WASHINGTON BUREAU — The full House could start debating financial services reform legislation in the first week of December, House Financial Services Chairman Barney Frank, D-Mass., said today.
He said the committee will finish work Wednesday on the Investor Protection Act, and then start work on establishing a mechanism for dealing with systemically risky financial services companies.
Frank said he will revise the systemic risk discussion draft he developed together with the Treasury Department.
Other Democrats on the Financial Services Committee want Frank to rewrite the bill to have large financial institutions contribute to a pool that can be used to help cover the cost of liquidating large, troubled financial institutions.
Frank added that, in the revised version of the bill, the Federal Reserve Board would lose its authority to provide funds to troubled non-banks under Section 13(3) of the Federal Reserve Act. That is the provision the Fed used to help American International Group Inc., New York.
The industry-financed fund is needed to keep the failure of a very large financial institution from hurting the financial markets, Frank said.
In the original draft, Frank and the Treasury Department proposed that taxpayers pay to cover the cost of unwinding a large financial institution, with those funds later to be recouped from large financial institutions, including insurers with assets of more than $10 billion.
Under the revised plan, he said, if funds run out, taxpayer dollars would be used, subject to expedited congressional disapproval. He said the exact size of the fund is unknown. But “we’re not talking in the hundreds of billions of dollars,” he said.
He said general debate on the legislation will begin tomorrow, and that work on amendments will start Thursday.
But, he said, if the House is in session next Monday or Tuesday, the committee will continue “marking up,” or revising, the bill draft. Otherwise, he predicted, the committee will finish work on the bill the week after next.
Frank did not discuss a timetable for consideration of a Federal Insurance Office bill.
But Frank will meet soon with House Ways and Means Committee representatives to discuss questions about jurisdiction that are holding up Financial Services Committee debate on the legislation, a spokesman said.
“We don’t think these issues will prevent marking up the legislation very soon by our committee,” the spokesman said.
The committee jurisdiction questions concern provisions that would give the Treasury Department the authority to negotiate insurance trade pacts with other countries.