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Financial Services Report

June 13, 2016

Looking Ahead

Near Term

  • SEC Chair White testifies before the Senate Banking Committee on Tuesday.
  • The House Financial Services Committee will mark-up a slew of bills on Wednesday.

Further Out

  • Fed Chair Yellen will trudge back up the Hill in two weeks for her annual Humphrey-Hawkins testimony.  On Tuesday June 21st she will be before the Senate Banking Committee and then later in the week before the House Financial Services Committee.
  • Rumors swirl that the already truncated Congressional calendar may be even further reduced with either the week of July 4th or the week following being “given back” to a recess week.   However, with Congress set to be out of session from mid-July through September, it is hard to see how this additional district work time could occur.

 
The Past Week
 

Legislative Branch
House
House Passes Puerto Rico Debt Relief Bill
On Thursday, in a victory for the compromise brokered by Speaker Paul Ryan (R-WI) and President Obama, House lawmakers passed a bill (H.R. 5278) addressing Puerto Rico’s $70 billion debt crisis by a vote of 297-127. The bill would create a seven-member board to help manage the island territory’s debt restructuring, as well as its future fiscal policy. Senate Majority Leader Mitch McConnell has not yet scheduled consideration of the bill, but the White House has urged Senate leaders to advance the legislation before Puerto Rico’s next debt payment is due on July 1.
 
House Appropriations Committee Approves Financial Services Spending Bill With IRS, SEC Cuts
On Thursday, the House Appropriations Committee advanced the Financial Services and General Government spending bill on a 31-17 vote. The bill would provide $21.7 billion in funding to regulatory agencies, but cut the budgets of the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) by $50 million and $236 million, respectively. Over 30 policy riders were included in the bill, notably provisions to delay the Consumer Financial Protection Bureau’s (CFPB) payday lending rule and allowing for firms to change their operations before being designated systemically important financial institutions (SIFI) by the Financial Stability Oversight Council (FSOC).
Hensarling Unveils Alternative To Dodd-Frank Regime
On Monday, House Financial Services Committee Chairman Jeb Hensarling (R-TX) released the details of a Republican alternative to the 2010 Dodd-Frank financial reform law. The plan, encapsulated in a soon-to-be-introduced bill known as the Financial CHOICE Act (executive summary here), would undo much of the regulatory structure implemented in the five years since Dodd-Frank’s passage, including making changes to the Consumer Financial Protection Bureau (CFPB), reducing the role of the Financial Stability Oversight Council (FSOC), and repealing the Volcker Rule, which bans banks from making speculative bets with their own accounts. 
 
With the White House and Senate Democrats likely opposed to most of the changes included in the proposal, the GOP plan has little chance of being enacted in this Congress. However, even before meeting Hensarling’s meeting later in the week with the presumptive Republican nominee for president, Donald Trump, it was widely speculated that this framework would be adopted by the Republican nominee. 
 
Senate
Senate Appropriators Advance HHS-Labor Bill Without Fiduciary, Overtime Riders
On Thursday, the Senate Appropriations Committee advanced its version of the fiscal 2017 Health and Human Services-Labor spending bill, notably lacking contentious policy provisions to gut the Department of Labor’s (DOL) recent rules on fiduciary responsibility for retirement advisers and overtime for low-and-middle income workers. However, Sen. James Lankford (R-OK) suggested that he will offer an amendment on the overtime rule when the bill hits the Senate floor, and a similar amendment is expected to target the fiduciary rule. The underlying measure would provide $163.8 billion to the agencies, with the DOL’s budget cut by about $134 million from fiscal 2016 levels.
 
Senate Democrats Roll out Agenda – Includes Prohibition on Bonuses for New Regulators coming from Financial Services Sector
On Thursday, Senate Democrats unveiled their agenda for the next Congress, including new legislative initiatives aimed at implementing campaign finance reform and improving government accountability. One component of this proposal would prohibit financial services companies from paying “huge bonuses” to employees who leave their firms to become regulators within the federal government. The bill also includes language that would increase the “cool down” periods for those leaving government service, including life time bans on former members of Congress. 
 
Select Highlights from the Administration
White House
White House Council of Economic Advisers Release Financial Inclusion Report
On Friday, the White House’s Council of Economic Advisers (CEA) released a new issue brief entitled, “Financial Inclusion in the United States.” The report points to the higher costs that the unbanked and underbanked often face in accessing financial services, particularly payment settlement, credit intermediation, and maturity transformations.  The full report can be found here.
 
President Obama Vetoes Fiduciary Rule Disapproval Resolution
On Wednesday, President Obama vetoed a resolution that would block the Department of Labor’s (DOL) recently finalized rule requiring retirement advisers to act in a client’s best interest. The resolution passed the Senate with support of three Democrats last month and on a party line vote in the House in April, meaning that support is likely well short of the required two-thirds to override a presidential veto.
 
Consumer Financial Protection Bureau (CFPB)
CFPB Releases New Online Tools for Auto Lending
On Thursday, in a speech in Little Rock, Arkansas, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray unveiled new tools geared towards helping consumers understand the cost of an auto loan. The set of tools includes an auto loan “shopping sheet” and encourages consumers to “take control of the auto loan process.” The new initiative builds on the CFPB’s enforcement actions in the auto lending space, which has drawn criticism from the industry and Members of Congress.
 
Federal Reserve
Fed and FDIC Ease Living Will Requirements
On Friday, the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) announced that they would begin allowing smaller banks to file “reduced content” living wills. The new procedures will affect 84 firms with less than $50 billion in assets and is an effort to “increase clarity and reduce burden” for the smaller institutions. Regulators added that the narrower plans should focus on changes made since the last living wills submission, actions taken to improve a will’s effectiveness, and any actions an institution takes to protect insured depository institutions from risks associated with non-bank subsidiaries.
 
Federal Trade Commission
FTC Holds First Workshop of its FinTech Series
On Thursday, Federal Trade Commission held an a workshop on marketplace lending, the first forum that the FTC is planning on emerging financial technology, or FinTech. The event was broken into two panels, with the first focusing on explaining the current state of the industry, and the second dedicated to discussing necessary consumer protections for the new products, including the prospect for future regulation. Each panel featured industry experts and consumer advocates, with disagreements primarily centered on the shape of new regulation, the necessity for collecting alternative data, and the viability of expanding credit access for sub-prime borrowers.  Industry leaders in particular criticized a “fractured” regulatory environment, suggesting a principles-based approach to encourage innovation in the sector. Consumer advocates and regulators on the panel, meanwhile, suggested that enforcement action was often necessary to add specificity to regulatory guardrails. 
 
Next Week’s Schedule
Tues. (6/14)

  • Hearing: Senate Banking on SEC Oversight – 10:00 AM – The Senate Banking Committee will hold a hearing entitled, “Oversight of the U.S. Securities and Exchange Commission,” featuring SEC Chair Mary Jo White. Details here.

 
Wed. (6/15)

  • Markup: Senate Appropriations Subcommittee Financial Services Bill – 10:00 AM – The Senate Appropriations Financial Services & General Government Subcommittee will hold a markup of the FY 2017 Financial Services appropriations bill. Details here.
  • Markup: House Financial Services Full Committee – 10:00 AM – The House Financial Services Committee will hold a markup on a series of bills.
  • Hearing: Senate Aging Committee on Financial Innovation – 2:30 PM – The Senate Special Committee on Aging will hold an event entitled, “Closing the Gap: Innovations to Promote Americans’ Financial Security.” Details here.

 
Thurs. (6/16)

  • Markup: Senate Appropriations Financial Services Bill – 10:00 AM – The Senate Appropriations Committee will hold a markup of the FY 2017 Financial Services appropriations bill. Details here.