Friday, November 30, 2012

Rep. Jeb Hensarling Named new Chair of House Financial Services Committee for 113th Congress

House Speaker John Boehner (R-OH) has announnced that Rep. Jeb Hensarling (R-TX) will be the Chair of the Financial Services Committee in the upcomong 113th Congress, succeeding Rep. Spencer Bachus (R-AL). The Committee has oversight of the securities markets and the securties industry, we well as the banking industry and financial institutions. Rep. Hensarling is currently the Vice-Chairman of the Committee.

Rep. Hensarling has been a strong advocate for the reform of goevrnment-sponsored enterprises and the creation of a private secondary mortgage market in the US and a revival of securitization. In the 112th Congress. Vice Chairman Hensarling inroduced legislation that would either place Fannie Mae and Freddie Mac into receivership or reform the GSEs under new regulations. Chairman-designate Hensarling could be expected to reintroduce a version of this legislation in the 113th Congress andtry to  pass it out of the Committee to the House floor.

The GSE Bailout Elimination and Taxpayer Protection Act (HR 1182) would establishe a finite end to the GSEs’ conservatorship 2 years from the date of enactment and imopose a prohibition on any reduction to the senior preferred stock dividends the GSEs contractually agreed to pay taxpayers under their conservatorship. Upon the end of the conservatorship, the Federal Housing Finance Agency (FHFA) must evaluate the financial viability of each GSE. If it is determined not to be viable, the FHFA would follow the procedure laid out by the Housing and Economic Recovery Act of 2008 (P.L. 110-289) for placing that GSE into receivership. If determined to be viable, the GSE would be allowed to resume limited market operations under its own control for a maximum of three years under new regulations that would enhance the authority for FHFA to adjust the minimum capital requirements for the GSEs as appropriate, mirroring the existing capital adequacy requirements other regulators already have in place for banks. The legislation would also repeal the exemption allowing GSE securities to avoid full SEC registration.

Rep. Hensarling co-sponsored the GSE Credit Risk Equitable Treatment Act HR 2223), which would amends the Securities Exchange Act to require that credit risk retention regulations ensure that there is no difference in the treatment of asset-backed securities securitized by Fannie Mae or Freddie Mac solely because of securitization by the GSE, from the treament of other asset-backed securities securitized by any other entity.

Rep. Hensarling also introduced a bill (HR 2225) to amend the Investment Advisers Act to define "family office" (exempt from coverage by the Act) as a company (including any director, partner, trustee, or employee of such company, when acting in their respective capacities as such) that has no clients other than family clients and is owned, controlled, or operated primarily for the benefit of family clients and does not hold itself out to the public as an investment adviser.

The incoming Chair is also a proponent of reforming the federal regulatory process. He co-sponsored the
SEC Regulatory Accountability Act, HR 2308, which would amend the Securities Exchange Act to direct the SEC, before issuing a regulation, to: (1) identify and evaluate the significance of the problem that the proposed regulation is designed to address in order to assess whether any new regulation is warranted; (2) use the SEC Chief Economist to assess the costs and benefits of the intended regulation and adopt it only upon a reasoned determination that its benefits justify the costs; (3) identify and assess available alternatives that were considered; and (4) ensure that any regulation is accessible, consistent, written in plain language, and easy to understand.

The legislation would also require the SEC to: (1) consider whether the rulemaking will promote efficiency, competition, and capital formation; (2) consider the impact of the regulation upon investor choice, market liquidity and small business; (3) explain in its final rule the nature of comments received concerning the proposed rule or rule change; and (4) respond to those comments, explaining any changes made in response, and the reasons that it did not incorporate industry group concerns regarding potential costs or benefits.

The bill would further directs the SEC to: (1) review its regulations and orders periodically to determine if they are outmoded, ineffective, insufficient, or excessively burdensome; and (2) modify, streamline, expand, or repeal them.

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