Financial Market Reform Legislation Moves Ahead

With Senate passage of a second version of the financial markets regulatory legislation last week comes a prediction by Congressman Barney Frank that the conference committee will have a final markup very soon, and Congress will have a bill on President Obama’s oval office desk by Independence Day. If you are in the business of building houses and condominiums, it won’t matter which version of this bill comes out of conference committee, the legislation will put another brick on financing for your business. New rules on consumer lending will make it harder for home buyers to get mortgage loans, and this will keep the housing market in the doldrums for both new and existing homes and condos. New working capital for home builders is going to remain difficult to find because of this legislation.

Frank and his Senate counterpart Christopher Dodd have yet to release a timetable for conference committee action on the bills. The principal difference between House and Senate version of the measure is the Senate requirement that banks spin off their financial derivatives business into separately capitalized business units. Lobbying activity respecting this legislation will surely intensify in the coming weeks. So far in the 2009 and the first quarter of 2010 business and consumer groups have spent $1.33 billion in lobbying efforts regarding this bill, with 3,000 lobbyists contacting our 100 Senators and 435 Representatives, making a ratio of more than five and a half lobbyists for every politician in Congress.

Small Business Lending Reporting Imposed

In another move designed to make easier credit available to small businesses, the Obama administration has announced that it will require the 21 largest banks benefitting from TARP funding to report monthly on their levels of small business lending, and all other banks getting TARP money to report on small business lending levels quarterly. The White House announcement also encouraged banks not needing TARP assistance to "make an extra effort" to increase small business lending. Let's hope the bankers are listening.

Ending Mark To Market - Will Housing Rebound?

Thursday the Capital Markets Subcommittee of Barney Frank's House Financial Services Committee will hold a hearing to discuss whether ending or modifying current mark to market accounting rules for valuing the mortgages on the books of banks and other lenders could relieve the housing market's lending crunch, and help restart the moribund new home construction segment of our industry. This is one of the ways credit could be loosened up without minting another trillion dollars of funny money by the Treasury and Congress in yet another round of financial bailouts.