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CONGRATS TO ALL WHO BOUGHT TODAY...WE RIDE TOMORROW!!!
Ahhh yes those famous words before the chasing...gotcha...no wonder you end up buying high...got to know a bargain when you see one...it separates the rich from the poor...
We got a pregnant candle on the 60...
ALL IN...NOW LET'S BOUNCE!
You bought too high...lol
TIME TO BUY!!! BAM BAM...LOAD 'EM UP...HIT ME WITH ALL YOUR SHARES LEMMINGS!
I believe even an alien can fill it out as long as you either have an account or an address...try it...doesn't hurt...
Then done it already...lol
J/K...everyone is doning this...
https://www.popvox.com/bills/us/114/hr1673
Gotta watch that grill or you'll Blackburn it...
Alright I'll break the monotony...signed.
Suppose to be...just like HERA 2008 is suppose to trump the sweep amendment...someone at FHFA and Treasury got it backwards...
Evidently Executive Privileges overrides anything...if the president wants to wind-down a company, he can can choose to do so with any company in America by claiming dividend payments...how will other countries look at The American President now? Disregard rule of law, the American President can choose to do so at any given time...what will the other countries think about international laws then?
According to the Sweep amendment dividends payments are mandatory...since when are DIVIDEND payments mandatory?
Watt Pursues Fannie-Freddie Overhaul Blocked by Senator
by Clea Benson
12:00 AM PDT March 26, 2015
Mel Watt, director of the Federal Housing Finance Agency. Photographer: Andrew Harrer/Bloomberg
(Bloomberg) -- Senator Richard Shelby’s declaration Wednesday that Fannie Mae and Freddie Mac will likely remain in U.S. conservatorship shifts the task of reducing taxpayer mortgage risk mostly to one man: Mel Watt.
Shelby, an Alabama Republican, controls the fate of housing bills as chairman of the Banking Committee. He said he wouldn’t support replacing the two U.S.-controlled companies with a system that includes explicit government backing for mortgages.
“I don’t want to do something to make it worse than it is,” Shelby, 80, said in his Southern drawl at a Chamber of Commerce conference in Washington. “It’s very complex, but giving an explicit guarantee by the taxpayer, that’s too strong for me.”
With those words, Shelby snuffed out any chance that Congress would overhaul the $11 trillion housing-finance system in this two-year term. President Barack Obama’s insistence on a continued government role in supporting the housing market puts him and fellow Democrats at loggerheads with the powerful banking chairman. That increases pressure on Watt, director of the Federal Housing Finance Agency, to accelerate regulatory efforts to remake Fannie Mae and Freddie Mac -- under rules of a crisis-era conservatorship that’s dragging into a seventh year.
Shelby’s comments “just reaffirm the markets’ belief that Mel Watt is the most important figure in the housing-finance system,” said Isaac Boltansky, an analyst at Compass Point Research & Trading LLC in Washington.
Taxpayer Risk
Since the housing crash, Fannie Mae and Freddie Mac, which package mortgages into guaranteed securities, have taken on a greater share of risk. According to a New York Federal Reserve report this week, the two companies -- and therefore the U.S. Treasury -- backed 47 percent of outstanding single-family mortgage debt in 2013. That compares with 40 percent in 2007, the year before the companies were seized by regulators and rescued with a $187.5 bailout.
Even the Obama administration, after months of unsuccessfully exhorting lawmakers to replace the two companies, is pushing the FHFA to act on its own. Outside of their core securitization business, the two companies have asset portfolios of about $400 billion each that they’re under regulatory orders to wind down to $250 billion.
Securitization Platform
Michael Stegman, a senior adviser at Treasury on housing issues, this month said Fannie Mae and Freddie Mac should speed up the pace of shrinking their portfolios, accelerate deals transferring mortgage-bond risk to private investors and open a securitization platform to bond issuers that they’re building for themselves.
“The progress we make today could serve both as a framework for, and reduce certain challenges associated with, achieving bipartisan legislative reform,” Stegman said at a Goldman Sachs Group Inc. conference in New York in March.
The two companies have sold risk-sharing securities on about $530 billion of mortgage debt since 2013, amounting to about 12 percent of their book of business. That should be increased, Stegman said.
“The closer the GSEs can come to transferring the majority of risk to private market participants, the better,” he said.
Fannie Mae and Freddie Mac, which currently issue separate securities, also have finished building many of the core functions of their platform for a joint security. They need to set more concrete timelines for development of the platform, make it more transparent and allow outside participants to have a role in governing it, Stegman said.
Politically Polarized
Missouri Democrat Emanuel Cleaver, a member of the House Financial Services Committee, said the prospects for a broad housing bill are nil in this Congress. House Republicans, if they introduce such a measure, are likely to limit the government role so much that it wouldn’t gain Democratic support.
“We’re politically polarized to the point that we have probably the highest level of dysfunctionality in the history of Congress,” Cleaver said at a meeting with Bloomberg reporters Wednesday in Washington.
A bipartisan bill that would have replaced Fannie Mae and Freddie Mac with government insurers taking losses behind private investors almost made it to a vote in the Senate last year. The bill failed after some Democrats said it didn’t give enough support to affordable housing.
While the prospect of comprehensive legislation remained on the horizon, lawmakers were reluctant to work on smaller bills to fix portions of the system on which Democrats and Republicans agreed. That may have changed now, said Jim Parrott, a senior fellow at the Urban Institute.
Watt’s Speed
Watt defended the speed of his agency’s risk-transfer efforts at the Goldman Sachs conference.
“We move at a pace we think is a responsible pace,” Watt told reporters. “We evaluate things very carefully.”
The director could find himself the target of legislation requiring him to speed up.
“Mel Watt is already pushing down several paths that will ultimately better position us for longer term reform,” Parrott said. “The question is whether he’s going down them as aggressively as those who are interested in reform would like.”
If Congress clarified the path of reform, he added, “it would remove a great deal of uncertainty for the regulator and market participants alike.”
To contact the reporter on this story: Clea Benson in Washington at cbenson20@bloomberg.net
To contact the editors responsible for this story: Vincent Bielski at vbielski@bloomberg.net Rob Urban
http://www.bloomberg.com/news/articles/2015-03-26/watt-pursues-fannie-freddie-overhaul-blocked-by-senator?cmpid=yhoo
Fannie And Freddie: New Bill Establishes A Secondary Reserve To Protect Capital
Mar. 26, 2015 4:47 PM ET | About: Fannie Mae (FNMA), FMCC
Disclosure: The author is long FNMA, FMCC. (More...)
Summary
Representative Marsha Blackburn proposes a Secondary Reserve Fund.
Revenues from Fannie and Freddie would be placed into "Escrow".
Existing statutes would be followed until Congress acts permanently on GSE Reform.
Taxpayers, homeowners, and stockholders of Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) have something to cheer about thanks to House Republican Marsha Blackburn. On Thursday, she sponsored a bill that would end the potentially illegal acts being committed by the U.S. Treasury to sweep away capital from our housing finance system for deficit reduction. The bill is titled ''Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act of 2015'' and will be filed as HR 1673.
The stated purpose of the bill is to
"amend the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish a secondary reserve fund for a housing enterprise under conservatorship to protect taxpayers against loss in the event of a housing downturn, and for other purposes."
The secondary reserve could also be referred to as an escrow account, where funds are held until a resolution is created on GSE reform. The text of this bill is available at this link.
The bill would establish a secondary reserve by inserting the following language into the existing statutes:
''(E.) SECONDARY RESERVE.-
''(1) ESTABLISHMENT-Notwithstanding any other provision of law, rule, regulation, order, or agreement, the Director shall, by regulation, establish for any enterprise operating in conservatorship pursuant to section 1367 a secondary reserve fund and shall deposit in such fund from any revenues of the enterprise an amount equal to the amounts enumerated under subsection (A.) for the enterprise.
''(2) MAINTENANCE.-Amounts in the secondary reserve fund shall be held in escrow by the enterprise until-
'' the Director uses such amounts pursuant to paragraph (3); or
''(B.) the Director abolishes the secondary reserve fund pursuant to paragraph (4).
''(3) AVAILABILITY OF AMOUNTS.-If the Director determines, in accordance with regulations issued under paragraph (5), that losses of an enterprise operating in conservatorship pursuant to section 1367 will exceed amounts available for the enterprise under subsections , (C.), (D.), or (F.), the Director shall make a determination, in accordance with such regulation, whether to use funds held in the secondary reserve for the enterprise.
''(4) ABOLISHMENT.-Upon the dissolution of the conservatorship of an enterprise, the Director shall abolish any secondary reserve established under paragraph (1) for the enterprise and amounts remaining in such reserve upon such abolishment shall revert to meet capital requirements under subsections , , , and then to earnings of the enterprise.
It also continues to provide the Federal Housing Finance Agency (FHFA) with the authority to establish a capital restoration plan for the entities.
''(6) TREATMENT OF SECONDARY RESERVE.-
Any secondary reserve established under this Act for an enterprise shall not be considered capital, a capital reserve, or otherwise an asset of the enterprise, other than as part of a capital restoration plan for the enterprise approved under section 1369C, during the pendency of a conservatorship for the enterprise.''.
For several years, the Government Sponsored Entities (GSEs), Fannie Mae and Freddie Mac have existed in a quasi-legal state. The Treasury successfully used them, under FHFA's discretion, to prop up the housing market by modifying millions of mortgages. Then, as Fannie and Freddie began to regain profitability, Treasury and FHFA enacted a 3rd Amendment to their Senior Preferred Stock Purchase Agreement, which assigned 100% of their net worth gains to deficit reduction. The result of these changes is that Fannie and Freddie have repaid taxpayers with interest and that the companies are operating with razor-thin capital levels.
This bill does not resolve all of the issues around Fannie Mae and Freddie Mac, but it does solve one problem. It eliminates any conflicting interests between Treasury and Congress on GSE reform goals. As long as the two companies were sweeping all available capital to Treasury for deficit reduction, there was no mechanism to build up reserves against future losses. Establishing a capital reserve fund will protect taxpayers and ultimately provide capital for the future of the housing finance system.
Shareholders should note that this escrow account bill does not preclude Congress from acting with other priorities on GSE reform. Policy-makers will note that the process of rebuilding capital at the GSEs will be a long one and they have plenty of time to rethink legislation on the issue.
In the end, this should be seen as a positive step towards a win-win solution with Fannie Mae and Freddie Mac. A significant overhang would be removed and uncertainties resolved regarding private property rights.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
http://seekingalpha.com/article/3031846-fannie-and-freddie-new-bill-establishes-a-secondary-reserve-to-protect-capital
Holy crap! This Representative has an extensive list of legislations that has become law...
https://www.congress.gov/member/marsha-blackburn/B001243?q=%7B%22bill-status%22%3A%22law%22%2C%22sponsorship%22%3A%22cosponsored%22%2C%22subject%22%3A%22Finance+and+Financial+Sector%22%7D
Thanks to all who sold...the chart looks like a downtrend again...people who can't hold shares in a company they believe in even if their life depended on it...those people need to stop claiming they're truely longs...using daytraders, pattern-traders, swing-traders, shorts, and any other xxx-trader...but don't call yourselves longs...might as well call yourselves Ponzi-traders...Only if we had more Buffet type of investors in the GSE's...you buy, you hold, you take a loss and ride it down on a downtrend...those of you who bought in because you believed in the companies, many of you have strayed away...many of you have...call it a marriage to a stock or whatever you'd like, but you forget why you even bothered buying-in in the first place...shame on all of you who've sold...these distressed stocks will have no warning before a release or an uplisting...believe in the 30 year fixed mortgage, believe that the GSE's provide an important role in the American Housing...BELIEVE IN FANNIE MAE AND FREDDIE MAC...
FEDERAL NATIONAL MORTGAGE
Last Pattern:BEARISH HARAMI CROSS
Market Outlook The market is uncertain with a negative tilt. The traders seem to be in disagreement. The negative sentiment, however, is increasing as evident from the last bearish pattern. So, it is better to be on alert.
This is a major bearish reversal pattern, which is even more significant than a regular Bearish Harami. The outline again looks like a pregnant woman, as with the Bearish Harami Pattern. However, now the baby is a Doji. Basically, the pattern is characterized by a white body followed by a Doji that is completely inside the range of the prior white body.
https://www.americanbulls.com/SignalPage.aspx?lang=en&Ticker=FNMA
FEDERAL HOME LOAN MORTGAGE
Last Pattern:BEARISH HARAMI
The market is uncertain with a negative tilt. The traders seem to be in disagreement. The negative sentiment, however, is increasing as evident from the last bearish pattern. So, it is better to be on alert.
This pattern consists of a white body and a small black body that is completely inside the range of the white body. If an outline is drawn for the pattern, it looks like a pregnant woman. This is not a coincidence. “Harami” is an old Japanese word for “pregnant”. The white candlestick is “the mother” and the small candlestick is “the baby”.
https://www.americanbulls.com/SignalPage.aspx?lang=en&Ticker=FMCC
This shows the Deficit-Neutral Reserve Fund will be damaging to Democrats without this fund...No wonder they want to stop the sell off of SPS...it basicly gives the Democrats to spend money anyway they want without passing a law just like Executive Priviledge...so in order for the Democrats to look good without raising taxes for spending money they just pass this bill, to keep siphoning the money out of the GSE's and everyone would be happy including the Republicans since tax is not raised...how clever...
The Great Deficit-Neutral Reserve Fund Debate of 2013
by JONATHAN STRONG December 13, 2013 6:17 PM Following a report in National Review Online, a relatively obscure provision in the Ryan–?Murray budget deal has become a major point of dispute between proponents and critics of the deal. NRO first reported that the agreement includes language eliminating the ability to raise a budget “point of order” in the Senate that sets a 60-vote threshold to offset a spending increase with new taxes. That much — that the budget deal removes points of order under certain circumstances — is undisputed by all sides. Senator Jeff Sessions of Alabama, the ranking member of the Senate Budget Committee, has said this language “legitimizes tax and spend.” But the authors of the deal, House Budget Committee chairman Paul Ryan and Senate Budget Committee chairman Patty Murray, have sought to downplay the importance of this point of order in the arsenal of weapons available to the Senate minority to stop tax increases. Murray’s office has noted that other points of order, which are specific objections available to senators that require a set amount of votes to overcome, are also available under certain circumstances. The Washington Post’s fact-checker, Glenn Kessler, also weighed in, primarily citing the input of Steve Bell and G. William Hoagland from the Bipartisan Policy Center to assess the claim as deserving of three “Pinocchios.” The extremely technical nature of the debate ensures that there are only a few hundred people — perhaps a few dozen — with the expertise to speak knowledgeably about the matter. But as I have continued to discuss this with the top experts in Senate procedure, it has become even more clear that Sessions’s objections have merit — and could possibly result in the “worst-case scenario” of a tax increase passed through the Senate with only a bare-majority vote. First, some background. A congressional budget sets spending limits by “function,” or purpose. Under normal rules, spending is capped by the Budget allocation for that function. If the cap is reached, the only way to increase spending for any given area would be to cut spending somewhere else in the function. Enter the “Deficit Neutral Reserve Fund.” These funds, known in budget parlance as DNFRs, offer committee chairmen flexibility to spend more money than the budget caps — specifically, by allowing them to raise new taxes to pay for the new spending, rather than cutting other spending. “Those reserve funds give committees more leeway in terms of finding ways to pay for things,” says Cheri Reidy, the retired former staff director for Senator Judd Gregg on the Budget Committee. “Without a reserve fund, you would have to pay for spending increases with spending cuts in your own jurisdiction. With a reserve fund, you don’t necessarily have to do that. You can pay for them with tax increases,” says Reidy, who worked for the budget panel for 29 years. In the Ryan–Murray deal, there are dozens of DNFRs covering all different sorts of topics. The DNFR that is potentially the most dangerous to Republicans allows flexibility vis-á-vis the sequestration budget caps of the Budget Control Act. That DNFR makes it impossible to raise what’s called the ”302(f)” point of order to enforce the rule against using tax increases to pay for for spending above the caps. Murray’s office, working with Ryan aides to dismiss criticism about the provision, has assured reporters that other points of order will always remain in play for Republicans to object to such a bill. One such objection available is the “306? point of order, which says any bill that comes under the purview of the Budget Committee must be reported, or approved, out of the Budget Committee. It’s easy enough to send a bill through the Budget Committee. But any bill that would “pay for” busting the sequestration caps faces a kind of Catch-22: Because of the “origination clause” in the Constitution, all tax bills have to originate from the Ways and Means Committee. After passing the House, such a bill would be referred to the Senate Finance Committee. From there it would go to the Senate floor, where Sessions could raise the 306 point of order, establishing a 60-vote threshold through another means because it hadn’t come through the Budget Committee. However, Sessions and his staff at the budget committee fear Democrats could work around the 306 objection fairly easily: all they’d have to do is send a tax-related bill through the Budget Committee after it came out of the Finance Committee. Holding an actual Budget Committee meeting would require a 48-hour notice period, but Majority Leader Harry Reid may be able to avoid even that by ordering it reported “forthwith.” Would it work? Sessions would undoubtedly raise the 306 objection anyway, prompting a ruling by the Senate parliamentarians. It’s unclear how they would come down on the issue, because the question is unprecedented. Beyond the sequester caps, the Ryan–?Murray budget deal also includes dozens of other DNFRs that are not subject to a 306 point of order. Some Republicans say those provisions are actually more dangerous than the sequester DNFR because they aren’t subject to the 306 backstop. The fear is that Democrats would pay for, say, an education-funding bump by closing the tax loophole on corporate jets, allowing them, if not to pass the bill, an opportunity to demagogue on the issue. Ryan’s office, in responding to Sessions’s criticisms, has noted that the Senate GOP still retains the general right to filibuster all bills, which is true. In order for any legislation to pass through the Senate, Reid has to clear the bill through several 60-vote thresholds that are separate from any points of order. Another caveat is that, beyond 302(f) and 306 points of order, there are other possible objections that could derail the bills, putting up major hurdles to any Democratic attempt to jam Republicans by this method. “There’s all kinds of different ways that legislation can be tripped up,” says Reidy. “A lot has to happen for a reserve fund to work. There’s been a lot of reserve funds in budget resolutions, but very few have actually been triggered by the Budget Committee chairman to help legislation move forward,” she says. Other objections include “Paygo,” if the spending increases aren’t revenue-neutral, and unfunded-mandate objections, if the legislation creates new requirements for state and local governments. Those may or may not apply to different legislative situations. Presumably, Reid could work to avoid them. And two other potential points of order raised by Murray’s office, the “314(f)” and “312(b)” points of order, appear not to apply to these direct circumstances, experts told me. With the DNRFs in place, here’s how the Senate could take up a tax increase with only a bare majority. First, the Senate would take up a bill — say, a veterans-funding bill — that doesn’t yet raise taxes, and invoke cloture, closing off debate and the chance to filibuster the bill. This is often difficult, and Republicans aren’t likely to go along with invoking cloture on a bill they suspect will be used to raise taxes. Still, as the September debate over the CR showed, there are instances in which Republican senators will help invoke cloture as part of a process that will change the legislation in a way they say they oppose. In that case, it was to remove language defunding Obamacare, but the same pattern could apply to any number of situations. With cloture invoked, Reid could then use a procedure called “motion to strike” to amend the bill after debate has been cut off. Again, this is what happened in the September CR debate. It’s then that Senate Democrats may move to “pay for” new spending with a tax increase under the authority of the DNRFs in the Ryan–Murray deal, allowing them to pass a tax increase through the Senate on a bare-majority vote. “That scenario could happen,” Reidy says. Again, there are difficulties. Any such amendments are subject to a requirement that they be germane. “That germaneness test under cloture is very tight. You may find that you can’t put together a germane amendment that has a tax increase in it to pay for the education-spending increase,” Reidy says. Sessions at the Budget Committee is concerned and doesn’t want to find out it’s possible when Reid is able to pull it off. It’s a highly technical subject, and there are varying, good-faith views about how serious a threat this scenario is. But it’s undisputed that the Ryan–Murray bill removes a tool previously available to stop just such an action. Ryan’s office noted that Republicans who control the House wouldn’t go along with a tax increase passed through the Senate, anyway, which provides its own backstop. That’s true. But critics offer a few rejoinders. First, Senate passage of a bill has, in many recent instances, put pressure on the House to follow suit. In some cases, such as the Violence Against Women Act, Boehner has capitulated and passed legislation with mostly Democratic votes. In other cases, such as the Senate immigration bill, House Republicans haven’t gone along. But it’s not as if the pressure — and its resulting leverage — doesn’t exist. Second, if the provision were in place and Democrats took control of the House, it would offer a potential opportunity to bust the sequester budget caps with a House majority and 51 Senate votes. Sure, there are lots of hurdles and other ways to object. And the final ruling by the Senate parliamentarians is uncertain, at least on sequestration. But critics wonder if this was really a good idea to put in the deal? To that end: why did Murray want it in the budget deal? Her office says it was because DNRFs offer solace to senators who didn’t get everything they want. With a DNRF, they can tell constituents that they’re fighting to spend more on some project or department and if they can just find a tax loophole to close, they may be able to do it. That strikes Sessions’ staff as unlikely. This deal was struck after the two parties have been engaged in years of brutal trench warfare on spending. If it were a symbolic gimme for senators to sell the deal back home, it seems like it wouldn’t have been a deal-killer if Ryan had insisted it be thrown out. He at least might have thought to give Sessions a heads up about it. He did not.
http://www.nationalreview.com/corner/366312/great-deficit-neutral-reserve-fund-debate-2013-jonathan-strong
Senators are proposing hundreds of “deficit-neutral reserve funds.” What gives?
By Dylan Matthews March 22, 2013
Sen. Michael Crapo (R-ID, above) gets a reserve fund, and Barbara Mikulski gets a reserve fund, and you get a reserve fund… (Melina Mara / Washington Post)
Vote-a-rama has officially begun.
The annual ritual (or supposed-to-be-annual, anyway), in which amendments are offered to the Senate budget resolution and the world's greatest deliberative body takes forever to vote on all of them, is underway, with amendments on everything from the Affordable Care Act to drones. Many of them promise to establish "deficit-neutral reserve funds."
For example, Sen. Barbara Mikulski (D-MD) proposed a "deficit-neutral reserve fund to require equal pay policies and practices" and Sen. Michael Crapo (R-ID) proposed to "repeal the tax increases enacted under the Patient Protection and Affordable Care Act that were imposed on low- and middle-income Americans."
Wait, what? How is repealing taxes "deficit-neutral"? Well, it isn't obviously; Crapo is just required by the rules of the Senate to say it is. None of these funds leads to binding changes in policy; they're more like "sense of the Senate" resolutions on the topics at hand. But the "reserve fund" language is important. As this CRS report explains, Section 310(d) of the Budget Act "bars the consideration of any amendment to a reconciliation bill that would increase the deficit." Hence the "deficit-neutral" part.
And what about "reserve fund"? According to CRS, "'Reserve fund' refers to any provision establishing procedures to revise spending or revenue levels, or both, if certain legislation is enacted or some other condition is met." So that specifies that the policies for which reserve funds are established won't take effect unless other legislation gets passed as well. The use of these measures has increased dramatically in recent decades, going from 0 funds as recently as in 1986 to a whopping 37 in the 2009 budget. "These deficit neutral reserve funds are popular because they carve out an area for future policy making without having to specify up front a precise mix of revenues and/or spending cuts to pay for them," Sarah Binder, a rules expert at George Washington University and the Brookings Institution, emails. "By writing the 'reserve fund' into the budget resolution, subsequent bills reported from committee wouldn't be subject to a point of order for violating the committee's spending limits dictated in the budget resolution."
Short version — "deficit-neutral reserve funds" are completely inconsequential amendments offered as a way to discuss budget-irrelevant topics without violating budget reconciliation rules around what you can and can't include in a budget resolution.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/22/senators-are-proposing-hundreds-of-deficit-neutral-reserve-funds-what-gives/
Interesting...it seems there's fear of a sell off of the SPS...Democrats must be under some serious pressure by the Republicans to recapitalize and release the GSE's...Johnson said it himself before retirement...told Watts to go talk to Treasury to release the GSE's...looks like Democrats got some head wind coming their way with the Republicans taking over...This amendment is written up in a format that shows an urgency for a delay tactic...Under pressure...
Regulation can be changed however they want...it's a matter of time...right now we have regulators that don't understand or don't know how to completely correct the housing market...that's the issue...you can see it with Congress being scattered all over with different bills that won't get on Hussein's desk for the time being...
Treasury Secretary Tells How to Lose the ‘Systemically Important’ Label
Senators raise concerns that financial institutions don’t have clear guidance from Financial Stability Oversight Council
By VICTORIA MCGRANE And RYAN TRACY
March 25, 2015 5:29 p.m. ET
WASHINGTON—Lawmakers from both parties grilled Treasury Secretary Jacob Lew on Wednesday over whether financial companies singled out by federal regulators for tougher oversight can ever escape the penalty box.
Several lawmakers raised concerns that firms designated as systemically important financial institutions don’t have clear guidance from the Financial Stability Oversight Council on what changes they should make to shed the label, which brings with it tougher rules and Federal Reserve oversight.
“There was no intent to create a ‘Hotel California’ provision,” Sen. Mark Warner (D., Va.) told Mr. Lew during a Senate Banking hearing, referencing the Eagles song about being able to “check out any time you like, but you can never leave.”
Mr. Lew heads the oversight council, a group of U.S. financial regulators created by the 2010 Dodd Frank law to help prevent a repeat of the 2008 financial crisis. The FSOC has designated four nonbank firms as being systemically important over concerns their failure could damage the financial system. Those designated include the finance unit of General Electric Co. and insurers Prudential Financial Inc.,American International Group Inc. and MetLife Inc.
Mr. Lew said the council provides firms with plenty of detail on the risks in their business models and activities that led to the designation. The council provides each firm with an annual review of its designation, during which FSOC could decide to remove the label if a firm has made significant changes that remove those risks, Mr. Lew said.
That review process is “serious and gives rise to the possibility of removing a designation,” Mr. Lew said. “Obviously, a firm would have to change the character of the risk it presents in order for that change to be made.”
He suggested it is too early in FSOC’s life cycle for lawmakers or others to make judgments about whether the council is serious about letting firms out of the designation. “The test will come over time as firms think through what the supervisory process means and make the business judgments as to whether or not they want to change their business to have the annual review reach the conclusion that they should be de-designated,” he said. “It was never meant to be a process that only could go one way.”
Several lawmakers, including the Senate Banking Chairman Richard Shelby (R., Ala.) and Sen. Elizabeth Warren (D., Mass.), indicated they believe a key part of FSOC’s process should be providing incentives to firms to make changes so they’re no longer considered systemically important.
Mr. Shelby asked Mr. Lew if he would support adding language to Dodd-Frank to provide a process under which a firm could work with FSOC before a final designation to figure out how to lower risk enough to escape the label. Mr. Lew said no.
The debate is crucial to those firms, including asset managers and other large financial firms that might someday come into regulators’ cross hairs.
So far, only MetLife has publicly challenged the regulators’ decision, arguing in a January lawsuit that the council “denied MetLife the opportunity to modify its activities to avoid designation.”
The other firms that have received the label haven’t yet aggressively pushed to have it removed, according to people familiar with the matter.
But The Wall Street Journal reported earlier this month that GE has undergone a change of heart about GE Capital, and that the banking business’ commercial lending arm, which at the end of last year accounted for just under half of its $237 billion in loans outstanding, could be next on the block. The company has made no decision about whether or how to dispose of the business, and any move could come in stages.
The company’s move has been driven primarily by two factors. One is the fact that the unit’s returns are falling, in part because of restrictions that have led it to hold on to more capital and reduce the amount of profits it can share with the parent company.
And secondly, some GE investors remain hungry for a more pronounced shift away from financial services and toward the company’s industrial businesses, which could finally lift the company’s share price out of recent doldrums.
One person familiar with the matter said that GE’s recent discussions about GE Capital haven’t centered on its status of systemic importance. The issue could become relevant in the future if the company makes larger changes to the business, this person said.
—Ted Mann contributed to this article.
Write to Victoria McGrane at victoria.mcgrane@wsj.com and Ryan Tracy at ryan.tracy@wsj.com
...you know it...I know it...news trump charts...
...pull the trigger not the finger though...might give you the wrong kind of rip...
Write him a letter...
Buy the dip...we should see a sharp dip before the rise...you'll know it when you see it...
A systemically important financial institution (SIFI) is a bank, insurance company, or other financial institution whose failure might trigger a financial crisis. Currently it's considered $50 billion or more. So to give you a short answer...yes...
You sold every single share? -.-
Do you have knowledge of what is being withheld? What leads you to believe there's incriminating evidence? Let's not believe our wishful thinking minds and go with fact driven evidence...we have yet to see any evidence that will do as you say yet...
lol...where did get that info...it doesn't apply to criminal activity...
One word...GREED!!!
Wishful thinking...only if it's proven there was criminal activity by the Hussein Administration...then I can see that happening...doing is one thing...proving is another...
He's not going to do that...Hussein's Admin is enjoying to profits too much...new legislation is just an excuse to keep taking the money since he knows it takes time to get a bill passed onto his desk...by then he'll be collecting a hefty pension so he won't care what happens to his HusseinCare afterwards...
They briefly talked about capitalizing "companies" not necessarily the GSE's, but they feel they need companies in place for liquidity...but why make 2 companies when they can just change the policy and regulations for the GSE's right?...so yeah...I don't buy their word manipulation just because they politically hate the GSE's...The need to hate the game not the players...
Corky bashing Hussein Administration over IMF...lol
He said they've made progess...haaa...how funny...then why is the economy not recovered for 7 years since the crash...so much for progress with this Hussein Administration...
If I remember correctly he's been bashing since Ackman bought...maybe he has a grudge against Ackman more than the GSE's...
The sky is falling?
...to pee or not to pee...that is the question...