TRP Financial Services Report

November 17, 2014

The first quarter of the lame duck is in the books and it didn’t take long for commentators to begin chipping away at the spirit of bipartisanship that was being forged following the election.  Notwithstanding the game of political chicken looming over the Immigration issue and the end of year spending bills –shaping up either to be finalized by December 8th, or perhaps sometime next year –we continue to believe that 2015 will show positive development for legislative activity in Congress, including the potential for regulatory relief from Dodd-Frank as both Chairman Hensarling and Chairman Shelby have both expressed an interest in including that issue on their agenda.  Additionally, as long as Leader McConnell allows for more, if not unlimited amendments, it will ensure that all sides have at least a chance to raise their concerns on a variety of issues.    

Looking Ahead

Near Term 

  • House Democrats vote on leadership positions.  While Speaker Pelosi and Whip Hoyer are expected to retain their positions, the big question is on Energy and Commerce Committee Ranking Member.  A pitched battle has been going on for months between Anna Eshoo (CA) and Frank Pallone (NJ) and many see it as a proxy battle reigniting the old Pelosi v. Hoyer rivalry. 
  • The Senate is likely going to take up long stalled legislation to force the President to approve the Keystone Pipeline this week.  In addition the Senate is going to consider and vote on legislation dealing with NSA reforms as well as judicial nominees. 
  • On Wednesday the Federal Reserve will release the minutes from their last meeting at the end of October

 Further Out 

  • Congress will return from the Thanksgiving Recess on December 1st and are scheduled to be in session until December 12th.
  • House to return January 6th
  • Labor Department to hold hearing on January 15th whether affiliates of Credit Suisse should be permitted to serve as Qualified Professional Asset Managers after the company’s guilty plea to one count of conspiracy to engage in tax fraud.

 The Past Week

Legislative Branch



Financial Services Holds Hearing on Terrorist Financing
On November 13, the House Financial Services held a hearing entitled: “Terrorist Financing and the Islamic State.” The hearing focused on the Treasury Departments role in helping combat terrorism and the Islamic State; Administration policy to combat terrorism, and whether more tools are needed to properly “cut off” funding streams for terrorists.  David Cohen, Treasury Under Secretary for Terrorism and Financial Intelligence was the sole witness on the first panel, while the second panel was comprised of Notre Dame Professor Jimmy Gurulé, Dr. Matthew Levitt, Director of the Stein Program on Counterterrorism and Intelligence, at the Washington Institute for Near East Policy, and  Dr. Patrick B. Johnston with the RAND Corporation.  During the hearing members expressed their concerns that not enough was being done to combat illicit funds flowing to terrorist groups like ISIS / ISIL.  Other topics at the hearing included questions about limiting oil revenues and ensuring that rules intended to prevent funds from going to terrorist organizations didn't impact legitimate remittances from the United States.   
Cummings Asks Retailers for Briefing on Cyberattacks
On Tuesday, House Committee on Oversight and Government Reform Ranking Member Elijah Cummings (D-MD) sent letters to the CEOs of several retail companies, including Home Depot and Target, asking for a briefing about recent cyber-attacks on the company.  Cummings pressed for information related to the scope of these cyber-attacks, including the types of data breached and those suspected to have caused the breach, the number of customers potentially affected, findings about vulnerabilities to computer systems, and data protection improvement measures taken since discovering the breach.
Waters Praises Labor Department Announcement
Following the announcement that the Department of Labor would hold a public hearing on whether the company should be permitted to serve as a Qualified Professional Asset Manager, after pleading guilty to one count of conspiracy to engage in tax fraud, Financial Services Ranking Member Waters issued a press release praising the decision.  In her release she noted that both she and Congressman George Miller (D-CA) had called on DOL to hold this hearing, and she was pleased that DOL is not simply “rubber stamping” applications.  The hearing is set to take place on January 15th.


Senate Leadership Announced
On Thursday both the Senate and House Republicans conducted leadership elections that offered few surprises, as Mitch McConnell (R-KY), Harry Reid (D-NV), and John Boehner (R-OH) all received their caucus’s endorsement to continue lead in the 114th Congress.  Sen. McConnell was unanimously named to serve as majority leader when the new Congress convenes in January, while at least six Senate Democrats—Sens. McCaskill (D-MO), Manchin (D-WV), Heitkamp (D-ND), Landrieu (D-LA), Kaine (D-VA), and Warner (D- VA)—reportedly opposed Reid in the secret-ballot vote.   The election reportedly followed a nearly four-hour meeting of the Caucus.  House Speaker Boehner was easily remitted to his post following a GOP wave election that effectively silenced any opposition to his leadership.  House Democrats will hold leadership elections next week; Minority Leader Nancy Pelosi (D-CA) is seeking re-election unopposed.
Perhaps the only notable addition came from the Democratic leadership, where Sen. Elizabeth Warren (D-MA) was elevated to the newly created position of Strategic Policy Advisor to the Democratic Policy and Communications Center (DPCC).  Warren, who will act as a bridge to the party’s progressive wing—which embraces her populist style and willingness to take on the banking and financial services industries—said she’ll use her role to focus on financial equality.  “Wall Street is doing very well, CEOs are bringing in millions more, and families all across this country are struggling,” she said following yesterday’s leadership elections.  Commentators have questioned whether Warren’s new role sends the signal that Senate Democrats will be more interested in appealing to their progressive base than compromising with Republicans and the White House in 2015, whether it was intended to serve as a counterbalance to Senator Tester (D-MT) being named DSCC Chair, or if Leader Reid simply wanted to shore up his liberal base ahead of what is expected to be a difficult road to re-election in Nevada.
Senate Banking Committee Holds Nominations Hearing
On Thursday, the Senate Banking Committee held a hearing to consider the nominations of Lourdes Maria Castro Ramirez for Assistant Secretary of Housing and Urban Development (HUD), and Therese McMillan to be Federal Transit Administrator at the U.S. Department of Transportation.  During his opening statement Ranking Member Crapo expressed his frustration the HUD’s recent “reiteration” of rules impacting recreational vehicles. 

Select Highlights from the Administration



Rough Road Ahead for Nominee?
On Wednesday, the White House announced that it was nominating Antonio Weiss, a global head of investment banking at Lazard Ltd to be Under Secretary of the Treasury.  Mr. Weiss immediately came under fire from both the right and the left, primarily for his role in advising companies in inversion based tax deals.  For example, Senator Chuck Grassley (R-IA) criticized the nomination as the hypocritical given the Administration’s continued rhetoric against inversion mergers.  While on the other side of the aisle, Senator Elizabeth Warren (D-MA) expressed her intention to oppose a “wall street banker” for a position responsible for continuing to implement Dodd-Frank.
Changes in Store for Student Debt Collection?
According to a report in the Huffington Post, the Treasury is considering implementing a pilot program that places the role of student debt collection with Federal government employees.  Currently, much of the collection is outsourced to private contractors.  If successful, Treasury appears to interested to expand the program.

Consumer Financial Protection Bureau (CFPB)

Bureau Unveils Proposed Rules on Prepaid Cards
On Thursday, the CFPB announced its Notice of Proposed Rulemaking on Prepaid Cards. The massive, 870 page  NPRM includes new proposed disclosures, as well as different rules to distinguish cards that offer overdraft protection and other forms of credit from those that don’t.  The announcement came one day after the Consumers Union released its ratings on the industry, while some analysts thought the NPRM was more onerous than anticipated, many of the consumer groups that participated in the panel discussion following Director Cordray’s announcement expressed concern or outright criticism that the NPRM doesn't go far enough.    

Next Week’s Schedule

On Tuesday, November 18th, at 2pm in Room 2167 Rayburn, the Housing and Insurance Subcommittee will hold a hearing entitled, “Opportunities for a Private and Competitive Sustainable Flood Insurance Market.”
On Wednesday, November 19th at 2pm in Room 2123 Rayburn the Housing and Insurance Subcommittee will hold a hearing entitled, ““Opportunities for a Private and Competitive Sustainable Flood Insurance Market.”
On Wednesday, November 19th at 10am in Room 538 Dirksen the Senate Banking Committee will hold a hearing entitled, “The Federal Housing Finance Agency: Balancing Stability, Growth, and Affordability in the Mortgage Market”
On Thursday November 20th and on Friday, November 21st at 9:30am in Room 106 Dirksen, the Permanent Subcommittee on Investigations will hold a hearing on Wall Street banks' investments in oil, natural gas, aluminum and other commodities and whether this ownership poses a conflict of interest.
On Friday, November 21st at 10am in Room 538 Dirksen, the Senate Banking Committee will hold a hearing on regulatory capture.  *This hearing will be chaired by Senator Sherrod Brown.