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Inside Washington (04/07/2010)
* WASHINGTON (4/8/10)--Former Federal Reserve Board Chairman Alan Greenspan said Wednesday in prepared remarks that policymakers should place higher collateral and capital requirements on the financial services industry. He also warned that future crises could take place if steps aren’t taken to tackle the “too big to fail” problem (The Wall Street Journal April 7). Greenspan testified before the Financial Crisis Inquiry Commission Wednesday. If capital and collateral requirements are adequate, taxpayers will not be at risk for losses, he said. Only a few good solutions exist to deal with firms that pose systemic risks, and it’s hard to identify those risks in time for the government to react accordingly, he added. Greenspan also defended his work on consumer protection matters, arguing that subprime mortgages did not significantly cause the crisis, and that the Fed was active in pursuing consumer protections for mortgage borrowers during his time at the Fed. He voted in favor of consumer protection initiatives when they were brought before the board, he said. Addressing criticism that the Fed was slow to implement protections for homeowners to address unfair and abusive lending, Greenspan said the Fed worked to ensure the law was implemented and that it monitored the growth of subprime lending ... * WASHINGTON (4/8/10)--The Securities and Exchange Commission (SEC) voted Wednesday on a proposal to require financial firms to retain 5% of each class of an asset-backed security if they want to avoid regulatory obstacles when selling the bonds. Banks would not be allowed to hedge on the securities they retain (Bloomberg.com April 7). “I applaud today’s vote by the SEC to propose new standards under the securities laws for the securitization market,” said Federal Deposit Insurance Corp. Chairman Sheila Bair in a statement. “The SEC’s proposals align with the FDIC initiative to set new standards for a ‘safe harbor’ for future securitizations originated by FDIC-insured institutions. Notably, the SEC’s proposed new standards will extend to the nonbank ‘shadow sector,’ demonstrating a common approach that will further the ultimate goal of ending arbitrage and implementing securitization reforms across the entire market,” Bair said. The Obama administration and lawmakers say Wall Street lacked “skin in the game” when they engaged in risky lending before the housing market collapsed in 2007. The proposal would apply to shelf offerings--which allow firms to register stocks and bonds with the SEC before an offering and then sell securities as needed. Such offerings allow debt sellers to raise money quickly without SEC approval ... * WASHINGTON (4/8/10)--The National Association of Realtors (NAR) said Tuesday that it will urge lawmakers to renew the National Flood Insurance Program, which expired March 28. Congress is on recess and will return Monday. The program provided insurance coverage for homes bought within the 100-year flood map as defined by the Federal Emergency Management Agency. Flood insurance is required by law for home mortgages on properties in the 100-year floodplain areas, which are currently unprotected. Until the program is renewed, worthy buyers will be left without access to mortgages, said NAR President Vicki Cox Golder ... * WASHINGTON (4/8/10)--The Government Accountability Office (GAO) investigated the competitiveness and long-term viability of the domestic auto industry, specifically as it relates to auto companies that were recipients of the Troubled Asset Relief Program (TARP). More than $81 billion of TARP funds were funneled to bolster the car industry, the bulk of which went to General Motors (GM) and Chrysler, sponsors of some of the largest defined benefit pension plans insured by the federal Pension Benefit Guaranty Corporation (PBGC). The GAO is statutorily mandated to oversee TARP expenditures. “Although the pension plans have been maintained, their future remains uncertain. According to current company projections, large contributions may be needed to comply with federal pension funding requirements within the next (five) years,” the GAO reported. The report is titled ”Automaker Pension Funding and Multiple Federal Roles Pose Challenges for the Future”


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