Insights

Financial Services Report

September 15, 2016

Our Take
After months of waiting this past week saw the return of what so many in our nation follow so closely.   That’s right, the NFL is back! 
 
Oh yeah, and Congress returned from a seven-week recess, much to the chagrin of staff, K Street, and perhaps even some of the Members themselves.   With members already itching to get back to their districts, and more importantly to them, their re-election efforts, dreams of a full and productive September have quickly faded.  In its place is the reality that both the House and Senate may adjourn as early as the end of this week, or perhaps by the end of next week.  With Leader McConnell making it clear that he intends to push for a short-term CR that funds the government through December 9th and the House unsure as to what it can pass, it looks like McConnell is attempting to flip the script on the House by jamming them with a “take it or leave it” deal.   Contributing to the confusion are outstanding questions over impeaching the IRS Commissioner, amendments on Syrian refugees, and whether the Freedom Caucus would be willing to agree to a short-term resolution at all. 

But unlike past versions of this script, the current political environment – with multiple members of McConnell’s conference asking him to wrap things up so they can get back to campaigning – is very different than in the past.   While on some levels it is reassuring to see that “re-election” can still trump “ideology” it seems like things are being set up for a knock-down, drag-out battle in the December Lame Duck session. 
 
Looking Ahead
 
Near Term 

  • The House Financial Services Committee will hold a mark-up of Chairman Hensarling’s “Choice Act,” – his legislation to replace Dodd-Frank with a new regulatory regime for banks and other financial institutions.  At this point the biggest question surrounding the mark-up is whether it will be a bunch of “speechifying” or whether the Democrats intend to use the mark-up to offer a series of controversial amendments designed to make members take tough votes.
  • The Senate Banking Committee returns to action with a hearing on the National Flood Insurance Program.
  • The lure of the campaign trail and the smell of jet fumes weigh heavy on both sides of the Capitol, as leaders in the House and Senate try to figure out how to pass a (likely short-term) continuing resolution and get out of town.

Further Out 

  • The Senate Banking Committee is scheduled to hold its own hearing on the Iran Payments.
  • The House Financial Services Committee supposedly has separate hearings with Jack Lew and Janet Yellen scheduled for the next couple of weeks.
  • The fixation with FinTech continues this fall.  The Electronic Transaction Association has a policy event scheduled for September 22nd and the FTC holds its second listening session, this time on payments, on October 26th.

The Past Week

Legislative Branch 
House
Two Bills Relaxing SEC Disclosure, Small Business Rules Pass House
On Thursday and Friday, the House passed to bills to adjust Securities and Exchange Commission (SEC) bills to reduce the burden on businesses. The first (H.R. 2357) would scrap some registration requirements for small companies and help small businesses raise capital from investors. It was passed on a 236 to 178 vote, with two Democrats voting in favor. 
 
The second bill (H.R. 5424) would relax disclosure rules on advisers to private equity funds and was passed on a 261-145 vote, with 35 Democrats voting in favor. The bill would by create an exemption to a current rule that requires advisers who manage at least $150 million to file information with the Financial Stability Oversight Council (FSOC). The White House has threatened to veto both bills. 
 
House Financial Services Subcommittee Holds Hearing on Fed Governance
On Wednesday, the House Financial Services Subcommittee on Monetary Policy and Trade held a hearing entitled, "Federal Reserve Districts: Governance, Monetary Policy, and Economic Performance,” featuring remarks from Federal Reserve Bank Presidents Jeffrey Lacker and Esther George. Other panelists included Robert Jones, Chairman and CEO of Old National BanCorp, and William Spriggs, Chief Economist at the AFL-CIO.  
 
House Financial Services Subcommittee Holds Hearing on Payments to Iran
On Thursday, the House Financial Services Subcommittee on Oversight and Investigations held a hearing entitled "Fueling Terror: The Dangers of Ransom Payments to Iran." The panelists included analysts from the foreign policy think tanks Foundation for Defense of Democracies, American Enterprise Institute, Financial Integrity Network, and the Brookings Institution. 
 
Senate
McConnell Announces Intention to File Short-Term CR
On Wednesday, Leader McConnell (R-KY) told reporters that he was working to get a short-term continuing resolution (CR) passed that would keep the Government funded through December 9th.   Democrats have insisted that any CR include funding for fighting the growing Zika threat.   McConnell’s plan was seen as an effort to jam House Republicans, whose conservative component has been pushing for a longer resolution to fund the government until March.   If enacted, a short-term CR sets up the potential for a very aggressive schedule in the lame duck session after the election.

Select Highlights from the Administration

Federal Reserve
Fed Recommends Congress Remove Merchant Banking Authority
On Thursday, the Federal Reserve made a formal recommendation to Congress to remove the ability of financial holding companies to invest in any non-financial companies. The recommendation came as a part of a highly anticipated report released by the banking regulators as a part of Dodd-Frank requirements. The report also recommends that Morgan Stanley and Goldman Sachs lose their grandfathered authority to directly own physical commodities such as oil, diamonds, and aluminum.  
 
Federal Deposit Insurance Corporation (FDIC)
Fed Report Finds Share of Unbanked Households Has Fallen
On Thursday, the Federal Deposit Insurance Corporation (FDIC) released the findings of a survey that suggests the percentage of unbanked Americans fell to 7 percent in 2015, down from 8.2 percent in 2011. The FDIC said it uses the survey to study why some households remain unserved by traditional financial institutions. FDIC officials also noted that the fall in the unbanked percentage means fewer American households are susceptible to predatory lenders. 
 
Consumer Financial Protection Bureau
CFPB Announces Record $100 Million Fine on Wells Fargo for Opening Unauthorized Accounts
On Thursday, the Consumer Financial Protection Bureau (CFPB) announced that it was fining Wells Fargo Bank $100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts. The accounts were allegedly opened due to compensation incentives put forth by the bank, with employees using funds from consumer’s accounts to fund them. Wells Fargo was also required to pay $35 million to the Office of the  Comptroller of the Currency and $50 million to the City of Los Angeles. The CFPB fine represents its largest fine on any institution to date.
 
 
Next Week’s Schedule
Mon. (9/12) 

  • Speech: Fed Governor Brainard at Chicago Council on Global Affairs – 1:15 PM – Federal Reserve Governor Lael Brainard will give remarks on the economic outlook and monetary policy implications at the Chicago Council on Global Affairs’ Global Economic Series. Details here.

Tues. (9/13)

  • Markup: House Financial Services Committee Markup of Financial CHOICE Act – 10:00 AM – The House Financial Services Committee will markup the Financial CHOICE Act of 2016. Details here.
  • Marketplace Lending Summit – The Online Lenders Policy Institute will hold a daylong summit on marketplace lending in Washington, DC. Details here.
  • Hearing: Senate Banking Committee on National Flood Insurance Program – 10:30 AM – The Senate Banking Committee will hold a hearing entitled, “The National Flood Insurance Program: Reviewing the Recommendations of the Technical Mapping Advisory Council’s 2015 Annual Report.” Details here.
  • Hearing: House Small Business on Administration Regulations – 10:00 AM – The House Small Business Committee will hold a hearing entitled, “The Cumulative Burden of President Obama’s Executive Orders on Small Contractors.” Details here.
  • Financial Services Roundtable Event on Retirement Challenges – 12:00 PM – The Financial Services Roundtable will hold an event entitled, “Retirement Challenges 2017: A Bipartisan Forum on Policy Solutions for the Next Administration.” Details here.

Wed. (9/14)

  • PIIE Streaming Event on Central Banks – Sept. 14 – The Peterson Institute for International Economics will gold an online event entitled, “Launch of the Geneva Report: What Else Can Central Banks Do?” Details here.

Thurs. (9/15)

  • Hearing: Senate Agriculture Committee Consideration of CFTC Nominations – 10:00 AM – The Senate Agriculture Committee will consider the nominations of Christopher Brummer and Brian Quintenz to serve as Commissioners on the Commodity Futures Trading Commission (CFTC). Details here.
  • Financial Services Roundtable Event on Innovations in Payments – 2:00 PM – The Financial Services Roundtable Financial Services University series will hold an event entitled, “Innovations in Payments.” Details here.
  • Meeting: SEC Closed Meeting – 2:00 PM – The Securities and Exchange Commission will hold a closed meeting to discuss the institution and settlement of administrative and enforcement proceedings, and adjudicatory matters. Details here.

Fri. (9/16)

  • No relevant events at this time.