Chairman Jeb Hensarling

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Posted by Staff on March 16, 2014
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To mark Sunshine Week, Financial Services Committee Chairman Jeb Hensarling (Twitter | Facebook) delivers this week’s Sunday Video Message on the lack of transparency at the CFPB.
Posted by Staff on March 14, 2014
By Rep. John Campbell
Chairman of the Subcommittee on Monetary Policy and Trade


The Obama Administration is deliberately holding up economic assistance to Ukraine by trying to make permanent a temporary U.S. investment in the International Monetary Fund. The Administration is not being honest about what the IMF quota increase would actually mean for Ukraine, nor is it being transparent with the American people on the risks that this new investment will carry.

The fact is that the IMF currently has assistance programs that would allow Ukraine to borrow billions of dollars, and would have the added benefit of being paired with much needed technical assistance. The Administration’s push to make additional funds available through the IMF’s Rapid Financing Instrument (RFI) does nothing to correct the serious structural challenges that will continue to face the Ukrainian economy. In fact, increased access to the RFI would merely provide one month’s worth of assistance to Ukraine. This is not a serious approach towards providing the kind of relief that Ukraine needs. Additionally, the loan guarantees that the House passed last week would provide more than double the assistance that the marginal increase in RFI access would provide.

The fact of the matter is that Ukraine needs more sustainable financial assistance and serious economic reforms. We have seen in the IMF’s experience with Greece that by not forcing private creditors to shoulder significant losses, debt burdens could remain unsustainable even with an IMF loan. The Administration should be forcing these creditors to the table, many of whom are Russian, in order to negotiate a debt restructuring. Failing to do so is effectively allowing the IMF to perform a backdoor bailout of Russian investors.

The Administration argues that by ratifying the increase in quota, the IMF will implement some governance changes. What the Administration is not saying is that the governance changes only incrementally address a fundamental problem of outsized European influence on the Board of Directors. Even if the reforms are implemented, Europe would continue to have at least six times more representation than the United States. Europe has wielded this influence to force the IMF to shoulder more of the financial burden in European bailouts, sparing losses for European banks.

If the Administration wants to have an honest discussion about its role in the IMF, the role of the IMF in the world, and what should be done to improve its governance, then we should engage in these debates in a thoughtful manner removed from the pressure of quickly providing assistance to Ukraine. Congress only recently received an official request from the President on the quota increase, when he included it in his late budget submission a few weeks ago. What the Administration should do is seek stronger IMF reforms that include more balanced representation on the Board of Directors and is less reliant on U.S. taxpayer funds.
Posted by Staff on March 11, 2014
The House is in session Tuesday through Friday this week.

Here’s what’s happening:

On Wednesday at 10:00 a.m. the Monetary Policy and Trade Subcommittee will hold a hearing to examine the Federal Reserve’s role in credit allocation. This hearing is part of the Committee’s Federal Reserve Centennial Oversight Project to bring accountability and transparency to the Federal Reserve.

On Thursday at 10:00 a.m., the Full Committee will markup five bills to provide regulatory relief for America’s small businesses and community financial institutions. These bills will help job creators throughout America navigate through a sea of red tape and ill-advised Washington regulation. The following bills will be considered:

- H.R. 3623, the Improving Access to Capital for Emerging Growth Companies Act (Rep. Steve Fincher)
- H.R. 4164, the Small Company Disclosure Simplification Act (Rep. Robert Hurt)
- H.R. 4167, Restoring Proven Financing for American Employers Act (Rep. Andy Barr)
- H.R. 2672, the CFPB Rural Designation Petition and Correction Act (Rep. Andy Barr)
- H.R. 3584, the Capital Access for Small Community Financial Institutions Act of 2013 (Rep. Steve Stivers)

The Full Committee will also markup the Committee’s Views and Estimates on the President’s Fiscal Year 2015 Budget.

Be sure to check back here on the Bottom Line Blog -- and sign up for our email updates -- for additional information throughout the week.
Posted by Staff on March 07, 2014
…Wasting Millions on Office Renovations
…Under Investigation
…Closed Door Meetings
…Shocking Report of Discriminatory Treatment
…In Urgent Need of House-Approved Accountability, Oversight and Reform Bill

American Banker, 3/6: CFPB Staff Evaluations Show Sharp Racial Disparities

“CFPB managers show a pattern of ranking white employees distinctly better than minorities in performance reviews used to grant raises and issue bonuses. Overall, whites were twice as likely in 2013 to receive the agency's top grade than were African-American or Hispanic employees, the data shows.

“What's more, those disparities are only one of many serious personnel problems plaguing the CFPB. Inside the agency, morale is poor and management has been accused in several cases of favoring Caucasian men and of creating a hostile work environment.”

American Banker, 3/6: Hensarling Probes CFPB on Employee Complaints, Evaluations

“House Financial Services Committee Chairman Jeb Hensarling and two other GOP lawmakers are probing the Consumer Financial Protection Bureau over how it treats its employees.

“The lawmakers seized on an article by American Banker that revealed data showing that the agency’s white employees had a greater likelihood of receiving the highest rating in performance evaluations — which determine salary increases and bonuses — than minorities.”

National Review Online, 3/6: Do As We Say, Not As We Do

“The CFPB likes to use the ‘disparate impact’ approach in its regulation of banks, but the American Banker has obtained data showing that the Bureau’s own employment practices might not fare very well under this approach.”

Washington Examiner, 3/7: CFPB to Pay $22.3 Million to Lease Building Owned by Obama Bundler

“Controversy has dogged the CFPB for more than a year for nearly tripling the initial $55 million cost estimate for renovations to the building that will serve as the bureau's permanent headquarters.”

“The agreement requires CFPB to pay GSA more than $1.6 million for August and September 2013, more than $9.8 million from October 2013 through September 2014, nearly another $10 million through September 2015 and more than $800,000 for October 2015.

“The bureau must make those payments even though it won't begin moving into the temporary space until this spring.”

Investor’s Business Daily, 2/25: What is Obama’s Consumer Credit Agency Hiding?

“Even after a Mississippi businessman last year was bounced from what should have been an open meeting of the Consumer Financial Protection Bureau, the agency again is making itself closed to the public.

“On Wednesday and Thursday, CFPB Director Richard Cordray and other top bureau officials will meet behind closed doors with a group of radical advisers who are having undue influence over financial regulatory policy. Both the public and the press again are barred from covering the private discussions.”

Washington Examiner, 2/14: Federal Reserve Inspector General to Probe Spiraling Building Renovation Costs at CFPB

“Federal Reserve investigators want to know why renovation costs for the Consumer Financial Protection Bureua’s headquarters building have soared to more than three times the original estimate”

The Hill, 2/27: GOP Slams Dodd-Frank Panel, Votes for Reform

The House voted Thursday to restructure a controversial government bureau created by the Dodd-Frank law, amid GOP accusations that the bureau is not responsive to Congress and plans to waste millions of dollars renovating its headquarters.
Posted by on January 30, 2014

6,778 total words.

40 words devoted to housing finance reform.

0 housing finance reform proposals from the Obama administration in 5 years

1 bill in Congress that protects taxpayers from ever again having to foot the bill for a housing crisis by ending the bailout of Fannie Mae and Freddie Mac and explicitly preserves the 30-year fixed rate mortgage. 

That bill – the Protecting American Taxpayers and Homeowners Act, the PATH Act.

“Instead of perpetual bailouts, Americans want meaningful reform of our housing finance system. That is why the House Financial Services Committee passed the PATH Act to give Americans the sustainable housing finance system we need – sustainable for homeowners so they buy homes they can actually afford to keep, sustainable to taxpayers so they will never again have to bail out Washington’s failed housing programs, and sustainable for our economy so we avoid future cycles of boom, bust and bailout. If the president truly believes in the need to address housing finance reform, as he said in tonight’s speech, he has come to the right place.”  -- Chairman Jeb Hensarling, 1/28/14

Specifically, the PATH Act:

  • Responsibly phases out Fannie Mae and Freddie Mac over five to seven years. These taxpayer-backed corporations played a central role in causing the 2008 financial crisis and taxpayers were forced to provide Fannie and Freddie with a nearly $200 billion bailout. The PATH Act permanently ends their bailout.
  • Strengthens and protects the FHA by giving it tools to tackle its solvency crisis and by giving it a specific mission to serve first-time homebuyers and those with low-to-moderate incomes.
  • Expressly preserves the 30-year fixed-rate mortgage. Section 213 of the PATH Act (.pdf) specifically states that the “FHA shall provide, among other mortgage insurance products, for the availability of a 30-year fixed-rate mortgage.” Under the PATH Act, the FHA would be required -- for the first time -- to offer a 30-year fixed-rate mortgage insurance product.
  • Reduces government control of the mortgage market by removing artificial barriers to private investment capital.
  • Repeals Dodd-Frank Act regulations that are harming community banks and credit unions and making it more difficult for middle income Americans to buy homes they can afford to keep.

Posted by on January 27, 2014

The House is in session Monday through Wednesday this week.

Here's what's happening: 

On Tuesday at 10 a.m. the Full Committee will hold a hearing to receive the Semi-Annual Report of the Consumer Financial Protection Bureau (CFPB). CFPB Director Richard Cordray will be the only witness. 

Commensurate with holding the CFPB accountable, our website now offers individuals a web form to let committee members know how the CFPB has impacted them as consumers, as business owners or how the Bureau has affected their customers. The committee’s web form gives individuals the choice of having their story shared publicly or kept confidential.  See our press release for more information about the web form. 

Also on Tuesday, at 9 p.m., President Obama will deliver his State of the Union address. Be sure to follow us on Twitter @FinancialCmte for our reactions during and after the president’s speech. 

Also,  be sure to check back here on the Bottom Line Blog -- and sign up for our email updates -- for additional information throughout the week. 

Posted by on January 06, 2014

Welcome back for the Second Session of the 113th Congress. The House convenes on Tuesday with votes scheduled through Friday this week.  

Here's what's happening: 

On Thursday at 10 a.m. the Monetary Policy & Trade Subcommittee continues our Federal Reserve Oversight Project with a hearing on the international impacts of the Fed's quantitative easing program. 

Be sure to check back here on the Bottom Line Blog -- and sign up for our email updates -- for additional information throughout the week. 

Posted by on January 06, 2014

WSJ Editorial | January 5, 2014

The prospects for progress on Capitol Hill this year are few, but one possibility is reform of federal housing policy. With home prices rising and the economy growing, now is a good time to pare back the government support that has too often led to unsustainable housing booms and taxpayer busts.

Consider the Obama Administration's latest report to Congress on the Federal Housing Administration. The Department of Housing and Urban Development noted last month that the FHA has a negative $1.3 billion net worth, and that's after a $1.7 billion Treasury capital infusion in September to offset losses. FHA insures more than $1 trillion in loans and has now missed its federally mandated 2% minimum capital standard for five years.

This is hard to do amid a housing recovery, even for the government. FHA wasn't caught up in the subprime hurricane as Fannie Mae or Freddie Mac were in the pre-2007 boom years. Instead, FHA expanded its high-risk book of business right as everyone else was getting out.

As HUD Secretary Shaun Donovan euphemistically put it, "the substantial role FHA was forced to play" to keep housing credit flowing during the bust inflicted "considerable stress." Uh huh. Delinquency rates on FHA's 2007, 2008 and 2009 books stand at 26%, 26% and 19%. Taxpayers will now have to pay for those homeowners who were induced in part by FHA subsidies to buy more home than they could afford.

The Obama Administration's response to FHA's troubles has been to pile higher fees on new borrowers. Along with rising housing prices and the quiet shuttering of FHA's reverse-mortgage business, this has helped FHA's finances improve from awful to merely rotten, but it may not be enough to right the books soon.

It's hard to know how deep the FHA's red ink goes. The agency's fiscal health is an estimate based on 30-year forecasts of mortgage prepayment rates, unemployment rates, house prices and inflation rates that no private insurer would use. Do you know what unemployment will be in 2044?

Even the actuaries disagree on the scope of the problem. FHA's go-to firm, Integrated Financial Engineering Inc., thinks the agency's single-family home insurance program is worth negative $7.9 billion but could make money by the end of the fiscal year. Summit Consulting and Milliman Inc., more conservative outfits, think the right number is negative $10.6 billion and the business will remain in the red next year, adding that forecasts are "subject to significant variability."

Whatever the real number, the main goal should be not to repeat the mistake. The underlying problem is that the FHA's woes derive from a policy of public risk and private profit, which is what blew up Fannie Mae and Freddie Mac.

In a better world, Congress would slowly work off the FHA's portfolio and get out of the housing subsidy business. Short of that, Texas Republican Jeb Hensarling has a proposal to spin off FHA from the Department of Housing and Urban Development, make it a stand-alone agency, focus its mission on low-income and first-time home buyers, and subject it to the same accounting rules that private lenders have to meet. How about starting there?

Posted by on December 17, 2013

Earlier this month Chairman Hensarling and Monetary Policy and Trade Subcommittee Chairman Campbell announced the committee's “Federal Reserve Centennial Oversight Project” – an aggressive series of hearings slated during 2014 that will culminate in the markup of legislation to reform how the nation’s central bank operates. The Oversight Project coincides with the 100th anniversary of the Fed’s creation later this month, as well as the expected Senate confirmation of a new Federal Reserve chairman. 

“The Federal Reserve Centennial Oversight Project will be the most vigorous and sustained assessment and evaluation the Fed has received in its history,” Chairman Hensarling said. “Our committee has an obligation to carefully scrutinize the Federal Reserve’s decisions, especially since the Fed has either implicitly or explicitly assumed so many mandates and has, historically, been subject to little or no congressional oversight.”

Here's what they're saying after the first full committee hearing on the oversight project:

Fox Business | Will the Fed’s 101st year be its most challenging?

The Hill | GOP begins ‘rigorous’ review of the Fed

 
Hensarling, while a vocal critic of the Fed’s recent efforts to boost the economy, said he was entering into this process with an open mind, vowing any reform legislation would be informed by what is learned during the hearings.

“I believe that it has gone too far, yes, but again I have an open mind,” he said. “I’m willing to sit down with others and to have them explain or articulate why the Fed should be able to exercise certain powers.”

POLITICO Pro | House GOP announces plan to examine Fed

 
Some Republicans have questioned whether the Fed would be more effective if it did not have the so-called dual mandate of keeping unemployment low and prices stable.

“The Fed is independent, and it should be independent, but it’s not unaccountable,” said Rep. John Campbell (R-Calif.).

Bloomberg | Fed’s $4 Trillion in Assets Draw Lawmakers’ Scrutiny

 
Campbell and Hensarling also say the Fed’s purchases of government debt are encouraging deficit spending by allowing the government to borrow cheaply. The yield on the 10-year Treasury note has averaged 2.31 percent this year, compared with a 6.61 percent mean over the past half century.

“The Fed’s additional extraordinary purchases of Treasury bonds have supported the Obama administration’s trillion-dollar deficits,” Hensarling said at a Dec. 12 hearing.

Bloomberg | Fed to Come Under ‘Rigorous’ House Scrutiny, Hensarling Says

 
The congressional review coincides with a debate among Fed policy makers on how to wind down a third round of bond buying, or quantitative easing, that has pushed the Fed’s balance sheet to a record $3.93 trillion.

Posted by on December 15, 2013


Congressman John Campbell (Twitter | Facebook) delivers this week's Sunday Video Message on the committee's Federal Reserve Centennial Oversight Project.