Dodd-Frank ready for congressional close-up
WASHINGTON (Reuters) - Republican lawmakers this week will test their strategy of stifling the Obama administration's financial reform law through oversight hearings when some of the biggest financial policymakers appear before Congress.
The highest-profile event will be on Thursday, when Federal Reserve Chairman Ben Bernanke testifies before the Senate Banking Committee.
The panel will also hear from the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission, the two agencies that arguably have the most rules to formulate under the Dodd-Frank financial reform law.
While the Senate Banking Committee hearing will have the marquee names, House of Representative hearings on derivatives and debit card fee limits could provide more insight into how much relief regulators may be prepared to give.
Republicans have been highly critical of the Dodd-Frank law, passed last year with almost exclusively Democratic support. Although Republicans now control the House of Representatives, the Democrat-controlled Senate would be an obstacle to any amendments.
Instead, the Republicans have settled on a strategy of oversight, arguing they can influence regulators through hearings and the budget process that allocates funding to carry out the law.
The House Financial Services subcommittee on Thursday examines the Federal Reserve's proposed limits on the fees a bank can charge a retailer when a customer uses a debit card.
Banks and card network companies such as Visa Inc and MasterCard Inc have been pleading with Congress and the Federal Reserve to ease up on a December proposal that would cut debit processing fee revenue by about 75 percent.
The proposal was required by Dodd-Frank, but the depth of the Fed's cuts took the industry by surprise, sinking Visa and MasterCard shares by more than 10 percent in one day.
The debit card industry could lose some $13 billion of an estimated $23 billion in annual processing fee revenue as a result of the rules, according to CardHub.com.
Bank and card company lobbyists say their best chance of easing the crackdown is for Congress to amend the law, possibly putting pressure on Republicans to revise their oversight-centered strategy.
There is even some bipartisan support for a narrowly-targeted amendment of Dodd-Frank on this issue.
Democratic Representative Barney Frank, a lead author of the law, says the fee crackdown goes too far.
Opponents of the fee limits, hoping to hear a chastened Fed at the hearing, will likely be disappointed by testimony from Fed Governor Sarah Raskin.
When the Fed voted in December to put the debit fee rule out for comment, some Fed governors were cautious, emphasizing the need to closely consider the feedback they receive.
Raskin, however, said the current system is not transparent, is dominated by big banks as well as Visa and MasterCard, and ultimately winds up costing the consumer.
"In my mind, the directive for this kind of intervention results from a market that is working less than competitively," she said.
Republicans will also continue to scrutinize what they see as onerous regulations for businesses that use swaps to hedge their risk at two hearings on Tuesday, one by the House Financial Services Committee and another by Agriculture committee members.
They are concerned that a flood of proposals from the CFTC and SEC have overwhelmed businesses' ability to analyze and respond to the new rules -- and they want the agencies to slow down on implementing the regulations.
On Friday, a panel of experts advising U.S. regulators on the May 6 "flash crash," when U.S. stock markets plunged about 700 points before recovering most of those losses within minutes, will hold a public meeting on its recommendations to prevent future market plunges.