Insights

Financial Services Report

October 12, 2015

Our Take
Last week’s turbulence in the expected ascension of Kevin McCarthy to Speaker, not only threw the House into disarray, but was also was one of those moments when you realize we are living through history.  Outside of the drama surrounding McCarthy’s decision and what it means for the Republicans in the House, the event was a reminder of the strength of the “little d” democratic process of the House of Representatives and our constitutional process.  Perhaps this is a bit counterintuitive, since both Boehner’s decision to depart, as well as part of McCarthy’s decision was based on the tyranny of the minority, but whether you agree or disagree with the goals of the Freedom Caucus, not a single actual gunshot has been fired in this leadership fight. 

The leadership vacuum also presents Speaker Boehner with multiple options on how to proceed between now and the 30th (or however long he remains in control of the gavel).   While it looks       like the House will vote on Ex-Im before Boehner’s retirement, there are a host of other issues outstanding that he could choose to wrap up in his “clean the barn” approach to finishing out his Speakership. 
 
Looking Ahead

Near Term

  • The House and Senate are out of session for the Columbus Day Recess.
  • Republican House members will spend the week trying to figure out who the next Speaker will be.

Further Out

  • The Senate will take up the Sanctuary Cities issue when it returns from the Recess
  • Ex-Im Bank Vote potentially on the floor on October 26th
  • Highway Authorization expires on October 30th
  • Treasury says Debt Ceiling will need to be increased by November 5th.  Impact on US Treasuries already noticeable.  

The Past Week

Legislative Branch

House
House Overwhelmingly Passes Homebuyers Assistance Act
On Tuesday, by a veto-proof majority of 303-121, the House passed legislation to create a 4-month grace period for companies complying with the CFPB’s TRID rule by prohibiting the CFPB from enforcing the rule until February 2016.  In the end 64 Democrats joined 239 Republicans in voting for the measure, going against a veto threat by the White House and vociferous lobbying by Leader Pelosi and Ranking Member Waters.  The measure now goes to the Senate, where Senator Tim Scott has introduced a similar bill (S. 1711).
 
Majority of House Signs Discharge Petition on Ex-Im
On Friday, more than 40 Republicans joined the majority of Democrats to put 218 signatures on the discharge petition to bring the Export-Import Bank reauthorization to the House floor.  House Financial Services Ranking Member Maxine Waters was the 218th signature on the petition.  Under the rules of the House the measure can be brought up in seven legislative days, which because of the recess means the earliest the bill can come up will be October 26th.  However, it is more likely that House leadership will bring the bill forward on a rule, allowing Financial Services Chairman Hensarling an opportunity to amend the bill in some manner.
 
Bipartisan Legislation to Require OFR to Focus on Cybersecurity Introduced
On Friday, Congressmen Ed Royce (R-CA) and Patrick Murphy (D-FL) introduced the Office of Financial Research Accountability Act of 2015. The bill ensures improved transparency, more efficient interagency coordination, and bolstered cybersecurity protections at the U.S. Department of the Treasury’s Office of Financial Research (OFR).  Specifically, the bill requires the OFR to release an annual work plan outlining the Office’s priorities, mandates the OFR to consult federal regulatory agencies when preparing public reports, and tasks the OFR with developing and implementing a cybersecurity plan to be reviewed annually by the U.S. Government Accountability Office.
 
Senate
Brown Probes Settlements with Big Banks
On Tuesday it was reported that Sherrod Brown (D-OH), the top Democrat on the Banking Committee sent letters to over a dozen major banks as part of a wide-ranging inquiry into how settlements with the government over alleged wrong-doing is impacting those companies’ practices.  According to published reports, the letters request details on legal judgments the banks have entered into with 15 agencies, dating back to 2005. 
 
Senate Poised to Take up Cyber Security Bill Upon Return from Recess
Last week, Senator Diane Feinstein (D-CA) the top Democrat on the Senate Intelligence Committee indicated that the Senate bill on cyber security will be one of the first measures considered when the Senate returns from the Columbus Day recess.  Currently, the Senate is scheduled to take up the sanctuary cities bill immediately upon its return.  However with a unanimous consent agreement to debate 21 amendments, further negotiations are likely necessary before the cyber bill can be scheduled, as it would likely eat up too much floor time – a precious commodity in the fall.
 
Select Highlights from the Administration
Consumer Financial Protection Bureau (CFPB)
CFPB Unveils Proposal to Modify Arbitration Agreements
On Wednesday, the CFPB announced that it was considering banning arbitration agreements in consumer financial services contracts.  The move, which was not surprising, builds upon a flawed study that the CFPB was required to publish under Dodd-Frank that found out over 75% of the people surveyed were unaware of these types of agreements in their contracts.  Interestingly, the CFPB’s proposal appears to be a gift to the trial bar, which would have the option of deciding which forum to seek redress, as the proposal only appears to ban the agreements from limiting class actions, not arbitration generally.
 
Securities and Exchange Commission (SEC)
White Continues to Face Pressure of PCAOB
Last week liberal groups continued their campaign of pressuring SEC Chair Mary Jo White to recuse herself from picking the head of the Public Company Accounting Oversight Board, based on what they see is a potential conflict of interest with her husband, John White’s, legal work.  The groups, which include Public Citizen, MoveOn.org and Rootstrikers, sent a letter to Chair White last week again asking her to recuse herself because her husband's membership on the PCAOB advisory panel “turns on the pleasure of PCAOB members that you help appoint…”  Current PCAOB chairman James Doty's term expires this month.
 
Next Week’s Schedule
 
The House and Senate are in Recess Next week 
 
Next Week’s Schedule
 
The House and Senate are in Recess Next week