Last week was a quiet one on Capitol Hill, as both the House and Senate were in recess for the Fourth of July holiday. Both chambers return this week for what will be a busy three-week legislative session before August recess. Congress will want to do as much as it can now, as getting legislation passed after August recess will be difficult as attention will begin to shift towards the 2018 mid-term elections.
THE BIG PICTURE
Senate GOP Appears Ready to Fix Obamacare if Repeal Not Adopted: According to Senate Majority Leader Mitch McConnell (R-KY), if the Republican Obamacare repeal effort is unable to make it through Congress, Republicans will try to pass a more limited bill to strengthen health insurance markets. McConnell has told dissenting Republicans in the past that if the party is unable to come together on a repeal bill, he would need to work with Minority Leader Chuck Schumer (D-NY) to pass the insurance-fix legislation. Republicans are redrafting the legislation and hoping to have a vote before August recess.
Senate Judiciary Committee Hearing on FBI Director Nominee: The Senate Judiciary Committee will hold a hearing at 9:30am on July 12 to discuss Christopher Wray, President Trump’s nominee to replace James Comey as FBI Director. The hearing will likely focus on Wray’s ability to stay independent from the President’s influence, as well as Russia’s interference in the 2016 Presidential election.
THIS WEEK ON THE HILL
Wednesday, July 12
House Financial Services Committee, Hearing, “Semi-Annual Testimony on the Federal Reserve’s Supervision and Regulation of the Financial System,” 10:00am, 2128 Rayburn House Office Building
House Financial Services Financial Institutions and Consumer Credit Subcommittee, Hearing, “Examining Legislative Proposals to Provide Targeted Regulatory Relief to Community Financial Institutions,” 2:00pm,
2128 Rayburn House Office Building
Thursday, July 13
House Financial Services Capital Markets, Securities, and Investment Subcommittee, Hearing, “Impact of the DOL Fiduciary Rule on the Capital Markets,” 10:00am, 2128 Rayburn House Office Building
Senate Banking Committee, Hearing, “Semiannual Monetary Policy Report to Congress,” 10:00am, 538 Dirksen Senate Office Building
- The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System
Friday, July 14
House Financial Services Capital Markets, Securities, and Investment Subcommittee, Hearing, “A Review of Fixed Income Market Structure,” 9:15am, 2128 Rayburn House Office Building
Regulators Set to Revamp Volcker Rule: According to some regulators, there is room to alter the Volcker Rule without action in Congress. As such the Financial Stability Oversight Council (FSOC) ordered each of the regulators responsible for overseeing the Rule to examine ways it can be made less burdensome. Opponents of the Rule say that it has cost banks millions of dollars to comply with and possibly billions more in revenue. Supporters say that it is making the banking system safer. The Financial CHOICE Act, which passed the House of Representatives last month, would repeal the Rule entirely. However, since the future of that bill and other financial legislation in the Senate is uncertain, regulators are looking at what they can do on their own.
Office of the Comptroller of the Currency Releases Semiannual Risk Report: OCC reported on July 7 regarding the strategic, credit, operational, and compliance risks facing the U.S. banking system in its Semiannual Risk Perspective. According to Acting Comptroller of the Currency Keith Noreika, “Today the federal banking system remains healthy.” The report showed that net revenue rose 3.9 percent at the end of 2016 from the end of 2015, due to increased lending, however, overall loan growth slowed in the second half of 2016.
Department of Labor Publishes Request for Information on Fiduciary Duty Rule: The Department of Labor (DOL) published on July 6 a Request for Information (RFI) regarding the Fiduciary Duty Rule. The first part of the Rule took effect on June 9, and the second part of the Rule is to take effect on January 1, 2018. The RFI gives the public 15 days from July 6 to comment on whether the January 1 deadline should be delayed. There is a 32 day period (until August 7) to comment on other parts of the RFI.
The Department of Justice (DOJ) filed a brief in a Fifth Circuit case challenging the Rule. The DOJ in its brief supports the DOL’s entire rulemaking, other than the waiver for people to participate in class actions.
Federal Reserve Governor Jerome Powell Speech about Housing Reform: Speaking at the American Enterprise Institute on July 6, Federal Reserve Governor Jerome Powell urged Congress to act on housing reform while the market is strong. He laid out five principals for reform: avoiding future bailouts, making government guarantees apply only to securities, not institutions, promoting competition in the market, restructuring and repurposing parts of the existing architecture of the housing finance system, and building on areas of bipartisan agreement.
Consumer Financial Protection Bureau (CFPB) Director Threatened with Contempt: House Financial Services Chairman Jeb Hensarling (R-TX) threatened CFPB Director Richard Cordray with contempt, saying that Cordray failed to fully respond to a subpoena request. The Bureau had a May 2 deadline to send all communications regarding a proposed rule governing arbitration agreements. In Hensarling’s July 5 letter, he said that an effort to issue a final rule before complying with the subpoena’s requirements “may lead to contempt proceedings.”
CFPB Finalizes Updates to “Know Before You Owe” Mortgage Disclosure: The CFPB finalized on July 7 updates to its “Know Before You Owe” mortgage disclosure rule with amendments that are intended to formalize guidance in the rule. The Rule took effect on October 3, 2015 and created new forms that consumers receive when applying for and closing on a mortgage.
Banks Request Meeting With Attorney General Regarding Fair Lending Enforcement: Banking trade groups have requested a meeting with U.S. Attorney General Jeff Sessions to discuss the enforcement of fair lending laws. Lenders argued that the Obama administration took an expansive approach to enforcing the laws, and interested groups in the housing sector had hoped that the Trump Administration would take a different approach to enforcement. According to the groups, however, the Trump Administration is “further[ing] the prior administration’s policy.”
National Credit Union Administration (NCUA) Chairman Asks CFPB for Relief: NCUA Chairman J. Mark McWatters asked CFPB Director Richard Cordray in a July 6 letter for the CFPB to provide a conditional exemption for credit unions with assets of more than $10B from its examination and enforcement authority. McWatters cited credit unions’ unique role in the financial system by virtue of their being not-for-profit institutions owned and controlled by members. McWatters said that shifting examination and enforcement authority to NCUA offers numerous benefits from the current system.
Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Publish “Living Wills”: The Fed and the FDIC published last week portions of resolution plans for the eight of the largest banks operating in the U.S. The regulators gave systemically important nonbanks AIG and Prudential until the end of 2018 to submit their living wills, extending the original deadline of the end of this year. Commentators have noted that the extension is possibly an indicator that the two companies may soon lose their “systemically important” designation.
Basel Committee to Simplify Capital Needs Calculation: The Basel Committee on Banking Supervision, a group of international bank regulators which sets global minimum bank capital rules, said that it will simplify the way domestic banks calculate the amount of capital needed to withstand market shocks. The rules are scheduled to be implemented around the world by 2019.
Financial Stability Board (FSB) Publishes Guidance for Global Banks: The Financial Stability Board published on July 6 two guidance documents to assist authorities in implementing the FSB’s standard on Total Loss-Absorbing Capacity, as well as a report on reform progress 10 years after the financial crisis. The report found progress on the build-up and clearing of bail-in buffers in large banks, but noted that “significant work remains to address cross-border resolution.”
Security and Exchange Commission’s Investor Advocate Releases Report to Congress: The SEC Office of the Investor Advocate released a report on June 29 detailing the office’s objectives for FY2018. Included was a suggestion that the agency could use a breather from congressionally-mandated rulemaking. In a message in the report, office head Rick Fleming stated: “I encourage Congress to consider giving the Commission a respite from statutory mandates to engage in rulemaking… From my point of view, the Commission could use some time to get back to basics and refresh some of the rules that have gone too long without updates.”
NOMINATIONS, COMINGS AND GOINGS AT THE AGENCIES
Federal Reserve Announces Appointment of New General Counsel: The Federal Reserve announced on July 6 that Mark Van Der Weide will become the central bank’s general counsel, effective later this summer. Van Der Weide has worked in various capacities in the Fed’s supervision division since 2010 and previously served in the Fed’s legal division.
Securities and Exchange Commission (SEC) Hires Congressional Liaison: SEC Chairman Jay Clayton has hired Bryan Wood to head up the agency’s Legislative and Intergovernmental Affairs Office. Wood recently worked as a Republican staff member of the House Financial Services Committee.
OTHER NOTEWORTHY ITEMS
New York Stock Exchange (NYSE) Withdraws “Unicorn” Listing Proposal: The New York Stock Exchange withdrew a proposal to change its rules to allow highly valued private companies to list shares on the exchange without first raising funds in an initial public offering (IPO). The proposal did not receive any public comments and was pulled in late June, for reasons unknown.
On another note, in a move designed to bring large, privately owned businesses into the public market, the SEC announced on June 29 that all companies, including large ones, will be allowed to confidentially submit registration statements for initial public offerings. This expands a provision of the JOBS Act that allowed confidential submissions for small firms.
Delaware Moving Toward Enactment of Blockchain Record-Keeping Legislation: The State of Delaware is close to enacting legislation that would facilitate the use of blockchain technology for corporate recordkeeping. The bill, SB 69 in the Senate, amends Delaware’s General Corporate Law and moved easily through both chambers of the State’s General Assembly. The amendments, once signed into law, will become effective August 1.