Republicans could shut off Wall St reform: Rep Frank
BOSTON (Reuters) - Republican gains in Congress could endanger funding for agencies charged with overseeing the sweeping financial overhaul enacted earlier this year, Representative Barney Frank, one of the act's authors, said on Tuesday.
"What I'm afraid will happen is they could, if they came to power, shut off this reform, and I think that would be a mistake," said Frank, chairman of the House Financial Services Committee, while speaking to reporters at a gathering of local financial-services executives held at the Federal Reserve Bank of Boston.
"They can't repeal it, but they could underfund it," said Frank.
He cited two agencies that could lose funding: the Securities and Exchange Commission and the Commodity Futures Trading Commission. Both will have increased roles under the new rules, such as overseeing the $615 trillion over-the-counter derivatives market, which will require hundreds of new staff members.
Those agencies are particularly vulnerable because their budgets are largely controlled by Congress while other agencies have independent revenue sources. They have already seen threats to their funding.
Requested budget increases for financial regulators were not included in a stopgap spending bill to fund government operations through early December that passed Congress in late September. The delay could stretch into 2011 and could complicate efforts to put the sweeping law in place.
ROLLING BACK REFORMS
Frank was the author of key reforms meant to stabilize the financial system after the worst economic crisis in decades.
But Frank faces a tough election season, including an unusually strong challenge from a Republican in his own district west and south of Boston. Nationally, meanwhile, Republicans hope to regain control of at least one chamber of Congress in November.
If that happens, Republicans have already made it clear they plan to roll back parts of the reform law, known as Dodd-Frank and one of the Obama administration's legislative victories.
Speaking at a Reuters Washington Summit on September 20, Richard Shelby, the Senate Banking Committee's top Republican, said Republicans are particularly interested in revisiting the newly created Consumer Financial Protection Bureau. Under Dodd-Frank the agency has the power to write and enforce rules for mortgages, credit cards and other financial products.
"They have said they think we have overregulated derivatives; they don't like the consumer financial protection agency," Frank said about Republicans.
Frank also raised the question of how much Washington should oversee the insurance industry, which now is mostly governed by the states. Frank said he made a decision not to include it in the Dodd-Frank reform package.
But now, he plans to "put out there for debate" questions of whether to allow insurance companies to operate under a federal charter, which would allow them to do business in any state.
Some consumer advocates say such a system could let companies sidestep tough state regulators. Not all insurance companies favor changes either.
Frank said he has not yet taken a position on the matter, and said the discussion also would include whether to allow a national charter only for life insurers or for those in the property and casualty sectors as well.
"It's a very nonpartisan issue," he said. "It's an interesting one that cuts across both partisan and ideological lines."
(Reporting by Ross Kerber; Editing by Steve Orlofsky)
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