SIFMA Testifies on the Dodd-Frank Act's Impact on Municipal Finance
Kenneth Gibbs, SIFMA board member and Chair of SIFMA's Municipal Securities Division, testified before the House Financial Services Subcommittee on Capital Markets about the impact of Dodd-Frank on municipal finance. Gibbs reviewed the numerous comment letters SIFMA filed with federal regulators on relevant Dodd-Frank provisions and the suggested changes regulators should implement to ensure the continued proper functioning of the municipal financing system.
Gibbs also noted three issues that remain unresolved:
- The SEC has yet to finalize its municipal advisor registration rule, and the proposed final rule includes numerous provisions that would go against congressional intent and statutory authority. H.R. 2827 would help address these issues.
- The Volcker Rule -- as currently proposed -- would take too narrow an approach to the municipal securities exclusion in the statute. Moreover, it would bifurcate the market and increase borrowing costs for states and localities with no benefit to bank safety. (SL Comment: In regard to the damage that may be done to the municipal market by the Volcker Rule, see, for example, this Cadwalader Client and Friends Memo, dated Dec. 12, 2011, titled " A Critical Analysis of the Potential Impact of the Volcker Rule on Municipal Bonds". (The memo is available from Scott Cammarn.)
- The GASB funding provision in Dodd-Frank is misguided because it imposes the funding obligation on FINRA-member dealers (which have little to do with GASB's activities). The FINRA rule related to the GASB funding provision is also unfairly implemented because it fails to tax non-FINRA dealers and is inappropriately based on trading activity. The provision also provides a virtually unlimited funding source for GASB with little oversight.
The full testimony focuses on four areas of Dodd-Frank that effect municipal finance and highlights three major issues that remain unresolved.
View release in full here(links externally to SIFMA website).