Once Congress approves legislation to stabilize foreclosure rates a process that has taken months and may finally be nearing a conclusion lawmakers are expected to turn to revamping the financial regulatory structure in order to prevent a crisis similar to the collapse of the subprime mortgage market.
They will also consider ways to improve affordable housing options systematically.
This process is most likely to bear fruit next year, when a new Congress and president will be calling the shots.
The House Financial Services Committee is nonetheless scheduled to hold a series of hearings this month on what types of regulatory changes need to be made in the financial services sector.
Ever since the Federal Reserve approved a $30 billion buyout for investment bank Bear Stearns, lawmakers have been taking a hard look at the type of oversight financial entities should have in order to access discounted federal loans.
House Financial Services Chairman Barney Frank (D-Mass.) has said that financial entities looking to borrow from the Feds so-called discount window a way of acquiring short-term emergency capital should have appropriate regulatory oversight.
One proposal would give the Federal Reserve regulatory powers over investment banks. Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, said his group supports making the Fed a systemic risk regulator and requiring all eligible firms seeking access to the discount window to be subject to appropriate regulation, including capital standards based on their business model and risk profile.
Other regulatory changes likely to be delayed until the next Congress include a revamping of the insurance regulation system. Earlier this year, the Treasury Department released a blueprint calling for an optional federal charter in which insurers could choose to be regulated by the federal government rather than a mix of state systems. Currently, all insurers are regulated by individual states.
Insurance carriers are split on the issue. Advocates of an optional federal charter, including the American Insurance Association, blame states for running what they call inconsistent and inefficient regulatory and enforcement operations, and they argue that such regulatory regimes pose obstacles to introducing new and innovative insurance products. Instead, such insurers would like to see a model similar to the dual regulatory platform for the nations banking system enacted by the 1999 Gramm-Leach-Bliley Act.
But other key groups, such as the Property Casualty Insurers Association of America, support overhauling insurance regulation while emphasizing the need to preserve states regulatory authority.
On the housing front, some lawmakers are eager to return to the issue of improving the nations public and affordable housing a subject that was nudged aside when the subprime crisis hit full force.
Although the housing bill now on the Senate floor is expected to retain an affordable housing trust fund to help build at least 1.5 million low-income housing units, efforts to preserve existing public housing are more likely to be resolved in the next Congress.
The House has passed the HOPE VI Improvement and Reauthorization Act, which would authorize hundreds of millions of dollars in spending on public housing over the next several years. The bill sponsored by Rep. Maxine Waters (D-Calif.), who chairs the House Financial Services Subcommittee on Housing and Community Opportunity would authorize $800 million annually between fiscal 2008 and 2015 for programs to fund efforts to revamp distressed public housing.
The bill would overhaul the administration of the HOPE VI program, requiring that proposed revitalization plans prove that the public housing project is severely distressed. The bill would also require that those plans account for temporary relocation needs, replace units on a one-for-one basis and involve residents before any grants are made. And it would mandate that replacement units be built on the same site as the original project or nearby.
The Department of Housing and Urban Development would be prohibited from granting funds for demolition-only plans, and at least one-third of the replacement units must be public housing units.
By contrast, the Senate version doesnt guarantee that there wont be a net loss of units or that residents will be able to return to the new housing project.
Its going to depend on how strict you are about the one-for-one replacement, said Linda Couch, deputy director of the National Low Income Housing Coalition. Weve lost a lot of public housing, and meanwhile we have a worsening housing market.
Meanwhile, another item on next years legislative horizon is a draft measure by Frank that would preserve project-based assistance for nonpublic housing units. The draft, being circulated among housing groups, aims to help provide affordable rental housing by stipulating rules for the conversion of public-assistance housing contracts.