Money Matters: This Week in Washington
This Week in Washington for June 12, 2017
By Dina Ellis and Casey Miller
THE BIG PICTURE
Trump to Nominate Next Director of Federal Bureau of Investigations: President Trump announced on Twitter June 7th that he will nominate Christopher Wray to be the next FBI Director. Wray previously served as Assistant Attorney General from 2003 to 2005 and is currently a partner at law firm King & Spalding.
The CHOICE Act was approved in the House notwithstanding the 1.7 million-member group Veterans of Foreign Wars (VFW) circulating a memo on Capitol Hill asking Members of Congress to oppose the legislation because of concerns related to the Consumer Financial Protection Bureau. However, House Financial Services Chairman Jeb Hensarling (R-TX) said that he would work with the organization to ensure that the new agency would “protect our nation’s veterans from fraudulent and predatory practices while still maintaining access to affordable credit.” The VFW said that its concerns are satisfied “for now.”
Commentators have said that even though the legislation is unlikely to make it past Democratic opposition in the Senate, parts of the bill may pass on a bipartisan basis. One issue that may have bipartisan support is raising from $50B the threshold for “systemically important” designation. There may also be bipartisan support for raising the $10B threshold for when banks must conduct their own stress testing. Finally, there may possibly be bipartisan support for replacing the single director at that Consumer Financial Protection Bureau with a bipartisan commission, though leading Democrats like Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) would oppose this change.
ALSO ON THE HILL LAST WEEK
HOUSE FINANCIAL SERVICES COMMITTEE
Committee Threatens Contempt Charges Against Consumer Financial Protection Bureau (CFPB) Director Richard Cordray: In a
SENATE BANKING COMMITTEE
Senate Banking Committee Member Looking at Return of Glass-Steagall: In an interview on June 7th, Senator John Kennedy (R-LA) said that he is interested in learning more about a return of Glass-Steagall, the depression-era law that separated commercial from investment banks. At a hearing last month, Kennedy asked Department of Treasury Secretary Steven Mnuchin whether he supported a return of Glass-Steagall. Mnuchin said that he is interested in a modernized version of the law.
At the hearing, Senator Elizabeth Warren (D-MA) said that she wants to keep a Dodd-Frank regulation that subjects banks with more than $50B in assets to stricter rules. Regional banks are currently lobbying to eliminate the threshold and leave it at regulators’ discretion to pick which banks to subject to stricter rules.
Trump Nominee Shows Independent Streak During Confirmation Hearing: President Trump’s nominee to head the Council of Economic Advisers, Kevin Hassett, expressed some independent views at his confirmation hearing on June 6th, especially regarding immigration. He refused to outright endorse a border wall between U.S. and Mexico and said that he is not an expert on the subject. He also said that immigration increases productivity. In his
LEGISLATION INTRODUCED AND PROPOSED
Legislation Introduced to Repeal Fiduciary Duty Rule: Representatives Phil Roe (R-TN) and Peter Roskam (R‑IL) introduced legislation on June 8th to repeal the Department of Labor’s Fiduciary Duty Rule. According to Roe, the bill “reflects a more responsible solution that will ensure all Americans have access to affordable retirement advice that’s in their best interest.” Parts of the Fiduciary Duty Rule went into effect this month.
THIS WEEK ON THE HILL
Tuesday, June 13
Senate Banking Committee,
Mr. Kevin Allen Hassett, to be Chairman of the Council of Economic Advisers; and
The Honorable Pamela Hughes Patenaude, to be Deputy Secretary of Housing and Urban Development.
Thursday, June 15
Senate Banking Committee, Hearing,
Mr. Harris Simmons, Chief Executive Officer and Chairman, Zions Bancorporation, on behalf of the Regional Bank Coalition;
Mr. Greg Baer, President, The Clearing House Association;
Mr. Randy Chesler, President and Chief Executive Officer, Glacier Bancorp, on behalf of the Midsize Bank Coalition of America; and
Ms. Saule Omarova, Professor of Law, Cornell University Law School.
Consumer Financial Protection Bureau Mired in Litigation: The CFPB is currently facing at least a dozen lawsuits challenging its constitutionality and a large and growing number of disputes surrounding its enforcement actions. With the political uncertainty around the agency, many companies are choosing to challenge enforcement rather than settle. One-third of the 21 enforcement actions filed through May are being challenged. Though the agency maintains that it has enough resources to handle the cases, others are speculating that the agency is being stretched thin.
States Positioned to Pick up Slack in CFPB Enforcement: As Republicans seek to dismantle the CFPB, state attorneys general are set up to fill the enforcement gap created if the CFPB decreases its enforcement activity. Before the CFPB was in place, multistate cases resulted in billions of dollars of settlements over predatory lending charges. If the CFPB does scale back enforcement activity, state action may again play an important role in checking predatory lending.
Department of Labor Asks for White House Guidance on Fiduciary Duty Rule: The Department of Labor sent a request for information on the Fiduciary Duty Rule to the White House Office of Management and Budget. Department Secretary Alexander Acosta described the request as “the first step in the administration’s review of [the] rule.” The Fiduciary Duty Rule requires that broker dealers consider only the client’s best interests, and not commissions or fees, when providing retirement advice.
Administration Open to Tweaks to the Committee on Foreign Investment in the United States (CFIUS): The Trump Administration is working on some “technical changes” to CFIUS. Speaking at the U.S.-China Business Council’s annual membership meeting, Treasury Secretary Steven Mnuchin said that the Administration wants “to keep CFIUS as a national security review” but that it wants to “deal with economic issues separately.” The statement is a response to speculation that the Administration will use CFIUS and national security concerns as a tool to ease the growing trade deficit.
Financial Stability Oversight Council (FSOC) Looking at Effect of Regulations on Financial Instability: FSOC is looking at whether regulations are causing financial instability, rather than preventing it. Wall Street has said since rules were put into place after the 2008 financial crisis that the regulations make markets more susceptible because they dry up liquidity. According to bankers, it has become much harder to trade during periods of stress. An FSOC working group has been tasked with investigating this contention and the impact of rules on liquidity.
Federal Reserve Enforcing Compliance with Volcker Rule: The Federal Reserve on June 7th announced that it was giving three banks five years to come into compliance with the Volcker Rule. The Volcker Rule prohibits banking entities from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund.
NOMINATIONS, COMINGS AND GOINGS AT THE AGENCIES
President Trump Nominates Comptroller of Currency: On June 6th, President Trump nominated Joseph Ottingbas Comptroller of the Currency. Otting is former CEO of OneWest, the bank founded by Treasury Secretary Steven Mnuchin. The nomination has received significant backlash from Democrats, with Senator Elizabeth Warren (D-MA) saying that “Mr. Otting has no experience as a bank supervisor, but he has helped lead a bank that illegally foreclosed on working families and paid a multimillion dollar fine for defrauding the government.” Senate Banking Committee Ranking Member Sherrod Brown (D-OH) has also
CFTC Fintech Adviser Leaving Agency: On June 5th, Jeffrey Bandman announced that he is leaving the CFTC. Bandman was special adviser on fintech and headed up a three-month review of fintech at the agency. The CFTC expects to name a replacement by early July, according to CFTC Chief of Staff Mike Gill.
New Executive Vice President at Ginnie Mae: Michael Bright is expected to be appointed as Executive Vice President and Chief Operating Officer at Ginnie Mae. Bright is currently director of the Milken Institute’s Center for Financial Markets. He formerly served as vice president at investment firm BlackRock.
Thin Bench of Political Appointees at Department of Treasury: Treasury Secretary Steven Mnuchin is currently the only Senate-confirmed official at Treasury, with many posts yet to be filled. His choice for deputy secretary, wealth manager Jim Donovan, dropped out. Two undersecretary positions are held up in the Senate, and one has yet to be named. Instead of relying on traditional leadership, Mnuchin has assembled a small group of “counselors” that do not require confirmation.
Paul Hastings’ Government Relations team is monitoring these issues. We help our clients craft strategies to address federal legislation and regulatory matters. Please reach out to us if your organization needs assistance with congressional or regulatory relations.