Insights

TRP Financial Services Report

April 27, 2015

Looking Ahead

Near Term:

  • It’s “Insurance Week” in DC with three hearings, two in Senate Banking and one over in the House.
  • Also, there will be a joint Financial Services – Government Reform subcommittee hearing on Ex-Im.
  • The House will take up two Appropriations bills – Military Construction and Veterans Affairs and also the Energy and Water Appropriations bill.
  • The Senate will spend the majority of the week on the Iran Nuclear Review Agreement Act. 

Further Out:

  • Senate Banking Committee intends to meet on May 14th to consider legislation that would provide regulatory relief to regional banks as well as impose changes on FSOC.
  • Senate Banking will hold two hearings (6/2 and 6/4) on Ex-Im – though it is unclear whether these hearings will occur after the House holds a secret vote of the Republican Conference on the issue … or not. 
  • The FTC will commence its “Debt Collections Dialogues” in Buffalo, NY on June 15th.  NY AG Eric T. Schneiderman and a representative from the CFPB are expected to be in attendance. 
  • The remaining statutorily imposed deadlines for the year are:

    • May 31: Surface Transportation
    • June 1: USA PATRIOT Act
    • June 30: Export-Import Bank
    • Sept. 30: CHIP Funding
    • Sept. 30: Child Nutrition & WIC
    • Sept. 30: FAA Authorization
    • Sept. 30: End of the Federal Fiscal Year
    • End of September or October: Extraordinary Measures for dealing the Debt Ceiling run out and default becomes possible.

The Past Week
Legislative Branch

House
House Passes CFPB Advisory Board Bill
On Wednesday, by a vote of 235-183, the House passed legislation (H.R. 1195) to establish three advisory boards within the Consumer Financial Protection Bureau (CFPB) –for small business, credit unions, and community banks.  The measure also limits the amount of money the Bureau could request from the Federal Reserve, its principal source of funding. The amounts would be capped at $655 million for fiscal 2020 and $720 million for fiscal 2025.
 
While many Democrats had expressed support for the underlying bill, the provision pertaining the Bureau’s funding—which was automatically adopted as an amendment under the rule—was widely opposed by Democrats in Congress. House Minority Whip Steny Hoyer (D-MD) accused Republicans of “turning a bipartisan bill into a partisan bill” when the measure was added.  Ultimately, just four Democrats voted in support of the legislation: Reps. Brad Ashford (NE-2), Henry Cuellar (TX-28), Collin Peterson (MN-7) and Krysten Sinema (AZ-9).  The White House has indicated that President Obama intends to veto the legislation if it advances through the Senate.
 
House Passes Series of Cyber Security Measures
Last week the House passed two major bills designed to improve our nation’s ability to deal with a growing cyber threat.  First was the “Protecting Cyber Networks Acts), passed over the objections of privacy advocates, that would create a shield of liability from lawsuit for companies that  share information on hacking threats with each other and U.S. law enforcement.  Second was the “National Cybersecurity Protection Advancement Act of 2015,” which designates the U.S. Department of Homeland Security’s (“DHS”) National Cybersecurity and Communication Integration Center as the lead federal civilian interface for cybersecurity threat information sharing.   Both bills now head to the Senate where they are expected to be taken up in the near future. 
 
Financial Institutions Subcommittee Holds Another Hearing On Regulatory Burdens
On April 23, the House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled “Examining Regulatory Burdens – Regulator Perspective.” Following on last week’s hearing on regulatory burdens for non-depository financial institutions, the witnesses at this hearing included representatives from the CFPB, the OCC, the Federal Reserve, the FDIC, the NCUA and the Texas Department of Banking.  Among the topics discussed included the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), pay-day lending, and the CFPB’s continued involvement in the indirect auto lending industry. 
 
Task Force on Terrorism Financing Has First Hearing
On April 22, the House Financial Services Committee's Task Force to Investigate Terrorism Financing held its first hearing, which was titled “A Survey of Global Terrorism and Terrorist Financing.”  At the hearing the Task Force heard from a series of witnesses who shared their perspective on how terrorism financing mechanisms had evolved since Al-Qaeda used $500,000 to conduct the September 11th attacks.  Other topics included Iranian financing of terror cells and the involvement of Hizbollah in Latin America. 
 
Senate
Senate Finance Marks up TPA, Customs and other trade bills
On April 22, the Senate Finance Committee marked up and passed four different trade bills, most notably legislation dealing with trade promotion authority (TPA) (S.995). Throughout the hearing, Senate Finance Committee Chairman Orrin Hatch (R-UT) urged his colleagues to support S. 995 and maintain “clean” bills to ensure each piece of legislation would be able to pass the House as well. Only two amendments were approved by the committee for the TPA bill. This included an amendment to promote human rights as a principal negotiating objective, as well another that would not allow fast-track consideration for countries on the State Department’s list of human traffickers.  Ultimately, Senator Schumer and his allies decided to add their amendment, which would allow the United States to initiate a countervailing duty investigation against a foreign government that is found to be undervaluing its currency to the Customs Reauthorization bill instead of TPA, where it passed by a vote of 18-8.  TPA was subsequently passed by a vote of 20-6.  The following day the House Ways and Means Committee also passed four similar bills.   While it is unclear the exact next steps (i.e., will these four bills get considered as a package or voted on separately)  what is clear is that the issue continues to divide the Democratic party.
 
Baldwin Writes SEC about Stock Buy-backs
On Thursday, Senator Tammy Baldwin (D-WI) wrote to the SEC expressing her concerns about the growing number of stock buy-backs that public corporations are executing in recent years.   In her letter the Senator indicates her belief that “[t]here is mounting evidence to suggest that the buybacks have negative impact on jobs wages and investment, which in turn have negative impact on innovation and long-term economic growth, competiveness and national security.”  She goes on to encourage the SEC to study this issue and reconsider its 1982 rule that created a safe harbor for companies that issue buybacks.
 
McCaskill & Warren Question Garnishment of Social Security to Pay Student Loans
On Thursday, Senator Claire McCaskill (D-MO), the Ranking Democrat on the Senate Aging Committee and Senator Elizabeth Warren, also a member of that Committee sent a letter to the GAO asking Congress’ audit arm to further examine a policy that allow Treasury to garnish the social security payments of older Americans who have student loan debt. 
 

Financial Services Related Legislation Introduced Last Week

S.1010   A bill to amend the Securities Exchange Act of 1934 to exempt from registration brokers performing services in connection with the transfer of ownership of smaller privately held companies.
Sponsor: Sen. Joe Manchin (D-WV)
 
H.R.1908   To require the Secretary of Housing and Urban Development to discount FHA single-family mortgage insurance premium payments for first-time homebuyers who complete a financial literacy housing counseling program.
Sponsor: Rep. Joyce B. Beatty (D-OH-03)
 
H.R.1912   To exempt smaller public companies from requirements relating to the use of Extensible Business Reporting Language for periodic reporting to the Securities and Exchange Commission, and for other purposes.
Sponsor: Rep. Robert Hurt (R-VA-05)
 
H.R.1975   To amend the Securities Exchange Act of 1934 to require the Securities Exchange Commission to refund or credit excess payments made to the Commission.
Sponsor: Rep. Gregory W. Meeks (D-NY-05)
 
H.R.1941   To improve the examination of depository institutions, and for other purposes.
Sponsor: Rep. Lynn A. Westmoreland (R-GA-03)
 
H.R.1982   To amend the Securities Investor Protection Act of 1970 to confirm that a customer's net equity claim is based on the customer's last statement and that certain recoveries are prohibited, to change how trustees are appointed, and for other purposes.
Sponsor: Rep. Scott Garrett (R-NJ-05)
 
S.1084   A bill to promote transparency by permitting the Public Company Accounting Oversight Board to allow its disciplinary proceedings to be open to the public, and for other purposes.
Sponsor: Sen. Jack F. Reed (D-RI)
 

Select Highlights from the Administration

Department of Labor (DOL)
Department Doesn’t Seem Inclined to Extend Comment Period for Fiduciary Rule
On Tuesday, an alphabet soup full of trade groups including the FSR, SIFMA, ICI, NAREIT, FSI and the Chamber jointly requested that due to the breadth, length and complexity of the Department’s proposed “Fiduciary Standard” rule, DOL should extend the initial comment period another 45 days.  When asked for a response, Secretary Perez said “The comment period is 75 days, followed by a public hearing and publication of the transcript followed by another opportunity to comment on it; that’s all in the aftermath of 18 months of informal outreach.” He went on to add, “That’s a long time that we’ve provided, and we’ll make sure we’ve heard people’s voices.”  Assuming that the Secretary’s views hold it will mean that comments on the rule will be due on July 6th. 
 
Consumer Financial Protection Bureau (CFPB)
CFPB Announces Conference on Consumer Finance Research
Recently, the CFPB announced that it will hold a research conference in Washington, D.C. on
May 7-8, 2015.  According to the announcement, the conference “will be focused on high-quality consumer finance research, with academic and government researchers presenting their research papers.”  Given the recent criticisms of the Bureau’s economic analysis, it will be interesting to see how many different points of views are represented at the conference.  
 
Securities and Exchange Commission (SEC)
SEC to Rules Required by Dodd-Frank
On Wednesday, the SEC is expected to vote on Dodd-Frank rules governing cross-border swaps trades and executive compensation disclosures.  On cross-border swaps, the Commission will be voting to repurpose the rule governing whether U.S. rules apply to swaps partially arranged in the US but held by foreign banks or oversees.  The rule, dealing with how companies show a comparison of total executive pay to company stock performance in the company’s annual proxy statement is not nearly as controversial as the pending rule, long awaited by liberal stakeholders, that would require companies to disclose the ratio between their top executives compensation and that of their median wage earners. 
 

Next Week’s Schedule

On Tuesday, April 28th at 10:00am in 538 Dirksen, the Senate Banking Committee will hold a hearing entitled, “the State of the Insurance Industry and Insurance Regulation”
 
On Wednesday, April 29th at 9:30am in 538 Dirksen, the Senate Banking Committee will hold a hearing entitled, “Exploring Opportunities for Private Investment in Public Infrastructure”
 
On Wednesday, April 29th at 10:00am in HVC-210, the Housing and Insurance Subcommittee will hold a hearing entitled, “The Impact of International Regulatory Standards on the Competiveness of U.S. Insurers.”
 
On Wednesday, April 29th at 2:00pm in HVC-210 the Capital Markets Subcommittee will hold a hearing entitled, “Legislative Proposal to Enhance Capital Formation and Reduce Regulatory Burdens.”
 
On April 30th at 10:00 in 538 Dirksen, the Banking Committee will hold a hearing entitled, “Examining Insurance Capital Rules and FSOC Process.”
 
On April 30th at 1:00pm in 2154, Financial Services Oversight Subcommittee and the Government Reform Subcommittee on Health Care, Benefits and Administrative Rules will hold a joint hearing entitled, “Examining the Export-Import Bank’s Mandates.”
 
On May 1st at 9:15am in HVC-210, the Capital Markets Subcommittee will hold a hearing entitled, “Oversight of the Financial Industry Regulatory Authority.”