Here is the email I just received from one of Julia Brownleys staff explaining more fully (than I did on a previous post) why Congresswoman Brownley voted to delay a portion of Dodd/Frank. Pamela, Per our conversation, wanted to give you a little background on recent Dodd/Frank legislation and Julia’s vote. First of all, Julia supports Dodd/Frank. That being said, Dodd/Frank is a complicated piece of legislation, dealing with many, many aspects of our financial markets, and much of it is subject to rulemaking which is still in progress. In this case, a rule came out on collateralized loan obligations (CLOs), detailing more strict guidelines going forward, and requiring financial institutions to divest themselves of the old CLOs by 2017. CLOs are used to package commercial loans for certain non investment grade businesses. Without CLOs, many businesses would have a hard time borrowing to grow and innovate. Based on the rulemaking process, financial firms did not believe CLOs would fall under the Volker Rule until the SEC weighed in. When the rule finally came out a couple of years late, financial firms asked for more time to divest of the old CLOs, which the SEC granted. It was a fairly non-controversial extension, and when the House decided to weigh in on the rule last fall by putting legislation on the floor to codify it, the legislation passed with unanimous consent. Because it did not get onto the Senate schedule, the legislation was brought back up by the House the first week we were in session. But when it was re-introduced, the extension was changed to 2019 by the Republicans. Julia did not feel the extension was controversial (in fact, neither did the Republicans because they put it on the floor as a suspension bill which requires, and almost always gets, a 2/3 majority to pass). Democratic leadership on the other hand decided that the extension should have gone through committee first (they were right), both to discuss the extension but also so freshmen members could have more time to review the entire bill. It’s not likely that an extension to 2017, versus 2019, is the red line that was intended to be drawn, and more likely that it’s simply been taken up as a salvo between Democratic leadership and Republican leadership on any legislation that deals with Dodd/Frank. Given that this is not really a change to Dodd/Frank, it’s simply an extension on a rule issued by the SEC, and it’s not really a big piece of the pie for financial institutions, it’s a little surprising it turned into such a controversy, but in hindsight, the timing was probably more at play than the actual substance. Given that it was one of the first votes in the new Congress, the Senate switching to Republican control, less Democrats in the House, etc., I think this just became the vehicle by which lines were drawn. Very long explanation for a very complicated issue, but you should know that Julia supports Dodd/Frank and opposes weakening the very important protections it provides. This vote was not, and should not be considered, a change in that position. Attached is an op/ed printed in The Hill last fall that explains part of the issue (what CLOs are, why the extension for divestiture is need), probably better than I just did.
Posted on: Wed, 21 Jan 2015 01:01:15 +0000
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