Washington, D.C. – Today, leaders of the New Democrat Coalition applauded the House Financial Services Committee’s passage of comprehensive regulatory reform legislation, clearing the way for the full House to vote on these important reforms to our financial system.

New Dem Members have been helping lead the effort to reform the financial regulatory system to better protect consumers and investors, strengthen market stability and transparency, and enhance the effectiveness of regulatory oversight. Passage of this legislation by the Financial Service Committee is an important step towards enacting much-needed change.  The New Dems will continue working with the House Committees of jurisdiction, House Leadership and President Obama to enact these important reforms into law.

“Enacting comprehensive regulatory reform is a must for American families, workers and businesses who are still struggling after last year’s near-market collapse,” said Congressman Joseph Crowley (NY-07), Chair of the New Democrat Coalition.  “New Dems have been working for over a year with stakeholders to craft substantive legislation that will stabilize our financial markets and bolster protections for American investors, workers and small businesses.  We applaud the members of the Financial Services Committee, including Chairman Frank and many members of our Coalitions, for their hard work and taking the first step in the process toward enacting critical reforms. ”

“As I said when we began work on these reforms almost a year ago, regulatory reform may not be glamorous, but it is critical to creating a functional, sustainable financial system that families and businesses can count on,” said Congresswoman Melissa Bean (IL-08), Co-Chair of the New Dem Financial Services Task Force. “We must avoid future breakdowns that jeopardize the value of our pensions, our homes, our businesses and our national economy.”

“For far too long, our financial regulatory system was undermined, outclassed, and outmoded. Disaster followed,” said Congressman Jim Himes (CT-4), Co-Chair of the New Dem Financial Services Task Force. “The legislation we have drafted will update our regulation to make sure that our financial system thrives by serving the needs of American businesses and families, but that it does so safely and competently.”

In February, the New Democrat Coalition Financial Services Task Force released a set of 21 principles for Regulatory Reform.  With Committee consideration of Financial Regulatory Reform now complete, the House is set to vote, or has already voted, to implement 20 of the New Dem principles.  The legislation:

Efficient and Effective Regulation

  • Creates a systemic risk regulator that can monitor systemically important institutions and their counterparties to mitigate the risk of systemic collapse.
  • Reduces redundant regulatory structures in exchange for robust regulatory oversight.
  • Ensures oversight over new financial instruments that currently do not have regulatory oversight.
  • Increases coordination and communication between federal regulators.
  • Modernizes the regulation and oversight of the insurance industry to ensure adequate information and a consolidated U.S. position in international trade discussions.

Market Stability and Transparency

  • Reforms how regulators evaluate capital requirements when using fair value accounting values (mark to market) on hold to maturity assets in a temporarily impaired market.
  • Prohibits excessive leverage on debt and derivative instruments by requiring necessary capital reserves to prevent against the potential risk of default.
  • Creates a countercyclical mechanism to temper extreme market fluctuations.
  • Prohibits manipulation that can lead to extreme fluctuations in securities prices that could destabilize fair and orderly markets.
  • Supports open exchanges (through clearing and exchange trading where appropriate) and price disclosure to increase transparency in opaque markets like the credit default swaps market.
  • Requires lenders to hold a small percentage of loans in a first loss position to ensure originators retain some stake in the loans they underwrite.
  • Conducts a thorough review of rating agencies' methodologies, models and compensation structures to ensure that ratings are accurate and not subject to conflict.
  • Holds Treasury accountable to regularly collect data from all federal sources that receive financial data from recipients of TARP funds.

Robust Consumer and Investor Protection

  • Aggressively pursues a multi-tiered strategy that prevents unnecessary foreclosures for credit worthy borrowers while protecting taxpayers and preserving the moral hazard principle.
  • Works towards reintroduction of mortgage reform legislation and pass into law.
  • Ensures that credit is available and appropriate for consumers through strengthened oversight and regulation of predatory loans while protecting businesses' ability to price for risk.
  • Holds federal financial regulators accountable for enforcement of consumer and investor protections.
  • Protects and continue to encourage simpler disclosure of status and terms and conditions of Americans' retirement and investment accounts.
  • Reduces incentives for excessive risk taking and improves corporate governance by empowering shareholders.
  • Increases fraud prevention efforts.