[Congressional Record Volume 156, Number 105 (Thursday, July 15, 2010)]
[Extensions of Remarks]
[Pages E1347-E1349]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   CONFERENCE REPORT ON H.R. 4173, DODD-FRANK WALL STREET REFORM AND 
                        CONSUMER PROTECTION ACT

                                 ______
                                 

                               speech of

                         HON. JOHN CONYERS, JR.

                              of michigan

                    in the house of representatives

                        Wednesday, June 30, 2010

  Mr. CONYERS. Mr. Speaker, as the Chairman of the House Judiciary 
Committee, and a House conferee on the Dodd-Frank Wall Street Reform 
and Consumer Protection Act, I would like to highlight a few provisions 
of this legislation of particular jurisdictional importance to our 
Committee, and that our Committee was instrumentally involved in 
shaping. During the course of Congress's consideration of this 
legislation, our Committee carefully examined a range of legal issues 
posed, including issues of antitrust law, bankruptcy law, criminal law, 
administrative procedure, and judicial proceedings, and held two days 
of hearings last fall focusing on antitrust and bankruptcy law in 
particular. Below is a summary of some of the more significant of these 
issues and how they have been addressed.


                             Antitrust Law

  One major impetus of this bill is to address the problem posed two 
years ago by financial institutions that were deemed ``too big to 
fail.'' The emergency efforts to deal with those institutions led to 
infusions of billions of federal dollars, and federal guarantees of 
billions more, putting the Treasury, and our nation, at significant 
risk.
  But ``too big'' also places our nation at significant risk in another 
respect--and that is the risk of harm to competition, when a 
marketplace becomes concentrated in the hands of so few competitors 
that consumers no longer have meaningful choice, and the healthy 
influence of competition on price, quality, and innovation is lost.
  It is therefore essential that the antitrust laws, the laws 
protecting our economic freedoms against monopolization, 
anticompetitive restraints of trade, and undue market concentration, 
remain in place. They are needed to ensure that the heightened 
regulatory supervision the new law contemplates, as well as our 
response to any future financial system emergency, do not inadvertently 
lead to an even more concentrated marketplace--with companies that are 
even bigger, with more market power, and with less incentive to be 
responsive to the consumers they are supposed to serve, and leaving 
less opportunity for new entry and innovation.
  The final bill contains a number of provisions to ensure that the 
antitrust laws remain fully in effect.


                        Antitrust Savings Clause

  First and foremost is the antitrust savings clause in section 6 of 
the bill. It is the standard antitrust savings clause found in other 
statutes. It applies to the entire Act, and all amendments made by the 
Act to other laws. The phrase ``unless otherwise specified'' is added 
in reference to four provisions in the bill. In two places--sections 
210(a)(1)(G)(ii)(III) and 210(h)(11) of the bill--the standard pre-
merger waiting period under section 7A of the Clayton Act is explicitly 
shortened. And in two other places--section 163(b)(5) of the bill, and 
the amendment to section 4(k)(6)11(B) of the Bank Holding Company Act 
made in section 604(e)(2) of the bill--there are cross-references to 
the exception to pre-merger review in section 7A(c)(8) of the Clayton 
Act that explicitly make that exception inapplicable.
  The phrase ``unless otherwise specified'' refers only to those four 
specific provisions that explicitly modify the operation of those 
specified provisions of the antitrust laws in specified ways, and is 
not a basis for courts to consider whether any other provision in the 
bill might be intended as an implicit modification of how the antitrust 
laws operate. The savings clause is intended to make clear that it is 
not.
  For example, in a number of places in the bill, there are provisions 
referring to ``Antitrust Considerations'' that various securities and 
commodities entities--including derivatives clearing organizations, 
swap dealers, major swap participants, swap execution facilities, 
clearing agencies, security-based swap dealers, and major security-
based swap participants--are directed to take into account in 
formulating their operating rules. There are exceptions to these 
directives for situations in which the entity believes pursuing them 
itself is inconsistent with its other obligations under the relevant 
securities or commodities law. The fact that the entity is excused from 
the new directives, however, does not alter the application of the 
antitrust laws. Nor does the fact that the entity follows these 
directives in its own rulemaking supplant the operation of the 
antitrust laws.
  In this regard, the rule of construction found in section 541 of the 
bill simply reaffirms, perhaps unnecessarily, for Title V of the bill 
what the antitrust savings clause already provides for the entire bill 
and all amendments made by it. In attempting to elaborate on the effect 
of an antitrust savings clause, it does not create a different rule, 
but merely reaffirms the general rule.
  Moreover, an antitrust savings clause is itself merely a 
reinforcement of the well-established principle that, because the 
antitrust laws are ``a comprehensive charter of economic liberty aimed 
at preserving free and unfettered competition,'' Northern Pac. Ry. Co. 
v. U.S., 356 U.S. 1 (1958), ``the Magna Carta of free enterprise,'' 
Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 
540 U.S. 398 (2004); United States v. Topco Associates, Inc., 405 U.S. 
596, 610 (1972), there is a strong presumption against their normal 
operation being superseded by some other statutory scheme. E.g., Ricci 
v. Chicago Mercantile Exchange, 409 U.S. 289, 302-303 (1973); Silver v. 
New York Exchange, 373 U.S. 341, 357 (1963). Whether the antitrust laws 
reach particular conduct depends on whether the other statutory scheme 
is ``incompatible with the maintenance of an antitrust action.'' Ricci, 
409 U.S. at 302; Silver, 373 U.S. at 358. The antitrust laws are 
superseded only ``where there is a plain repugnancy between the 
antitrust and regulatory provisions.'' Credit Suisse Securities (USA) 
LLC v. Billing, 551 U.S. 264, 272 (2007); Gordon v. New York Stock 
Exchange, Inc., 422 U.S. 659, 682 (1975). The antitrust laws are 
displaced ``only if necessary to make the [other statutory scheme] 
work, and even then only to the minimum extent necessary.'' Ricci, 409 
U.S. at 301; Silver, 373 U.S. at 357.


                      Pre-Merger Antitrust Review

  Recognizing that a fully methodical pre-merger antitrust review may 
be in tension with the need for quick action to avoid systemic harm, 
the bill shortens the ``Hart-Scott-Rodino'' pre-merger waiting periods 
under section 7A of the Clayton Act, based on the procedure developed 
for reviewing sales of assets during a bankruptcy proceeding. This 
procedure expedites the initial review, while permitting the antitrust 
enforcement agency to extend the period when more information is needed 
to make its assessment. This expedited procedure is included in two 
places--in section 210(a)(1)(G)(ii) of the bill, for mergers of a 
covered financial company in receivership with another company, and in 
section 210(h)(11) of the bill, for mergers or sales of bridge 
financial companies.
  The House bill had included, at the request of our Committee, a 
provision permitting the FDIC receiver to effectuate a merger 
immediately, without prior notice to the Attorney General or any pre-
merger waiting period, if the Treasury Secretary determined that 
immediate action was necessary to preserve financial stability. This 
provision was not included in the Senate bill or the conference report. 
While express authority to act immediately is therefore missing, the 
Judiciary Committee hopes the antitrust enforcement agencies will work 
constructively with the Treasury Department to develop a mechanism for 
dispensing with the prior notice requirement and the pre-merger waiting 
period, or shortening them appropriately, when warranted by urgency and 
the danger posed to stability of the economy, keeping in mind that the 
antitrust laws authorizing challenge of anticompetitive mergers and 
acquisitions remain fully in force.
  In this regard, it should be emphasized that the shortening of the H-
S-R pre-merger antitrust waiting period, and even the possibility of 
permitting a merger to be effectuated as close to immediately as can be 
arranged, in no way alters the applicability of the other antitrust 
laws. If a merger raises significant competitive concerns, it can still 
be challenged after the fact under section 7 of the Clayton Act. And 
post-merger conduct that raises competitive concerns is fully subject 
to the Sherman Act. These laws are not amended by the bill; and

[[Page E1348]]

the antitrust further emphasizes that their operation is not affected 
in any way.
  Similarly, the House bill had, at the request of our Committee, 
applied the expedited pre-merger review process not only to mergers, 
but to sales or transfers of financial company assets. While transfers 
within the financial company's own internal corporate structure, or to 
a temporary bridge company set up by the FDIC, would never trigger the 
H-S-R notification and waiting period, and even sales or transfers to 
outside third parties would trigger it only if the assets acquired 
exceeded $63 million in value, an acquisition of this type is as 
likely, if not more so, than a merger with the entire financial 
company. Our Committee thought it important that acquisitions of this 
type, when they occur, have the expedited process available, as well as 
the emergency process allowing acquisitions to be effectuated 
immediately.
  The Senate bill limited the application of the expedited process to 
mergers, however, and the Senate approach was retained in the final 
conference report, which limits availability of the expedited review to 
mergers described in section 210(a)(1)(G)(i)(I), leaving out transfers 
of assets described in section 210(a)(1)(G)(i)(II). To the extent that 
subparagraph (G)(i)(II) may be read not only to cover transfers within 
the corporate structure or to the temporary bridge financial company, 
but also to include transfers to third parties, these transfers, to the 
extent they are at thresholds that trigger Hart-Scott-Rodino reporting, 
will not be able to take advantage of the expedited waiting period 
under section 210(a)(1)(G)(ii). Our Committee urges the antitrust 
enforcement agencies to use their existing authority to work 
constructively with the FDIC to establish an informal arrangement to 
enable these transactions to proceed in an expedited fashion where 
consistent with effective antitrust enforcement, keeping in mind, 
again, that the antitrust laws authorizing challenge of anticompetitive 
mergers and acquisitions remain fully in force.


                             Bankruptcy Law

  One of the bill's centerpieces is a new emergency procedure for 
placing a financial institution into FDIC receivership when its 
insolvency poses imminent and significant ``systemic risk'' to the 
stability of the broader financial system and economy. Congress made a 
judgment to craft this procedure outside the Bankruptcy Code, rather 
than seek to adopt the Code to the additional needs of dealing 
effectively with systemic risk. While generally supportive of this 
judgment, our Committee has urged proceeding in keeping with two 
important objectives. First, that this new emergency procedure be 
authorized only for cases of genuine emergency, where a departure from 
the well-established procedures in the Bankruptcy Code is essential to 
broader financial and economic stability. And second, that even in the 
new emergency procedure, the well-developed bankruptcy principles of 
due process and equitable treatment of all affected parties be 
incorporated to the fullest extent possible.


  Confining the Extraordinary Receivership Procedure to Extraordinary 
                             Circumstances

  As to the first objective, the House bill reaffirmed, at our 
Committee's request, the ``strong presumption that resolution under the 
bankruptcy laws will remain the primary method of resolving financial 
companies,'' and that the new FDIC receivership authority ``will only 
be used in the most exigent circumstances.'' The substantive essence of 
this presumption is reflected in several places in the final bill's new 
liquidation provisions.
  In particular, section 203(a)(2)(F) requires that, in any 
recommendation to the Treasury Secretary that FDIC receivership be 
invoked, the FDIC and the Fed explain why a case under the Bankruptcy 
Code is not appropriate. Section 203(b)(4) requires that the Secretary 
have determined, in consultation with the President, that ``any effect 
on the claims or interests of creditors . . . and other market 
participants . . . is appropriate, given the impact . . . on financial 
stability in the United States.'' And section 203(c)(2) requires the 
Secretary to make an immediate report to Congress, within 24 hours, on 
specified considerations supporting the FDIC receivership invocation, 
including, in subparagraphs (E)-(I), several considerations regarding 
the effects of FDIC receivership as compared with bankruptcy procedure.
  In addition, section 165(d)(4)(b) specifies that the resolution plans 
that large financial holding companies and nonbank financial companies 
will be required to submit to the Fed, as part of enhanced prudential 
standards, must be sufficient to result in orderly resolution under the 
Bankruptcy Code in the event of insolvency. Established bankruptcy 
procedure is thus reaffirmed as the preferred route even in the 
planning stages.
  Our Committee expects these provisions to be cornerstones for 
ensuring that this extraordinary procedure will be invoked only when 
essential--when bankruptcy procedure is clearly not sufficient in light 
of the extreme urgency and overriding systemic risk.


   Incorporating Key Bankruptcy Principles in the FDIC Receivership 
                                Process

  As to the second objective, the bill incorporates a number of key 
bankruptcy protections, first and foremost among them preservation and 
priority for specified kinds of claims against the financial company, 
and powers for the FDIC receiver to avoid transfers for the benefit of 
the United States and other creditors. The bill also incorporates a 
number of terms directly from the Bankruptcy Code. While we were not 
always successful in explicitly incorporating every useful Bankruptcy 
Code concept, many of the most important due process and equitable 
treatment considerations are reflected in some fashion.
  For example, section 208 of the bill requires dismissal of a covered 
financial company's pending bankruptcy case upon appointment of the 
FDIC receiver. Subsection (b) provides that any assets that have vested 
in another entity automatically vest back in the covered financial 
company. We had expressed concern that this would prove not only 
unworkable in practice, but could undermine the effectiveness of the 
bankruptcy proceeding in preserving assets of the financial company, by 
creating uncertainty regarding any purchase of assets even in the 
ordinary course of business. Subsection (c) of the final bill clarifies 
that any order entered or other relief granted by a bankruptcy court 
prior to the date the FDIC receiver is appointed ``shall continue with 
the same validity as if an orderly liquidation had not been 
commenced.'' Our Committee expects subsection (c) to be construed so 
that payments made during the ordinary course of the financial 
company's business while it is a debtor in a bankruptcy case will not 
be subject to the automatic re-vesting. This is in keeping with other 
provisions of the bill, such as section 165, that are intended to 
encourage financial companies to be resolved through bankruptcy 
wherever possible.
  At our Committee's urging, section 210(b) of the bill establishes 
priority of payment for various types of unsecured claims against a 
covered financial company for which the FDIC has been appointed as 
receiver under section 202, modeled on similar protection in the 
Bankruptcy Code. Subsection (b)(1)(C) accords third priority--after 
payment of the FDIC's administrative expenses as receiver, and any 
amounts owed to the United States (unless otherwise agreed to)--to 
employees with claims for unpaid wages, salaries, or commissions 
(including earned vacation, severance, and sick leave pay) up to a 
maximum $11,725 for each employee, earned within 180 days before the 
date of the FDIC's appointment as receiver. Also at the Committee's 
urging, subsection (b)(1)(D) accords fourth priority for certain 
contributions owed to employee benefit plans arising from services 
rendered within the same 180-day time frame. These provisions will 
ensure that American workers will be accorded the equivalent 
protections they have under current bankruptcy law with respect to 
payment priority for unpaid wages and employee benefit plan 
contributions.
  At our Committee's urging, the House bill required the FDIC receiver 
to appoint a Consumer Privacy Advisor to assist with ensuring that the 
privacy of sensitive consumer information would be appropriately 
protected. A similar provision was added to the Bankruptcy Code in 
2005, following revelations that Toysmart.com, an Internet retailer of 
educational toys had, after filing for bankruptcy, sought to sell its 
customer data base, including personal information about children who 
used its toys, despite its promise never to sell this information. This 
provision was not retained in the final bill; but the FDIC has advised 
our Committee that it is absolutely committed to safeguarding any 
personally identifiable information it acquires from a covered 
financial company for which it serves as receiver.


                            Practice of Law

  The Constitutional freedoms and legal rights we enjoy as Americans 
are ultimately protected in our courts, through the advocacy of 
attorneys who are licensed to practice before them. In keeping with 
these critical responsibilities, the activities of these ``officers of 
the court'' are regulated by the States, through government bodies 
overseen by the State's highest court, with specialized expertise in 
the sometimes complex duties imposed by the code of legal ethics. Among 
the myriad activities engaged in as part of the practice of law are 
activities to assist consumer clients in resolving serious debt 
problems, including but by no means limited to representing them in 
bankruptcy proceedings.
  Conceptually, the activities Congress intends to give the Bureau 
authority to regulate--``the offering or provision of a financial 
product or service''--are distinguishable from the practice of law. But 
because of the breadth of the authority being given the Bureau, 
including the definitions of ``covered person'' and ``financial product 
or service,'' and the complexities of the practice of law, there was 
concern about potential overlap. And giving the new Bureau authority to 
regulate the

[[Page E1349]]

practice of law could materially interfere with and jeopardize 
sensitive aspects of the attorney-client relationship, including the 
attorney-client privilege and work product protection that enable 
clients to obtain sound legal advice from their attorneys on a 
protected confidential basis.

  It could also undermine the authority of the State supreme courts to 
effectively oversee and discipline lawyers. There are carefully 
developed ethical codes and disciplinary rules governing all aspects of 
the practice of law. Any regulation from a new source would unavoidably 
conflict with the existing rules and lines of accountability. And 
because one of the foremost, and at times most complex, ethical 
obligations is for an attorney to represent the client zealously within 
the bounds of the law, there would be a significant likelihood of 
attorneys being impeded in meeting their obligations to their clients 
and to the legal system they are sworn to protect.
  Even if the Bureau's authority could be reliably confined to legal 
representation in financial matters, the result would be material harm 
to consumer clients of bankruptcy lawyers, consumer lawyers, and real 
estate lawyers--the very consumers the Bureau is being created to 
protect. But the harm would inevitably be far broader, extending into 
unrelated aspects of legal practice.
  For those reasons, our Committee was determined to avoid any possible 
overlap between the Bureau's authority and the practice of law. At the 
same time, our Committee recognized that attorneys can be involved in 
activities outside the practice of law, and might even hold out their 
law license as a sort of badge of trustworthiness. Although State 
supreme courts would have some authority to respond to abuses in even 
these outside activities, as reflecting on the attorney's unfitness to 
hold a law license (see Model Rule 8.4 of the American Bar Association 
Model Rules of Professional Conduct, adopted in virtually all States), 
their disciplinary authority is not necessarily as extensive in these 
outside areas. The Committee was equally determined that these outside 
activities not escape effective regulation simply because the person 
engaging in them is an attorney or is working for an attorney. 
Congresswoman Maxine Waters, a senior Member of both our Committee and 
the Committee on Financial Services, and a House conferee, was 
instrumental in helping ensure that the final bill draws this 
distinction appropriately and clearly.
  Accordingly, our Committee worked to make clear that the new Consumer 
Financial Protection Bureau established in the bill is not being given 
authority to regulate the practice of law, which is regulated by the 
State or States in which the attorney in question is licensed to 
practice. At the same time, the Committee worked to clarify that this 
protection for the practice of law is not intended to preclude the new 
Bureau from regulating other conduct engaged in by individuals who 
happen to be attorneys or to be acting under their direction, if the 
conduct is not part of the practice of law or incidental to the 
practice of law.
  Section 1027(e) of the final bill incorporates this protection. It 
excludes from Bureau supervisory and enforcement authority all 
activities engaged in as part of the practice of law under the laws of 
a State in which the attorney in question is licensed to practice law. 
To the extent that a paralegal, secretary, investigator, or law student 
intern is performing activities under the supervision of an attorney, 
and in a manner recognized under the laws of the relevant State as 
within the scope of the attorney's practice of law--and only to that 
extent--those activities also fall within this protection. As the 
commentary to Model Rule 5.3 of the American Bar Association Model 
Rules of Professional Conduct, adopted in virtually all States, makes 
clear, these legal assistants ``act for the lawyer in rendition of the 
lawyer's professional services . . . [and the] lawyer must give such 
assistants appropriate instruction and supervision concerning the 
ethical aspects of their employment . . . .'' Extending the protection 
to cover these legal assistance, under these conditions, is consistent 
with ensuring that the protection fully covers the practice of law as 
it is conventionally engaged in, while foreclosing any opportunity for 
an attorney to shield other commercial activities by engaging in them 
through surrogates.
  The provision in the final bill includes indicia for determining 
whether an activity that constitutes the offering or provision of a 
financial product or service within the terms of the bill is part of or 
incidental to the practice of law, and therefore excluded from the 
Bureau's authority. First and foremost, the activity must be among 
those activities considered part of the practice of law by the State 
supreme court or other governing body that is regulating the practice 
of law in the State in question, or be incidental to those practices. 
As further protection against abuse, the activity must be engaged in 
exclusively within the scope of the attorney-client relationship; and 
the product or service must not be offered by or under direction of the 
attorney in question with respect to any consumer who is not receiving 
legal advice or services from the attorney in connection with it.
  We would hope that this carefully considered statutory provision will 
also serve as a model for other federal agencies considering new 
regulations that might cover conduct engaged in by attorneys as well as 
others, so as to better ensure that important consumer protection 
objectives are achieved consistent with safeguarding the ability of our 
``officers of the court'' to fulfill their ethical obligations under 
our legal system.
  It is generally contemplated that the new Bureau will make rules 
regarding various aspects of its authority. Any determinations by rule, 
or otherwise, regarding what activities constitute the practice of law 
should be consistent with the views and practices of the State supreme 
court or State bar in question as to what activities it regards as part 
of the practice of law and oversees on that basis, giving appropriate 
deference to comments received from the State supreme courts and State 
bars, supplemented with further guidance as appropriate from the other 
indicia set forth in section 1027(e)(2).
  Section 1027(e)(3) makes clear that existing federal regulatory 
authority over activities of attorneys, either under enumerated 
consumer laws as defined in the bill, or transferred to the new Bureau 
from existing agencies under subtitle F or H of Title X, the Consumer 
Financial Protection Bureau title, is not diminished.


                  Administrative and Judicial Process

  Throughout the bill are provisions authorizing administrative or 
judicial enforcement. Our Committee has endeavored, where possible, to 
have these provisions written in conformance with the standard modern 
formulations found in the Administrative Procedures Act and title 28 of 
the United States Code, in lieu of novel formulations, or formulations 
modeled on laws enacted in a bygone era, that have the potential to 
create unnecessary uncertainty and litigation over interpretation. We 
were not always entirely successful in this regard.
  Among the changes made at our Committee's urging was revision of the 
Consumer Financial Protection Bureau's new investigative authority to 
bring it closer into conformity with the Antitrust Civil Process Act, 
on which it is modeled; and revisions to the new authority for 
nationwide service of subpoenas by the Securities and Exchange 
Commission to ensure that the authority will be exercised consistent 
with due process.
  Our Committee remains concerned about the use of the terms 
``privileged'' or ``privileged as an evidentiary matter'' to mean 
confidential and protected from discovery. This inartful phraseology, 
which was removed from some parts of the bill but not others, could 
unintentionally raise questions regarding evidentiary privilege law, 
which under the Rules Enabling Act is left to State common law. In 
particular, the Committee wishes to emphasize that this bill in no way 
authorizes government officials or courts to demand that anyone furnish 
information that is protected by legal privilege.

                          ____________________