The House is likely to move quickly in adopting legislation to strengthen federal oversight of the government securities market, a senior House aide told members of the Public Securities Association yesterday.
Jeffrey Duncan, a top Democratic aide on the Energy and Commerce telecommunications and finance subcommittee, said he expects the House to act "some time this summer," and possibly "as early as this month."
Mr. Duncan, appearing at a PSA conference on government securities, said that given the bipartisan support for the bill approved last week by the Energy and Commerce Committee, he expects the measure to clear the House without major changes.
One possible hang-up is that the House Banking Committee, chaired by Rep. Henry Gonzalez, D-Tex., may ask to review the bill before it is sent to the House floor. Mr. Gonzalez, once the bill is before his committee, could seek to modify it.
He has a bill that would require the Treasury Department and the Federal Reserve to automate auction procedures. The bill also contains a controversial provision that would let the Fed suspend a dealer under investigation for violating Treasury auction rules.
Critics say that would violate the due process right firms to do business until a decision is reached on whether they engaged in abusive practices. The Treasury, the Fed, and the government securities industry oppose the Gonzalez bill.
Mr. Duncan said Rep. Edward Markey, D-Mass., and other supporters of the House oversight bill hope the measure will not remain before Mr. Gonzalez's committee for long if it is referred there.
But Ira Paull, senior Republican counsel for the Senate Banking Committee, harshly criticized the House bill for giving too much authority to the Securities and Exchange Commission and warned that Congress will not approve it if it remains as written. The Senate has passed a less restrictive oversight bill that the industry prefers.
"There are vast differences between the House and the Senate bills that have to be resolved," said Mr. Paull.
Last week, officials from the Treasury and the Fed warned that the House bill threatens to impose unneeded regulations and undermine market liquidity.
Given such opposition, as well as the ability of individual senators to delay a bill they dislike, "this bill could very well be held up," said Mr. Paull.
PSA members at the conference were openly hostile toward the House bill, saying it would impose unneeded rules on the industry. They were especially critical of provisions in the bill that would give additional authority to the SEC to set record-keeping and price disclosure rules.
In defending the House bill, Mr. Duncan said, "Nothing in this bill is going to impair the liquidity of the government securities market."
He added, "We don't regard any of this as a blank check to the SEC."
In other comments to PSA members, Treasury and Fed officials said they are on schedule with plans to implement automated bidding for large dealers by the end of the year.
Peter Sternlight, executive vice president of the Federal Reserve Bank of New York, said dealers will be provided special software called Fast Fedline, an upgraded version of the Standard Fedline software that is now being made available for automated bidding by smaller dealers and brokers.
Deborah Danker, the Treasury's deputy assistant secretary for federal finance, said officials plan to set up automated, single-price auctions by spring of next year.
But Mr. Sternlight was more cautious about the timing, saving implementation by spring "might be a little optimistic." It will take time to set specifications for the new system and complete testing, he added.