Reform reading: Fed wants to expand stress testing to 35 big U.S. banks

Introduction

A daily round-up of news, commentary and analysis about the Dodd-Frank financial reform law.

Stress tests – Top U.S. banking regulators on Friday said they will require more banks to hold annual stress tests beginning in 2012 to measure if they are strong enough to raise dividends to shareholders.

The Fed proposal would apply to banks with at least $50 billion in assets — or about 35 companies — up from the current 19 banks that are required to do stress testing. Stress tests are computer models run by banks to assess their loans, securities portfolios, and funding operations based on various economic scenarios, including factors such as higher unemployment.

Senate Republicans take aim at law – Republican senators have introduced three amendments to a U.S. Senate bill in an attempt to rework Dodd-Frank, including one from Jim DeMint of South Carolina that would repeal the entire Dodd-Frank law, reports the Wall Street Journal.

In addition to DeMint’s amendment, Jerry Moran of Kansas offered language that would replace the director of the Consumer Financial Protection Bureau with a six-person board, while David Vitter of Louisiana proposed blocking the Federal Reserve from bailing out failing companies. Vitter’s amendment would also strip a council of regulators, known as the Financial Stability Oversight Council, of its authority to decide if a bank is “too big to fail.”

However, the amendments are likely to fail based on the Wednesday vote in the Senate, in which lawmakers rejected an attempt to delay a Dodd-Frank provision capping bank fees on debit card processing.

CFTC funding – A Republican push to starve the Commodity Futures Trading Commission of funding would put the American public at risk of another recession, said Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission.

As the agency scrambles to meet its Dodd-Frank deadlines to police over-the-counter derivatives trading, the Republican-controlled House approved a $172 million budget for the CFTC — a $30 million cut from the current year, Reuters reports. A cut in funding for the CFTC in fiscal 2012 would “hamper our ability to seek out fraud, manipulation and other abuses at a time when commodity prices are rising and volatile,” Gensler said.