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Financial Services Report

February 1, 2016

Our Take
What was supposed to be a slow start to the 2016 Congressional calendar was further delayed by a snow storm that dumped historic accumulations on our nation’s Capital causing the House to cancel work for the week and the Senate to delay votes.  While many pundits criticize members of Congress for not living and working in DC and returning back to their home districts / states each weekend, this past week may have been an example of why the so-called “Tuesday-Thursday” lifestyle is so detrimental to the health of Congress.  With the DC metro region snowed in, and almost all area schools shut down for the entire week, it would be a safe bet that if Members of Congress and their families lived in, or near, the District of Columbia (as they had in years past) the politicians would have been willing to cut any deals just to get out of the house. 

  
Looking Ahead
Near Term

  • The House is expected to take up a series of financial services related bills this week including:

    • H.R. 766, the Financial Institution Consumer Protection Act, a bill designed to limit “Operation Chokepoint” by prohibiting financial regulators from requiring banks to close customer accounts based solely on a company’s reputation risk.
    • H.R. 1675, a package of securities-related legislation that would loosen some Securities and Exchange Commission rules, such as by providing a safe harbor for investment fund research reports and expanding exemptions from disclosure requirements for companies that offer stock options to employees.
    • H.R. 3700, which would impose revisions on various Federal Housing programs, including the Section 8 program.
  • The Senate will continue to debate the Energy bill and may turn to legislation adding new sanctions for entities doing business with North Korea.  Rumors persist that the Senate will look to take up the Customs conference report – assuming it has found a work around for dealing with ancillary issues.
  • The House Financial Services Committee will hold a couple of hearings and a mark-up of its FY17 budget.  One of the hearings will be a continuation into terrorist financing and the first committee involvement into “fintech lending.” 
  • The Iowa Caucuses take place tonight.    

Further Out

  • New Hampshire Primary on February 9th
  • Fed Chair Yellen to speak before Congress for her semi-annual monetary policy report – Feb 11th and 12th. Alabama Primary March 1st

 
The Past Week

Legislative Branch
Senate
Finance Committee Holds Hearing on Retirement
On Thursday, the Senate Finance Committee held a hearing entitled, “Helping Americans Prepare for Retirement: Increasing Access, Participation and Coverage in Retirement Savings Plans.”  The hearing, which focused on ways to increase retirement savings among American workers, as well as other retirement related policy issues such as limiting plan leakage and increasing retirement portability. 
 
Senate Democrats Urge for Puerto Rico Resolution
On Wednesday, the entire Democratic caucus signed onto a letter to Senate Leader McConnell urging him to “swiftly enact legislation to give Puerto Rico restricting tools.”  In addition the letter requests that the Senate try to meet the House’s timeline of the end of March for resolving the Puerto Rico financial crisis. 
 
Shelby Confirms Limited Banking Committee Schedule for February
On Friday, Bloomberg / BNA reported that that Banking Chairman Richard Shelby indicated that the Committee would not consider any of the pending nominations, nor schedule other hearings or mark-ups until after the resolution of his March 1st primary.  Currently Chairman Shelby is facing a primary challenge from Jonathan McConnell, who is attempting to run to the Chairman’s right in the race.
 
Merkley Introduces “American Savings Act”
On Thursday, Senator Jeff Merkley (D-OR) introduced the American Savings Act, legislation that would create a national program similar to Thrift Savings Plan federal employees are eligible to use to save for their retirements.  According to published reports, the legislation would create so-called American savings accounts that workers would have to opt out of having an automatic 3% of earnings set aside for savings each year.  Plan members would then have the option of lowering or raising their contributions up to the statutorily allowed savings amount of $18,000 each year. 
 
Select Highlights from the Administration
White House
President Floats Retirement Savings Enhancement Plan
On Tuesday, the White House announced a series of proposals that will be incorporated into the White House’s FY17 budget proposal are intended to increase the access to workplace savings for Americans.  Included were proposals to:

  • Enable small businesses to come together and create pooled 401(k) plans, at lower cost and with less burden than going it alone;
  • Automatically enrolling workers without access to a workplace plan in an IRA;
  • Provide tax credits for small businesses that begin offering retirement plans, or choose to automatically enroll workers in existing plans; and
  • Allow long-term, part-time workers to participate in their employer’s plan.

Treasury
Office of Financial Research Releases Annual Report
On Wednesday, Treasury’s Office of Financial Research (OFR) released its annual report, which among other things highlighted what it viewed as threats to the financial stability of the United States.  Once again, OFR indicated that it was concerned about weak underwriting standards by financial institutions and corporations seeking to maximize yields.  In addition, OFR cited cybersecurity and exposures to energy companies and energy investments given the current decline in the oil industry as other risks.
 
Consumer Financial Protection Bureau (CFPB)
CFPB Releases Monthly Snapshot
On Thursday, the CFPB released its latest monthly consumer complaint snapshot.  Among the facts and figures contained in the report was the disclosure that complaints about prepaid products had increased over 230% in a year over year analysis of the 4Q.  Each monthly report also highlights a geographical location, with this one focused on the New York City metro area, with this report noting that consumers in the area submitted the most complaints about their mortgages.    
 
Department of Labor (DOL)
Fiduciary Rule Sent to OMB
On Thursday, it was reported that the DOL had sent its so-called “Fiduciary Rule” to the Office of Management and Budget (OMB) and by Friday receipt had been confirmed on OMB’s website.  OMB now has up to 90 days to review the rule, but many think it is likely they will expedite the process.  After the OMB signs off, the DOL will release the final rule publicly — perhaps as early as March and likely by April.  Then, after a final rule is published, Congress will have 60 legislative days to adopt a joint resolution of disapproval, if it opposes the regulation.
 
Securities and Exchange Commission (SEC)
White Commits to Completing CAT this Year
On Tuesday, while speaking at a Northwestern Law School conference in California, SEC Chair White indicated that the SEC intends to get the Consolidated Audit Trail (CAT) program that will track every quote, order and trade on the various exchanges “out of the gate” in 2016. 
 
Next Week’s Schedule
Mon. (2/1)

  • Hearing: House Rules Committee on H.R. 3700 – 5:00 PM – The House Rules Committee will consider H.R. 3700, the Housing Opportunity Through Modernization Act of 2015. The committee’s amendment deadline is set for 10:00 AM on Monday. Details here.

Tues. (2/2)

  • Hearing: House Rules Committee on H.R. 766 and H.R. 1675 – 3:00 PM – The House Rules Committee will consider H.R. 766, the Financial Institution Customer Protection Act of 2015, and H.R. 1675, the Encouraging Employee Ownership Act of 2015. Details on H.R. 766 here. Details on H.R. 1675 here.
  • Markup: House Education & the Workforce Committee on H.R. 4293 and H.R. 4294 – 10:00 AM – the House Education & the Workforce Committee is marking up both the Affordable Retirement Advice Protection Act (H.R. 4293) and the Strengthening Access to Valuable Education and Retirement Support Act (H.R. 4294). Details on H.R. 4293 here. Details on H.R. 4294 here.
  • Markup: House Financial Services Committee on FY 2017 Budget – 10:00 AM – The House Financial Services Committee will hold a markup of its Views and Estimates on the budget for fiscal year 2017. Details here.
  • Hearing: House Ways and Means Committee on Economic Growth – 10:00 AM – The House Ways and Means Committee will hold a hearing entitled “Reaching America’s Potential: Delivering Growth and Opportunity for All Americans.” Details here.

Wed. (2/3)

  • Hearing: House Financial Services Committee on Trade-Based Money-Laundering – 10:00 AM – The Task Force to Investigate Terrorism Financing will hold a hearing entitled “Trading with the Enemy: Trade-Based Money Laundering is the Growth Industry in Terror Finance.” Details here.

Thurs. (2/4)

  • Hearing: House Budget Committee on CBO Budget – 9:30 AM – The House Budget Committee will hold a hearing entitled “CBO's Budget and Economic Outlook.” Details here.