[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3691 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 3691

     To amend the Commodity Exchange Act to require reporting and 
 recordkeeping for positions involving credit-default swaps, to grant 
   the Federal Reserve Board authority over investment-bank holding 
                   companies, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 19, 2008

  Ms. Collins introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
     To amend the Commodity Exchange Act to require reporting and 
 recordkeeping for positions involving credit-default swaps, to grant 
   the Federal Reserve Board authority over investment-bank holding 
                   companies, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Financial Regulation Reform Act of 
2008''.

SEC. 2. REPORTING AND RECORDKEEPING FOR POSITIONS INVOLVING CREDIT-
              DEFAULT SWAPS.

    (a) In General.--Section 2(h) of the Commodity Exchange Act (7 
U.S.C. 2(h)) is amended by adding at the end the following:
            ``(8) Reporting and recordkeeping for positions involving 
        credit-default swaps.--
                    ``(A) Definitions.--In this paragraph:
                            ``(i) Credit-default swap.--The term 
                        `credit-default swap' means a bilateral 
                        derivative contract that transfers, in exchange 
                        for 1 or more lump-sum or other payments, from 
                        1 party to another, the risk that an entity, 
                        regardless of whether owned by the buyer of the 
                        protection, may experience a loss of value from 
                        a credit event such as a default, credit 
                        downgrade, or other contractually agreed-upon 
                        adverse event.
                            ``(ii) Credit-default swap trading 
                        clearinghouse.--The term `credit-default swap 
                        trading clearinghouse' means an approved 
                        centralized clearinghouse for credit-default 
                        swap trading that is designated by the 
                        Securities and Exchange Commission, in 
                        consultation with the Commodity Futures Trading 
                        Commission and the Chairman of the Board of 
                        Governors of the Federal Reserve System.
                            ``(iii) Reportable contract.--The term 
                        `reportable contract' means a contract, 
                        agreement, or transaction involving a credit-
                        default swap, executed through a credit-default 
                        swap trading clearinghouse.
                    ``(B) Use of credit-default swap trading 
                clearinghouses.--Each credit-default swap trading 
                clearinghouse--
                            ``(i) shall be subject to regulation by the 
                        Commission;
                            ``(ii) shall be capitalized by participants 
                        in the credit-default swap trading 
                        clearinghouse at a level that is sufficient to 
                        guarantee payment for trading in credit-default 
                        swaps; and
                            ``(iii) may assess participants in the 
                        credit-default swap trading clearinghouse in an 
                        amount necessary to maintain a default fund for 
                        the credit-default swap trading clearinghouse.
                    ``(C) Recordkeeping.--The Commission, by rule, 
                shall require any person holding, maintaining, or 
                controlling any position in any reportable contract 
                under this paragraph--
                            ``(i) to maintain such records as directed 
                        by the Commission for a period of 5 years, or 
                        longer, if directed by the Commission; and
                            ``(ii) to provide such records upon request 
                        to the Commission, the Department of Justice, 
                        the Securities and Exchange Commission, or the 
                        Federal Reserve System, as applicable.
                    ``(D) Reporting of positions involving credit-
                default swaps.--The Commission shall prescribe rules 
                requiring such regular or continuous reporting of 
                positions in reportable contracts in accordance with 
                such requirements regarding size limits for reportable 
                positions and the form, timing, and manner of filing 
                such reports under this paragraph, as the Commission 
                shall determine.''.
    (b) Conforming Amendments.--Section 4a(e) of the Commodity Exchange 
Act (7 U.S.C. 6a(e)) is amended--
            (1) in the first sentence--
                    (A) by inserting ``, by any credit-default swap 
                trading clearinghouse (as defined in section 
                2(h)(8)(A)),'' after ``registered by the Commission''; 
                and
                    (B) by inserting ``, credit-default swap trading 
                clearinghouse,'' after ``derivatives transaction 
                execution facility''; and
            (2) in the second sentence, by inserting ``, by any credit-
        default swap trading clearinghouse (as defined in section 
        2(h)(8)(A)),'' after ``registered by the Commission''.

SEC. 3. FEDERAL RESERVE BOARD AUTHORITY OVER INVESTMENT BANK HOLDING 
              COMPANIES.

    (a) Regulation by the Board of Governors of the Federal Reserve 
System.--
            (1) Rulemaking required.--Not later than 90 days after the 
        date of enactment of this Act, the Board of Governors of the 
        Federal Reserve System (in this section referred to as the 
        ``Board'') shall issue final rules to provide for the 
        examination of the safety and soundness of, and the extent of 
        systemic financial risk posed by, any investment bank holding 
        company organized in or doing business in the United States.
            (2) Information from investment bank holding companies.--
        The rules of the Board under this section shall provide for 
        reasonable reporting of information by each investment bank 
        holding company, to the extent necessary to carry out the 
        purposes of this section.
    (b) Rule of Construction.--Nothing in this section shall be 
construed as negating or preempting the authority of the Securities and 
Exchange Commission to exercise its authority over broker or dealer 
operations in accordance with applicable provisions of law.
    (c) Exchange of Information on Systemic Risk.--The Securities and 
Exchange Commission, the Commodity Futures Trading Commission, and 
other appropriate Federal regulatory agencies shall provide to the 
Board all relevant information, as directed by the Board, on the 
activities of investment bank holding companies with respect to the 
prevention of systemic risks posed by such activities to the United 
States economy.
    (d) Enforcement Provisions.--Any violation of this section or the 
rules of the Board under this section shall be subject to the 
enforcement and penalty provisions of the Bank Holding Company Act of 
1956, in the same manner and to the same extent as those provisions are 
applicable to violations of that Act by a bank holding company (as 
defined in that Act).
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated to the Board such sums as may be necessary to carry out 
this section.
    (f) Definitions.--For purposes of this section, the term 
``investment bank holding company'' means--
            (1) any person other than a natural person that owns or 
        controls one or more brokers or dealers (as those terms are 
        defined in section 3 of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c)); and
            (2) the associated persons thereof.
    (g) Conforming Amendments.--The Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.) is amended--
            (1) in section 6(g)(4)(A)(iv) (15 U.S.C. 78f(g)(4)(A)(iv)), 
        by striking ``and (k)'' and inserting ``and (i)'';
            (2) in section 15(b) (15 U.S.C. 78(o)(b))--
                    (A) in paragraph (11)(B)(vi), by striking ``(h), 
                and (i)'' and inserting ``and (h)''; and
                    (B) in paragraph (12)(B)(vi), by striking ``(h), 
                and (i)'' and inserting ``and (h)'';
            (3) in section 15A(k)(4)(C) (15 U.S.C. 78o-3(k)(4)(C)), by 
        striking ``and (k)'' and inserting ``and (i)''; and
            (4) in section 17 (15 U.S.C. 78q)--
                    (A) by striking subsections (i) and (j); and
                    (B) by redesignating subsection (k) as subsection 
                (i).

SEC. 4. REGULATIONS ON CLEARINGHOUSE OPERATIONS AND FRAUDULENT, 
              DECEPTIVE, AND MANIPULATIVE ACTS.

    (a) Rulemaking Required.--Not later than 90 days after the date of 
enactment of this Act, the Securities and Exchange Commission, in 
consultation with the Board of Governors of the Federal Reserve System 
and the Commodity Futures Trading Commission, shall issue final rules--
            (1) to designate clearinghouses for credit-default swaps; 
        and
            (2) to prohibit fraudulent, deceptive, or manipulative acts 
        or practices in connection with credit-default swaps.
    (b) Criteria.--Rules of the Commission under this section shall 
require that clearinghouses--
            (1) are capitalized by participants to a level adequate to 
        guarantee payments; and
            (2) are authorized to assess members for a default fund.
    (c) Required Use of Clearinghouses.--Any person that engages in a 
credit-default swap transaction shall utilize a clearinghouse 
designated by the Commission for such purpose in accordance with the 
rules issued under subsection (a).

SEC. 5. ESTABLISHING AN INDEPENDENT, BIPARTISAN COMMISSION.

    (a) Commission Establishment.--There is established a temporary 
commission to be known as the Commission on Financial Regulatory Reform 
(referred to in this section as the ``Commission''). The Commission 
shall review the financial regulatory structure and propose a 
comprehensive framework for fundamental reform of financial regulation 
in the United States.
    (b) Functions of the Commission.--
            (1) In general.--The Commission shall conduct a top-to-
        bottom review of the Nation's existing financial regulatory 
        structure and the contribution of the current structure to the 
        stability or instability of financial markets, in order to 
        develop a comprehensive framework for--
                    (A) reforming the laws governing our Nation's 
                financial markets;
                    (B) strengthening and reconstituting regulatory 
                agencies; and
                    (C) improving transparency and oversight.
            (2) Analysis.--In the course of its activities, the 
        Commission shall analyze--
                    (A) the impact of the financial regulatory 
                structure on the health and stability of the United 
                States economy;
                    (B) the strength, sustainability, and 
                competitiveness of the Nation's financial institutions; 
                and
                    (C) the financial well-being of American taxpayers, 
                investors, and businesses.
            (3) Considerations.--The Commission shall review and 
        consider all aspects of financial regulation, including the 
        regulation of--
                    (A) bank holding companies, financial holding 
                companies, commercial banks, investment banks, thrifts, 
                credit unions, and industrial loan companies;
                    (B) payment and settlement systems;
                    (C) hedge funds, private equity funds, and the 
                markets for alternative investments;
                    (D) special purpose vehicles and off-balance sheet 
                financing for financial companies;
                    (E) the securitization of mortgages and other 
                assets;
                    (F) exchange-based, electronic, and over-the-
                counter markets for financial derivative products;
                    (G) the mortgage finance industry, including 
                mortgage brokers and mortgage lending institutions;
                    (H) equity markets, including short-selling 
                practices, and commodity futures markets; and
                    (I) the insurance industry and its role in the 
                financial markets.
    (c) Powers of the Commission.--
            (1) In general.--
                    (A) Hearings and evidence.--The Commission or, on 
                the authority of the Commission, any subcommittee or 
                member thereof, may, for the purpose of carrying out 
                this Act--
                            (i) hold such hearings and sit and act at 
                        such times and places, take such testimony, 
                        receive such evidence, administer such oaths; 
                        and
                            (ii) require the attendance and testimony 
                        of such witnesses and the production of such 
                        books, records, correspondence, memoranda, 
                        papers, and documents, as the Commission or 
                        such designated subcommittee or designated 
                        member may determine advisable.
                    (B) First meeting.--The first meeting of the 
                Commission shall occur not later than 30 days after the 
                date of enactment of this Act.
            (2) Contracting.--The Commission may, to such extent and in 
        such amounts as are provided in appropriation Acts, enter into 
        contracts to enable the Commission to discharge its duties 
        under this Act.
            (3) Information from federal agencies.--
                    (A) In general.--The Commission is authorized to 
                secure directly from any executive department, bureau, 
                agency, board, commission, office, independent 
                establishment, or instrumentality of the Government, 
                information, suggestions, estimates, and statistics for 
                the purposes of this Act. Each department, bureau, 
                agency, board, commission, office, independent 
                establishment, or instrumentality shall, to the extent 
                authorized by law, furnish such information, 
                suggestions, estimates, and statistics directly to the 
                Commission, upon request made by the chairman, the 
                chairman of any subcommittee created by a majority of 
                the Commission, or any member designated by a majority 
                of the Commission.
                    (B) Receipt, handling, storage, and 
                dissemination.--Information shall only be received, 
                handled, stored, and disseminated by members of the 
                Commission and its staff consistent with all applicable 
                statutes, regulations, and Executive orders.
            (4) Assistance from federal agencies.--
                    (A) General services administration.--The 
                Administrator of General Services shall provide to the 
                Commission on a reimbursable basis administrative 
                support and other services for the performance of the 
                Commission's functions.
                    (B) Other departments and agencies.--In addition to 
                the assistance prescribed in subparagraph (A), 
                departments and agencies of the United States may 
                provide to the Commission such services, funds, 
                facilities, staff, and other support services as they 
                may determine advisable and as may be authorized by 
                law.
            (5) Gifts.--The Commission may accept, use, and dispose of 
        gifts or donations of services or property.
            (6) Postal services.--The Commission may use the United 
        States mails in the same manner and under the same conditions 
        as departments and agencies of the United States.
    (d) Non-Applicability of Federal Advisory Committee Act.--
            (1) In general.--The Federal Advisory Committee Act (5 
        U.S.C. App.) shall not apply to the Commission.
            (2) Public meetings and release of public versions of 
        reports.--The Commission shall--
                    (A) hold public hearings and meetings to the extent 
                appropriate; and
                    (B) release public versions of the reports required 
                under this Act.
            (3) Public hearings.--Any public hearings of the Commission 
        shall be conducted in a manner consistent with the protection 
        of information provided to or developed for or by the 
        Commission as required by any applicable statute, regulation, 
        or Executive order.
    (e) Composition.--
            (1) In general.--The Commission shall be composed of 12 
        members, selected not later than 15 days after the date of 
        enactment of this Act, of whom--
                    (A) three persons shall be appointed by the 
                majority leader of the Senate, after consultation with 
                the Chairman of the Committee on Banking, Housing and 
                Urban Affairs;
                    (B) three persons shall be appointed by the 
                minority leader of the Senate, after consultation with 
                the ranking minority members of the Committee on 
                Banking, Housing and Urban Affairs;
                    (C) three persons shall be appointed by the Speaker 
                of the House of Representatives, after consultation 
                with the Chairman of the Committee on Financial 
                Services; and
                    (D) three persons shall be appointed by the 
                minority leader of the House of Representatives, after 
                consultation with the ranking minority member of the 
                Committee on Financial Services.
            (2) Qualifications.--An individual appointed may not be an 
        officer or employee of the Federal Government or any State or 
        local government. It is the sense of Congress that individuals 
        appointed to the Commission should have national recognition as 
        financial sector experts, and may include former government 
        officials, private market participants, and representatives of 
        the academic community,
            (3) Officers.--Officers of the Commission are to be chosen 
        by the Commission's membership.
    (f) Final Report of Commission.--Not later than 120 days after the 
date of the enactment of this Act, the Commission shall submit to the 
President and Congress a final report containing such findings, 
conclusions, and recommendations for corrective measures as have been 
agreed to by a majority of committee members.
    (g) Compensation of Commission Staff.--
            (1) In general.--
                    (A) Appointment and compensation.--The chairman, in 
                consultation with vice chairman, in accordance with 
                rules agreed upon by the Commission, may appoint and 
                fix the compensation of a staff director and such other 
                personnel as may be necessary to enable the Commission 
                to carry out its functions, without regard to the 
                provisions of title 5, United States Code, governing 
                appointments in the competitive service, and without 
                regard to the provisions of chapter 51 and subchapter 
                III of chapter 53 of such title relating to 
                classification and General Schedule pay rates, except 
                that no rate of pay fixed under this subsection may 
                exceed the equivalent of that payable for a position at 
                level V of the Executive Schedule under section 5316 of 
                title 5, United States Code.
                    (B) Personnel as federal employees.--
                            (i) In general.--The executive director and 
                        any personnel of the Commission who are 
                        employees shall be employees under section 2105 
                        of title 5, United States Code, for purposes of 
                        chapters 63, 81, 83, 84, 85, 87, 89, and 90 of 
                        that title.
                            (ii) Members of commission.--Subparagraph 
                        (A) shall not be construed to apply to members 
                        of the Commission.
            (2) Detailees.--Any Federal Government employee may be 
        detailed to the Commission without reimbursement from the 
        Commission, and such detailee shall retain the rights, status, 
        and privileges of his or her regular employment without 
        interruption.
            (3) Consultant services.--The Commission is authorized to 
        procure the services of experts and consultants in accordance 
        with section 3109 of title 5, United States Code, but at rates 
        not to exceed the daily rate paid a person occupying a position 
        at level IV of the Executive Schedule under section 5315 of 
        title 5, United States Code.
    (h) Compensation and Travel Expenses.--
            (1) Compensation.--Each member of the Commission may be 
        compensated at not to exceed the daily equivalent of the annual 
        rate of basic pay in effect for a position at level IV of the 
        Executive Schedule under section 5315 of title 5, United States 
        Code, for each day during which that member is engaged in the 
        actual performance of the duties of the Commission.
            (2) Travel expenses.--While away from their homes or 
        regular places of business in the performance of services for 
        the Commission, members of the Commission shall be allowed 
        travel expenses, including per diem in lieu of subsistence, in 
        the same manner as persons employed intermittently in the 
        Government service are allowed expenses under section 5703(b) 
        of title 5, United States Code.
    (i) Reports of Commission; Termination.--
            (1) Interim reports.--The Commission may submit to the 
        President and Congress interim reports containing such 
        findings, conclusions, and recommendations for corrective 
        measures as have been agreed to by a majority of Commission 
        members.
            (2) Final report.--Not later than 6 months after the date 
        of the enactment of this Act, the Commission shall submit to 
        the President and Congress a final report containing such 
        findings, conclusions, and recommendations for corrective 
        measures as have been agreed to by a majority of Commission 
        members.
            (3) Termination.--
                    (A) In general.--The Commission, and all the 
                authorities of this Act, shall terminate 60 days after 
                the date on which the final report is submitted under 
                paragraph (2).
                    (B) Administrative activities before termination.--
                The Commission may use the 60-day period referred to in 
                subparagraph (A) for the purpose of concluding its 
                activities, including providing testimony to committees 
                of Congress concerning its reports and disseminating 
                the final report.
    (j) Funding.--
            (1) Transfer from the department of the treasury tarp 
        program.--Of the amounts authorized to be appropriated by this 
        Act and made available in Public Law for the Troubled Asset 
        Relief Program established under the Emergency Economic 
        Stabilization Act of 2008, not to exceed $5,000,000 shall be 
        available for transfer to the Commission for purposes of the 
        activities of the Commission under this Act, and including 
        assistance for participating Federal agencies.
            (2) Duration of availability.--Amounts made available to 
        the Commission under paragraph (1) shall remain available until 
        the termination of the Commission.
                                 <all>