Financial Services Report

August 3, 2015

Our Take
Last week Treasury Secretary Lew sent a letter to Congress letting them know that the Treasury’s extraordinary measures used to stave off default would likely expire around the end of October all but ensuring that we will once again see a conflation of the congressional effort to resolve the debt limit tied into the constitutional obligation of Congress to fund our government.  With both parties appearing to have drawn their lines in the sand over the funding of Planned Parenthood, itself an issued that will be easily incorporated into the large politics of the 2016 Presidential race, the combination of these issues, plus Highway funding, international taxation, and the renewal of the Export-Import charter clearly mean that Congress will have a lot on its plate come the fall.

Hopefully they will enjoy the recess because September and October are going to be rough.
Looking Ahead

Near Term

  • The Senate will take up the procedural vote to move forward with defunding Planned Parenthood, which is expected to fail.  Following that, Leader McConnell has expressed his intent to move toward the cyber bill.  Some have questioned whether the Senate will be able to dispose of the bill before they leave town for the recess and whether that will preclude the Senate from actually turning to the legislation. 
  • The Senate Banking Committee will wade into the debate on the Iran nuclear deal with a hearing on Iranian Sanctions with witnesses from the State Department and the Treasury. 
  • Starting August 10th and going at least until the 12th, the Department of Labor will hold a forum on its Fiduciary Rule.   

Further Out

  • House and Senate in Recess until September 8th

The Past Week

Legislative Branch

Financial Services Marks up 14 Bills
On July 28 and 29, the House Financial Services Committee held a markup of fourteen pieces of legislation.  During the two days of debate the discourse ranged from bipartisan polite to entrenched partisanship.  The latter was clearly the case for the debate on H.R. 1737, a bill that would require the CFPB to reissue its guidance for auto lenders, but which devolved into a debate on racial inequality and allegations of racism at the CFPB.  Other bills debated included legislation to delay the CFPB’s TRID rules; impose new restrictions on Operation Choke Point and a bill to change the compensation for Fannie and Freddie executives.  Not surprising, all of the bills on the agenda passed.  A full list follows:

  • H.R. 766, the “Financial Institution Customer Protection Act of 2015” was adopted by a roll call vote of 35 to 19.
  • H.R. 1210, the “Portfolio Lending and Mortgage Access Act” was adopted by a roll call vote of 38 to 18.
  • H.R. 1317, 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 was adopted by a roll call vote of 57 to 0.
  • H.R. 1553, the “Small Bank Exam Cycle Reform Act of 2015” was adopted by a roll call vote of 58 to 0.
  • H.R. 1737, the “Reforming CFPB Indirect Auto Financing Guidance Act” was adopted by a roll call vote of 47 to 10.
  • H.R. 1839, the “Reforming Access for Investments in Startup Enterprises Act of 2015” was adopted by a roll call vote of 58 to 0.
  • H.R. 1941, the “Financial Institutions Examination Fairness and Reform Act” was adopted by a roll call vote of 45 to 13.
  • H.R. 2091, the “Child Support Assistance Act of 2015” was adopted by a roll call vote of 56 to 2.
  • H.R. 2243, the “Equity in Government Compensation Act of 2015” was adopted by a roll call vote of 57 to 1.
  • H.R. 2643, the “State Licensing Efficiency Act of 2015” was adopted by a roll call vote of 57 to 0.
  • H.R. 2912, the “Centennial Monetary Commission Act of 2015” to “establish a commission to examine the United States monetary policy, evaluate alternative monetary regimes, and recommend a course for monetary policy going forward” was adopted by a roll call vote of 35 to 22.
  • H.R. 3032, the “Securities and Exchange Commission Reporting Modernization Act” was adopted by a roll call vote of 58 to 0.
  • H.R. 3189, the “Fed Oversight Reform and Modernization Act of 2015” was adopted by a roll call vote of 33 to 25.
  • H.R. 3192, the “Homebuyers Assistance Act” was adopted by a roll call vote of 45 to 13.

First Bipartisan Letter Against Fiduciary Rule Sent
With the official deadline for public comment having tolled on July 21st, we are now starting to see comment letters come in from various members of Congress.  This past week we saw the first bipartisan letter requesting the Department of Labor re-propose the rule.  Democrats David Scott (D-GA) and Lacy Clay (D-MO) joined 19 of their Republican colleagues from the House Financial Services Committee in sending a letter to Labor Secretary Perez. 
Financial Services Committee Examines Impact of Dodd-Frank After Five Years
On July 28, the House Financial Services Committee held a hearing entitled “The Dodd-Frank Act Five Years Later: Are We More Prosperous?”  Witnesses included former Senate Banking Committee Chairman Phil Gramm, former House Financial Services member Brad Miller and Arthur Burns, a fellow at the American Enterprise Institute.  It was reported that one of the laws namesakes, former Committee Chairman Barney Frank was considering joining the panel, which given some of Senator Gramm’s comments, would have certainly made for interesting theater.  As with every other Dodd-Frank anniversary hearing, both sides took their usual positions in attacking and defending the law.
Senate Agrees to Punt on Highway Bill
After weeks of tension between the House and Senate on a highway funding strategy, the Senate is voted on two separate highway bills on Thursday, first the House passed three-month patch that will finance highway projects through October 29 and then the six-year bill negotiated by Majority Leader Mitch McConnell (R-KY) and Barbra Boxer (D-CA).  Although that longer bill includes a reauthorization of the Export-Import Bank Charter, the short term patch did not, causing some supporters of the bank to think that they may have lost their best chance at reauthorization. 
Banking Committee Hearing on Lifting the Crude Oil Export Ban
On July 28, the Senate Banking, Housing, and Urban Affairs Committee held a hearing entitled “Lifting the Crude Oil Export Ban”.   In his opening statement Chairman Richard Shelby (R-AL) noted that the crude oil export ban was imposed 40 years ago as part of a comprehensive set of price and export controls and that the ban has held back economic potential in the U.S. for at least ten years.
On the other hand, Ranking Member Sherrod Brown (D-OH) referenced the fact that the resurgence of domestic oil and gas production has reduced oil imports, increased energy security, and spurred billions of dollars of investment in U.S. refineries. He also appeared to favor an alternative that was not a full repeal of the ban, mentioning expanded licensing under existing legal authorities as one option.
Select Highlights from the Administration

FSOC Keeps GE and AIG as SIFIs
With members of Congress and many companies wondering what it takes to get de-designated on Friday, the FSOC announced that it was keeping the systemically important designations for both GE Capital and AIG.  Neither GE nor AIG contested the designations, though GE has been in the process of shedding most of its financial services footprint since April.
Consumer Financial Protection Bureau (CFPB)
Bureau Announces Second Fine of Mortgage Savings Company
On Tuesday, the CFPB announced that it was fining Paymap Inc., a Western Union subsidiary, a $5 million civil penalty and require the company to return $33.4 million to its consumers while also fining LoanCare LLC $100,000 for misleading customers about the amount of savings they could achieve under the companies “Equity Accelerator” program.  According to the CFPB, Paymap advertised to customers about the benefits of making bimonthly payments but instead the company collected deposits, held them in a custodial account and only made one payment, rather than the two that were advertised.  
Next Week’s Schedule
On Monday August 3rd at 1:30pm Central Time at the Louisiana State Police Training Academy Auditorium, Building A, 7901 Independence Boulevard, Baton Rouge, Louisiana, there will be a Senate Banking Committee Field Hearing entitled, “Does SIPC Have a Conflict of Interest.”
On Wednesday, August 5th at 10:00 AM in 538 Dirksen, the Banking Committee will hold a hearing entitled, “The Implications of Sanctions Relief under the Iran Agreement.”