Posted by Staff on October 09, 2015
House Passes Bipartisan Consumer Protection and Regulatory Relief Bills
The House passed five bipartisan Financial Services bills this week, including one that provides a formal hold-harmless period for those making a good faith effort to comply with the CFPB’s 1,888-page TRID rule, which became effective on Oct. 3.
The bill, H.R. 3192, the Homebuyers Assistance Act sponsored by Rep. French Hill (R-AR), passed overwhelmingly by a vote of 303-121.
“I am happy members of both sides of the aisle were able to come together and move legislation that will prevent costly market disruptions and delays for Americans homebuyers,” said Rep. Hill.
Four other bipartisan bills that passed the House this week provide needed regulatory relief for Main Street job creators and investors, and help state and local agencies aid families in collecting child support payments. Americans working in the financial sector to have the freedom to use their time and resources toward creating jobs and growing the economy rather than complying by misguided rules. The following are the financial services bills that passed with bipartisan support:
• H.R. 1553, the Small Bank Exam Cycle Reform Act, sponsored by Rep. Scott Tipton (R-CO)
• H.R. 1839, the Reforming Access for Investments in Startup Enterprises Act (RAISE) Act, sponsored by Rep. Patrick McHenry (R-NC)
• H.R. 2091, the Child Support Assistance Act, sponsored by Rep. Bruce Poliquin (R-ME)
• H.R. 1525, the Disclosure Modernization and Simplification Act, sponsored by Rep. Scott Garrett (R-NJ)
Subcommittee Recommends MDBs Focus on Economic Growth
The Monetary Policy and Trade Subcommittee held a hearing on Friday to discuss the future of multilateral development banks (MDBs) and how they can more effectively spur economic growth to alleviate poverty in developing countries.
“Congress plays an important role in determining U.S. funding for the MDBs and engaging in oversight of the Administration’s participation in the MDBs," remarked Subcommittee Chairman Bill Huizenga (R-MI). "The MDBs’ goal is to draw on member nations’ contributions to leverage additional private sector financing."
Rep. French Hill | House OKs Hill's bill to delay bank rebuke
Rep. French Hill, R-Ark., who sponsored the bill, said businesses are concerned that the agency won't be lenient, despite a written promise from the bureau's director. An act of Congress, he said, would give the institutions greater confidence.
Rep. Scott Tipton| House OKs Tipton’s bank relief bill
The House unanimously passed legislation on Tuesday sponsored by Rep. Scott Tipton that would ease regulatory burdens on well-managed community banks.
Weekend Must Reads
Investor's Business Daily | Sorry, Bernanke, But Fed’s ‘Recovery’ Was Miserable
This “recovery” has been by far the worst – even by the Fed’s own data. Put simply, Fed policies since the financial crisis not only haven’t helped the economy rebound, they’ve also held it back.
Powerline | Why the Big Banks Love the Democrats
Democrats are corporatists who want to favor a few big firms that the government can then control. Dodd-Frank has been a disaster, but not for the nation’s biggest banks and not for the Democratic Party.
In the News
American Banker | House Passes Bill to Delay Enforcement of New Mortgage Disclosures
Washington Examiner | Jobs Report: Disappointment Is Routine With This Administration
Investor's Business Daily | Jobs Report: Disappointment Is Routine With This Administration
Posted by Staff on October 07, 2015
Today the House will consider H.R. 3192, the Homebuyers Assistance Act. This bipartisan legislation was approved by the Committee 45-13 in July and would provide a temporary safe harbor (until February 1, 2016) from enforcement of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure Rule, known as TRID, as long as the person subject to the rule has made a good faith effort to comply with it. . TRID took effect just a few days ago -- Oct. 3.
Posted by Staff on October 02, 2015
CFPB, Dodd-Frank Harms Consumers
As Investor’s Business Daily noted in its coverage of the hearing, “Cordray confessed under grilling by House banking panel chief Jeb Hensarling that the disparate impact methodology that his agency uses…’overestimates’ racial disparities on loan pricing.”
“In short, Cordray is trying to restructure the $900 billion auto finance industry based on bad math,” said the newspaper’s editorial.
The CFPB’s disparate impact methodology was described as “downright insulting to African-Americans” by Rep. David Scott (D-GA), “for assuming last names such as Johnson, Williams or Robinson belong to black borrowers,” the Wall Street Journal reported in its article about Tuesday’s hearing.
The Bureau, a creature of Dodd-Frank, is uniquely unaccountable to hardworking taxpayers because it is not subject to the usual checks and balances that protect Americans from government overreach and abuse.
“Instead of the equal protection offered by the impartial rule of law, they are today dictated to by the arbitrary rule of regulators, and Exhibit Number One is the CFPB director,” said Chairman Hensarling (R-TX).
“Dodd-Frank and the CFPB are the prime reason the big banks are bigger and the small banks are now fewer. This has eliminated competition, stifled innovation and given consumers fewer choices. Dodd-Frank and the CFPB have raised prices, eliminated free checking for millions, and are cutting off access to mortgages, bank accounts and credit cards. This tragically makes it harder for low income Americans living paycheck to paycheck to improve their lives and achieve financial independence,” Hensarling added.
Committee Approves Bipartisan Bills to Empower Consumers and Job Creators
One of the bipartisan bills approved by the committee, H.R. 1090, the Retail Investor Protection Act sponsored by Rep. Ann Wagner (R-MO), will protect Americans’ ability to choose and access investment advice.
“I'm grateful for my colleagues on the Financial Services Committee who joined me today in protecting the millions of low- and middle-income Americans from the Administration's latest power grab. Preserving access to sound investment advice for hardworking families is something I believe in and will continue to fight for, and I look forward to seeing this bipartisan bill on the House floor soon," said Rep. Wagner.
The committee also approved two bipartisan bills that will bring more accountability and transparency to the CFPB. The CFPB is perhaps the most powerful and least accountable federal agency in history – a dangerous defect that stems from how the Bureau was designed in the Dodd-Frank Act.
H.R. 957 ensures greater accountability at the CFPB by creating an independent Inspector General for the Bureau.
“The CFPB has been given broad authority and must be accountable to the American people. More than 30 other federal departments and agencies have an independent Inspector General. This bill would bring the CFPB in line with these agencies and provide the necessary oversight and transparency,” said bill sponsor Rep. Steve Stivers (R-OH).
H.R. 1266, the Financial Product Safety Commission, removes the CFPB from within the Federal Reserve System and re-establishes it as a stand-alone agency that is governed by a five-member, bipartisan commission. All authorities and powers of the CFPB remain unchanged.
“After months of productive conversations with my colleagues from both sides of the aisle, I’m pleased the Committee acted in a bipartisan manner to move this CFPB commission bill forward. By changing the leadership structure, we can ensure the Bureau is more accountable, transparent and shielded from the whims of political change and partisan politics,” said bill sponsor Rep. Randy Neugebauer (R-TX).
The committee approved the Burdensome Data Collection Relief Act, H.R. 414 sponsored by Rep. Bill Huizenga (R-MI). The bill repeals a burdensome, unneeded and expensive pay ratio requirement of Dodd-Frank.
“We are all concerned about creating more jobs in our various congressional districts. And instead of companies being forced to spend millions of dollars trying to comply with a regulatory mandate for which the SEC was unable to quantify any benefits to shareholders, shouldn’t these burdensome costs be used by manufacturers, retailers and other public companies for much-needed investment and job creation and hiring of new employees” said Rep. Huizenga.
Legislation requiring the National Credit Union Administration (NCUA) to conduct a study of the appropriate capital requirements for federal and state credit unions also passed the committee on Wednesday. In January the NCUA issued a revised risk-based capital proposed rule for credit unions. The bill’s sponsor, Rep. Stephen Fincher (R-TN), said it “would ensure the cost of this [NCUA] proposal is vetted relative to its impact on lending.”MEMBER SPOTLIGHT
Rep. Ann Wagner | Wagner financial services bill, opposed by Obama, passes House committee
Rep. Ann Wagner's Retail Investor Protection Act passed the House Financial Services Committee Wednesday, setting up a vote in the full House of Representatives on an issue that the Obama administration has taken an opposing position.
Weekend Must Reads
Wall Street Journal | Elizabeth Warren’s Intellectual Purge
President Obama has let Elizabeth Warren veto presidential appointments, and the power rush seems to have gone to her head. Now the Massachusetts Senator has forced the resignation of a Brookings Institution economist because he dared to report that new financial regulations will cost investors.
The Hill | CFPB should be bipartisan commission
From the very beginning, Sen. Warren (D-Mass.) and other supporters intended to structure what is now the Consumer Financial Protection Bureau as a bipartisan commission. Unfortunately, the dedication to a consumer agency led by a diverse board or commission did not last, and the CFPB that Congress created is headed by a single director. In this regard, the new CFPB is unlike most financial regulators in Washington, including the Federal Reserve Board, Federal Deposit Insurance Corp., Securities and Exchange Commission, and National Credit Union Administration.
Wall Street Journal | The Jack Kemp Model for Republicans
Jack Kemp never became president, but the country desperately needs a leader like him now. When Kemp died in 2009, two themes dominated tributes to his career as a star quarterback, congressman, cabinet secretary and candidate for vice president and president. Conservatives called him one of the most influential politicians of the 20th century who never made it to the White House. He was “among the most important Congressmen in U.S. history,” as a Wall Street Journal editorial put it. Liberals declared that the Republican Party needed, but didn’t have, a Kemp: a leader who cared about the poor, who wanted to make the GOP attractive to minorities and working-class voters, who never went negative and regularly worked across party lines.
Investors Business Daily | CFPB Admits Using Bad Math To Restructure $900 Bil Auto Finance Industry
Shakedown: After accusing the ninth-largest bank auto lender of discriminating against minorities, the president's consumer watchdog admits his analysis is less than perfect.
Still, according to Monday's federal order, Cincinnati-based Fifth Third Bank will have to make $18 million in restitution for allegedly marking up loans for blacks and Latinos.
It will also have to cap the interest rates it charges customers, which Consumer Financial Protection Bureau chief Richard Cordray called "a significant step toward protecting consumers from discrimination."
Yet on Tuesday, as the ink was still drying on the settlement, Cordray confessed under grilling by House banking panel chief Jeb Hensarling that the disparate impact methodology that his agency uses to determine lending bias "overestimates" racial disparities in loan pricing.On the Horizon
October 8, 2015 9:00 a.m.
Wall Street Journal | Questions About Leak at Federal Reserve Escalate to Insider-Trading Probe
American Banker | Some House Democrats Defect in Battle Over CFPB
Washington Examiner | GOP seeks to rein in Obama's finance bureau
Wall Street Journal | CFPB Head Defends Regulator’s Work Before Lawmakers
Posted by Staff on September 18, 2015
Dodd-Frank's Impact 5 Years Later: We Are Less Free
As the nation marked Constitution Day on Thursday, the Financial Services Committee heard from witnesses that the Dodd-Frank Act makes Americans less free. By centralizing greater power in the hands of Washington bureaucrats, Dodd-Frank results in a less dynamic economy and a command-and-control system in which regulators dictate credit offerings and individual freedom and choice are sacrificed.
"Dodd-Frank erodes the economic freedom and opportunity that empowers low income Americans to rise and generate greater shared prosperity. Dodd-Frank moves us away from the equal protection offered by the impartial rule of law towards the unequal and victimizing rule of political bureaucrats. Of all the harm Dodd-Frank inflicts, this is the most profound and disturbing" Chairman Jeb Hensarling (R-TX) said.
Rep. Robert Hurt (R-VA) said he’s heard from his constituents about the impact Dodd-Frank is having on their lives. “Constituents told me that while this law was touted as Washington’s attempt to protect consumers, in reality it has only left consumers with fewer choices and higher costs to access capital,” he said. “In giving even more power to Washington bureaucrats, Dodd-Frank has made us less free and gravely inhibited individual freedom and choice.”
George Mason University law professor Todd Zywicki reminded the committee that freedom and an effective financial services system go together. “Freedom to gain access to capital to start and grow a business, freedom to buy a home and provide for your family’s financial security, freedom to choose those whom you entrust with your hard-earned money provide the means for pursuing the American dream.”MPBN News reported Rep. Bruce Poliquin’s (R-ME) comments at the hearing on the harm of Dodd-Frank’s regulatory burden. "But now you have this big net - we do a lot of fishing up in Maine - and this big net is smothering everybody that should be able to swim through the net," he said.
Strong U.S. Leadership During Global Economic Turmoil is Essential
Members and witnesses at Thursday’s Monetary Policy and Trade Subcommittee hearing said recent global economic turmoil presents an opportunity for the United States to lead international economic policies away from government intervention and toward free markets, free trade and fiscal responsibility.“The combination of debt and misguided policy decisions being implemented by countries across the globe provides the U.S. with an opportunity to reorient international priorities,” remarked Subcommittee Chairman Bill Huizenga (R-MI). “Today’s hearing urged the Obama Administration to advance a ‘back to basics’ approach to economic policy that prioritizes fiscal responsibility and free markets.”
Republican Members called the turmoil a clear indication that government intervention in the markets has serious consequences. Members urged the Obama Administration to press China to commit to greater openness and transparency. Members also called on the Administration and the IMF to recognize the consequences of “moral hazard”—that is, the risks to the stability of the financial system that may result from underwriting imprudent bank lending practices and irresponsible fiscal policies by European governments.
Rep. Bruce Poliquin | Banking Regs Smothering Small Banks and Credit Unions
Poliquin told fellow members of the House Financial Services Committee that provisions aimed at big banks are being applied to small banks and credit unions.
Weekend Must Reads
AEI | New poverty numbers highlight importance of jobs – not wages
Some might use the new data to show that more government intervention is needed to increase low wages. But a deeper look at the data shows that a lack of work all together is the bigger culprit.Wall Street Journal | Stuck on Zero
Zero rates channel credit to big companies, the well-to-do and government, while punishing savers and doing little for entrepreneurs and small businesses. The Fed’s monetary policy hesitation also feeds uncertainty, which further dampens business investment, which keeps growth low, while inflation never rises, and so the Fed is never confident enough in the economy to raise interest rates.
Wall Street Journal | Incomes and Poverty, 2014
The White House didn’t put out an official statement on the Census release, and perhaps commenting was too embarrassing politically. No President has done worse by the middle class in modern times. Absent a change of policy direction—prioritizing growth rather than social justice, measuring success by results instead of federal dollars spent—the unfortunate reality is that the future is unlikely to be better than today. No wonder so many Americans are anxious or angry.
Investor's Business Daily | Middle Class Lost In Obama's 'Middle Class Economics'
Obama's economy has been particularly harsh on those already at the bottom. Census data show that the bottom fifth of households saw their average income fall by 8% from 2009 to 2014.
In the News
Politico | Federal Reserve to Leave its Main Borrowing Rate Near Zero
Washington Examiner | Poverty unchanged in 2014, 46.7 million impoverished
Credit Union Times | Duffy Urges CUs to Rat on Regulators: Onsite at NAFCU Caucus
Politico Pro | Yellen: Fed is cooperating with House subpoena
Posted by Staff on September 11, 2015
Lawmakers Express Bipartisan Concerns Over Labor Dept. Retirement Regulation
The Capital Markets and Government Sponsored Enterprises Subcommittee and the Oversight and Investigations Subcommittee held the hearing to examine the Labor Department's proposed "fiduciary rule," which will limit retirement choices and prevent lower and middle income savers from accessing affordable financial advice.
"Every day, millions of Americans look to a broker dealer or investment adviser for guidance on what to do with their hard-earned savings and to help them achieve a secure and prosperous retirement. That makes it all the more curious that this same Department of Labor is now marching forward with a regulation that will upend the ability of Americans to receive such guidance and which threatens the retirement security of the most vulnerable within our society," said Capital Markets Subcommittee Chairman Scott Garrett (R-NJ).
Rep. Sean Duffy (R-WI), Chairman of the Oversight and Investigations Subcommittee, noted the proposed rulemaking has been described as "Obamacare for your IRA, and is yet another attempt by the Administration to perpetuate a 'government-knows-best' regime. Americans should be able to make the investment choice that is right for them."
Expert witnesses at the hearing said the regulation will make the type of financial advice millions of Americans want either unaffordable or unavailable -- particularly for those who need it most. "Under such a model, many will either pay more than they do today or will receive no advice at all," said one witness.
"There will be massive market disruption and many middle income savers will suffer without advice," said another witness.
Rep. Ann Wagner (R-MO) has introduced H.R. 1090, which would stop the Department of Labor’s misguided rule. "This is good legislation that prevents an overzealous administration from taking away sound advice for low and middle income savers," she told reporters during an interview this week.
Following the hearing, Chairman Jeb Hensarling (R-TX) said the Committee will advance Rep. Wagner's bill. "We will stand with lower and middle income savers and prevent government bureaucrats from denying them access to reliable and affordable retirement saving options," he said.
Task Force members continued their discussions from previous hearings about the myriad ways terrorist organizations are able to finance their operations and the threat these groups pose to U.S. national security.
Concerns were expressed by both Republicans and Democrats on the Task Force that President Obama's nuclear deal with Iran will lead to more terrorism since Iran is the world's largest and most dangerous state sponsor of terrorism.
Task Force Vice Chairman Robert Pittenger (R-NC) said, “Iran will soon receive a windfall of over $100 billion, and their 46 banks will be integrated into the world’s financial system. Preventing these dollars from funding terror must be a priority."
Witness Scott Modell told the Task Force that the U.S. "will fall further behind" when it comes to combating terrorist financing if the Iranian nuclear agreement is implemented. "If you look at the thousands of individuals and entities that have been designated as a result of Iran's illicit activities over the years that are now going to be exonerated essentially by this deal, of course it's a setback. Those are people who are willingly engaged in criminal activity on behalf of the Iranian regime."MEMBER SPOTLIGHT
Rep. Sean Duffy | Duffy: Financial reforms have failed us
In large part, the 2008 financial crisis was a result of federal financial regulators failing to do their jobs in the first place, coupled with a failure to anticipate the looming issues in the subprime mortgage market. What did Dodd-Frank do? It rewarded regulators’ incompetence with more responsibility, and it built a moat around “too big to fail institutions,” while making it difficult for small banks to stay afloat — to say nothing of the untold damage it has done to our economy. The law of unintended consequences has never been more apparent than when we look at Dodd-Frank.
Weekend Must Reads
Real Clear Politics | Can We Please Have a Rules-Based Policy?
And so much of the confusion stems from the fact that the Fed is still running a seat-of-the-pants policy based on the vagaries of monthly data points and daily stock market moves when it should adhere to a market price rule (commodity indexes including gold, the exchange value of the dollar, and Treasury bond spreads) that might really inform investors and govern Fed activity.
Wall Street Journal | At 50, This Housing Policy Needs a Big Renovation
As HUD marks its 50-year anniversary on Sept. 9, the challenges it faces are not on city streets or in homeless shelters, but within its own offices. Mission creep, management problems and criminal activity have rendered the agency a feeble instrument for renewing urban America.
AEI | No, America Isn’t Moving Left
The real defect in the theory that America is moving left is that the polling evidence does not back it up. The public has not turned to the left ideologically—and it remains unhappy with the status quo under Obama.
Forbes | Addressing the SEC's Administrative "Home Court" Advantage in Enforcement Proceedings
To date, the SEC has been silent on the central issue of the fairness of administrative proceedings and the objectivity of the ALJs, despite the fact that courts have noted it would be a relatively “easy fix” for the SEC to change the way it appoints judges.
On the Horizon
September 17, 2015 10:00 a.m.
Politico Pro | Iran the focus of terror finance task force hearing
St. Louis Post-Dispatch | Wagner Bill Heats Up Financial Services Fight
Washington Examiner | House Panel Will Move to Stop Labor Rule
New York Times | Companies Struggle With Rules on Conflict Minerals
Austin American-Statesman | Williams: Why I Will Oppose the Iran Deal
MPBN News | Bruce Poliquin Critical of Investment Advisor Regulations
Plan Adviser | Legislators Hear Arguments About Fiduciary Reform
Kuwait News Agency | Kuwait’s Cooperation on Detecting Terrorism Financing “Impressive”
Posted by Staff on July 31, 2015
Committee Passes Federal Reserve Accountability, Bipartisan Reg Relief Bills
On Wednesday the Financial Services Committee passed several bills designed to help grow the economy, create jobs and bring much-needed accountability and transparency to the Federal Reserve.
H.R. 3189, the Fed Oversight Reform and Modernization Act (FORM Act), requires the Federal Reserve to transparently communicate its monetary policy decisions to the American people. Included among its reforms are changes that require the Fed to generate a monetary policy strategy of its own choosing.“History – not theory, but history – shows that when the Fed follows a monetary policy strategy of its own choosing and transparently communicates that strategy to the rest of us, the economy performs better and more Americans get to wake up in the morning and go to work. The FORM Act protects the Fed’s independence to chart whatever monetary policy course it deems appropriate, but it has to give the American people a greater accounting of its actions," said Chairman Jeb Hensarling (R-TX).
The FORM Act’s sponsor, Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (R-MI), added, "With the Federal Reserve having more power and responsibility than ever before, it is imperative the Fed changes its opaque structure and becomes more transparent and accountable to the American people. The Fed’s recent high degree of discretion and its lack of transparency in how it conducts monetary policy demonstrate that not only are reforms needed, but more importantly that reforms are necessary. We need to modernize the Federal Reserve and bring it into the 21st Century."
For more information on the bills that the committee passed this week, click here.
Dodd-Frank Leaves Americans Less Prosperous
The Committee held its second hearing this month focused on the consequences of the Dodd-Frank Act with a discussion of the sweeping law’s impact on Americans’ prosperity.
Although President Obama promised Dodd-Frank would “lift the economy” when he signed the 2,300-page bill into law with much pomp and circumstance five years ago, Americans are instead stuck in the worst performing economic recovery since World War II – one that is even “weaker than previously thought, according to newly revised data,” the Wall Street Journal reported this week. And ABC News reported this week that wage growth fell to a “record-slow pace” in the second quarter.
The Committee’s hearing, according to Investor’s Business Daily, offered “eye-opening testimony” that Dodd-Frank is “largely to blame for our lackluster economy.”
“I believe that all the new regulation added by the Dodd-Frank Act in 2010 is the primary reason for the slow growth this country has experienced since 2010,” testified Peter Wallison of the American Enterprise Institute.
Former Senator Phil Gramm, an economist who served as Chairman of the Senate Banking Committee, testified before the Committee that “the regulatory burden has exploded under Dodd-Frank” and today “we’re experiencing the poorest recovery in the post-war history of America. If we had simply equaled the average of the 10 previous recoveries in the post-war period, 14.4 million more Americans would be working today and the average income of every man, woman, and child in the country would be over $6,000 higher.”
Wallison, who served on the Financial Crisis Inquiry Commission, refuted some of the Democrats’ myths about the cause of the financial crisis.
“Now, predatory lending no doubt occurred, but the Financial Crisis Inquiry Commission was unable to find enough data to show that it was significant. What we learned from the financial crisis is that in 2008 more than half of all mortgages in the United States were subprime. And of those, 76 percent were on the books of government agencies -- primarily Fannie Mae and Freddie Mac, FHA too. The point was here that the government had required certain quotas of mortgages to be made to people below median income. Now, there was no reason why that was a bad idea except for the fact that if you make those quotas too high then the GSEs had to reduce their underwriting standards, which they did. That's why 81 percent of all of the losses that Fannie suffered they reported as coming from subprime and other low-quality mortgages,” Wallison explained.MEMBER SPOTLIGHT
Rep. Ed Royce | Bill to kill $3M raises for Fannie, Freddie CEOs gains momentum
“Congress needs to put a stop to the planned multi-million dollar paydays at Fannie Mae and Freddie Mac. Holding compensation packages at taxpayer-backed organizations to responsible limits is in the interest of the public trust,” Royce said in advance of his bill being marked up.
Weekend Must Reads
Investor's Business Daily | How Dodd-Frank Ate The U.S. Economic Recovery
Dodd-Frank has led to a decline in small banks and rising market share for the very largest. A cynic might suspect this was how it was designed to be. But what it's done to the economy is worse.
International Business Times | Dodd Frank Act Killing US Banks? Only 3 New Financial Institutions Have Opened Since 2010
One explanation for the lack of new banks in recent years might be the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in 2010. Before the act was passed, the banking industry was spurring, and over 100 new banks popped onto the scene every year, according to data from the Federal Deposit Insurance Corporation, which is responsible for approving new banks.
Wall Street Journal | Dodd-Frank’s Unhappy Birthday
A unanimous three-judge panel of the D.C. Circuit Court of Appeals ruled that State National Bank of Big Spring has standing to challenge the CFPB’s constitutionality. The bank, supported by a legal team including former White House counsel Boyden Gray and the Competitive Enterprise Institute, argues that the agency violates the Constitution’s separation of powers. The bureau is an independent agency and thus largely unaccountable to the President. But because it draws funding directly from the Federal Reserve, rather than appropriations, it is also largely unaccountable to Congress. And it can declare lending practices abusive at its whim. Don’t be surprised if this is another case that makes it to the Supreme Court.
AEIdeas | The Wrong Directions for Poverty Policy
If the best antipoverty program is a job, government should support policies aimed at job growth, and should not increase wages for some while making employment harder to find for others.
In the News
Wall Street Journal | House Committee Approves Federal Reserve Overhaul Bill
American Banker | Your Definitive Guide for the Latest Slew of House Banking Votes
Automotive News | U.S. House committee approves limit on CFPB's oversight of auto lending
Bloomberg | Fed Accidentally Released Confidential Staff Projections
Posted by Staff on July 24, 2015
Committee Explores Appropriate Level of Capital and Liquidity
The full committee held a hearing to delve in to the issue of "too big to fail" and to hear from experts on the appropriate levels of capital and liquidity for U.S. banks to function properly and help foster economic growth.
"Since the crisis, U.S. banks have raised more than $400 billion in new capital and regulators have required institutions to maintain higher capital buffers -- again, under the authority they possessed pre-Dodd-Frank. I for one believe that generally this to be a good thing. But the capital standards that were already complex have become even more complex with Basel III. I do not necessarily believe this to be a good thing," remarked Chairman Jeb Hensarling (R-TX) in his opening statement.
He continued, "There are a number of questions this committee must explore. One, again, although capital and liquidity standards have increased post-crisis, do we really know by how much? How opaque do balance sheets still appear? How many items that were once off balance sheet will find their way back onto balance sheets? What amount of capital is the proper amount? Too much, economic growth can stall. Too little and too many failures could yet ensue."
Rep. Sean Duffy (R-WI) noted lawmakers' acknowledgement of Dodd-Frank's clear failure to end "too big to fail." "It's fascinating listening to my friends across the aisle as they've grown over the last four and a half years. They started off telling us how Dodd-Frank was going to end 'too big to fail,' it was a sure fix to end 'too big to fail,' if you listen to the debates with former Chairman Frank. That was the reason why we have a 2,000-plus page bill, why we have 400 new rules. But the tone has changed. They're now admitting that Dodd-Frank in all of its sweeping reforms does not end 'too big to fail.'"
Subcommittee Reviews Proposals for Greater Accountability and Transparency at the Federal Reserve
On Wednesday the Monetary Policy and Trade Subcommittee held a hearing to review legislative proposals that would reform the Federal Reserve. These reforms would bring about a more transparent and accountable Federal Reserve in regard to its operations and decision-making in monetary policy.
"Last Congress, as we examined the Fed’s actions over the last 100 years through the Federal Reserve Centennial Oversight Project, it became clear that the Federal Reserve has gone above and beyond its original mission statement. In fact, since the enactment of Dodd-Frank, the Federal Reserve has gained unprecedented power, influence, and control over the financial system while remaining shrouded in mystery to the American people," said Subcommittee Chairman Bill Huizenga (R-MI). "The Fed must be accountable to the people’s representatives as well as to the hardworking taxpayers themselves."
Rep. Luke Messer (R-IN) spoke about the many Americans who are still suffering from the financial crisis and deserve to have an accountable and transparent Federal Reserve. "I think the American people look at all of what happened, and they understand. They don't know all the complexities but from their perspective, it looks something like this - there are a whole lot of rich people who are part of creating this crisis. The crisis happened and all those rich people are still rich, and the average working family is struggling. Their savings haven't improved. Their wages are flat, and they see a process that seems not very transparent, and they want to know who's accountable and responsible for it."
Task Force Considers Iran Nuclear Deal’s Implications on Financing Terrorists
The Task Force to Investigate Terrorism Financing held a hearing on Tuesday to examine the possible consequences of the Obama administration’s nuclear deal with Iran, part of which involves the lessening or removing of economic sanctions placed on Iran in the past.
“It appears this agreement fails to address the realities surrounding Iran’s sponsorship of terror, while further empowering its mullahs by infusing billions of dollars into its economy through lifting the sanctions that successfully brought Iran to the negotiating table in the first place,” said Task Force Chairman Mike Fitzpatrick (R-PA). “The Iranian regime has demonstrated a lack of concern about its own people, leaving little doubt the estimated $150 billion in funds currently held abroad will allow the Iranian economy to fully recover – not to the benefit of its oppressed citizens – but to the advantage of the next generation of terror syndicates.”
Rep. Ann Wagner (R-MO) also weighed in with her concerns about how the economic boost for Iran might lead to undesirable outcomes for the United States and its allies in the region. “The president has agreed to far-reaching concessions in nearly every area that was supposed to prevent Iran from acquiring a nuclear weapon. Under this deal, Iran would receive $100 billion to $150 billion in sanctions relief and regain access to conventional arms and ballistic missiles that has been denied for nearly a decade. Iran will be free to transfer these weapons, as has been stated, to Hezbollah, the Syrian government, Yemeni rebels, and other terrorist groups. These organizations threaten the security of the United States, our ally Israel, and the world, and will further destabilize a region already in crisis.”
Subcommittee Conducts Oversight of the National Credit Union Administration
The Financial Institutions and Consumer Credit Subcommittee held a hearing to examine the National Credit Union Administration's (NCUA) operations and budget. Credit unions have been shutting down in alarming numbers and unable to fully serve their customers' needs due to overwhelming federal regulations. In lights of these circumstances, Subcommittee Members questioned NCUA Chair Debbie Matz on how the agency allocates its budget and how their policies affect the fiscal health of credit unions.
“Credit unions in particular share a unique relationship with local communities. After all, they are cooperatives at their core. They help bring unserved and underserved customers into the financial mainstream. They provide that first credit card for young adults trying to build credit. They help the first-time homebuyer purchase the home they have been dreaming of," said Subcommittee Chairman Randy Neugebauer (R-TX) in his opening statement. “Unfortunately, credit unions, like community banks, are suffering from ‘one size fits all’ regulatory actions from federal regulators. For example, some credit unions now under go stress testing like their larger bank counterparts. Because of this increased regulatory burden and the related compliance costs, we have seen massive consolidation of credit unions and inflexible product standardization, which has limited consumer choice."
Rep. Scott Tipton | Examining Dodd-Frank’s first five years
The regulatory burden under Dodd-Frank Act has imposed 61 million paperwork burden hours — at $24 billion in compliance costs — according to one calculation, with the hardest hit being small financial firms. During a visit to First Colorado National Bank, a locally-owned bank with a $50 million dollar portfolio in Delta, I heard first-hand how much of a toll this law has taken on banks that are the lifeblood of small communities’ economies. Instead of hiring tellers and loan officers, these banks are hiring compliance staff in order to keep up with new regulations. It is disappointing to hear that small bankers no longer feel like they run their bank, but that the federal government runs their bank for them.
To read other comments Committee Members issued this week on the harm caused by the Dodd-Frank Act, click here.
Weekend Must Reads
Wall Street Journal | Dodd-Frank’s Nasty Double Whammy
To limit abuse by the rulers, ancient Rome wrote down the law and permitted citizens to read it. Under Dodd-Frank, regulatory authority is now so broad and so vague that this practice is no longer followed in America. The rules are now whatever regulators say they are.
The Hill | Five years after Dodd-Frank, time for a course correction at CFPB
Most Americans don’t know about the existence of the CFPB, but Dodd-Frank’s out of control law enforcement agency is turning out to be perhaps the most powerful agency nobody has ever heard of. According to a USCC-Zogby Analytics poll in June, 2015, less than one in five Americans know the CFPB exists. From all indications, the CFPB would like to keep it that way.
Forbes | Dodd-Frank At 5 Years Old: Making The Next Crash More Likely And Worse When It Happens
You don’t reduce risk by concentrating it. What you’ve done there is concentrate risk.
On the Horizon
July 28, 2015 10:00 a.m.
Chicago Tribune | Five Years Later, Dodd-Frank Still Falls ShortMiami Herald | Fix the Dodd-Frank Law
Wall Street Journal | House Republican’s Proposal Takes Aim at Fed Powers
American Banker | House Panel Debates Bills to Rein In Fed's Authority
Bucks County Courier Times | Fitzpatrick Referees Hearing on Iran Nuclear Deal
Northwest Arkansas Democrat Gazette | Hill wants details on money flow to Iran
Credit Union Times | Credit Unions Don’t Represent Their Members: Matz
Wall Street Journal | Raising Ex-Im From the Dead
Politico | Democrats’ New Cause: Dodd-Frank
Washington Examiner | Dodd-Frank at 5: Helping Big Banks Get BiggerLA Times | Key Regulatory Job Created at Federal Reserve Still Vacant After Five Years
Orange County Register | Time to revisit Dodd-Frank banking restrictions
Posted by on July 20, 2015
By Jeb Hensarling
Click here to read article
Tuesday will mark five years since President Obama’s signing of the Dodd-Frank law, the most sweeping rewrite of the country’s financial laws since the New Deal. Mr. Obama told the country that the legislation would “lift our economy.” The statute itself declared that it would “end too big to fail” and “promote financial stability.”
None of that has come to pass. Too-big-to-fail institutions have not disappeared. Big banks are bigger, small banks are fewer, and the financial system is less stable. Meanwhile, the economy remains in the doldrums.
Dodd-Frank was based on the premise that the financial crisis was the result of deregulation. Yet George Mason University’s Mercatus Center reports that regulatory restrictions on financial services grew every year between 1999-2008. It wasn’t deregulation that caused the crisis, it was dumb regulation.
Among the dumbest were Washington’s affordable-housing mandates, beginning in 1977, that led to a loosening of underwriting standards and put people into homes they couldn’t afford. The Federal Reserve played its part in the 2008 financial crisis by keeping interest rates too low for too long, inflating the housing bubble. Washington not only failed to prevent the crisis, it led us into it.
Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day.
Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans.
Has Dodd-Frank nevertheless made the financial system more secure? Many of the threats to financial stability identified in the latest report of Dodd-Frank’s Financial Stability Oversight Council are primarily the result of the law itself, along with other government policies.
Dodd-Frank’s Volcker rule banning proprietary trading by banks, and other postcrisis regulatory mandates, has drastically reduced liquidity for making markets in fixed-income assets. The corporate bond market is one of the primary channels for capital formation in the economy. Reduced liquidity in this market amplifies volatility. Because of Dodd-Frank, financial markets will have less capacity to deal with shocks and are more likely to seize up in a panic. Many economists believe this could be the source of the next financial crisis.
Dodd-Frank’s scheme for regulating derivatives markets concentrates systemic risks into clearinghouses and then designates the clearinghouses as too big to fail. Dodd-Frank’s “orderly liquidation authority” enshrines taxpayer-funded bailouts into law. Meanwhile, the Fed, by keeping interest rates too low for too long, is introducing dangerous imbalances into financial markets and is likely inflating asset bubbles.
What is most disturbing about Dodd-Frank is the authority it gives bureaucrats to control huge swaths of the economy. The director of the Consumer Financial Protection Bureau, an agency created by Dodd-Frank, can declare any consumer-credit product “unfair” or “abusive” and outlaw it. Oversight? CFPB funding is not subject to congressional appropriations, and Dodd-Frank requires courts to grant the bureau deference regarding its interpretation of federal consumer-financial law.
Dodd-Frank requires that bank holding companies worth $50 billion or more must submit a “living will” to the Federal Deposit Insurance Corp. and the Fed. This “will” is a detailed plan for how the company will cope in case of severe financial problems. If the plan is not to the regulators’ liking, they can require the company to restructure, raise capital, divest or downsize.
The “heightened prudential supervision” Dodd-Frank allows the Fed to exercise over “systemically important” banks essentially places them under government control. Soon the Fed may exercise effective control over the largest insurance companies and asset managers as well. After AIG and GE Capital were designated “systemically important,” Fed officials, according to a Financial Times story last August, became de facto board members of the firms, involving themselves in decisions including whether employees should be fired or disciplined.
Before Dodd-Frank’s passage, former Sen. Chris Dodd said that “no one will know until this is actually in place how it works.” Today we know. The law he co-wrote with former Rep. Barney Frank is gradually turning America’s largest financial institutions into functional utilities and taking the power to allocate capital—the lifeblood of the U.S. economy—away from the free market and delivering it to political actors in Washington.
Five years ago, House Republicans offered the Consumer Protection and Regulatory Enhancement Act as an alternative to Dodd-Frank. It sought to restore market discipline, end taxpayer bailouts and protect consumers with innovative, competitive markets policed for fraud and deception. It’s time to revisit the ideas in that bill, offer new ones and replace Dodd-Frank.
Posted by Staff on July 17, 2015
Committee Focuses on Monetary Policy and the Economy
The Federal Reserve’s lack of transparency and accountability and the state of the U.S. economy were the main topics members addressed at Wednesday’s Financial Services Committee hearing with Federal Reserve Chair Janet Yellen
"Following a monetary policy convention or rule of the Fed’s own choosing, with the power to amend it or deviate from it at the Fed’s own choosing, in no way interferes with the Fed’s monetary policy independence. Accountability and independence are not mutually exclusive concepts," said Chairman Jeb Hensarling (R-TX) in his opening statement. "Dodd-Frank confers sweeping new powers on the Fed to regulate and control virtually every corner of the financial services sector of our economy, completely separate and apart from its traditional monetary policy role. Yet too often, the Fed appears to shield these activities from public view and improperly cloaks them behind monetary policy independence."
Rep. Robert Hurt (R-VA) made similar points. "Historically, when the Fed has followed a rules-based approach, these periods have experienced strong economic performance and strong employment."
Rep. Scott Tipton (R-CO) told Chair Yellen how the Dodd-Frank Act is harming local communities and small financial institutions. “At home our people are feeling the pain of bad policy that’s come out of Dodd-Frank. What are you going to be doing at the Fed to alleviate this?” he asked.
“Well, we are very focused on community banks,” Chair Yellen replied.
“That’s what they’re worried about,” responded Rep. Tipton.
Rep. Keith Rothfus (R-PA) spoke to Chair Yellen about the nation’s struggling economy. “This month marks five years since the enactment of the Dodd-Frank Act. At the signing ceremony, President Obama proclaimed that the law would lift our economy and lead all of us to a stronger, more prosperous future. Yet since that time, the law has resulted in some 400 new government mandates which research has shown will reduce gross domestic product by $895 billion over the next decade – or $3,346 for each working age person.”
Rep. David Schweikert (R-AZ) focused his comments at the hearing on how the Fed’s highly accommodative monetary policy has exacerbated our spending-driven debt. “My great fear is current monetary policy ultimately emboldens us to engage in bad fiscal policy – and we’re going to pay a price for that. I think that future, particularly if we keep seeing the revisions on our GDP growth, we may have to deal with this sooner than later.”
Rep. Bruce Poliquin (R-ME) also focused on the nation’s spiraling debt. "I was a state treasurer in Maine and I can tell you that high levels of public debt caused by long periods of deficit spending can do great damage to our economy because we need to pay the interest on that rising debt, therefore, we're not able to spend it to build roads, and bridges, and educate our kids," added Rep. Poliquin.
Subcommittee Calls for Transparency and Accountability at the Federal Reserve
The House Financial Services Subcommittee on Oversight and Investigations held a hearing on Tuesday to examine the Federal Reserve’s lack of transparency and accountability.
While the powers of the Federal Reserve significantly increased under the Dodd-Frank Act signed into law five years ago this month, its level accountability and transparency have not.
In its coverage of the hearing, The Hill reported that “Republicans made the case Tuesday that the Fed’s insistence on political independence serves as a shield from oversight and policy changes from lawmakers.”
“While the Fed’s purview and power continues to grow, opacity reigns supreme within its walls. It is a veritable fraternity where silence is golden, and no one, not even Congress, is allowed to ask questions. This is true not only of how it conducts monetary policy, but also of its internal processes,” said Chairman Sean Duffy (R-WI). “The Fed’s clamor for ‘independence’ is the underpinning of its argument for circumventing any Congressional accountability. Markets are left in the dark almost as much as Congress. Unless, that is, you are one of the lucky, well-capitalized firms that can afford inside, non-public information into the black box that is the Fed.”
“Over the last five years the Federal Reserve system’s influence over the economy has grown through the development of new rules and requirements for our financial institutions, with little involvement or consultation by Congress,” said Subcommittee Vice-Chairman Mike Fitzpatrick (R-PA).
Paul H. Kupiec of the American Enterprise Institute testified before the Subcommittee that the Federal Reserve “routinely acts as if its independence on monetary policy matters shields it” from accountability and transparency on other matters, including “congressional inquiries regarding internal investigations. Congress must mandate greater transparency.”
“The Federal Reserve played a starring role in both creating the financial crisis and in its response. Despite that role and the Fed’s numerous failings, Dodd-Frank largely expanded its responsibilities,” said Dr. Mark Calabria of the Cato Institute, who appeared as a witness at the hearing. “Without reform, including greater accountability and transparency, the Federal Reserve is almost certain to continue its pattern of inflating asset bubbles, in the false hope such will create wealth and jobs.”MEMBER SPOTLIGHT
Rep. Michael Fitzpatrick | Deal Must Prevent Nuclear Iran
“Next week, the bipartisan Task Force to Investigate Terrorism Financing I am proud to chair will take a closer look at Iran’s role in financing terrorist groups around the world; information that I feel is vital to the Administration, Congress and American people when reviewing any nuclear agreement with Iran that includes sanctions relief.”
Weekend Must Reads
Reuters | Banking regulators heighten financial market risk
It is an unavoidable fact that one of the greatest potential risks to the financial markets is the work of regulators themselves.
Wall Street Journal | Playing the Music of Capitalism
If the champions of free markets hope to sell the message to those who aren’t already sold, they need to speak to the heart as much as to the head.
Forbes | Five Years Of Dodd-Frank: 'Too Big To Fail' Still Unresolved
Decades of federal policies have helped save firms and their creditors from bankruptcy, and Dodd-Frank has done virtually nothing to reverse that trend.
On the Horizon
July 22, 2015 10:00 a.m.
Wall Street Journal | House Committee Will Interview Fed Staffers on Leak Probe, Chairman Says
Wall Street Journal | Janet Yellen’s Fed Flounders in Political ArenaWashington Free Beacon | Yellen: Fed Unwilling to Comply With Investigation Surrounding FOMC Leak
The Hill | Dodd-Frank legislation has expanded federal control of banks
Posted by Staff on July 10, 2015
Committee Explores Dodd-Frank's Impact on Financial Stability
On Thursday, the Financial Services Committee held the first of a series of planned hearings on the impacts the Dodd-Frank Act has had in the five years since it was signed into law.
Backing that up, a recent Federal Reserve survey of credit officers shows that “over four-fifths of respondents characterized current liquidity and market functioning…as having deteriorated over the past five years,” according to a Reuters report.
Chairman Jeb Hensarling (R-TX) in his opening statement emphasized the increased risk to stability that Dodd-Frank has created. "Dodd-Frank has codified 'Too Big to Fail' into law and provided a taxpayer-funded bailout system in Title I and Title II of the Act. This simply leads to even greater moral hazard and to greater instability. According to the Richmond Federal Reserve, the explicit federal guarantees of financial sector liabilities have increased to a whopping 60 percent post-Dodd-Frank. When private investors, depositors, and counterparties expect a bailout, their incentives to monitor risk clearly wane. Regulatory micromanagement is no substitute for market discipline. By this measure, Dodd-Frank has clearly made our financial system riskier."
The Financial Institutions and Consumer Credit Subcommittee held a hearing on Wednesday to examine the designation process of “systemically important financial institutions” (SIFIs) and the impact it has on financial institutions. Committee members heard testimony about the process for determining whether bank holding companies (BHCs) are systemically important and the consequences these designations carry.
Rep. Ed Royce (R-CA) voiced his concern about the "diminishing returns of increased regulation."
"When a regional bank is spending $200 million on compliance projects and hiring 500 additional non-loan officer staff, it really makes you question who's benefiting. Certainly not the customer looking for a loan, looking to build a home, start a business, or pay for a child's education," he said.
“This year, our Committee has held several hearings examining the regulatory burdens facing community financial institutions. The issue before us today is no different. Money spent to comply with unnecessary regulations can be better allocated to loans for small businesses and consumers," said Subcommittee Chairman Randy Neugebauer (R-TX).
Subcommittee Conducts Oversight of HUD's Public and Indian Housing Programs
The Housing and Insurance Subcommittee held a hearing today to examine the Department of Housing and Urban Development's (HUD) Public and Indian Housing operation and programs.
"We’ve spent a lot of time discussing the need for reform in our nation’s housing programs," said Subcommittee Chairman Blaine Luetkemeyer (R-MO) in his opening statement. "As I’ve said in the past, the status quo isn’t good enough. The reality is that the funding situation isn’t going to get better. Despite even the best of attempts, asking for more federal dollars isn’t the solution. It’s time to roll up our sleeves and work together to build a stronger Office of Public and Indian Housing and a better HUD."
Rep. Lynn Jenkins | Congresswoman Jenkins Marks 5 Year Anniversary of Dodd-Frank
This week we are pleased to feature a Member not on the Committee who is joining us in speaking out about the harm Dodd-Frank is having on Main Street: Rep. Lynn Jenkins (R-KS), Vice Chair of the House Republican Conference.
Weekend Must Reads
Financial Times | Free Lunch: Still too big to fail
That suggests perceptions of too-big-to-fail are alive and well. If so, and if those perceptions are right, it is bad for the rest of us who are not too big to fail but small enough to pay.
Wall Street Journal | MetLife Calls the Regulators’ Bluff
Now that we know the weakness of the FSOC’s data, Congress should consider whether the SIFI designation process makes sense. It should not leave the answer to an unaccountable organization of financial regulators.
On the Horizon
July 14, 2015 10:00 a.m.
American Banker | Dodd-Frank Battle Lines Intensify on Verge of Five-Year Mark
Credit Union Times | Dodd-Frank Debated in Congress
MarketWatch | Five Years After Dodd-Frank, Here Come the Reviews
American Banker | 'Take Your Lawmaker to Work' Puts New Twist on Lobbying for Reg Relief
Washington Times | Low unemployment rate obscures decline in Americans seeking workMarketWatch | Lew Unwilling to Declare Too-Big-To-Fail is Over