Financial Services Report

July 27, 2015

Looking Ahead

Near Term
The House Financial Services Committee continues its nostalgic review of Dodd-Frank with a hearing on Tuesday.  Later that afternoon the Committee will mark-up the following bills:

  • H.R. 766 – Financial Institution Customer Protection Act
  • H.R. 1210 – A bill to amend the Truth in Lending Act to provide a safe harbor from certain requirements related to qualified mortgages for residential mortgage loans held on an originating depository institution's portfolio, and for other purposes
  • H.R. 1317 – A bill to amend the Commodity Exchange Act and the Securities Exchange Act of 1934 to specify how clearing requirements apply to certain affiliate transactions, and for other purposes
  • H.R. 1553 – A bill to amend the Federal Deposit Insurance Act to specify which smaller institutions may qualify for an 18-month examination cycle
  • H.R. 1737 – Reforming CFPB Indirect Auto Financing Guidance Act
  • H.R. 1839 – Reforming Access for Investments in Startup Enterprises (RAISE) Act
  • H.R. 1941 – Financial Institutions Examination Fairness and Reform Act
  • H.R. 2091 – A bill to amend the Fair Credit Reporting Act to clarify the ability to request consumer reports in certain cases to establish and enforce child support payments and awards
  • H.R. 2243 – A bill to suspend the current compensation packages for the senior executives of Fannie Mae and Freddie Mac and establish compensation for such positions in accordance with rates of pay for senior employees in the Executive Branch of the Federal Government, and for other purposes
  • H.R. 2643 – A bill to direct the Attorney General to provide State officials with access to criminal history information with respect to certain financial service providers required to undergo State criminal background checks, and for other purposes
  • H.R. 2912 – Centennial Monetary Commission Act
  • H.R. 3032 – Securities and Exchange Commission Reporting Modernization Act
  • H.R. 3189 – A bill to amend the Federal Reserve Act to establish requirements for policy rules and blackout periods of the Federal Open Market Committee, to establish requirements for certain activities of the Board of Governors of the Federal Reserve System, and to amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited, and for other purposes
  • H.R. 3192 – A bill to provide for a temporary safe harbor from the enforcement of integrated disclosure requirements for mortgage loan transactions under the Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act, and for other purposes
  • The Senate will continue to debate the Highway Reauthorization bill, which appears likely to have the Ex-Im bank language included after the measure easily survived a procedural hurdle on Sunday afternoon.
  • The House is set to go out on Thursday this week so once again Congress will govern by manufactured crisis as it seeks to resolve House, Senate and White House differences on the Highway funding measure. 

The Past Week

Legislative Branch

Financial Services Subcommittee Examines Reforming Federal Reserve
On July 22, the House Financial Services Committee's Subcommittee on Monetary Policy and Trade held a hearing entitled “Examining Federal Reserve Reform Proposals.” Not surprising in light of his exchange with Fed Chair Yellen last week, Subcommittee Chairman Huizinga (R-MI) continued to stress for the Fed to use a rules-based approach and to provide greater accountability, while Ranking Member Gwen Moore (D-WI) noted critiques of the Taylor Rule, including those of former Fed Chair Bernanke. 
Terrorism Financing Task Force Examines the Iran Nuclear Deal
On July 22, the House Financial Services Committee's Task Force to Investigate Terrorism Financing held a hearing entitled “The Iran Nuclear Deal and its Impact on Terrorism Financing.”  Witnesses included: Ilan I. Berman, Vice President, American Foreign Policy Council; Mark Dubowitz, Executive Director, Foundation for Defense of Democracies and Director, Center on Sanctions and Illicit Finance; Steven R. Perles, Senior Attorney and Founder, Perles Law Firm; Olli Heinonen, Senior Fellow, Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University;  and Richard Nephew, Program Director, Economic Statecraft, Sanctions and Energy Markets, Center on Global Energy Policy, Columbia University.   Generally, Republicans used the hearing as a forum to pan the deal, while Democrats also appeared to express concern about the deal as well.
Committee Keeps Attention on Too Big Too Fail
On July 23, the House Financial Services Committee held a hearing entitled “Ending ‘Too Big to Fail': What is the Proper Role of Capital and Liquidity?”  As expected, Republicans used the hearing to question the effectiveness of Dodd-Frank and other regulatory measures that set capital and liquidity standards while Democrats defended those standards for helping to drive the economy out of the crisis. 
Perez Testifies Before HELP Subcommittee on Labor Rule
On Tuesday, Department of Labor Secretary Perez testified before the HELP Subcommittee on Employment and Workplace Safety.  This marked the second time that Perez has testified before Congress since the Department announced its proposal rule.  Not surprising, many of his talking points remained the same, though he did offer a glimpse into DOL movement on the rule. Most importantly, Perez suggested that advice from stakeholders on issues such as data retention and the BIC framework would have an influence on the final rule. He noted that the final version of the rule would be “materially different and notably better” than the one that is currently proposed. In his opening statement, the Secretary also said that he welcomed “any and all changes” as long as they conformed to the overarching goal of an “enforceable best interest standard rule.”
Appropriations Approves Financial Services Spending Bill – Adds Shelby’s Reform Package
On Thursday, the Senate Appropriations Committee, on a straight party line vote of 16-14 passed the $20.6 billion Financial Services and General Government spending bill.   While much of the coverage of the bill focused around the inclusion of Senator Shelby’s Dodd-Frank Reform legislation, it is important to note that the legislation kept the funding for the SEC and CFTC at the same funding levels as this past year.  The committee’s action also marked the completion of consideration of all of their appropriations measures, though none have yet to receive any floor time. 
Banking Subcommittee Examines FSOC Designation Process
On July 22, the Senate Banking Committee's Subcommittee on Securities, Insurance, and Investment held a hearing entitled “Oversight of the Financial Stability Oversight Council Designation Process” where they heard from Mr. Patrick Pinschmidt, Deputy Assistant Secretary for Financial Stability Oversight Council.  During the hearing members spared with Secretary Pinschmidt over the ability of companies to have a clear road map out of their SIFI designation.  Senator Warner, the ranking Democrat on the subcommittee noted that a SIFI designation should not be a “Hotel California” where companies “check in” but can never leave.  Secretary Pinschmidt appeared to agree with the members on the subcommittee that there should be a de-designation process but stressed that the existing supplemental procedures announced earlier this year should be sufficient.
Banking Committee Considers Raising SIFI Threshold
On July 23, the Senate Banking Committee held a hearing entitled “Measuring the Systemic Importance of U.S. Bank Holding Companies.”  During the hearing, Chairman Shelby continued to stress the need to modify the existing $50billion threshold for SIFI designation, calling it arbitrary.  Ranking Member Brown also appeared willing to modify the regulation though he seemed to favor giving the Fed more flexibility in applying a SIFI designation rather than increasing the limit.  Senator Warren came down very hard against Senator Shelby’s proposal to increase the SIFI designation threshold to $500 billion, leading some to conclude that there might be a level – perhaps around $250 billion – that could be acceptable to a majority of the Committee.
Judiciary Examines Too Big to Fail
On July 23rd the Senate Judiciary Subcommittee on the Constitution held a hearing on the 5th Anniversary of Dodd-Frank and whether the law really eliminated Too Big to Fail, as well as other constitutional concerns about the law such as the legality of the CFPB.   Like all the other Dodd-Frank anniversary related hearings this one quickly devolved into the parties getting to their predictable corners of Republicans attacking the law and Democrats defending it.
Select Highlights from the Administration
Department of Defense (DoD)
Department of Defense Announces Final Military Lending Act Rule
On Tuesday, while speaking before the 116th Veterans of Foreign Wars National Convention in Pittsburgh, Pennsylvania, President Obama announced that the Department of Defense was issuing a final rule expanding the types of credit products that will be covered by the 36-percent rate cap and other military-specific protections under the Military Lending Act.  Currently only payday, vehicle title, and refund anticipation loans were covered but going forward installment loans and credit cards, as well as ancillary products will be covered as well.   The rule will go into effect on October 1st but will have a staggered compliance date.
Consumer Financial Protection Bureau (CFPB)
CFPB Finalizes Effective Date of new TRID Rule
On Tuesday, the CFPB officially announced it was finalizing the effective date for the new TILA-RESPA Integrated Disclosures (TRID) rule to October 3, 2015. This action was necessary to correct an administrative error that would have delayed the effective date of the rule by at least two weeks, until August 15, at the earliest.  Interestingly, in their announcement the CFPB reinforced their belief that having the effective date fall on a Saturday benefits “both industry and consumers” by giving industry time over the weekend to “launch new systems configurations and to test systems.” 
Meredith Fuchs Named Acting Deputy Director
On Wednesday, CFPB Director Richard Cordray announced that Meredith Fuchs, currently the CFPB’s General Counsel will also serve as Acting Deputy Director of the Bureau.  According to news reports, Fuchs had intended to step down as General Counsel but will continue to serve in both capacities until the CFPB announces replacements for both positions.
Discover Hit with Fine for Student Loan Servicing Practices:
On July 22nd the CFPB announced it had fined Discover Bank $2 million dollars and that it was ordering the bank to return $16 million dollars to borrowers due to the bank’s overstating of minimum amounts due on statements,    issues surrounding providing tax information to borrowers and questionable debt collection practices. 
This Week’s Schedule
On Tuesday, July 28th at 10:00am in 2123 Rayburn, the House Financial Services Committee will hold a hearing entitled, “Dodd-Frank Act Five Years Later: Are We More Prosperous?
On Tuesday, July 28th at 10:00am in 538 Dirksen the Senate Banking Committee will hold a hearing entitled, “Lifting the Crude Oil Export Ban.”
On Tuesday, July 28th at 2:00pm in 2123 Rayburn, the Financial Services Committee will mark-up a series of bills.
On Wednesday, July 29th at 10:00am in 538 Dirksen the Subcommittee on Financial Institutions and Consumer Protection will hold a hearing entitled, “The Role of Bankruptcy Reform in Addressing Too-Big-To Fail.
On Wednesday, July 29th at 10:00am in 1300 Longworth the Agriculture Committee will hold a hearing entitled, ““Dodd-Frank Turns Five: Assessing the Progress of Global Derivatives Reforms.”
On Thursday, July 30th at 9:30am in Dirksen 342 the Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations will hold a hearing entitled, ““Impact of the U.S. Tax Code on the Market for Corporate Control and Jobs”