of his panel's vote on legislation giving federal regulators authority to seize and close failing nonbank financial firms. A lengthy vote on the House floor over credit card legislation prevented Frank's panel from turning their attention back to the resolution authority bill after brief opening remarks Wednesday morning. Frank rescheduled commencement of the vote for Thursday at 10 a.m.
A number of committee members from both parties expressed reservations about the current state of the legislation, suggesting that a final vote on the bill will take the committee well into next week. Rep. Mel Watt, D-N.C. acknowledged that Frank had agreed to require that financial conglomerates prefund a pool of money to cover the cost of future failures. But Watt insisted any pool be kept separate from the fund now overseen by the Federal Deposit Insurance Corp. to cover deposit insurance for commercial banks. Watt said: "The FDIC fund has its own brand name that the American public has substantial faith in. Whatever we do, we need to do separate from the FDIC fund, by creating solid firewalls between the new resolution fund ... and the FDIC fund. We cannot leave depositors with any doubt whatsoever about whether the FDIC fund will have integrity and will be able to protect them and their deposits" Rep. Paul Kanjorski, D-Pa., suggested the Frank is trying to vote the panel out of committee too fast. "We probably should take the next two or three weeks to accomplish the best this committee is capable of doing," he said. Republican Jeb Hensarling, a fierce opponent of the legislation, said he was "encouraged" to hear the Democrats' reservations. The Texan and other Republicans warn that the bill, by giving regulators unlimited authority to fund operations of failing firms, would set the stage for even larger bailouts of financial firms than those crafted by the government in the past year. Hensarling suggested the bill be retitled the "Perpetual Bailout Act of 2010" or "E-TARP" for "Eternal Troubled Asset Relief Program" because the legislation will "ultimately enshrine us as a bailout nation." - Bill McConnell
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