TRP Financial Services Report

Looking Ahead
 
Near Term 

• An incredibly packed week as both the House and Senate try to wrap up this work period.  The House week will be highlighted by a vote on the so-called “Doc fix” while the Senate will subject itself to the drama that is the vote-a-rama.
• In the Committees, House Financial Services will host SEC Chair Mary Jo White, where much attention is expected on her recent decision to jump feet first into the issue of the standard of care imposed on the guidance broker-dealers give to their retail customers.  Fireworks are also expected when the Oversight and Investigations Subcommittee hears from FDIC Chair Gruenberg about Operation Chokepoint. 
• The Senate Banking Committee also has a series of hearing on tap, including one that will continue to lay the groundwork for reducing the regulatory burden for smaller banks as well as one to examine how the FSOC is designating non-bank SIFIs.  And the House will not be the only chamber to hold a hearing that will likely touch on the Fiduciary Rule, as Department of Labor Secretary Tom Perez testifies before the Senate Appropriations Labor HHS subcommittee on Thursday.
• On Wednesday, the SEC is expected to vote on a proposal to require high frequency traders (HFT) to register with FINRA.  The Commission is also expected to vote on a proposal to revise Regulation A in order to deregulate small public offerings, to be defined as those up to $50 million dollars.

Further Out 

• The House and Senate leave town for a the two-week Easter / Passover recess.  Both chambers return the week of April 13^th

 Legislative Branch
 
House
Treasury Secretary Lew Testifies Before House Financial Services Committee
On Tuesday, March 17^th Treasury Secretary Lew was the sole witness for a Financial Services Committee hearing entitled, “The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System.”  While the hearing ostensibly was designed to hear about the United States involvement in the International Finance system through the International Monetary Fund (IMF), other issues, both foreign (i.e., the Financial Stability Board and IAIS standards) and domestic (the FSOC, Volcker Rule) were broached as well. 
 
Committee Hears of Regulatory Burdens on Smaller Banks
On Wednesday the Financial Services Committee held a hearing entitled, “Preserving Consumer Choice and Financial Independence.”  The purpose of the hearing was to hear from a variety of community bank and credit union representatives to share how Dodd-Frank compliance costs are impacting smaller financial institutions. 
 
Capital Markets Subcommittee Holds Oversight Hearing on SEC’s Division of Enforcement
On Thursday, the Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises heard from Andrew J. Ceresney, the Securities Exchange Commission’s Director of Enforcement.  The hearing, which was rescheduled due to a snow storm, allowed Director Ceresney to share how the SEC is focusing more on credit rating firms, mortgage backed securities, derivatives and fund valuation issues.  Additionally, during the hearing it was disclosed that the SEC had renamed its “Structured and New Products” unit into the “Complex Financial Instruments” unit.
 
Luetkemyer Sends Letter to Federal Insurance Office
On Tuesday, Representative Luetkemyer (R-MO), the Chairman of Financial Services Subcommittee on Housing and Insurance sent a letter to Director McRaith of the Federal Insurance Office at Treasury stating his concerns that U.S. negotiators not agree to international capital standards incompatible with the U.S. State based insurance regulatory system.  Luetkemyer’s letter echoed many of the themes in an op-ed written by SEC Commissioner Dan Gallagher and Peter J. Wallison that ran in Friday’s Wall Street Journal.
 
Democrats Write to White on Pay Ratio
On Tuesday, 58 members of the House Democratic Caucus wrote to SEC Chair White to “move quickly” on the pending Pay Ratio rule under Section 953(b) of the Dodd Frank Act.  The letter was lead Rep. Keith Ellison (D-MN) and Raul Grijalva (D-AZ) the Chairs of the House Progressive Caucus.  They were joined by Rep. Maxine Waters, the ranking Democrat on the House Financial Services Committee.
 
Congressional Payments Caucus Founded
On Thursday, the four members of the House Financial Services Committee; Lynn Westmoreland (R-GA), Randy Neugebauer (R-TX), David Scott (D-GA) and Krysten Sinema (D-AZ) announced they had formed a Congressional Payments Technology Caucus.  According to the press release, the goal of the group is to study emerging payment system technologies, access to online banking services and issues related to data security.  With Rep. Neugebauer, the Chairman of the Financial Services Subcommittee on Financial Institutions, as a founding member, it will be interesting to see if he also intends to plan hearings, or other forums, to examine these issues, outside of the work of the caucus.
 
Democratic Alternative for Housing Finance Reform Reintroduced
On Friday, Reps. Jim Himes (D-CT), John Delaney (D-MD) and John Carney (D-DE) introduced H.R. 1491, the “GET NAME” Act.  This legislation, which is similar to a bill introduced by these Representatives last Congress, is intended to capture the middle ground to seek bipartisan support for a Housing finance reform bill.  Unlike legislation authored by Housing Financial Services Chairman Hensarling, H.R. 1491, would wind down the GSEs, keep the 30 year fix rate mortgage and maintain a Federal backstop. 
 
Ellison Reintroduces Legislation to Levy a Tax on Financial Transactions
On Thursday, Rep. Keith Ellison (D-MN) introduced H.R. 1464, the Inclusive Prosperity Act. The bill would impose a tax of 0.5 percent on stocks, 0.1 percent on bonds and a 0.005 percent rate for derivatives and other financial investments.  According to Ellison’s press release, “almost 30 nations have some form of a financial transaction tax and the U.S. had a similar tax from 1914 until 1966.”   Despite that foundation, it is unlikely that this Congress would include this, or any of the so-called Robin Hood, or Tobin taxes under its current make-up.  
 
Senate
Senate Banking Holds Hearing on Reducing Burdens for Regional Banks
On Thursday the Senate Banking Committee held a hearing entitled, “Examining the Regulatory Regime for Regional Banks."  The purpose of the hearing was to examine whether certain regulatory relief proposals, such as raising the threshold for determining when a bank should be treated as a SIFI.  During the hearing, it became clear that Chairman Shelby is planning on introducing legislation next month that would open Dodd-Frank to ease burdens for community banks and increase transparency at the FSOC.  However, the hearing showed rifts between Democrats and Republicans on the need to make changes to Dodd-Frank that would help the regional banks.  For example, the genesis of bipartisan support for raising the threshold for SIFI designation originally came from Fed Governor Daniel Tarullo, when he said last year that the $50 billion threshold may have been too low and that $100 billion might be a better mark, however he seemed to move away from that stance in testimony, except when it comes to stress testing.   In addition both Senator Warren and Senator Brown appeared to oppose to raising the threshold, and instead seem to believe the Fed already has the discretion to act on a case-by-case basis. 
 
Merkley Urges CFPB to Go Hard on Payday Lending Rules
On Thursday, Oregon Senator, and Ranking Member of the Financial Institutions subcommittee, Jeff Merkley (D-OR) sent a letter to CFPB Director Cordray urging the CFPB to implement the strongest rules possible when it implements it long awaited payday lending rule.  In his letter, Merkley noted that by including robust ability to repay standards and stronger underwriting, the Bureau would go a long way to limiting predatory pay-day lending.  The CFPB is expected to announce final rules on the so-called “small dollar” and payday lending industry in the coming months.
 
Warren and Cummings Continue to Press CFTC Chairman on Stock Sales
After receiving a response to their first inquiry, Senator Warren and Rep. Elijah Cummings sent a second letter to CFTC Chairman Giancarlo seeking even more information and clarifications on his initial response.  They have asked for information by March 31^st.
 
 
Select Highlights from the Administration
 
Federal Reserve Board
Fed Creates Glide Path for Rate Increase
On Wednesday, the FOMC concluded its April meeting and based on the press conference that Fed Chair Yellen conducted following the meeting there was a growing consensus that the Fed is moving towards raising interest rates.  While significant attention was given to the fact that the Fed is no longer “patient” in its analysis of when to raise rates, it is clear that the Fed continues to keep an eye on labor market improvement as a key factor in determining when to raise rates. 
 
Securities and Exchange Commission (SEC)
Chair White Indicates her Preference for SEC to Act in Broker-Dealer Fiduciary Rule
After months of indicating that she would be sharing her personal views about whether the SEC should move forward on a broker-dealer fiduciary rule under section 913 of the Dodd-Frank Act, on Tuesday, while speaking at a SIFMA industry conference, SEC Chair White indicated her belief that the Commission should move forward on the matter.  Without going into much detail about how the SEC rule would look, she did mention that she thought a “principles based rule” modeled on the current standard that registered investment advisers adhere to.  Whether this announcement will slow down a similar, ERISA based standard being put forward by the Department of Labor remains to be seen, though it certainly could complicate the process.
 
Commissioner Piwowar Argues for SEC over FSOC in Turf Battle over Asset Management
On Monday, while speaking before an Investment Company Institute (ICI) event, Commissioner Michael Piwowar offered his rationale for why he believes the SEC has the authority and the ability to oversee large asset managers more effectively and efficiently than the Federal Stability Oversight Council (FSOC).  Among the ways he could see this happening include allowing funds to more readily suspend redemptions during market difficulties and to permit funds to give investors more “in-kind” redemptions of the funds' underlying securities instead of cash.  In addition, during his speech, the Commissioner also criticized the broad reach of the global Financial Stability Board, which he said “has already decided that the question is not whether investment funds and asset managers should be subject to prudential oversight, but rather which ones.”
 
Consumer Financial Protection Bureau (CFPB)
CFPB Approves Final Consumer Narrative Rule
On Friday the CFPB announced it would be adding unverified “narratives” to its consumer complaint portal.  While the narratives will not be published for at least 90 days, the CFPB intends to publish all narratives that consumers opt-in to share.  There will be a series of measures taken to ensure consumer confidentiality and companies will have a limited opportunity to provide a generic response.
 
Bureau Issues Request for Information from Credit Cards
On Tuesday, the CFPB issued a request for information (ROI) to seek further information on how the credit card market is functioning.  Among the information requested are the terms of credit card agreements, debt collection practices within the industry, and consumers understanding of reward products. 
 
Next Week’s Schedule
 
On Tuesday the House Committee on Financial Services will hold a hearing entitled “Examining the SEC’s Agenda, Operations, and FY 2016 Budget Request” at 10:00 AM.

On Tuesday, the House Committee on Agriculture’s Subcommittee on Commodity Exchanges, Energy and Credit will hold a hearing entitled “Reauthorizing CFTC: End-User Views” at 1:00 PM.

On Tuesday, the House Committee on Financial Services’ Subcommittee on Oversight and Investigations will hold a hearing entitled “The Federal Deposit Insurance Corporation’s Role in Operation Choke Point” at 2:00 PM.

On Tuesday the Senate Committee on Banking, Housing and Urban Affairs will hold a hearing entitled “Examining the Regulatory Regime for Regional Banks” at 10:00 AM.
 
On Tuesday, the Senate Committee on Banking, Housing and Urban Affairs’ Subcommittee on Securities, Insurance and Investment will hold a hearing entitled “Capital Formation and Reducing Small Business Burdens” at 2:30 PM.
 
On Wednesday the House Committee on Agriculture’s Subcommittee on Commodity Exchanges, Energy and Credit will hold a hearing entitled “Reauthorizing the CFTC: Market Participant Views” at 1:30 PM
 
On Wednesday the Senate Committee on Banking, Housing and Urban Affairs will hold a hearing entitled “FSOC Accountability: Nonbank Designations” at 2:00 PM.

On Thursday, the Senate Appropriations Subcommittee on Labor, Health and Human Services will hold a hearing to review the FY16 Funding Request from the Department of Labor at 10:00AM.