FINANCIAL REFORM

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The outlined position papers (pdf form)

 

In Depth on the Critical Financial Reforms We Need

An Overview of Americans for Financial Reform

Americans for Financial Reform is a coalition of more than 200 national, state and local consumer, employee, investor, community, labor, civil rights, and community development organizations that have come together to spearhead a campaign for real reform in our banking and financial system based on accountability, fairness and security.

Americans for Financial Reform (AFR) supports financial reform that will police Wall Street, defend consumers from abusive practices, and make sure banking and finance serve the real economy, rather than being its master. Real financial reform is crucial to getting the economy back on track and people back to work.

Irresponsible behavior by the biggest banks and Wall Street titans – along with thoughtless deregulation propelled by narrow financial industry self-interest, and a regulatory structure designed to fail - were the fundamental causes of the financial crisis, and the terrible recession we are now enduring. Responding to the crisis, we have bailed out the banks. But we have not yet changed the rules that got us into this mess. We must move forward on making the financial system work for the American people.

Americans for Financial Reform strongly urges you to support and to strengthen the financial reform legislation coming to the House floor.

Wall Street Reform and Consumer Protection (H.R. 4173)

Consumer Financial Protection Agency

Meaningful financial reform must make the marketplace safer for everyday Americans. The Consumer Financial Protection Agency (CFPA) will ensure fairness and safety for American consumers. Without it, the reform effort will fail in its current mission to save Americans from the type of crisis through which we are presently struggling. With a strong Consumer Financial Protection Agency, Americans can work and save to provide for their families and generations to come. Existing bank regulators failed to design and enforce fair rules of the road for credit, and the results include billions of dollars worth of tricks and traps on high priced credit cards, over-limit fees on debit cards and abusive mortgages that cost families their homes. The financial crisis demonstrates that unchecked abuse not only hurts individual borrowers, but also undermines the whole financial system. The CFPA will streamline government and ensure a stable and safe marketplace. We don’t let manufacturers sell toasters that are likely to explode: we need basic rules and protection against exploding loans, too.

AFR supports the CFPA proposal in the Financial Reform legislation, and we support amendments to close remaining loopholes, and oppose amendments to weaken CFPA authority. In particular, the CFPA should:

  • Cover all financial products: AFR supports amendments that close loopholes that exempt specific sectors and we oppose amendments to provide additional loopholes. All financial products must be covered.
  • Have primary examination, enforcement and rulemaking authority: AFR opposes amendments that would split up consumer protection responsibilities because it would weaken the agency’s effectiveness.
  • Be a federal floor of protection, not a ceiling: AFR opposes any amendment that would thwart the ability of states to be the first responder to local and regional issues.
  • Include the Community Reinvestment Act under its purview: The CFPA must be given both rulemaking and enforcement authority for the CRA in order for the agency to carry out its mission and to level the playing field for underserved communities.

Derivatives, Hedge Funds, and Venture Capital

Transparent, regulated derivatives markets are a critical element of systemic risk mitigation

Unregulated over-the-counter derivatives brought down AIG and fueled the housing bubble by allowing banks to purchase inexpensive “insurance” against risky loans in lieu of credit standards. Taxpayers bore the cost of this subsidy when $134 billion was paid out to AIG’s counterparties. Now the 5 biggest banks dominate the derivatives market and want to maintain the status quo, since opaque markets permit them to charge very high fees to derivatives clients. Taxpayers, consumers of energy and other commodities, and commercial enterprises using derivatives to hedge, are the losers.

AFR urges the House of Representatives to ensure that any legislation passed requires all standard derivatives to trade on an exchange, providing instant price information to market participants and regulators. This includes foreign currency derivatives. Because derivatives market participants are “too interconnected to fail” any exception to this policy risks rendering the legislation of little use.

Pooled investment vehicles may cause the next meltdown

Private equity funds, hedge funds, and venture capital funds are rarely stand-alone entities; they are interconnected financial enterprises about which little is known to either regulators or investors. The next Ponzi scheme to defraud investors could be disguised as any of these entities, and their web of opaque and leveraged structures poses significant risk to the US economy.

AFR supports the following elements of the House Financial Services Committee bill applicable to hedge funds and private equity funds:

  • Requires managers of hedge funds and private equity funds to register with the SEC;
  • Allows the SEC to establish record-keeping and reporting requirements;
  • Authorizes the SEC to do periodic and special examinations.

AFR recommends that the bill be strengthened by removing the exemption for venture capital, regulating the funds as well as their managers, and requiring public disclosure in addition to SEC reporting.

Systemic Risk

We need both robust mechanisms for preventing undue risk and putting on the brakes before catastrophic failure is a danger, and a system for resolving institutions should they fail that does not leave taxpayers holding the bag.

The proposed legislation creates a council of regulators to oversee systemic risk, gives the FDIC the authority to put failing banks into receivership, and creates a resolution fund that large financial institutions will pay into on an ongoing basis.

AFR would support amendments to:

  • Democratize the Federal Reserve Board and prevent the banks from controlling the regional Bank Boards.
  • Strengthen regulators ability to break up banks that are too big or too interconnected to fail, and to prohibit dangerous activity like excessive leverage.
  • Provide the systemic risk regulator with its own staff.
  • Reinstate separations between commercial and investment banking and limit insured depositories’ ability to engage in excessively risky activities.

AFR supports leaving in place the provisions on auditing the Federal Reserve Board added to the legislation during mark up.

Investor Protections

The Investor Protection Act (IPA) contains a variety of measures to enhance the ability of the Securities and Exchange Commission (SEC) to detect and prosecute fraud, including increasing the agency’s authorized funding, strengthening its enforcement tools, and providing new protections for whistleblowers. It also includes measures to address long neglected gaps in investor protection. The most important of these would require brokers who give investment advice to act in their customers’ best interests and would authorize the SEC to limit the use of mandatory arbitration clauses. The bill also strengthens the ability of shareholders to more effectively hold management and boards accountable from inside the company. This is a necessary, market-based complement to the external regulatory efforts of the SEC.

AFR supports the goals of the IPA and supports changes to strengthen this title and opposes changes that will weaken it. Specifically, the IPA should:

  • Require all providers of investment advice to act in the customers’ best interests under the fiduciary duty of the Investment Advisers Act. AFR supports stripping FINRA (the brokerage industry’s self-regulatory organization) of the responsibility for enforcing the fiduciary requirement for its member firms and associated persons and opposes any amendment to further limit the scope of the fiduciary duty.
  • End forced arbitration. AFR opposes any weakening of this provision.
  • Restore anti-fraud protections. AFR opposes weakening the investor protections of the Sarbanes-Oxley Act and supports restoring requirements that all publicly traded companies comply with Sarbanes-Oxley.
  • Give shareholders a greater role in holding corporate boards and management accountable. AFR opposes stripping the proxy access provisions from the bill.

Credit Rating Agencies

Credit rating agencies, attracted by lucrative fees and virtual immunity from accountability when their ratings failed, had given their seal of approval to financial products whose risks they had not adequately investigated and did not fully comprehend. Disastrously unfounded triple A ratings were key ingredients of the financial crisis; we need credit rating agency reform.

The proposed legislation includes useful and important measures to provide for:

  • Accountability, including significantly increased SEC oversight.
  • Increased liability for credit rating agency judgments (although it does not dramatically alter the structure of the credit rating agency system, as we believe might be the best long term course).
  • Universal ratings for corporate and municipal bonds.

AFR recommends that the bill be strengthened in two areas:

  • Reliance on ratings. Require regulators to identify areas where laws rely on ratings, determine whether better measures of creditworthiness are available, and either replace or supplement the ratings as appropriate, rather than simply eliminating reliance on ratings with no alternatives.
  • Independence. Increase the independence of the oversight board and impose a small fee on ratings engagements to fund increased oversight.

 
Support the Consumer Financial Protection Agency Act (H.R. 3126)

Meaningful financial reform must make the marketplace safer for everyday Americans. The Consumer Financial Protection Agency (CFPA) will ensure fairness and safety for American consumers. Without it, the reform effort will fail in its current mission to save Americans from the type of crisis through which we are presently struggling. With a strong Consumer Financial Protection Agency, Americans can work and save to provide for their families and generations to come. Existing bank regulators failed to design and enforce fair rules of the road for credit, and the results include billions of dollars worth of tricks and traps on high priced credit cards, over-limit fees on debit cards and abusive mortgages that cost families their homes. The financial crisis demonstrates that unchecked abuse not only hurts individual borrowers, but also undermines the whole financial system. The CFPA will streamline government and ensure a stable and safe marketplace. We don’t let manufacturers sell toasters that are likely to explode: we need basic rules and protection against exploding loans, too.

The Consumer Financial Protection Agency Act improves federal oversight and protection for consumer financial products. It consolidates all of the consumer protection rule-making and enforcement functions currently spread over 17 statutes and 7 different agencies. It reduces, streamlines and simplifies existing regulatory sprawl and ensures that the same rules apply and are consistently enforced for all entities providing financial products to consumers. The CFPA will improve consumer free choice by making products easier to understand for consumers and ensuring that consumers are offered the best available loans for which they qualify. Moreover, the CFPA will preserve the ability of the States to address particular problems that arise within their borders, and to provide the protections that elected state representatives deem important.

AFR supports the CFPA proposal in the Financial Reform legislation, and we support amendments to close remaining loopholes, and oppose amendments to weaken CFPA authority. In particular, the CFPA should:

  • Cover all financial products: AFR supports amendments that close loopholes that exempt specific sectors and we oppose amendments to provide additional loopholes. All financial products must be covered.
  • Have primary examination, enforcement and rulemaking authority: AFR opposes amendments that would split up consumer protection responsibilities because it would weaken the agency’s effectiveness.
  • Be a federal floor of protection, not ceiling: AFR opposes any amendment that would thwart the ability of states to be the first responder to local and regional issues.
  • Include the Community Reinvestment Act under its purview: The CFPA must be given both rulemaking and enforcement authority for the CRA in order for the agency to carry out its mission and to level the playing field for underserved communities.

 
Support the Accountability and Transparency Rating Agencies Act (H.R. 3890)

Unreliable Ratings Allowed Risky Products to Permeate the Financial System

Unsound subprime mortgages and the securities based on those mortgages were the poison that contaminated the financial system, but it was the ability of these mortgage-backed securities to attract AAA ratings that allowed them to penetrate every corner of the markets. As events unfolded, it became increasingly clear that credit rating agencies, attracted by the lucrative fees to be earned rating structured products and virtually immune from accountability when their ratings fail, had given their seal of approval to securities whose risks they had not adequately investigated and did not fully comprehend. As one Standard & Poor’s analyst famously proclaimed, “We rate every deal. It could be structured by cows and we would rate it.”

House Bill Takes Multi-pronged Approach to Reform

The House bill seeks to address these shortcomings through a multi-pronged approach that simultaneously strengthens regulatory oversight, increases credit rating agency accountability, and reduces the financial system’s vulnerability to faulty ratings. Credit rating agencies have been largely inoculated from liability for their misconduct through a combination of court deference toward arguments that ratings are protected speech under the First Amendment and actual statutory limits on liability. The House bill would remove these statutory limits on liability and make clear that knowing or reckless misconduct satisfies the pleading standards with regard to state of mind. In addition, the bill charges the Securities and Exchange Commission with conducting annual reviews of the rating agencies to evaluate such things as procedures followed in developing ratings and management of conflicts of interest, and it authorizes the agency to impose fines for violations. It also strengthens corporate governance practices at the rating agencies themselves, in particular by assigning responsibility for oversight of key functions to the board. Finally, the bill addresses the inequality between government and corporate bonds in that it requires all bonds to be rated on the risk of default. Currently, the rating agencies use a more conservative standard when rating US municipal bonds than they do when rating U.S. corporate or international issuers, which ends up costing taxpayers billions of dollars a year in extra interest and bond issuance costs.

  • AFR supports an amendment to further strengthen the bill by imposing a small fee on ratings engagements and dedicating the proceeds of that fee to ensure adequate funding for regulatory oversight.
  • AFR also supports an amendment to enhance board oversight by requiring that a majority of board members be independent and that the definition of independence be tightened to ensure that these board members represent the interests of users of credit ratings.

The House Bill Would Reduce Reliance on Ratings

In addition to increasing the reliability of credit ratings, it is also important to reduce the financial system’s vulnerability when ratings prove unreliable. One way to reduce our reliance on ratings, and with it the system’s vulnerability to inaccurate ratings, is to make both the ratings themselves and the securities rated more transparent. The House bill both would provide greater insight into the assumptions used in developing ratings, the sensitivity of the rating to those assumptions, and the nature and quality of the data relied on. This should better enable the users of ratings to assess the nature of risks being rated and the reliability of the rating. In addition, it would move to eliminate all legal references to credit ratings. While we support reducing reliance on ratings, eliminating all legal references to ratings without first determining whether more reliable measures of creditworthiness are available strikes us as reckless.

  • AFR supports an amendment to require regulators first to identify all areas where the laws and regulations refer to or rely on ratings, then to determine whether better or additional measures of creditworthiness are available, and finally to either replace or supplement the ratings as appropriate.

 
Support the Over-the-Counter Derivatives Markets Act of 2009 (H.R. 3795)

Congress cannot protect the U.S. financial system without acting to regulate over-the-counter derivatives, which brought down AIG at a cost of $134 billion to taxpayers. The five biggest banks dominate the derivatives market and want to maintain the status quo, since opaque markets permit them to charge very high fees to derivatives clients. Unregulated derivatives encourage excessive leverage and unacceptable levels of risk in the economy. Taxpayers, consumers of energy and other commodities, and commercial enterprises using derivatives to hedge, are the losers.

Derivatives are securities whose price is dependent upon (or derived from) one or more underlying assets. These assets include physical commodities (oil, wheat); and financial instruments (stocks, bonds, currencies). Calls, puts, swaps, and futures are all types of derivatives. They serve an economic purpose by permitting businesses to predetermine the prices of key production inputs and outputs.

Prior to 2000, standardized derivatives were required to be exchange-traded. The Commodities Futures Modernization Act of 2000 provided two large loopholes and gave rise to the over-the-counter (OTC) derivatives market. The first OTC trade was in 1997 and the market has since ballooned to $600 trillion.

AIG Financial Products sold a type of OTC derivative called a credit default swap (CDS) which transfers the risk of a negative credit event from the buyer to the seller, in exchange for a periodic protection fee similar to an insurance premium. AIG issued credit default swaps to cover the credit risk of bundled subprime loans, not only incurring unsustainable risk but also fueling the housing price bubble. Taxpayers bore the cost when $134 billion was paid out to AIG’s counterparties.

AFR urges Congress to ensure that any legislation passed requires all standard derivatives to trade on an exchange, including foreign currency derivatives Because derivatives market participants are “too interconnected to fail” any exception to this policy risks rendering the legislation of little use.

Returning derivatives to an open exchange is a common sense solution to the risky bets that were made with our money. We have been using exchanges for hundreds of years for financial products, because they allow market participants to see pricing information in real time, and allow both regulators and participants to take note if a dealer is taking on excessive risk. Most derivatives currently called “customized” are transacted on copyrighted boilerplate documentation, so would lend themselves to standardized exchange trading.

The largest swaps dealers are the five “too big to fail” banks, and they expect to earn $35 billion from opaque derivatives trades this year. Remarkably, these banks have convinced their customers that a return to transparency would be bad for them.1 Since the banks’ credibility is damaged, they have sent their corporate customers, known as “derivatives end users” to lobby on their behalf. The US economy cannot afford another derivatives meltdown.

Support the Investor Protection Act of 2009 (H.R. 3817)

A side-effect of last year’s market collapse was its exposure of the Madoff investment fraud. The subsequent investigation into the regulatory failure that allowed this multi-billion-dollar Ponzi scheme to operate undetected for decades revealed glaring weaknesses in the Securities and Exchange Commission’s oversight of the securities markets and protections for investors. The Investor Protection Act contains a variety of measures to enhance the ability of the SEC to detect and prosecute fraud, including increasing the agency’s authorized funding, strengthening its enforcement tools, and providing new protections for whistleblowers. It also includes measures to address long neglected gaps in investor protection. The most important of these would require brokers who give investment advice to act in their customers’ best interests and would authorize the SEC to limit the use of mandatory arbitration clauses.

Require All Who Give Investment Advice to Act in Customers’ Best Interests

Overwhelmed and intimidated, most investors choose to rely on a professional – whether a broker, a financial planner, or an investment adviser – to help them to make the investment decisions upon which their retirement security and long-term savings success depend. Most approach this relationship with their guard down, relying heavily, if not exclusively, on the recommendations they receive. This leaves them extremely vulnerable, particularly given the conflicts of interest that pervade the securities industry.

Our current regulatory approach contributes to this problem by applying very different standards to services that are indistinguishable to the average investor. Specifically, while investment advisers are held to a fiduciary duty to act in the best interests of their clients, brokers who offer investment advice are required only to make recommendations that are generally suitable for the investor. Moreover, this lower standard for brokers has continued to apply even as they rebranded their salespeople as financial advisers and their services as investment planning. As a result, these “financial advisers” are free to offer higher cost, poorer performing investment options that pay them a higher commission as long as the option is generally suitable. And, since none of this has to be disclosed, the typical investor never knows the difference.

The IPA seeks to rectify this problem by requiring the SEC to issue rules applying the same fiduciary duty to investment advice by brokers that applies under the Advisers Act. The legislation makes clear that brokers would still be able to charge commissions for their services and would still be permitted to sell from a limited menu of investment options so long as appropriate disclosures were provided. Unfortunately, an amendment was added during mark-up that would permit the SEC to make FINRA, the broker-dealer self-regulatory organization, responsible enforcing the requirement for its member firms and persons associated with those firms. This would leave primary responsibility for determining how the fiduciary standard would apply to the vast majority of investment advisers in the hands of an organization that is infused with the broker-dealer mindset and has until very recently adamantly opposed holding brokers to a fiduciary standard when they give advice.

AFR supports an amendment to strip Finra of this oversight authority and opposes any amendment to further limit the scope of the fiduciary duty.

Support an End to Forced Arbitration

Since the 1980s, brokers have been free to force customers to sign pre-dispute binding arbitration clauses. As a result, investors today must agree to resolve disputes in an industry-run system many perceive as biased as a condition of opening an account. If investors were allowed a choice of whether or where to arbitrate disputes, the industry-run system would have to compete for their business by offering a system that all parties perceive as fair, efficient and affordable. The Investor Protection Act would promote that outcome by requiring the SEC to conduct a study and permitting the agency to limit or ban the use of binding arbitration clauses if it found them to be contrary to the interests of investors.

Restore Anti-Fraud Protections

Earlier this fall, in a move cheered by retail and institutional investors, the SEC voted to begin long-delayed implementation of post-Enron accounting reforms at companies with under $75 million in market capitalization. Specifically, the Commission voted to require these companies to begin complying next year with the requirement that their independent auditor include in the annual financial statement audit an evaluation of the company’s controls to prevent accounting fraud and errors. The requirement is particularly important to protect investors in small companies, since these companies are more prone to both accounting fraud and financial reporting errors than larger companies and since, when fraud occurs at these companies, it almost always involves the complicity of senior management. Implementation had repeatedly been delayed, however, as regulators sought to reduce the costs of compliance. The SEC voted to proceed after having extensively revised the requirement to make it less prescriptive and more scalable based on the size and complexity of the company and after thorough study showed that compliance costs had dropped dramatically since those revisions were made.

Ignoring the revisions to the standard and the cost reductions that have resulted, as well as the devastating costs that accounting fraud and financial restatements impose on investors, the Committee adopted an amendment to the IPA that would provide roughly half of all public companies with a permanent exemption from the requirement. They justified their action using precisely the same twisted logic that landed us in the current financial crisis: that regulation is a luxury we can’t afford.

AFR supports an amendment to strip the anti-investor exemption from Sarbanes-Oxley Act requirements for small public companies.

Support Comprehensive Regulation of Hedge Funds, Private Equity and Venture Capital

Why we need comprehensive regulation of hedge funds, private equity and venture capital:

Financial oversight has failed to keep up with the realities of the marketplace, characterized by globalization, innovation, and the convergence of lending and investing activities. As President Obama said during the campaign, “We need to regulate institutions for what they do, not what they are.”

This means that unregulated pooled investment vehicles, including hedge funds, private equity and venture capital, have been major participants in the shadow financial markets. Private equity and hedge funds and their managers should be subject to more stringent oversight that, at a minimum, requires greater transparency, ensures that managers act in the best interest of investors, and subjects the funds to capital adequacy requirements and leverage limits.

Self-regulation is a myth. Sophisticated investors cannot and should not be relied upon to protect their own long-term financial interests or to avoid overly risky activities that can threaten the health of the financial markets and the global economy. This does not necessarily mean that all participants in the financial markets must be subject to identical regulatory requirements. But regulators must ensure a minimum level of transparency, accountability, and mandated risk management across the financial markets.

Key elements of strong regulation
No exemptions. All private investment funds should be subject to the same level of regulation. Exemptions give Ponzi schemes a place to hide. For example, if Congress exempts venture capital funds from regulation, Ponzi schemes are likely to claim to be venture capital funds to avoid detection by the SEC.

Transparency. It is essential that the SEC has access to information about private investment funds and has the authority to require them to provide disclosures to investors, prospective investors, counterparties and creditors. These disclosures are important to prevent systemic risks and provide investors with the information necessary to make responsible investment decisions. In addition, public disclosure would allow creditors and counterparties to fully assess second- and third-level counterparty exposures and further help to prevent financial institutions from taking on exposures to risky counterparties that could lead to systemic threats.

Regulation must be comprehensive. It is not enough to regulate the adviser. The funds themselves must be regulated as well. They are separate entities and each poses unique regulatory concerns.

Support the Financial Stability Improvement Act (H.R. 3996)

Why we need Systemic Risk reform:

  • As the current financial crisis-driven job losses show, stable management of systemic risk is important not only to the financial players on Wall Street, but to every American on Main Street.
  • The systemic failures that collapsed giant financial institutions last year also compromised the economic security–the jobs, homes and retirement plans–of millions of Americans who did not contribute to the problem.
  • Regulating systemic risk is needed to ensure that the moral hazards and risk-taking activities of a handful of firms do not threaten the broader system.

Key elements of strong systemic risk prevention:

  • One central authority should be responsible for monitoring and stemming potential systemic risks.
  • The systemic risk regulator must have the authority to stop institutions from creating systemic risk by growing to a certain size or complexity, becoming too interconnected, or engaging in excessively risky activities. Particularly, it should have authority to reinstate separations between commercial and investment banking or limit insured depositories’ ability to engage in speculative risk-taking.
  • Primary authority for systemic risk regulation may be assigned to a council of regulators, a new agency, or the Federal Reserve. If the Fed is given authority to oversee systemic risk, at the same time it must be made more democratic and transparent. Without reform, the Fed will be unlikely to take necessary steps to limit bank activity; it has designed-in conflicts of interest, with banks largely deciding who regulates them.
  • The systemic risk regulator must have staff, resources, and expertise sufficient to monitor sources of systemic risk in institutions, products, and activities throughout the financial markets, and it must have the power to act promptly and independently. It also must be fully accountable and transparent to the public.
  • Systemic risk and resolution authority are interconnected issues; strong safeguards against systemic risk requires having strong resolution authority.

Why we need new resolution authority:

  • Resolution authority is needed so that there is a process for failing bank holding companies – as there currently is for conventional banks – that does not require massive taxpayer bailouts. Currently, the Federal Deposit Insurance Corporation (FDIC) has no authority to take distressed bank holding companies into conservatorship or receivership. This is particularly problematic because bank holding companies (such as Citigroup, recipient of $374 billion in government support) were the main culprits in the risky activities at the heart of the financial crisis.
  • Clearly-defined resolution authority will help limit the government’s implicit guarantee that it will support failing institutions with taxpayer money.
  • In the wake of last year’s financial failures, many institutions already considered “too big to fail” have grown bigger by acquiring failing companies, leaving our economy even more vulnerable.
  • The Bankruptcy Code’s provisions for the distribution of the assets of a bankrupt financial institution take no account of the systemic considerations that regulators can and should consider.
  • The status quo severely restricts the ability of the government to prevent the kind of systemic crisis that the failure of a large, interconnected institution can cause.

Key elements of strong resolution authority:

  • A sensible approach that ends the current policy of piecemeal bailouts.
  • Clear language that resolution is for the purpose of systemic financial stability and not for the purpose of rescuing failing financial companies; i.e.:
    • shareholders should recieve nothing,
    • unsecured creditors other than insured depositors or employees should the bear losses, and
    • management and the Board of Directors responsible for the failed condition of the company should be removed
  • Assurance that to the greatest extent possible, the regulating agency responsible for resolution act in a manner that minimizes recourse to the general fund of the Treasury.
  • Strong and clearly-defined Systemic Resolution Fund to pay for the costs associated with the resolution process that is financed only through assessments on financial companies and not by taxpayers. The Systemic Resolution Fund should be funded through ongoing assessments paid by financial institutions who pose a risk due to size or the nature of their activities.
  • Systemic risk reform must be in addition to -not a substitute for- active, strong prudential regulation.

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