Treasury’s Wolin: Five Things Worth Fighting for in FinReg

Today, Neal Wolin, the deputy secretary of the Treasury, gave a speech to the Financial Industry Regulatory Authority’s annual conference in Baltimore, and outlined five things Treasury will push for as the House and Senate financial regulatory reform bills go through conference committee.

First, we remain focused on an issue that I know is of particular relevance to many of you here: fiduciary duty. We believe that retail brokers offering investment advice should be subject to the same fiduciary standard of care as investment advisors, and we will work to include that provision in the final bill. …

Second, we oppose efforts to weaken the consumer protection agency — including, in particular, the carve-out for auto dealers. Despite the fact that the auto dealers originate almost eighty percent of the auto loans in this country — and despite the fact that, after homes, automobile purchases are the most significant financial investments most American families make — the dealer-lenders have lobbied vigorously for a carve-out….

Third, we will work hard to include the so-called “Volcker Rule” provisions, which would protect taxpayers and depositors by separating “proprietary trading” from the business of banking — and, in addition, would limit the size of financial firms by preventing acquisitions that would result in a concentration of more than ten percent of the liabilities in the financial system.

Fourth, we will advocate for inclusion of the strong rules on conflicts of interest and transparency at credit rating agencies.

And fifth, with respect to resolution authority, we will seek to ensure that there are sensible safeguards in place to prevent resolution authority from being used unless absolutely necessary — but that regulators retain the ability to act swiftly and effectively in times of crisis, to protect taxpayers and to minimize the risk of panic or contagion.

Of these, none are particularly controversial at this point — the most notable thing here is the omission of the discussion of derivatives. The administration does not support forcing banks to spin off their swaps trading desks — a provision in the Senate bill that will presumably be dropped.