Insights

TRP Financial Services Report

May 18, 2015
Looking Ahead

Near Term

  • The Senate will continue to debate Trade Promotion Authority as it races to complete consideration of the bill by the end of the week.  Will the jet fumes of a Memorial Day recess week be enough incentive to smooth out any outstanding bumps in a bill that continues to divide Democrats?
  • The House will take up a series of suspension bills before turning to a short-term fix for the Transportation bill as well as another uncontroversial spending bill.
  • FSOC meets on Tuesday to consider its 2015 annual report and then in a closed session focused on resolution plans for bank holding companies. 
     

Long Term

  • Senate Banking Committee is expected to hold hearings on Ex-Im on June 2nd and June 4th but many proponents of the bank believe that if they can’t hitch a ride on the transportation reauthorization before then the writing of the banks demise may be fait accompli.
  •  The remaining statutorily imposed deadlines for the year are:

    • May 31: Surface Transportation
    • June 1: USA PATRIOT Act
    • June 30: Export-Import Bank
    • Sept. 30: CHIP Funding
    • Sept. 30: Child Nutrition & WIC
    • Sept. 30: FAA Authorization
    • Sept. 30: End of the Federal Fiscal Year
    • End of September or October: Extraordinary Measures for dealing the Debt Ceiling run out and default becomes possible.

 

The Past Week
Legislative Branch

House
House Ag Committee Marks-Up CFTC Reauthorization
On Thursday, the House Agriculture Committee marked up the Commodity End-User Relief Act, a bill to reauthorize the Commodity Futures Trading Commission (CFTC) through 2019.  While the bill was reported out of Committee on a voice vote, the Ranking Member, Colin Peterson (D-MN) made it clear that he couldn’t support the measure, as he had last year, in part because of the provision dealing with cross-border trades. 
 
Financial Services Committee Wades into Data Privacy Debate
On Thursday the Financial Services Committee heard from retailers and financial institutions as part of its hearing entitled, “Protecting Consumers: Financial Data Security in the Age of Computer Hackers.”  As expected the hearing brought up all of the controversial issues that have prevented any movement on the issue of data privacy, breach notification and data security during the past couple of Congresses, including whether preemption is necessary.  In addition, the hearing exposed the rift between retailers and banks about assigning liability, and on the need for chip and pin technology in cards. 
 
Cap Markets Subcommittee Continues to Examine Proposals to Reduce Regulatory Burdens
On Wednesday May 13th the Capital Markets Subcommittee held a hearing entitled, ““Legislative Proposals to Enhance Capital Formation and Reduce Regulatory Burdens, Part II.”  During the hearing the Committee listened to witnesses talk about the need for four legislative proposals designed, according to Subcommittee Chairman Garett to promote capital formation in the United States.  Those proposals were: the “Main Street Growth Act,”  that would establish venture exchanges; the ‘‘Fair Access to Investment Research Act of 2015”, that would allow certain safe harbor provisions for certain exchange-traded fund research reports; a bill that would direct the SEC to review all its significant regulations to determine whether such regulations are necessary in the public interest or whether such regulations should be amended or rescinded; and the ‘‘Accelerating Access to Capital Act of 2015", which would revise Form S-3.
 
Financial Services Subcommittee Examines Dodd-Frank
On Wednesday, the Financial Services Oversight and Investigations subcommittee held a hearing entitled, “The Dodd-Frank Act and Regulatory Overreach” where it held from three private sector witnesses.  During the hearing a variety of regulatory issues were discussed including the CFPB, TBTF and housing finance.  Interestingly, many of the members of the minority used their opening statements to call on the Committee to reauthorize the Export-Import bank.
 
Financial Services Committee Subpoenas New York Fed, DOJ, & Treasury
On Monday, House Financial Services Chairman Jeb Hensarling utilized his new power to unilaterally issue subpoenas to the New York Fed, the Department of Justice and the Treasury for “not adequately responding to, or withholding information.”  In the case of the New York Fed the subpoena was related to an investigation the committee is doing on the administration’s contingency planning on the debt ceiling.  For the DOJ the subpoena related to investigation on too big to fail, as well as DOJs decision to prosecute financial institutions based on their size.  Finally, the Treasury was also subpoenaed for information connected with Too Big to Fail and Debt Ceiling contingency planning.  As expected, Ranking Member Waters decried the issuance, calling it “unprecedented” and arguing that the agencies were responsive. 
 
Senate
Senate Moves Forward on TPA
After suffering an initial bump in the process earlier in the week, after a second vote the Senate invoked cloture and moved forward with a bill to grant President Obama and a successor President, Trade Promotion Authority.  While there are still a couple of delicate issues to deal with, it appears that the Senate may be able to wrap up consideration of TPA by the end of this week.  If so, then the action will turn to the House where opponents of the measure will have their last shot at slowing things down by trying to amend the bill in order to create a conference opportunity.
 
Senate Banking Committee Prepares to Mark-up Shelby’s Regulatory Relief Bill
On Tuesday, Senate Banking Committee Chairman Shelby (R-AL) released his discussion draft of the “Financial Regulatory Improvement Act,” which depending on who you talk to is a pragmatic response to help community banks and others deal with some of the unintended regulatory burdens created by Dodd-Frank or, a wholesale rollback of the most important Dodd-Frank protections.  With both sides so far apart, many are predicting it will be hard to forge common ground, but everyone is eagerly awaiting the mark-up this Thursday. 
 
Warren –Vitter Joint Forces Again, Draw Ire of Benanke
Last week, Senators Elizabeth Warren and David Vitter continued their “strange bedfellows” experiment by introducing a bill that would limit the Federal Reserve’s emergency lending powers during a financial crisis in order to prevent further bailouts of various financial institutions.  The legislation caught the eye of a new blogger, former Fed Chairman Ben Bernake, who expressed his belief that the bill was misguided and would do more harm then good.  Perhaps most interesting is the fact that Mr. Benanke’s post has received zero comments as of the writing of this newsletter.
 

Select Highlights from the Administration

Department of Labor (DOL)
Extension of Comment Period for Fiduciary Rule Granted
On Friday, DOL announced, via a letter to Hill staff that was leaked to the press, that it was extended the comment period for 15 days, bringing the total comment period to 90 days.  The period will now end on July 19th, not nearly as long as some opponents of the rule had requested. 
 
Department of Education  (DoEd)
Department Proposes Regulations to Limit Colleges and Universities from Entering in Marketing Agreements with Banks
On Friday, DoEd announced that it was proposing new rules to limit how colleges and universities enter into certain agreements with banks and other financial institutions about how the institutions can market students and how the educational institutions can work with banks and others to use products such as prepaid debit cards to disburse excess student aid. 
 
CFPB
CFPB Forecasts Intention to Put out Stronger Rules for Student Loan Servicing
On Thursday, while at a field hearing in Milwaukee, the CFPB announced it was issuing a request for information (ROI) about student loan servicing.  With student loans now the second-largest source of household debt after home mortgages — unpaid debts have roughly doubled since 2008 – it is clear that policy makers in the Administration and Congress are continuing to pay more and more attention to the issue.    At Thursday’s event, Director Cordary appeared to signal that new, tougher rules were coming to the student loan servicing industry, as he hinted that they wanted to hear how consumer protections from other areas, such as the CARD Act and the mortgage servicing industry could be applied in the loan servicing space.
 
Federal Reserve
Powell Indicates Support for Easing Volcker for Community Banks
On Thursday, while speaking before a community bankers conference organized by the Federal Reserve, Governor Jerome Powell said he supports raising the asset threshold for applying both the Volcker rule as well as incentive compensation rules to $10 billion.  He went on to add that he believed the normal examination process would be sufficient to catch any wrong doing.
 
Securities and Exchange Commission (SEC)
Commissioner Gallagher Announces his Resignation
On Tuesday, it was announced that SEC Commissioner Dan Gallagher was resigning from his position as Chairman of the SEC.  The resignation will not be effective until a successor is confirmed, which could take months.  However the announcement allows the White House to pair Gallagher’s Republican seat with that of Luis Agiluar, a Democrat, whose term expires in June.  According to press reports, the White House intends to fill the seats with  Keir Gumbs and Philip Khinda, both of whom are former SEC attorneys now in private practice.  The timing of their nomination remains undisclosed.
 
 
Next Week’s Schedule
On Tuesday, May 19th at 10:00am in 2220 Rayburn, the Financial Services Subcommittee on Housing and Insurance will hold a hearing entitled, “The Future of Housing in America: Oversight of the Rural Housing Service.”
 
On Tuesday, May 19th at 1:00pm in 2175 Rayburn the Financial Services Financial Institutions and Consumer Credit Subcommittee will hold a hearing entitled, “Protecting Critical Infrastructure: How the Financial Sector Addresses Cyber Threats.”
 
On Tuesday, May 19th at 10:00am in 2360 Rayburn the Committee on Small Business Subcommittee on Economic Growth, Tax and Capital Access will hold a hearing titled, "Improving Capital Access Programs within the SBA."
 
On Tuesday, May 19th at 10:00am in 2172 Rayburn the Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade will hold a hearing entitled, “Trade Promotion Agencies and U.S. Foreign Policy.”
 
On Thursday, May 21st at 10:00am in 2128 Rayburn the Financial Services Tax Force to Investigate Terrorism Financing will hold a hearing entitled, “A Dangerous Nexus: Terrorism, Crime and Corruption.”
 
On Thursday, May 21st at 10:00am in 538 Dirksen the Senate Banking Committee will be in executive session to mark-up the “Financial Regulatory Improvement Act of 2015.”