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Key Votes

HR 4173 - Dodd-Frank Wall Street Reform and Consumer Protection Act - Key Vote

National Key Votes

Alcee Hastings, Sr. voted Yea (Conference Report Vote) on this Legislation.

Read statements Alcee Hastings, Sr. made in this general time period.

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Stage Details

Legislation - Signed (Executive) -

Title: Dodd-Frank Wall Street Reform and Consumer Protection Act

Legislation - Conference Report Adopted (Senate) (60-39) - (Key vote)

Title: Dodd-Frank Wall Street Reform and Consumer Protection Act

Vote Smart's Synopsis:

Vote to pass a bill that amends and creates various statutes relating to regulation and oversight of activities within the U.S. financial system, including, but not limited to, the following highlights.

Highlights:

FDIC Liquidtion Authority

  • Authorizes a liquidation process for financial entities under the terms of which the Federal Deposit Insurance Corporation (FDIC) would take an entity into receivership, and specifies that the following requirements must be met before this liquidation process can be put into effect (Secs. 202-204):
    • Approval must be granted by the following entities in the manner specified in order to recommend the beginning of the liquidation process:
      • For "general cases," a 2/3 vote by the Board of Governors of the Federal Reserve and a 2/3 vote by the Board of Directors of the FDIC;
      • For cases involving brokers or dealers, a 2/3 vote by the Board of Governors of the Federal Reserve System and a 2/3 vote by the members of the SEC; or
      • For cases involving insurance entities, a 2/3 vote by the Board of Governors of the Federal Reserve and affirmative approval by the Director of the Federal Insurance Office;
    • The Secretary of the Treasury, in consultation with the President, must make certain findings, including, but not limited to, the following:
      • The financial entity is in default or in danger of default;
      • The failure of the entity and its resolution under otherwise applicable law would have "serious adverse effects" on financial stability in the United States; and
      • No "viable" private sector alternative is available to prevent default;
    • The board of directors (or similar body) of the financial entity must indicate its approval or disapproval of the appointment of the FDIC as receiver, after which the following will occur:
      • If the board of directors or similar body approves, the Secretary of the Treasury shall appoint the FDIC as receiver; or
      • If the board of directors or similar body disapproves, the Secretary of the Treasury shall petition the U.S. District Court for the District of Columbia for an order authorizing the appointment of the Corporation as receiver.
  • Specifies that if the Secretary of the Treasury petitions the Court for an order authorizing the receivership, the U.S. District Court for the District of Columbia shall proceed as follows (Sec. 202):
    • If it finds that the determination that the financial entity is in default or in danger of default and satisfies the relevant legal definition of a financial entity is not "arbitrary and capricious," the Court shall issue an order authorizing the receivership;
    • If it finds that the determination that the financial entity is in default or in danger of default and satisfies the relevant legal definition of a financial entity is "arbitrary and capricious," the Court shall provide to the Secretary a written statement of each reason supporting its determination, and allow the Secretary an "immediate" opportunity to amend and re-file the petition; or
    • If the Court does not make a determination within 24 hours of receipt of the petition, the petition shall be granted by operation of law and the Secretary shall appoint the FDIC as receiver.
  • Establishes the following terms under which the liquidation process shall proceed (Secs. 204 & 206):
    • Creditors and shareholders will bear the losses of the financial entity;
    • Management and members of the board of directors (or similar body) responsible for the condition of the financial entity will not be retained; and
    • The FDIC and other appropriate agencies will take "all steps necessary and appropriate" to assure that all parties, including management, directors, and third parties, bear losses "consistent with their responsibility," including actions for damages, restitution, and recoupment of compensation and other gains not compatible with such responsibility.
  • Authorizes the FDIC to take the following actions when it is appointed as receiver of a financial entity (Sec. 210):
    • Take over the assets of and operate the entity with all of the powers of the members, shareholders, directors, and officers of the financial entity;
    • Conduct all business of the covered financial entity;
    • Collect all obligations and money owed to the financial entity;
    • Perform all functions of the financial entity, in the name of the financial entity;
    • Manage the assets and property of the financial entity, consistent with "maximization of the value of the assets;" and
    • Provide by contract for assistance in fulfilling any function, activity, action, or duty of the FDIC as receiver.
  • Establishes the Orderly Liquidation Fund in the Department of Treasury to be made available to the FDIC Corporation to provide for the cost of the liquidation of financial entities and allows the FDIC to charge financial entities risk-based assessments and to issue obligations in order to deposit the proceeds in the Fund (Sec. 210).
  • Prohibits the FDIC from issuing or incurring any obligation, if, after issuing the obligation, the aggregate amount of such obligations outstanding for each covered financial entity would exceed (Sec. 210):
    • An amount that is equal to 10 percent of the total consolidated assets of the financial entity; and
    • The amount that is equal to 90 percent of the fair value of the total consolidated assets of each financial entity that are available for repayment.
  • Prohibits the use of taxpayer funds to prevent the liquidation of any financial entity, and requires that all funds expended in the liquidation of a financial entity shall be recovered from the assets of such financial entity, or shall be the responsibility of the financial sector, through assessments (Sec. 214).

Wall Street Regulations

  • Requires both the Commodity Futures Trading Commission (CFTC) and the Security and Exchange Commission (SEC) to consult with each other and the prudential regulators before initiating any rulemaking or issuing an order regarding swaps (Sec. 712).
  • Prohibits federal government financial assistance to swap entities (Sec. 716).
  • Defines "swap' as any agreement, contract, or transaction that (Sec. 721):
    • Is an option for a purchase or sale of, among other things, currencies, commodities, securities, or any other financial or economic interests or properties;
    • Provides for any purchase, sale, payment, or delivery that is dependent on an event occurring or not occurring with a potential financial, economic, or commercial consequence; and
    • That provides for the exchange of 1 or more payments based on the value of 1 or more financial or economic interests, properties (or related interest) that transfers the financial risk associated with a future change in any value without also conveying direct or indirect ownership interest in an asset or liability that incorporates the financial risk.
  • Authorizes the CFTC to determine which swaps and security-based swaps must be cleared, and requires any individual engaging in a swap or security-based swap that is required to be cleared to submit it for clearing to a qualified derivatives clearing organization (Sec. 723 and 763).
  • Exempts a swap from clearing requirements if one of the counterparties is not a financial entity, is using swaps to hedge or mitigate commercial risk, and notifies the CFTC regarding how it generally meets its financial obligations associated with entering into non-cleared swaps (Sec. 723).
  • Requires a swap data repository to perform duties that include, but are not limited to, the following (Sec. 728):
    • Accepting data prescribed by the Commission, and confirming the accuracy of the data submitted;
    • Providing direct electronic access to the data for the Commission;
    • Establishing automated systems for the monitoring, screening, and analysis of swap data; and
    • Maintaining the privacy of all swap transaction information.
  • Requires a swap not accepted by any clearing agency to be reported to a swap data repository or, if no repository will accept it, to the CFTC (Sec. 729).
  • Prohibits any individual from entering into any swap that the Commission determines to perform a "significant price discovery function" if the individual enters into the swap during any 1 day in an amount in excess of a limit to be determined periodically by the Commission and the individual has or obtains a position in the swap in excess of a limit to be determined periodically by the Commission, unless the individual files required reports with the Commission and keeps required books and records of any such swaps, transactions, or positions (Sec. 730).
  • Prohibits a federal employee or agent who acquires information that may affect the price of any commodity in interstate commerce or any individual who receives such information from a federal employee or agent from using the information for the purposes of entering into a contract of sale of a commodity for future delivery, an option, or a swap (Sec. 746).
  • Authorizes the CFTC, the SEC, and prudential regulators to consult and coordinate with foreign regulatory authorities on the subject of consistent international standards with regards to swaps (Sec. 752).
  • Requires each security-based swap execution facility to establish and enforce rules and procedures for ensuring the "financial integrity" of swaps that are entered on or through their facility (Sec. 763).
  • Requires any individual intending to act as a security-based swap dealer to register with the CFTC in order to be lawfully acting as a dealer (Sec. 764).
  • Requires each security-based swap dealer or major security-based swap participant to do the following, among other duties (Sec. 764):
    • Monitor its trading of security-based swaps to prevent violations of position limits;
    • Establish risk management systems for managing its day-to-day activities;
    • Disclose to the CFTC and the prudential regulator information regarding the terms and conditions of its security-based swaps, operations, mechanisms and practices of swap trading, and financial integrity protections relating to swaps;
    • Provide any requested information to the CFTC; and
    • Implement structural and institutional safeguards against conflict of interest.

Insurance Regulations

  • Establishes the Federal Insurance Office with the authority to do the following (Sec. 502):
    • Monitor all aspects of the insurance industry;
    • Monitor the extent to which "underserved communities" and low-income individuals have access to affordable insurance;
    • Recommend to the Financial Stability Oversight Council that it designate an insurer as an entity subject to regulation as a non-blank financial company;
    • Assist in administering the Terrorism Insurance Program established in the Department of Treasury;
    • Coordinate federal efforts and develop policy on prudential aspects of international insurance matters;
    • Determine if State insurance measures are preempted by covered agreements;
    • Consult with States regarding national and international insurance matters;
    • Perform any other duties and authorities assigned by the Secretary of the Treasury;
    • Advise the Secretary of the Treasury on major domestic and international insurance policy issues; and
    • Have the Director serve in an advisory capacity on the Financial Stability Oversight Council.
  • Prohibits the Federal Insurance Office from having authority over health insurance, long-term care insurance except that which is provided by life or annuity insurance, and crop insurance (Sec. 502).
  • Authorizes the Director of the Federal Insurance Office to obtain data or information by subpoena, provided such information is required to carry out the functions of the Office (Sec. 502).
  • Prohibits any state other than the home state of the insured to require any premium tax payment for nonadmitted insurance (Sec. 521).
  • Authorizes states to enter into a compact or otherwise establish nationwide unified requirements, forms and procedures for the reporting, payment, collection and allocation of premium taxes for nonadmitted insurance (Sec. 521).
  • Specifies the placement of nonadmitted insurance be subject to the statutory and regulatory requirements of the home state (Sec. 522).
  • Prohibits states from doing the following in terms of uniform standards for surplus lines eligibility (Sec. 524):
    • Impose eligibility requirements on nonadmitted insurers in a United States jurisdiction unless the State has adopted nationwide uniform requirements, forms, and procedures; or
    • Prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer outside the United States that is listed on the Quarterly Listing of Alien Insurers.
  • Defines "nonadmitted insurance" as any property and casualty insurance permitted to be placed directly or through a surplus lines broker with an insurer not licensed to engage in the insurance business in a State, but does not include a risk retention group (Sec. 527).

Bureau of Consumer Financial Protection

  • Establishes the Bureau of Consumer Financial Protection, an independent entity within the Federal Reserve System, with the following objectives and functions (Secs. 1011 & 1021):
    • Ensuring consumers are provided with "timely and understandable" information to make "responsible" decisions about financial transactions; -Ensuring consumers are protected from discrimination and "unfair, deceptive, or abusive" acts and practices;
    • Ensuring that "outdated, unnecessary, or unduly burdensome" regulations are regularly identified and addressed in order to reduce "unwarranted regulatory burdens";
    • Ensuring that federal consumer financial laws are enforced consistently;
    • Ensuring that markets for consumer financial products and services operate "transparently and efficiently" to facilitate access to innovation;
    • Conducting financial education programs; 
    • Collecting, investigation, and responding to consumer complaints;
    • Collecting, researching, monitoring, and publishing information relevant to the functioning of markets for consumer financial protection and identifying risks to consumers;
    • Supervising financial entities for compliance with federal consumer financial law, and taking appropriate enforcement action;
    • Issuing rules, orders, and guidance in implementing federal consumer financial law; and
    • Performing support activities as may be necessary or useful to facilitate other functions of the Bureau.
  • Authorizes the Director to establish a toll-free phone number, website and database for the collection, monitoring and response to consumer complaints concerning financial products and services. Requires the Director to present an annual report to Congress about the complaints received (Sec. 1013).
  • Establishes the Office of Fair Lending and Equal Opportunity within the Bureau of Consumer Financial Protection with the following duties (Sec. 1013):
    • Provide oversight and enforcement of Federal laws that ensure fair, equitable and nondiscriminatory access to credit;
    • Coordinate "fair lending efforts";
    • Work with private industry, fair lending, civil rights, consumer and community advocates on the promotion of fair lending compliance and education; and
    • Provide reports to Congress on the Bureau's efforts to fulfill its fair lending mandate.
  • Establishes the Office of Financial Education within the Bureau of Consumer Financial Protection, which is responsible for developing and implementing initiatives to educate consumers on making better-informed financial decisions (Sec. 1013).
  • Establishes a Consumer Advisory Board to advise and consult with the Bureau of Consumer Financial Protection concerning its functions under Federal financial laws and to provide information on emerging practices in the consumer financial products and services industry (Sec. 1014).
  • Requires the Board of Governors of the Federal Reserve to transfer funds from the Federal Reserve System to the Bureau of Consumer Financial Protection in the amount determined by the Director to be reasonably necessary to carry out its functions, provided the funds do not to exceed the following of the total operating expenses of the Federal Reserve System (Sec. 1017):
    • 10 percent for fiscal year 2010-2011;
    • 11 percent for fiscal year 2011-2012; and
    • 12 percent for fiscal year 2012-2013 and each year fiscal year thereafter.
  • Establishes, within the Federal Reserve, the Consumer Financial Civil Penalty Fund for payment to victims of activities where civil penalties were imposed under consumer financial laws (Sec. 1017).
  • Prohibits the Bureau from having rulemaking, supervisory, or enforcement authority with respect to a merchant, retailer or seller of nonfinancial goods or services, or a licensed or registered real estate broker (Sec. 1027).
  • Authorizes the Bureau to develop rules to ensure that the features of any consumer financial products or services are fully, accurately, and effectively disclosed to customers so that they are aware of the costs, benefits, and risks associated with the product or service (Sec. 1032).
  • Authorizes state attorney generals, or the equivalent thereof, to bring civil action against national banks or federal savings associations to enforce regulations established by the Bureau of Consumer Financial Protection, provided that a copy of the complaint has been "timely" submitted to the Bureau and prudential regulator, if any, or the designee thereof (Sec. 1042).
  • Prohibits state attorney generals, or the equivalent thereof, from bringing civil action against a national bank or federal savings association for any act or omission that would be a violation of Title X of this Act (Consumer Financial Protection Act of 2010) (Sec. 1042)

 Mortgage Regulations

  • Prohibits compensating a loan originator for any mortgage loan if the compensation varies based on the terms of the loan, other than the amount of the principal (Sec. 1403).
  • Prohibits creditors from issuing residential mortgage loans unless a determination can be made that the borrower has a "reasonable ability" to repay the loan and all applicable taxes, insurance, and assessments, and specifies that such determination shall consider the following (Sec. 1411):
    • Credit history;
    • Current income;
    • Expected income;
    • Current obligations;
    • Debt-to-income ratio, or the residual income the consumer will have after paying non-mortgage debt and mortgage-related obligations;
    • Employment status; and
    • Other financial resources other than equity in the dwelling or property that secures repayment of the loan.
  • Requires creditors to verify the aforementioned information by reviewing the following (Sec. 1411):
    • W-2 forms;
    • Tax returns;
    • Payroll receipts;
    • Financial institution records; or
    • Other third-party documents that provide "reasonably reliable" evidence of the consumer's income or assets.
  • Requires the Board to establish regulations that prohibit mortgage originators from doing the following (Sec. 1403):
    • Directing any consumer to a residential mortgage that the consumer lacks a "reasonable ability" to pay;
    • Directing any consumer to a residential mortgage that has "predatory characteristics," including "equity stripping, excessive fees, or abusive terms";
    • Directing any consumer from a residential mortgage for which the consumer is qualified that is a qualified mortgage to a residential mortgage loan that is not a qualified mortgage;
    • Engaging in lending practices that promote disparities among consumers of equal credit worthiness but of different race, ethnicity, gender, or age;
    • Mis-characterizing the credit history of a consumer or the residential mortgage loans available to a consumer;
    • Mischaracterizing, or inducing the mis-characterization of the appraised value of the property securing the extension of credit; and
    • Discouraging a consumer from seeking a residential mortgage loan secured by a consumer's principal dwelling from another mortgage originator if the mortgage originator is unable to suggest, offer, or recommend to a consumer a loan that is not more expensive than a loan for which the consumer qualifies.
  • Prohibits creditors from extending credit in the form of higher-risk mortgage to any consumer without first obtaining a written appraisal of the property to be mortgaged, including a physical property visit by a certified or licensed appraiser (Sec. 1471).
  • Requires creditors to obtain a second appraisal from a different certified or licensed appraiser if the purpose of a higher-risk mortgage is to finance the purchase or acquisition of the mortgage property from an individual within 180 days of the purchase or acquisition of such property at a price that was lower than the current sales price of the property, including an analysis of the difference in sales prices, changes in market conditions, and any improvements made to the property between the date of the previous sale and the current sale (Sec. 1471).
  • Defines "higher-risk mortgage" as a residential mortgage loan, other than a reverse mortgage loan, that is not a qualified mortgage (Sec. 1412(b)(2)(A)) and has an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1 of the following (Sec. 1471):
    • 1.5 or more percentage points for a first lien residential mortgage loan having an original principal obligation amount that does not exceed the amount of the maximum limitation on the original principal obligation;
    • 2.5 or more percentage points for a first lien residential mortgage loan having an original principal obligation amount that does exceed the amount of the maximum limitation on the original principal obligation; or
    • 3.5 or more percentage points for a subordinate lien residential mortgage loan.
  • Prohibits any of the following practices when extending credit or in providing any services for a consumer credit transaction secured by the principal dwelling of the customer (Sec. 1472):
    • Appraisals of property offered as security for repayment of the consumer credit transaction that is conducted in connection with such transaction in which an individual with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates an individual, appraisal management company, firm, or other entity conducting or involved in an appraisal, or an attempt thereof;
    • Mischaracterizing, or inducing any mischaracterization of, the appraised value of the property securing the extension of credit;
    • Seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and
    • Withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between the parties.
  • Prohibits certified or licensed appraisers from conducting an appraisal in connection with a consumer credit transaction secured by the principal dwelling of a consumer if he or she has a direct or indirect interest, financial or otherwise, in the property of the transaction involving the appraisal (Sec. 1472).

Other Provisions

  • Requires the Financial Stability Oversight Council, by a vote of no fewer than 2/3 of its members, including an affirmative vote by the Chairindividual, to designate financial market utilities or payment, clearing, or settlement activities that are, or are likely to become, "systemically important" (Sec. 804).
  • Authorizes the Board of Governors of the Federal Reserve System to prescribe risk management standards governing operations related to the payment, clearing, and settlement activities, and the conduct of such activities, of financial market utilities designated as "systemically important" (Sec. 805).
  • Requires the supervisory agency of any financial market utility that has been designated as "systemically important" to conduct examinations of that utility at least once annually in order to determine the following (Sec. 807):
    • The nature of the operations and the risks borne by the utility;
    • The financial and operational risks posed by the utility to financial institutions, critical markets, or the broader financial system;
    • The resources and capabilities of the utility to monitor and control risks;
    • The "safety and soundness" of the utility; and
    • The utility's compliance with Title VIII of this bill ("Payment, Clearing, and Settlement Supervision") and the rules and orders prescribed under Title VIII.
  • Authorizes the appropriate financial regulator to examine a financial institution subject to the risk management standards for activities that have been designated as "systemically important" in order to determine the following (Sec. 808):
    • The nature and scope of the designated activities engaged in by the institution;
    • The financial and operational risks the activities may pose to the "safety and soundness" of the financial institution;
    • The financial and operational risks the activities may pose to other financial institutions, "critical" markets, or the broader financial system;
    • The resources and capabilities of the financial institution to monitor and control the risks described in the previous 2 subhighlights; and
    • The financial institution's compliance with Title VIII of this bill and the rules and orders prescribed under Section 805(a) (regarding risk management standards for "systemically important" activities).
  • Authorizes the Board of Governors of the Federal Reserve System, after consulting with the appropriate supervisory agency and upon a majority vote of the Financial Stability Oversight Council, to take emergency enforcement action against a financial market utility designated as "systemically important" if the Board has "reasonable cause" to conclude that the "imminent risk of substantial harm" precludes the use of the ordinary enforcement recommendation procedures and either (Sec. 807):
    • An action engaged in or "contemplated by" the utility poses an imminent risk of substantial harm to financial institutions, critical markets, or the broader financial system of the United States; or
    • The condition of the utility poses an imminent risk of substantial harm to financial institutions, critical markets, or the broader financial system.
  • Establishes incentives for "whistleblowers" who voluntarily provide information to the CFTC that leads to the "successful enforcement" of an action relating to a violation of this Act that results in monetary sanctions of more than $1 million, and specifies that the aggregate amount of the incentives shall be no less than 10 percent and no more than 30 percent of what has been collected of the monetary sanctions (Sec. 922).
  • Prohibits an employer from directly or indirectly discharging, demoting, suspending, threatening, harassing, or discriminating against a "whistleblower" because of any lawful act done by that individual in providing information to the Commission, in initiating, testifying in, or assisting any investigation or judicial or administrative action of the Commission, or in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), or any other law, rule, or regulation subject to the jurisdiction of the Commission (Sec. 922).
  • Establishes the Office of Credit Ratings to administer the rules of the SEC with regards to the practices of nationally recognized statistical rating organizations in determining ratings, to promote accuracy in credit ratings issued by such rating organizations, and to ensure that such ratings are not "unduly influenced" by conflicts of interest (Sec. 932).
  • Requires the Office of Credit Ratings to conduct an examination at least once per year of each nationally recognized statistical rating organization, and specifies that such examinations shall include a review of the following (Sec. 932):
    • The organization's conduct of business as it relates to its own policies, procedures, and rating methodologies;
    • Conflict of interest management by the organization;
    • The implementation of ethics policies by the organization;
    • The internal supervisory controls of the organization;
    • The governance of the organization;
    • The activities of the individual designated by the organization to administer certain policies and procedures and to ensure compliance with securities laws, rules and regulations;
    • The processing of complaints by the organization; and
    • Policies of the organization governing the post-employment activities of former staff.
  • Authorizes private action to be brought against a credit rating agency if there is a "strong inference" that the agency "knowingly or recklessly" failed to do the following (Sec. 933):
    • Conduct a "reasonable" investigation of the rated security with regards to the factual elements relied upon by its own methodology for evaluating credit risk; or
    • Obtain "reasonable" verification of such factual elements from other sources, independent of the issuer and underwriter, that the credit rating agency considered to be competent.
  • Requires each nationally recognized statistical ratings organization to refer any information that the organization receives from a third party and finds to be "credible" that alleges that a securities issuer has violated or is violating the law to the appropriate law enforcement or regulatory authorities (Sec. 934).
  • Requires securitizers who transfer, sell, or convey an asset to a third party through the issuance of an asset-backed security to retain the following percentages of the credit risk (Sec. 941):
    • No less than 5 percent of the credit risk for any such asset that:
      • Is not a qualified residential mortgage; or
      • Is a qualified residential mortgage, if 1 or more of the assets that collateralize the asset- backed security are not qualified residential mortgages; or
    • Less than 5 percent of the credit risk for any such asset that is not a qualified residential mortgage if the originator of the asset meets the underwriting standards established by the federal banking agencies that specify the terms, conditions, and characteristics of a loan that indicate a low credit risk.
  • Requires that a non-binding shareholder vote to approve the compensation of executives occur at least once every 3 years (Sec. 951).
  • Requires that when a individual is set to receive compensation based on or related to the acquisition, merger, consolidation, sale, or other disposition of all or "substantially" all of the assets of a securities issuer, as determined by an agreement with executive officers of the acquiring securities issuer, the shareholders shall take a non-binding vote on approval or disapproval of the agreement (Sec. 951).
  • Requires securities issuers to develop and implement a policy to recover over-compensation awarded to any current or former executive who received too much incentive-based compensation during the 3 year period preceding the date on which the issuer is required to prepare an accounting restatement due to material noncompliance of the issuer with any financial reporting requirement under securities laws (Sec. 954).
  • Repeals the authority of the Board of Governors of the Federal Reserve, under "unusual and exigent circumstances," to authorize any federal reserve bank to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange if such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions (12 USC 343) (Sec. 1101).
  • Requires the Board of Governors of the Federal Reserve, "as soon as is practicable," to establish policies and procedures for governing emergency lending that meet the following criteria (Sec. 1101):
    • Designed to provide liquidity to the financial system;
    • Not for the purpose of aiding a failing financial company;
    • The security for loans is sufficient to protect taxpayers from losses; and
    • The program is terminated in a "timely and orderly fashion."
  • Requires the Board of Governors of the Federal Reserve to establish procedures to prohibit borrowing from programs and facilities by borrowers that are in bankruptcy, under the authority of the FDIC to be liquidated, or subject to any other federal or state insolvency proceeding (Sec. 1101).
Legislation - Conference Report Adopted (House) (237-192) - (Key vote)

Title: Dodd-Frank Wall Street Reform and Consumer Protection Act

Vote Smart's Synopsis:

Vote to pass a bill that amends and creates various statutes relating to regulation and oversight of activities within the U.S. financial system, including, but not limited to, the following highlights.

Highlights:

FDIC Liquidtion Authority

  • Authorizes a liquidation process for financial entities under the terms of which the Federal Deposit Insurance Corporation (FDIC) would take an entity into receivership, and specifies that the following requirements must be met before this liquidation process can be put into effect (Secs. 202-204):
    • Approval must be granted by the following entities in the manner specified in order to recommend the beginning of the liquidation process:
      • For "general cases," a 2/3 vote by the Board of Governors of the Federal Reserve and a 2/3 vote by the Board of Directors of the FDIC;
      • For cases involving brokers or dealers, a 2/3 vote by the Board of Governors of the Federal Reserve System and a 2/3 vote by the members of the SEC; or
      • For cases involving insurance entities, a 2/3 vote by the Board of Governors of the Federal Reserve and affirmative approval by the Director of the Federal Insurance Office;
    • The Secretary of the Treasury, in consultation with the President, must make certain findings, including, but not limited to, the following:
      • The financial entity is in default or in danger of default;
      • The failure of the entity and its resolution under otherwise applicable law would have "serious adverse effects" on financial stability in the United States; and
      • No "viable" private sector alternative is available to prevent default;
    • The board of directors (or similar body) of the financial entity must indicate its approval or disapproval of the appointment of the FDIC as receiver, after which the following will occur:
      • If the board of directors or similar body approves, the Secretary of the Treasury shall appoint the FDIC as receiver; or
      • If the board of directors or similar body disapproves, the Secretary of the Treasury shall petition the U.S. District Court for the District of Columbia for an order authorizing the appointment of the Corporation as receiver.
  • Specifies that if the Secretary of the Treasury petitions the Court for an order authorizing the receivership, the U.S. District Court for the District of Columbia shall proceed as follows (Sec. 202):
    • If it finds that the determination that the financial entity is in default or in danger of default and satisfies the relevant legal definition of a financial entity is not "arbitrary and capricious," the Court shall issue an order authorizing the receivership;
    • If it finds that the determination that the financial entity is in default or in danger of default and satisfies the relevant legal definition of a financial entity is "arbitrary and capricious," the Court shall provide to the Secretary a written statement of each reason supporting its determination, and allow the Secretary an "immediate" opportunity to amend and re-file the petition; or
    • If the Court does not make a determination within 24 hours of receipt of the petition, the petition shall be granted by operation of law and the Secretary shall appoint the FDIC as receiver.
  • Establishes the following terms under which the liquidation process shall proceed (Secs. 204 & 206):
    • Creditors and shareholders will bear the losses of the financial entity;
    • Management and members of the board of directors (or similar body) responsible for the condition of the financial entity will not be retained; and
    • The FDIC and other appropriate agencies will take "all steps necessary and appropriate" to assure that all parties, including management, directors, and third parties, bear losses "consistent with their responsibility," including actions for damages, restitution, and recoupment of compensation and other gains not compatible with such responsibility.
  • Authorizes the FDIC to take the following actions when it is appointed as receiver of a financial entity (Sec. 210):
    • Take over the assets of and operate the entity with all of the powers of the members, shareholders, directors, and officers of the financial entity;
    • Conduct all business of the covered financial entity;
    • Collect all obligations and money owed to the financial entity;
    • Perform all functions of the financial entity, in the name of the financial entity;
    • Manage the assets and property of the financial entity, consistent with "maximization of the value of the assets;" and
    • Provide by contract for assistance in fulfilling any function, activity, action, or duty of the FDIC as receiver.
  • Establishes the Orderly Liquidation Fund in the Department of Treasury to be made available to the FDIC Corporation to provide for the cost of the liquidation of financial entities and allows the FDIC to charge financial entities risk-based assessments and to issue obligations in order to deposit the proceeds in the Fund (Sec. 210).
  • Prohibits the FDIC from issuing or incurring any obligation, if, after issuing the obligation, the aggregate amount of such obligations outstanding for each covered financial entity would exceed (Sec. 210):
    • An amount that is equal to 10 percent of the total consolidated assets of the financial entity; and
    • The amount that is equal to 90 percent of the fair value of the total consolidated assets of each financial entity that are available for repayment.
  • Prohibits the use of taxpayer funds to prevent the liquidation of any financial entity, and requires that all funds expended in the liquidation of a financial entity shall be recovered from the assets of such financial entity, or shall be the responsibility of the financial sector, through assessments (Sec. 214).

Wall Street Regulations

  • Requires both the Commodity Futures Trading Commission (CFTC) and the Security and Exchange Commission (SEC) to consult with each other and the prudential regulators before initiating any rulemaking or issuing an order regarding swaps (Sec. 712).
  • Prohibits federal government financial assistance to swap entities (Sec. 716).
  • Defines "swap' as any agreement, contract, or transaction that (Sec. 721):
    • Is an option for a purchase or sale of, among other things, currencies, commodities, securities, or any other financial or economic interests or properties;
    • Provides for any purchase, sale, payment, or delivery that is dependent on an event occurring or not occurring with a potential financial, economic, or commercial consequence; and
    • That provides for the exchange of 1 or more payments based on the value of 1 or more financial or economic interests, properties (or related interest) that transfers the financial risk associated with a future change in any value without also conveying direct or indirect ownership interest in an asset or liability that incorporates the financial risk.
  • Authorizes the CFTC to determine which swaps and security-based swaps must be cleared, and requires any individual engaging in a swap or security-based swap that is required to be cleared to submit it for clearing to a qualified derivatives clearing organization (Sec. 723 and 763).
  • Exempts a swap from clearing requirements if one of the counterparties is not a financial entity, is using swaps to hedge or mitigate commercial risk, and notifies the CFTC regarding how it generally meets its financial obligations associated with entering into non-cleared swaps (Sec. 723).
  • Requires a swap data repository to perform duties that include, but are not limited to, the following (Sec. 728):
    • Accepting data prescribed by the Commission, and confirming the accuracy of the data submitted;
    • Providing direct electronic access to the data for the Commission;
    • Establishing automated systems for the monitoring, screening, and analysis of swap data; and
    • Maintaining the privacy of all swap transaction information.
  • Requires a swap not accepted by any clearing agency to be reported to a swap data repository or, if no repository will accept it, to the CFTC (Sec. 729).
  • Prohibits any individual from entering into any swap that the Commission determines to perform a "significant price discovery function" if the individual enters into the swap during any 1 day in an amount in excess of a limit to be determined periodically by the Commission and the individual has or obtains a position in the swap in excess of a limit to be determined periodically by the Commission, unless the individual files required reports with the Commission and keeps required books and records of any such swaps, transactions, or positions (Sec. 730).
  • Prohibits a federal employee or agent who acquires information that may affect the price of any commodity in interstate commerce or any individual who receives such information from a federal employee or agent from using the information for the purposes of entering into a contract of sale of a commodity for future delivery, an option, or a swap (Sec. 746).
  • Authorizes the CFTC, the SEC, and prudential regulators to consult and coordinate with foreign regulatory authorities on the subject of consistent international standards with regards to swaps (Sec. 752).
  • Requires each security-based swap execution facility to establish and enforce rules and procedures for ensuring the "financial integrity" of swaps that are entered on or through their facility (Sec. 763).
  • Requires any individual intending to act as a security-based swap dealer to register with the CFTC in order to be lawfully acting as a dealer (Sec. 764).
  • Requires each security-based swap dealer or major security-based swap participant to do the following, among other duties (Sec. 764):
    • Monitor its trading of security-based swaps to prevent violations of position limits;
    • Establish risk management systems for managing its day-to-day activities;
    • Disclose to the CFTC and the prudential regulator information regarding the terms and conditions of its security-based swaps, operations, mechanisms and practices of swap trading, and financial integrity protections relating to swaps;
    • Provide any requested information to the CFTC; and
    • Implement structural and institutional safeguards against conflict of interest.

Insurance Regulations

  • Establishes the Federal Insurance Office with the authority to do the following (Sec. 502):
    • Monitor all aspects of the insurance industry;
    • Monitor the extent to which "underserved communities" and low-income individuals have access to affordable insurance;
    • Recommend to the Financial Stability Oversight Council that it designate an insurer as an entity subject to regulation as a non-blank financial company;
    • Assist in administering the Terrorism Insurance Program established in the Department of Treasury;
    • Coordinate federal efforts and develop policy on prudential aspects of international insurance matters;
    • Determine if State insurance measures are preempted by covered agreements;
    • Consult with States regarding national and international insurance matters;
    • Perform any other duties and authorities assigned by the Secretary of the Treasury;
    • Advise the Secretary of the Treasury on major domestic and international insurance policy issues; and
    • Have the Director serve in an advisory capacity on the Financial Stability Oversight Council.
  • Prohibits the Federal Insurance Office from having authority over health insurance, long-term care insurance except that which is provided by life or annuity insurance, and crop insurance (Sec. 502).
  • Authorizes the Director of the Federal Insurance Office to obtain data or information by subpoena, provided such information is required to carry out the functions of the Office (Sec. 502).
  • Prohibits any state other than the home state of the insured to require any premium tax payment for nonadmitted insurance (Sec. 521).
  • Authorizes states to enter into a compact or otherwise establish nationwide unified requirements, forms and procedures for the reporting, payment, collection and allocation of premium taxes for nonadmitted insurance (Sec. 521).
  • Specifies the placement of nonadmitted insurance be subject to the statutory and regulatory requirements of the home state (Sec. 522).
  • Prohibits states from doing the following in terms of uniform standards for surplus lines eligibility (Sec. 524):
    • Impose eligibility requirements on nonadmitted insurers in a United States jurisdiction unless the State has adopted nationwide uniform requirements, forms, and procedures; or
    • Prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer outside the United States that is listed on the Quarterly Listing of Alien Insurers.
  • Defines "nonadmitted insurance" as any property and casualty insurance permitted to be placed directly or through a surplus lines broker with an insurer not licensed to engage in the insurance business in a State, but does not include a risk retention group (Sec. 527).

Bureau of Consumer Financial Protection

  • Establishes the Bureau of Consumer Financial Protection, an independent entity within the Federal Reserve System, with the following objectives and functions (Secs. 1011 & 1021):
    • Ensuring consumers are provided with "timely and understandable" information to make "responsible" decisions about financial transactions; -Ensuring consumers are protected from discrimination and "unfair, deceptive, or abusive" acts and practices;
    • Ensuring that "outdated, unnecessary, or unduly burdensome" regulations are regularly identified and addressed in order to reduce "unwarranted regulatory burdens";
    • Ensuring that federal consumer financial laws are enforced consistently;
    • Ensuring that markets for consumer financial products and services operate "transparently and efficiently" to facilitate access to innovation;
    • Conducting financial education programs; 
    • Collecting, investigation, and responding to consumer complaints;
    • Collecting, researching, monitoring, and publishing information relevant to the functioning of markets for consumer financial protection and identifying risks to consumers;
    • Supervising financial entities for compliance with federal consumer financial law, and taking appropriate enforcement action;
    • Issuing rules, orders, and guidance in implementing federal consumer financial law; and
    • Performing support activities as may be necessary or useful to facilitate other functions of the Bureau.
  • Authorizes the Director to establish a toll-free phone number, website and database for the collection, monitoring and response to consumer complaints concerning financial products and services. Requires the Director to present an annual report to Congress about the complaints received (Sec. 1013).
  • Establishes the Office of Fair Lending and Equal Opportunity within the Bureau of Consumer Financial Protection with the following duties (Sec. 1013):
    • Provide oversight and enforcement of Federal laws that ensure fair, equitable and nondiscriminatory access to credit;
    • Coordinate "fair lending efforts";
    • Work with private industry, fair lending, civil rights, consumer and community advocates on the promotion of fair lending compliance and education; and
    • Provide reports to Congress on the Bureau's efforts to fulfill its fair lending mandate.
  • Establishes the Office of Financial Education within the Bureau of Consumer Financial Protection, which is responsible for developing and implementing initiatives to educate consumers on making better-informed financial decisions (Sec. 1013).
  • Establishes a Consumer Advisory Board to advise and consult with the Bureau of Consumer Financial Protection concerning its functions under Federal financial laws and to provide information on emerging practices in the consumer financial products and services industry (Sec. 1014).
  • Requires the Board of Governors of the Federal Reserve to transfer funds from the Federal Reserve System to the Bureau of Consumer Financial Protection in the amount determined by the Director to be reasonably necessary to carry out its functions, provided the funds do not to exceed the following of the total operating expenses of the Federal Reserve System (Sec. 1017):
    • 10 percent for fiscal year 2010-2011;
    • 11 percent for fiscal year 2011-2012; and
    • 12 percent for fiscal year 2012-2013 and each year fiscal year thereafter.
  • Establishes, within the Federal Reserve, the Consumer Financial Civil Penalty Fund for payment to victims of activities where civil penalties were imposed under consumer financial laws (Sec. 1017).
  • Prohibits the Bureau from having rulemaking, supervisory, or enforcement authority with respect to a merchant, retailer or seller of nonfinancial goods or services, or a licensed or registered real estate broker (Sec. 1027).
  • Authorizes the Bureau to develop rules to ensure that the features of any consumer financial products or services are fully, accurately, and effectively disclosed to customers so that they are aware of the costs, benefits, and risks associated with the product or service (Sec. 1032).
  • Authorizes state attorney generals, or the equivalent thereof, to bring civil action against national banks or federal savings associations to enforce regulations established by the Bureau of Consumer Financial Protection, provided that a copy of the complaint has been "timely" submitted to the Bureau and prudential regulator, if any, or the designee thereof (Sec. 1042).
  • Prohibits state attorney generals, or the equivalent thereof, from bringing civil action against a national bank or federal savings association for any act or omission that would be a violation of Title X of this Act (Consumer Financial Protection Act of 2010) (Sec. 1042)

 Mortgage Regulations

  • Prohibits compensating a loan originator for any mortgage loan if the compensation varies based on the terms of the loan, other than the amount of the principal (Sec. 1403).
  • Prohibits creditors from issuing residential mortgage loans unless a determination can be made that the borrower has a "reasonable ability" to repay the loan and all applicable taxes, insurance, and assessments, and specifies that such determination shall consider the following (Sec. 1411):
    • Credit history;
    • Current income;
    • Expected income;
    • Current obligations;
    • Debt-to-income ratio, or the residual income the consumer will have after paying non-mortgage debt and mortgage-related obligations;
    • Employment status; and
    • Other financial resources other than equity in the dwelling or property that secures repayment of the loan.
  • Requires creditors to verify the aforementioned information by reviewing the following (Sec. 1411):
    • W-2 forms;
    • Tax returns;
    • Payroll receipts;
    • Financial institution records; or
    • Other third-party documents that provide "reasonably reliable" evidence of the consumer's income or assets.
  • Requires the Board to establish regulations that prohibit mortgage originators from doing the following (Sec. 1403):
    • Directing any consumer to a residential mortgage that the consumer lacks a "reasonable ability" to pay;
    • Directing any consumer to a residential mortgage that has "predatory characteristics," including "equity stripping, excessive fees, or abusive terms";
    • Directing any consumer from a residential mortgage for which the consumer is qualified that is a qualified mortgage to a residential mortgage loan that is not a qualified mortgage;
    • Engaging in lending practices that promote disparities among consumers of equal credit worthiness but of different race, ethnicity, gender, or age;
    • Mis-characterizing the credit history of a consumer or the residential mortgage loans available to a consumer;
    • Mischaracterizing, or inducing the mis-characterization of the appraised value of the property securing the extension of credit; and
    • Discouraging a consumer from seeking a residential mortgage loan secured by a consumer's principal dwelling from another mortgage originator if the mortgage originator is unable to suggest, offer, or recommend to a consumer a loan that is not more expensive than a loan for which the consumer qualifies.
  • Prohibits creditors from extending credit in the form of higher-risk mortgage to any consumer without first obtaining a written appraisal of the property to be mortgaged, including a physical property visit by a certified or licensed appraiser (Sec. 1471).
  • Requires creditors to obtain a second appraisal from a different certified or licensed appraiser if the purpose of a higher-risk mortgage is to finance the purchase or acquisition of the mortgage property from an individual within 180 days of the purchase or acquisition of such property at a price that was lower than the current sales price of the property, including an analysis of the difference in sales prices, changes in market conditions, and any improvements made to the property between the date of the previous sale and the current sale (Sec. 1471).
  • Defines "higher-risk mortgage" as a residential mortgage loan, other than a reverse mortgage loan, that is not a qualified mortgage (Sec. 1412(b)(2)(A)) and has an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1 of the following (Sec. 1471):
    • 1.5 or more percentage points for a first lien residential mortgage loan having an original principal obligation amount that does not exceed the amount of the maximum limitation on the original principal obligation;
    • 2.5 or more percentage points for a first lien residential mortgage loan having an original principal obligation amount that does exceed the amount of the maximum limitation on the original principal obligation; or
    • 3.5 or more percentage points for a subordinate lien residential mortgage loan.
  • Prohibits any of the following practices when extending credit or in providing any services for a consumer credit transaction secured by the principal dwelling of the customer (Sec. 1472):
    • Appraisals of property offered as security for repayment of the consumer credit transaction that is conducted in connection with such transaction in which an individual with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates an individual, appraisal management company, firm, or other entity conducting or involved in an appraisal, or an attempt thereof;
    • Mischaracterizing, or inducing any mischaracterization of, the appraised value of the property securing the extension of credit;
    • Seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and
    • Withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between the parties.
  • Prohibits certified or licensed appraisers from conducting an appraisal in connection with a consumer credit transaction secured by the principal dwelling of a consumer if he or she has a direct or indirect interest, financial or otherwise, in the property of the transaction involving the appraisal (Sec. 1472).

Other Provisions

  • Requires the Financial Stability Oversight Council, by a vote of no fewer than 2/3 of its members, including an affirmative vote by the Chairindividual, to designate financial market utilities or payment, clearing, or settlement activities that are, or are likely to become, "systemically important" (Sec. 804).
  • Authorizes the Board of Governors of the Federal Reserve System to prescribe risk management standards governing operations related to the payment, clearing, and settlement activities, and the conduct of such activities, of financial market utilities designated as "systemically important" (Sec. 805).
  • Requires the supervisory agency of any financial market utility that has been designated as "systemically important" to conduct examinations of that utility at least once annually in order to determine the following (Sec. 807):
    • The nature of the operations and the risks borne by the utility;
    • The financial and operational risks posed by the utility to financial institutions, critical markets, or the broader financial system;
    • The resources and capabilities of the utility to monitor and control risks;
    • The "safety and soundness" of the utility; and
    • The utility's compliance with Title VIII of this bill ("Payment, Clearing, and Settlement Supervision") and the rules and orders prescribed under Title VIII.
  • Authorizes the appropriate financial regulator to examine a financial institution subject to the risk management standards for activities that have been designated as "systemically important" in order to determine the following (Sec. 808):
    • The nature and scope of the designated activities engaged in by the institution;
    • The financial and operational risks the activities may pose to the "safety and soundness" of the financial institution;
    • The financial and operational risks the activities may pose to other financial institutions, "critical" markets, or the broader financial system;
    • The resources and capabilities of the financial institution to monitor and control the risks described in the previous 2 subhighlights; and
    • The financial institution's compliance with Title VIII of this bill and the rules and orders prescribed under Section 805(a) (regarding risk management standards for "systemically important" activities).
  • Authorizes the Board of Governors of the Federal Reserve System, after consulting with the appropriate supervisory agency and upon a majority vote of the Financial Stability Oversight Council, to take emergency enforcement action against a financial market utility designated as "systemically important" if the Board has "reasonable cause" to conclude that the "imminent risk of substantial harm" precludes the use of the ordinary enforcement recommendation procedures and either (Sec. 807):
    • An action engaged in or "contemplated by" the utility poses an imminent risk of substantial harm to financial institutions, critical markets, or the broader financial system of the United States; or
    • The condition of the utility poses an imminent risk of substantial harm to financial institutions, critical markets, or the broader financial system.
  • Establishes incentives for "whistleblowers" who voluntarily provide information to the CFTC that leads to the "successful enforcement" of an action relating to a violation of this Act that results in monetary sanctions of more than $1 million, and specifies that the aggregate amount of the incentives shall be no less than 10 percent and no more than 30 percent of what has been collected of the monetary sanctions (Sec. 922).
  • Prohibits an employer from directly or indirectly discharging, demoting, suspending, threatening, harassing, or discriminating against a "whistleblower" because of any lawful act done by that individual in providing information to the Commission, in initiating, testifying in, or assisting any investigation or judicial or administrative action of the Commission, or in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), or any other law, rule, or regulation subject to the jurisdiction of the Commission (Sec. 922).
  • Establishes the Office of Credit Ratings to administer the rules of the SEC with regards to the practices of nationally recognized statistical rating organizations in determining ratings, to promote accuracy in credit ratings issued by such rating organizations, and to ensure that such ratings are not "unduly influenced" by conflicts of interest (Sec. 932).
  • Requires the Office of Credit Ratings to conduct an examination at least once per year of each nationally recognized statistical rating organization, and specifies that such examinations shall include a review of the following (Sec. 932):
    • The organization's conduct of business as it relates to its own policies, procedures, and rating methodologies;
    • Conflict of interest management by the organization;
    • The implementation of ethics policies by the organization;
    • The internal supervisory controls of the organization;
    • The governance of the organization;
    • The activities of the individual designated by the organization to administer certain policies and procedures and to ensure compliance with securities laws, rules and regulations;
    • The processing of complaints by the organization; and
    • Policies of the organization governing the post-employment activities of former staff.
  • Authorizes private action to be brought against a credit rating agency if there is a "strong inference" that the agency "knowingly or recklessly" failed to do the following (Sec. 933):
    • Conduct a "reasonable" investigation of the rated security with regards to the factual elements relied upon by its own methodology for evaluating credit risk; or
    • Obtain "reasonable" verification of such factual elements from other sources, independent of the issuer and underwriter, that the credit rating agency considered to be competent.
  • Requires each nationally recognized statistical ratings organization to refer any information that the organization receives from a third party and finds to be "credible" that alleges that a securities issuer has violated or is violating the law to the appropriate law enforcement or regulatory authorities (Sec. 934).
  • Requires securitizers who transfer, sell, or convey an asset to a third party through the issuance of an asset-backed security to retain the following percentages of the credit risk (Sec. 941):
    • No less than 5 percent of the credit risk for any such asset that:
      • Is not a qualified residential mortgage; or
      • Is a qualified residential mortgage, if 1 or more of the assets that collateralize the asset- backed security are not qualified residential mortgages; or
    • Less than 5 percent of the credit risk for any such asset that is not a qualified residential mortgage if the originator of the asset meets the underwriting standards established by the federal banking agencies that specify the terms, conditions, and characteristics of a loan that indicate a low credit risk.
  • Requires that a non-binding shareholder vote to approve the compensation of executives occur at least once every 3 years (Sec. 951).
  • Requires that when a individual is set to receive compensation based on or related to the acquisition, merger, consolidation, sale, or other disposition of all or "substantially" all of the assets of a securities issuer, as determined by an agreement with executive officers of the acquiring securities issuer, the shareholders shall take a non-binding vote on approval or disapproval of the agreement (Sec. 951).
  • Requires securities issuers to develop and implement a policy to recover over-compensation awarded to any current or former executive who received too much incentive-based compensation during the 3 year period preceding the date on which the issuer is required to prepare an accounting restatement due to material noncompliance of the issuer with any financial reporting requirement under securities laws (Sec. 954).
  • Repeals the authority of the Board of Governors of the Federal Reserve, under "unusual and exigent circumstances," to authorize any federal reserve bank to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange if such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions (12 USC 343) (Sec. 1101).
  • Requires the Board of Governors of the Federal Reserve, "as soon as is practicable," to establish policies and procedures for governing emergency lending that meet the following criteria (Sec. 1101):
    • Designed to provide liquidity to the financial system;
    • Not for the purpose of aiding a failing financial company;
    • The security for loans is sufficient to protect taxpayers from losses; and
    • The program is terminated in a "timely and orderly fashion."
  • Requires the Board of Governors of the Federal Reserve to establish procedures to prohibit borrowing from programs and facilities by borrowers that are in bankruptcy, under the authority of the FDIC to be liquidated, or subject to any other federal or state insolvency proceeding (Sec. 1101).
Legislation - Nonconcurrence Vote Passed (House) -
Legislation - Bill Passed With Amendment (Senate) (59-39) - (Key vote)
Legislation - Bill Passed (House) (223-202) - (Key vote)

Title: Dodd-Frank Wall Street Reform and Consumer Protection Act

Vote Smart's Synopsis:

Vote to pass a bill that amends and creates various statutes relating to regulation and oversight of activities within the United States financial system.

Highlights:
  • Requires the Comptroller General of the United States to perform an audit of the actions taken by the Board of Governors of the Federal Reserve System and of Federal reserve banks during the recent "economic crisis" (Sec. 1000A).
  • Establishes the Financial Services Oversight Council, mandated to perform the following duties (Sec. 1001, 1002, 1102):
    • Advise Congress on domestic and international regulatory developments, and make recommendations regarding the stability, efficiency, and competitiveness of the U.S. financial system;
    • Monitor and identify threats to the U.S. financial system, and to create strategies that address such threats;
    • Enforce "stricter standards" on financial companies and their activities, and recommend that regulatory agencies adopt such standards for firms under their jurisdiction;
    • Identify international regulatory developments that conflict with U.S. policy and that put the U.S. financial marketplace at a competitive disadvantage;
    • Facilitate information sharing and coordination amongst Council members, and provide for discussion and analysis of market developments and regulatory issues;
    • Resolve jurisdictional disputes between two or more financial regulatory agencies about a particular company, activity, or product, provided that such agencies are unable to resolve the dispute; and
    • Review and submit comments to the Securities Exchange Commission regarding any accounting principles, standards, or procedures.
  • Authorizes the Comptroller General to audit the activities and financial transactions of the Financial Services Oversight Council and any entity acting on its behalf, including the authority to access Council employees, officers, and records, and to make "periodic evaluations" (Sec. 1008).
  • Establishes criteria that the Financial Services Oversight Council shall consider in order to determine if a financial company poses a serious threat to the stability of the United States economy as follows (Sec. 1103):
    • The company's assets and liabilities, including the firm's "degree of reliance on short-term funding;"
    • The company's financial leverage (the degree to which an investment is made on borrowed money);
    • The company's "off-balance sheet" exposures;
    • The company's transactions and its relationships with other companies;
    • The company's degree of importance in terms of providing credit to households, businesses, and state and local governments, and as a source of liquidity;
    • The nature, scope, and mix of the company's activities;
    • The degree to which assets are managed and not owned by the company and the extent to which ownership of assets under management is diffuse;
    • The company's degree of importance as a credit source for low-income, minority, or underserved communities and the impact the company's failure would have on such communities;
    • The degree to which the company is already regulated; and
    • Other factors the Financial Services Oversight Council determines are appropriate.
  • Authorizes the Board of Governors of the Federal Reserve System to impose stricter standards on certain financial holding companies, and provides the Board with a list of standards to heighten (Sec. 1104):
    • Risk-based capital requirements;
    • Limits on financial leverage;
    • Liquidity requirements;
    • Limits on credit exposure, which includes all extensions of credit to and from the company, securities purchases, borrowing and lending, repurchase agreements, and derivative transactions;
    • "Prompt corrective action requirements," which includes assessments on how "capitalized" the company is, the thresholds of which shall be determined by the Board;
    • "Resolution plan requirements," or how the company plans to resolve financial distress in a fashion that is "rapid and orderly," and includes reporting credit exposure details;
    • Overall risk management requirements; and
    • Establishment of short-term debt limits.
  • Prohibits financial holding companies subjected to stricter standards from paying bonuses to any senior executive officer, and prohibits such companies from paying more than the average rate of compensation to any senior executive officer for 12 months from the time the Board of Governors determines a company is "undercapitalized" (Sec. 1104).
  • Authorizes the Secretary of the Treasury to appoint the Federal Deposit Insurance Corporation (FDIC) as the receiver of any large, critically undercapitalized financial institution subjected to stricter standards if the following applies (Sec. 1603, 1604):
    • The company is in default or is in danger of default;
    • The failure of the company would have "serious adverse effects" or would be "systematically destabilizing" to the United States economy; and
    • The appointment of the FDIC as the receiver of such company would avoid such adverse effects.
  • Establishes that the FDIC has resolution authority over covered companies (as described above) or any covered subsidiary, and authorizes the FDIC to take any of the following actions (Sec. 1604):
    • Make loans to the company, or purchase its debt obligations;
    • Purchase the company's assets either directly or through an entity established by the FDIC;
    • Assume or guarantee the company's obligations to one or more third parties;
    • Take a lien on any or all assets, including a first priority lien on all unencumbered assets to secure repayment of any transactions conducted in accordance with this section; and
    • Sell or transfer all or part of the company's acquired assets, liabilities, or obligations.
  • Requires the FDIC to impose the following terms and conditions for all stabilization actions (Sec. 1604):
    • The action must be determined necessary for financial system stability;
    • The shareholders must not receive payment until all other claims are fully paid;
    • Taxpayer funds must be repaid before payments are made to creditors;
    • Unsecured creditors must "bear losses;" and
    • Members of the board of directors or management responsible for the failed condition must be removed.
  • Establishes that the FDIC is the successor to any company it receives or any of its subsidiaries, and is authorized to perform all of the functions of the covered company, including the authority to merge the company with another company, transfer any assets and liabilities, determine and disallow claims, collect obligations and money due, and contract for assistance (Sec. 1609).
  • Establishes the Systemic Dissolution Fund to facilitate the "orderly and complete" dissolution of failed financial companies or companies that pose a "systemic threat" to the economy, specifies that it shall be financed by amounts assessed against failed financial companies, and resolves that this fund shall have a maximum size of $150 billion (Sec. 1609).
  • Provides the Commodity Futures Trading Commission with exclusive jurisdiction over transactions involving swaps, and requires all swap dealers and major swap participants to register with the Commission (Sec. 3102, 3107).
  • Requires the Commodity Futures Trading Commission to review each swap or type of swaps to determine whether it should be required to be cleared, and requires the Commission to provide a 30 day public comment period regarding such determination (Sec. 3103).
  • Specifies that any swap that has not been cleared by a derivatives clearing organization and that has not been recorded by a swap repository must (Sec. 3106):
    • Provide reports as the Commodity Futures Trading Commission prescribes; and
    • Keep books and records about the swap, which shall be available to the Commission, Federal banking agencies, the Financial Services Oversight Council, the Securities and Exchange Commission, and the Department of Justice, for as long as the Commission requires.
  • Specifies that the Commodity Futures Trading Commission shall require futures commission merchants and introducing brokers to establish conflict-of-interest systems and procedures so that there are "appropriate informational partitions" within the firms such merchants and brokers work for (Sec. 3109).
  • Establishes the Consumer Financial Protection Agency to regulate consumer financial products and services, and establishes the Consumer Financial Protection Oversight Board to advise the Director of the Agency on regulatory, strategic, policy, and consumer protection matters (Sec. 4101-4104).
  • Requires the establishment of the Consumer Advisory Board for the purpose of providing advice and information to the Director of the Consumer Financial Protection Agency regarding consumer laws and emerging practices in the consumer financial products or services industry, to assemble field experts to this purpose, and to "represent the interests of covered persons and consumers" (Sec. 4107).
  • Establishes the Consumer Financial Protection Agency Civil Penalty Fund for the purposes of collecting penalties assessed against a person in a court of law, and specifies that such amounts shall be available for paying the victims for which the civil penalties were imposed (Sec. 4111).
  • Authorizes the Consumer Financial Protection Agency to review any regulations governing alternative mortgage transactions (which are distinguished by adjustable rates or finance charges that can be adjusted or renegotiated, in addition to other attributes not common to traditional fixed rate mortgages), to determine if such regulations are "fair and not deceptive," and to prescribe new regulations (Sec. 4803).
  • Authorizes the Consumer Financial Protection Agency to enforce compliance of any regulations governing home mortgage disclosures (Sec. 4808).
  • Requires the Securities and Exchange Commission to examine on an annual basis the policies, procedures, and methods of calculating credit scores at each of the nationally recognized statistical rating organizations in order to determine if such organizations are consistently adhering to an "established and documented" system of determining such ratings (Sec. 6002).
  • Requires nationally recognized credit rating organizations to provide, in a certified form that can be compared across securities and easily understood by investors, the following information on credit scoring data (Sec. 6002):
    • The main assumptions of the methods and techniques used in the the ratings, and an analysis of how sensitive the rating is to these assumptions;
    • Potential shortcomings of the ratings;
    • Risks not measured in the rating, including liquidity, market, and other "potential shortcomings;"
    • The "certainty" of the data used to calculate ratings, including reliability, accuracy, and quality;
    • The extent of any due diligence services provided by a third party, if applicable;
    • A description of any obligor, issuer, security, or money market instrument used to determine the rating;
    • An overall assessment on the quality of information available and considered in producing a rating;
    • A measure or explanation of how "volatile" the credit rating may be, including any factors that may change the rating;
    • The "content" of the rating, including the probability of default and estimated losses upon default;
    • How the credit rating organization used servicer or remittance reports to conduct surveillance of the rating, and how often; and
    • Other information required by the Securities and Exchange Commission.
  • Establishes an Investor Advisory Committee to provide consultation and advice to the Securities Exchange Commission on regulatory issues and priorities on new products, trading strategies, fee structures, effectiveness of disclosures, actions to "protect investor interest," and actions to promote "confidence in the integrity of the marketplace" (Sec. 7101).
  • Requires that the Securities Exchange Commission establish uniform "standard of conduct" guidelines for brokers and dealers who give personalized investment advice about securities to customers, and requires that the Commission provide to customers clear disclosures about investment advisors (Sec. 7103).
Legislation - Introduced (House) -

Title: Dodd-Frank Wall Street Reform and Consumer Protection Act

Sponsors

  • Barney Frank (MA - D) (Out Of Office)
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