Structured Finance Association Supports Federal Legislation to Ease LIBOR Transition
In Congressional Testimony, Federal Reserve Chairman Powell Also Expresses Support
The Structured Finance Association (SFA) today released the following statement on testimony delivered by Federal Reserve Chairman Jerome H. Powell at a U.S. House Committee on Financial Services hearing in which Powell expressed support for federal legislation to ease the transition away from the London Inter-Bank Offered Rate (LIBOR).
“LIBOR is the benchmark index currently used to determine the interest rate that millions of consumers pay on credit cards, home equity lines of credit, mortgages, and private student loans. Many of these loans were made years ago with contracts that never contemplated an end to LIBOR, and so once LIBOR goes away, consumers and investors could be left with a very confusing situation,” said Michael Bright, CEO of the Structured Finance Association. “We were pleased to hear Chairman Powell’s comments today and agree that federal legislation is the best solution to this problem. The Structured Finance Association has been extremely focused on this issue and will continue to work with policymakers on responsible legislation that will ensure stability through this massive transition.”
During the hearing, U.S. Representative Brad Sherman (D-Cali.), a senior member of the committee, asked Powell: “In your view, is it necessary to have federal legislation to have a smooth transition after June 2023 when LIBOR is no longer published?”
Powell responded: “Yes, we think it will be. As you know, many LIBOR contracts are going to run off before then, but there will be a hard tail, as we say, and we do think federal legislation is the best answer.”
Pressed by Sherman on “those who think the private sector can just invent a synthetic LIBOR” that will “solve the problem,” Powell added: “No, federal legislation creating a path for a backup would be the best solution, we think.”