July 14,2010

Grassley on Conference Report on Financial Regulation Bill

Statement by Senator Chuck Grassley
Wednesday, July 14, 2010
Conference Report on Financial Regulation Bill

I’ll vote against the conference report because of concerns about changes made to the Senate bill, which I supported.

First, there’s new spending with a new offset that’s a huge problem.  The new offset uses TARP dollars.  TARP dollars should be returned to the taxpayers and used for deficit reduction, as was promised from the start.  I voted for the Senate version of the banking bill to protect taxpayers from another government bailout of Wall Street, not to put taxpayers on the hook by spending more money through TARP.

The new offset also uses FDIC fees for a budget gimmick by crediting those fees to the FDIC and using them as an offset.

The conference report also waters down important reforms that were in the Senate bill.

I wanted to make the derivatives market transparent.  The conference report weakened the Senate derivatives title, which required that banks receiving federal assistance push out all derivatives trading to separate affiliate operations.  Instead, the conference report allows certain types of derivatives trading by the bank which puts them in a more risky position.

I also wanted to target conflicts of interest with credit rating agencies.  The Senate bill contained an amendment that I cosponsored to break up the conflict of interest where security issuers get to pick the credit rating agencies.  A lack of independent assessment in this area was a major factor in what led up to the meltdown in 2008.  The conference report guts this reform by replacing it with a mere study.

I also wanted to make the Fed open to scrutiny and accountability.  The Senate bill took a step in that direction, albeit way too small of a step.  A lot more should have been done in this area.  For instance, the House version included a full audit of the Fed, and members of the conference could have taken that stronger language.

It’s a bill that most of Wall Street wants passed.  And that’s the last thing Iowans expect in any real reform bill.