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.

Republicans highlighted the lack of accountability and unconstitutionality of the modern administrative state in which the rule of law is replaced by the rule of regulators.  Members and witnesses drove home the importance of the separation of powers and reiterated that while elected officials answer to their constituents back home, unelected bureaucrats who make sweeping regulatory decisions do not have the same accountability to the American people.  

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

 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

American Banker | Hensarling Requests GAO Study on Fed Dividend

The Hill | Dems not sold on Obama's financial adviser regs

Politico Pro | House Democrats request specific fixes to Labor Department fiduciary proposal

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

Palm Beach Post | Community bankers: We’re paying compliance officers to work for the government

Posted by Staff on September 11, 2015

Lawmakers Express Bipartisan Concerns Over Labor Dept. Retirement Regulation

A controversial regulation proposed by the Department of Labor will make it harder for Americans, especially those with lower and middle incomes, to plan for retirement said Republicans, several Democrats and witnesses at a joint subcommittee hearing on Thursday.

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 Reviews U.S. Efforts to Combat Terror Financing 

The Task Force to Investigate Terrorism Financing held its fifth hearing since April on Wednesday to assess whether the United States is doing enough to stem the flow of funds to terrorist organizations.

"While the United States has significant tools at its disposal to degrade and inhibit terrorist financing and money laundering, it is unclear to what extent such tools have been effectively utilized," said Task Force Chairman Rep. Michael Fitzpatrick (R-PA) in his opening statement, "Today’s hearing will examine the current state of counter-terrorist financing efforts within the federal government to ensure that they are meeting each’s intended purpose and, should they not be, identify areas needing improvement."

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."


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.

 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.
Full Committee Hearing

"The Dodd-Frank Act Five Years Later: Are We More Free?"

September 17, 2015 2:00 p.m.
Monetary Policy and Trade Subcommittee Hearing

"Strengthening U.S. Leadership in a Turbulent Global Economy"

  In the News

Politico Pro | Iran the focus of terror finance task force hearing

Bloomberg | Lawmakers Seek Magic Number for Deal on SIFI Label Level

Reuters | U.S. outlines new policy for investigating corporate executives

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

Benefits Pro | Several Democrats Concerned Over DOL Fiduciary Rule

Think Advisor | Rep. Wagner Wants Bill to Halt DOL Fiduciary Rule Marked Up by Month-End

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.


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

Washington Examiner | Fed Faces a Laundry List of Reform Measures

Wall Street Journal | Lawmakers Move to Halt Fannie, Freddie Pay Raises

Bloomberg | House Panel Approves Bills Meant to Help Small Banks

American Banker | Your Definitive Guide for the Latest Slew of House Banking Votes

Housing Wire | Dodd-Frank dragging down economic recovery, House Committee says

The Hill | House members push Obama to start over on financial adviser rule

Housing Wire | Bill to eliminate $6M raise for Fannie, Freddie CEOs passes House Committee 57-1

Automotive News | U.S. House committee approves limit on CFPB's oversight of auto lending

Bloomberg | Fed Accidentally Released Confidential Staff Projections

National Mortgage News | House Committee Passes Bills to Delay TRID Enforcement, Revise QM

DSNews House | Committee Passes 14 Bills, Including Regulatory Relief and Fed Reform 

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-FrankI 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.
Full Committee Hearing

"The Dodd-Frank Act Five Years Later: Are We More Prosperous?"

July 28, 2015 2:00 p.m.
Full Committee Markup

"Markup of H.R. 766, H.R. 1210, H.R. 1317, H.R. 1553, H.R. 1737, H.R. 1839, H.R. 1941, H.R. 2091, H.R. 2243, H.R. 2643, H.R. 2912, H.R. 3032, H.R. 3189, and H.R. 3192"

  In the News

The Hill | Hensarling: No more birthdays for Dodd-Frank

Pittsburgh Tribune | Dodd-Frank Turns 5: What a Mess

Chicago Tribune | Five Years Later, Dodd-Frank Still Falls Short

Miami Herald | Fix the Dodd-Frank Law

The Hill | Hensarling: Dodd-Frank made country 'less financially stable'

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 Bigger

LA 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.”


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.
Monetary Policy and Trade Subcommittee Hearing

"Examining Federal Reserve Reform Proposals"

July 22, 2015 2:00 p.m.
Task Force to Investigate Terrorism Financing Hearing

"The Iran Nuclear Deal and its Impact on Terrorism Financing"

July 23, 2015 10:00 a.m.
Full Committee Hearing
“Ending Too Big to Fail: What is the Proper Role of Capital and Liquidity?”

  In the News

Wall Street Journal | House Committee Will Interview Fed Staffers on Leak Probe, Chairman Says

The Hill | GOP uses Fed standoff to build case for reforms

New York Times | Yellen Warns Congress Against Adding to Fed’s Oversight

The Hill | Yellen spars with GOP on leak probe, Fed reforms

Reuters | Yellen stands by Fed's transparency as lawmakers turn up hea

Wall Street Journal | Janet Yellen’s Fed Flounders in Political Arena

Washington Free Beacon | Yellen: Fed Unwilling to Comply With Investigation Surrounding FOMC Leak

Reuters | Yellen stands by Fed's transparency as lawmakers turn up heat

The Hill | The Department of Labor best-interest proposal isn’t about best interest

The Hill | Dodd-Frank legislation has expanded federal control of banks
New York Sun | A Fed Without Vision

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.

Thursday’s hearing focused on whether Dodd-Frank has made the financial system more or less stable, and it comes on the heels of a report from the Financial Stability Oversight Council (FSOC) that many of the systemic risks identified by FSOC are the direct result of government policies, including Dodd-Frank.  Dodd-Frank’s Volcker Rule, for example, has made capital markets less liquid and more fragile, undermining rather than enhancing financial stability.  The lack of liquidity means financial markets have less capacity to deal with shocks and will be more likely to seize up in a panic.  Rather than making markets more stable, the new regulations have made them more brittle.

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."

Rep. Robert Hurt spoke on Dodd-Frank's unintended consequences that have harmed Main Street, our economy’s engine for job creation and growth. "This month marks the fifth anniversary of the Dodd-Frank Act, which was sold to the American people as a solution to the financial crisis of 2008. A recent Harvard study articulates how Dodd-Frank has actually given Wall Street an advantage over Main Street - the exact opposite of what its proponents said it would do. The consequences of this misguided law have been increased burdens on our Main Street banks and their customers through excessive regulations, contributing to a stagnant economy and unnecessarily high unemployment rates."

Mark Calabria, Director of Financial Regulation Studies at the Cato Institute, testified at Thursday’s hearing that “moral hazard has been increased by Dodd-Frank’s expansion of the financial safety net and increased concentration of risk into fewer entities, while the primary 18 causes of the crisis were largely left untouched.”

Dodd-Frank's SIFI Designation Process Comes Under Subcommittee’s Review

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.

Many commentators – including members of Congress and banking regulators – have criticized the arbitrary manner in which the Dodd-Frank Act designates bank holding companies as systemically important.

Rep. Scott Tipton (R-CO) said, "I never thought I would be quoting Barney Frank but effectively he's come out and said we didn't intend for it to be able to go this far in terms of a regulatory regime.  And I think that it really speaks to an out of control regulatory process where a broad-based piece of legislation is being put forward and we're leaving the regulators to fill in the blanks."

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.
Oversight and Investigations Subcommittee Hearing

"Fed Oversight: Lack of Transparency and Accountability"

July 15, 2015 10:00 a.m.
Full Committee Hearing

"Monetary Policy and the State of the Economy"

  In the News

American Banker | Dodd-Frank Battle Lines Intensify on Verge of Five-Year Mark

Bloomberg | Midsize Bank Challenges $50 Billion SIFI Threshold

Inquisitr | Reps. Luetkemeyer, Neugebauer Stand For Consumers By Reigning In And Reforming CFPB

DS News | Lawmakers Debate ‘Too Big to Fail’ and Criteria for ‘Systemically Important’ Tag

U.S. News | Five Years After Dodd-Frank, CFPB Still Under Fire

Credit Union Times | Dodd-Frank Debated in Congress | Have the Dodd-Frank Financial Reforms Been a Success?

MarketWatch | Five Years After Dodd-Frank, Here Come the Reviews

DSNews | House Committee Schedules Hearings Marking Anniversary of Dodd-Frank

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 work

Bloomberg | Brainard Says Rules Probably Have a Role in Liquidity Volatility

MarketWatch | Lew Unwilling to Declare Too-Big-To-Fail is Over
Posted by Staff on June 26, 2015
Committee Seeks Accountability for Discrimination and Retaliation at the CFPB

On Thursday the Oversight and Investigations Subcommittee held a hearing to examine new evidence that discrimination and retaliation against employees at the Consumer Financial Protection Bureau (CFPB) continue. The Committee began its investigation into these allegations in April 2014. Since then, several whistleblowers have come forward to allege CFPB managers have created a toxic workplace. Despite promises last year from CFPB Director Richard Cordray that this unacceptable and offensive behavior at the CFPB would stop, two whistleblowers testified on Thursday that discrimination and retaliation have gotten worse during the past year.

Subcommittee Chairman Sean Duffy (R-WI) said in his opening statement, "This Committee has spent two years and more than five Congressional hearings giving a voice to the victims of abusive, unfair and unlawful discriminatory behavior of CFPB managers. We are here again today because their messages have clearly not been heard. There is mounting evidence that not only does the agency still have a huge problem with managers discriminating against employees based on race, age, gender, and sexual orientation, but CFPB leadership refuses to take meaningful action to prevent this behavior and protect its employees."

Both witnesses testified that they believed CFPB Director Richard Cordray did not take these issues seriously.

Committee members emphasized discrimination and retaliation must end, and there must be accountability at the CFPB.

Rep. Scott Tipton (R-CO) remarked, "In the private sector, when there are issues that are coming up on discrimination, there will be fines, there will be penalties, and there will be prescriptive measures to be able to address it. Yet apparently from what you are testifying here today, the government is not applying the same rules to itself that it expects, may not achieve, but expects out of the private sector."

Rep. Mia Love (R-UT) said change is needed at the CFPB.

"How can an agency that is unable and unwilling to govern itself be entrusted to protect the American people and, frankly, make sound decisions about how it pursues its own mission?” she asked. “Perhaps most disturbing to me is that despite all the publicity this issue has received and all the previous congressional hearings, overwhelming evidence indicates this culture of discrimination and intimidation within the CFPB has only been growing worse. It’s clear to me that reform of the CFPB is badly needed," she said.

Task Force Examines Security of U.S. Financial Sector

The Task Force to Investigate Terrorism Financing held its third hearing on Wednesday where it evaluated the security of the U.S. financial sector. At the hearing, the Task Force discussed the financial sector’s vulnerabilities to cyber-attacks as well as how terrorist organizations and criminal groups are using shell companies to launder money and fund their activities.

In his opening statement, Chairman Michael Fitzpatrick (R-PA) voiced concerns about the increasing number, size and damaging effects of recent cyber-attacks. “In the past several years, there has been a noticeable rise in the number of cyber-related attacks on U.S. businesses and government agencies launched by state and non-state actors alike. This is attributed to the fact that such attacks cost very little to carry out, but have potential to cause severe problems and inflict great cost on the victim attempting to carry out the defense. The U.S. financial sector is too important for this task force to overlook when seeking to address the nexus of terrorism and finance. The continued innovation and evolution by our enemies highlights the importance of this body’s role in the fight against terror. The United States must do better when defending our financial system and addressing the threats operating within it. The risk is too great to ignore. “

Vice Chairman Robert Pittenger (R-NC) echoed these sentiments. “Recent reports from the State Department and the Treasury Department have further highlighted the priority we must place on our counter-terrorist financing efforts. The 2014 State Department country reports on terrorism make it clear that terrorism is becoming more prevalent. The number of attacks increased by 35%. There were 3,000 more attacks in 2014 than in 2013. The fatalities increased 81%, to 32,727 deaths in 2014. The National Terrorism Financing Risk Assessment shows that while we have made progress in undermining terrorist financing, there’s still vulnerabilities in our system and more can be done.”

John W. Carlson, the Chief of Staff at the Financial Services Information Sharing and Analysis Center, shared his view on the current threat faced by the United States today. “The current cyber threat environment continues to evolve and intensify. Each day, cyber risk grows as attacks increase in number, pace, and complexity. Our members constantly adapt to this changing threat environment. We are no longer in the days wherein the threat was confined to individual hacktivists and fraudsters. We are now in an era of attacks by not only organized crime syndicates, but also nation-states and entities affiliated with terrorist operations.”


Rep. Sean Duffy | Accountability at the CFPB

The Chairman of the Oversight and Investigations Subcommittee is Sean Duffy (R-Wisconsin), who has been at the forefront of legislative efforts to reform the CFPB. In March, Duffy introduced a comprehensive package to reform the Bureau, which included proposals to replace the Bureau's director, Richard Cordray, with a bipartisan five-member board; and a proposal to make the Bureau subject to the regular Congressional appropriations process.

Weekend Must Reads

Forbes | Congress Should Reign In Rogue CFPB

That’s not to say that all regulations are bad and consumers tend to support reasonable regulations, ones that make sense, such as regulations that protect people from food that will make them sick or protect them from a dangerous product. They tend to draw the line when regulations that are purported to help them in the name of consumer protection, make things more challenging if not out right difficult for them by prohibiting access to services or in this case capital.

Investor's Business Daily | The New American Dream Under Obama: Renting

The heavy federal hand in the housing market has been a disaster. Despite spending more than $13,000 for every household, Washington has record low homeownership to show for it, even among the middle class.

Hoover Daily Report | How the U.S. Can Return to 4% Growth

Economic growth in real terms is averaging a meager 2.2% annual rate in the 23 quarters since the recession’s trough in June 2009. The consensus forecast of about 1% growth for the first half of this year offers little solace. Americans need not be resigned to such a dim fate.

    In the News

American Banker | CFPB Civil Rights Officer Says Agency Makes 'Mockery' of Process

Housing Wire | CFPB employees: Workplace discrimination getting worse, leadership absent

Politico Pro | Racial tension erupts at House hearing on discrimination at CFPB

American Banker | Dems' Defense of CFPB: Let's Talk About Something Else

The Hill | Dems accuse GOP of playing race card in contentious hearing

Housing Wire | Whistleblowers to testify on alleged discrimination at CFPB

American Banker | CFPB 'Whistleblowers' to Air Bias Claims Before Lawmakers

The Hill | Yellen pushes back on GOP 'obstruction' claims
Posted by Staff on June 19, 2015
Washington Policies Like Dodd-Frank Threaten U.S. Financial Stability

Members of the Committee on Thursday questioned Treasury Secretary Jacob Lew on the threats posed to America’s financial stability by misguided government policies, including the Dodd-Frank Act.

The most recent annual report issued by the Dodd-Frank-created Financial Stability Oversight Council (FSOC) identifies several threats to financial stability that are the direct result of these policies.  However, “it conspicuously omits any references to specific government policies or agencies as helping cause the systemic risks it identifies,” said Chairman Jeb Hensarling (R-TX).

“FSOC simply refuses to look in the mirror,” he said.  “Mr. Secretary, your council and the rest of Washington needs to awaken to this obvious truth:  when it comes to systemic risk, Washington is a large part of the problem.”

Not only does FSOC fail to identify the Washington sources of these threats, it ignores other key threats to our financial stability, such as the nation’s $18 trillion – and growing – national debt.

CBO points out the debt is a problem for our economy, and yet your report does nothing, says nothing about it.  And you are supposed to be an agency that points out these problems," Rep. Blaine Luetkemeyer (R-MO) said.

"The Federal Reserve Bank of Richmond recently reported that 60 percent of the financial system’s liabilities are backed by taxpayers. This report directly contradicts claims by Secretary Lew and the Administration that the Dodd-Frank Act ended ‘too big to fail’ – a stated objective of the Dodd-Frank Act - and that American taxpayers will never again have to foot the bill for bailouts," said Rep. Robert Hurt (R-VA).

Rep. Ann Wagner (R-MO) pointed out that FSOC’s deeply flawed process for designating so-called “non-bank SIFIs” further entrenches another threat to our financial stability:  Too Big to Fail.

To date, FSOC has designated four non-bank financial companies as systemically important financial institutions, or SIFIs, essentially signaling to market participants that the government considers them Too Big to Fail. As a result, Richmond Fed President Jeffrey Lacker stated that shareholders and creditors of those firms can expect the government to shield them from losses during periods of distress, ultimately putting the taxpayer on the hook for a future potential bailout,” she said.

A Cyber Attack Every 34 Seconds

The Oversight and Investigations Subcommittee held a hearing on Tuesday to continue the Committee’s ongoing efforts to combat cyber threats to consumers and the financial sector.

Subcommittee Chairman Sean Duffy (R-WI) said that while the motivations behind cyber attacks may vary, “there remains one constant. They intend to hurt America and our interests. Not only are they targeting the critical infrastructure of our country, like banks, power grids, food supplies, but they also pose a much graver threat directly to the citizens of the United States."

Witnesses called by the Subcommittee shed light on the prevalence of cyber threats to the financial sector.  Frank Cilluffo, Associate Vice President of the George Washington University and the Director for the Center for Cyber and Homeland Security, said one major U.S. bank faced 30,000 cyber attacks just last week.  “This amounts to an attack every 34 seconds each and every day.  And these are just the attacks that the bank actually knows about,” he told the Subcommittee.

Michael Madon of RedOwl Analytics and an advisor to the Center on Sanctions and Illicit Finance, called for a more pro-active stance by the federal government in fighting cyber attacks. "It is clear from watching these attacks dramatically increase in both frequency and damage, our nation's current defensive posture is simply not sufficient to address the threat. We need to have a more pro-active approach, one that shifts the paradigm away from defense to offense."

Subcommittee Reviews Economic Growth Proposals

Building on the success of the bipartisan Jumpstart Our Business Startups (JOBS) Act, the Capital Markets and Government Sponsored Enterprises Subcommittee chaired by Rep. Scott Garrett (R-NJ) has been identifying legal, regulatory and market impediments to capital formation, particularly for small and medium-capitalized companies.  On Tuesday, the Subcommittee continued its work with a hearing on the Small Business Credit Availability Act and the Fair Investment Opportunities for Professional Experts Act.

The Small Business Credit Availabiltiy Act, sponsored by Rep. Mick Mulvaney (R-SC), is geared toward updating regulation of Business Development Companies.  “We've heard that in other hearings BDCs have played an increasingly important role in our economy," said Chairman Garrett.

The Fair Investment Opportunities for Professional Experts Act, sponsored by Rep. David Schweikert (R-AZ), would allow more Americans to have the opportunities to secure their financial future," said Chairman Garrett.

at the hearing spoke about the importance of modernizing the regulation of BDCs and expanding the pool of investment opportunities.

Vincent D. Foster of Main Street Capital
said, "Modernizing BDC regulations will help support American jobs and foster economic growth by improving access to the public capital markets for BDCs. It will also free up significant resources at the SEC, which can be utilized more effectively to protect investors."

"With the JOBS Act, Congress helped to modernize existing regulations and establish new systems to provide the opportunities to allow Emerging Growth Companies (EGCs) to grow into public companies," said Tom Quaadman with the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness. "The proposals before us today continue that tradition and are important as they help small and mid-size businesses continue on the path to becoming EGCs."

For further information on these legislative proposals, click here.

Impact of the IMF:  Economic Stability or Moral Hazard?

Members of the Monetary Policy and Trade Subcommittee on Thursday expressed concerns that the IMF, in providing public funds to ease current financial problems in Europe is, in effect, transferring the cost of Europe’s past risky lending practices to the American public at large and to commercial banks that were more conservative in selecting their loan portfolios.

“The use of the IMF as a backstop for advanced European countries calls into question, in my mind, whether this institution has become an enabling crutch instead of a helping hand,” Subcommittee Chairman Bill Huizenga (R-MI) said.


Rep. Randy Neugebauer | Lawmaker Calls Round Table on Bond Trading Challenges

A top lawmaker is inviting a bevy of Wall Street regulators and large financial institutions to a round table next month to discuss how regulations may be contributing to challenges in bond trading, the latest sign that officials are paying increased attention to the issue in Washington.

Weekend Must Reads

Washington Post | Obama wants to reengineer your neighborhood

This is what you get when you put a community organize in the White House – he tries to reorganize your community from Washington. The answer is not to force local governments to build affordable housing in affluent communities. The answer is to restore upward mobility in the United States so that more people can afford housing in affluent communities.

Real Clear Markets | The U.S. Is Defined By Expanding Government, Retreating Economy

Where once there was a limited government and unlimited economy, today there is a comparatively unlimited government and a limited economy. Following this progression, at what point do we begin to seriously measure, regulate and mitigate the impact of government's increasingly destructive impact upon the economy?

Wall Street Journal | Washington’s Illegal Bailout

Fed officials are upset that Congress wants to rein in their emergency and regulatory powers. Congress might have less cause to act if the Fed showed more respect for the law.

    On the Horizon 

June 24, 2015 2:00 p.m.
Task Force to Investigate Terrorism Financing Hearing

"Evaluating the Security of the U.S. Financial Sector"

June 25, 2015 10:00 a.m.
Oversight and Investigations Subcommittee Hearing

"Examining Continuing Allegations of Discrimination and Retaliation at the Consumer Financial Protection Bureau"

  In the News

Wall Street Journal | House Committee Rejects Yellen’s Reason for Not Complying With Subpoena

Bloomberg | Hensarling Accuses Fed of Willful Obstruction of Leak Probe

American Banker | CFPB Grapples with Spike in Employee Bias Complaints

The Hill | Hensarling accuses Fed of 'willful obstruction' in leak probe

Politico | HUD aid for its own workers includes $100k move

HousingWire | TRID, Discrimination and Accountability: The Appalling CFPB Double Standard

Wall Street Journal | Small Firms Aim to Raise Capital More Easily Under New Rules

MarketWatch | Lew, Hensarling Spar Over Bond Market Liquidity

Bloomberg | Risk Panel Will Divulge Why AIG, MetLife Are Too Big to Fail

Washington Times | Obama-Elizabeth Warren payday lender rules slammed by Florida Democrats

Posted by Staff on June 12, 2015
Committee Questions HUD Secretary on Ineffectiveness of Agency After 50 Years

The Department of Housing and Urban Development (HUD) was created 50 years ago to serve as a main weapon in the “War on Poverty” and the agency has received more than $1.6 trillion in annual appropriations over its lifetime.  On Thursday, members of the Financial Services Committee questioned HUD Secretary Julian Castro on his agency’s failure to achieve measurable results.

“By nearly every official measure, poverty and its consequences are as bad as they were 50 years ago.  The poverty rate today is essentially unchanged from when HUD was founded,” said Chairman Jeb Hensarling (R-TX).  "If we truly care about the least of these among us, we can no longer measure success by the number of dollars appropriated to HUD. That should be obvious. Instead, success must be measured in the number of our fellow citizens who rise from lives of poverty and dependency to lives of hope, self-sufficiency, and pride. That’s true success."

Throughout the hearing, members expressed concerns that HUD has created a bureaucratic, complex tangle of programs that foster dependency rather than promote economic freedom and provide a roadmap out of poverty.

"Our aspirations need to be much higher. Our expectations are far too low. The expectation should be that success is measured not just by how many people we're moving into dependency on the department but how many people we are moving out of dependency," said Rep. Andy Barr (R-KY).

Rep. Mia Love (R-UT) told Secretary Castro, “Every program that we have aimed at poverty should be aimed at making poverty temporary, not tolerable.”

Subcommittee Reviews More Proposals to Promote Financial Independence and Consumer Choice

The Financial Institutions and Consumer Credit Subcommittee continued its review of legislative proposals aimed at helping Americans achieve financial independence and preserving consumer choice.

Subcommittee Chairman Randy Neugebauer (R-TX) said the hearing was another “opportunity for members to continue the discussion of regulatory relief for community financial institutions and the protection of consumer financial choice. Many members here today have put in a tremendous amount of work to build bipartisan coalitions for their legislation."

The hearing covered 12 bills designed to reduce regulatory burdens and streamline regulatory compliance, ensuring consumers have greater access to the financial services they want and need.

Witness Hester Peirce from the Mercatus Center at George Mason University testified how financial regulation needs to be revisited and updated to allow for well-functioning markets. "A well-functioning market enables people who need financing to obtain it efficiently and at a competitive price,” she said.  “Market forces reward financial companies that serve consumers well and discipline firms that fail to provide products and services in a form and at a price that consumers want."


Rep. Mia Love | VIDEO: Affordable Housing Coming To a Neighborhood Near You?

The Fox Business Network featured Rep. Love’s questioning of HUD Secretary Castro from Thursday’s hearing before the House Financial Services Committee.

Weekend Must Reads

The Hill | Ex-Im acting inspector general: Deal could cost taxpayers $150 million

The Export-Import Bank’s acting inspector general testified to Congress on Thursday that the bank could lose $150 million off a deal it financed with an Australian company that went bankrupt in April.

American Banker | Basel III Pulls the Rug Out from Community Banks

Similarities between Volcker and Basel are striking: Both rules weren't intended for community banks, but have had a disproportionate impact on hometown institutions.

Investor's Business Daily | Regulations Could Top Taxes As Enemy Of Small Business

For a large business, complying with regulations is often just a minor cost of doing business. For a small business, regulatory compliance can be an enterprise-killer.

    On the Horizon 

June 16, 2015 10:00 a.m.
Oversight & Investigations Subcommittee Hearing
"A Global Perspective on Cyber Threats"

June 17, 2015 10:00 a.m.
Full Committee Hearing "The Annual Report of the Financial Stability Oversight Council"

June 17, 2015 2:00 p.m.
Monetary Policy and Trade Subcommittee Hearing
“The Impact of the International Monetary Fund: Economic Stability or Moral Hazard?”

June 16, 2015 2:00 p.m.
Capital Markets and Government Sponsored Enterprises Subcommittee Hearing

"Legislative Proposals to Modernize Business Development Companies and Expand Investment Opportunities"

  In the News

Washington Free Beacon | HUD Has Spent $1.6 Trillion Since Its Creation

National Mortgage Professional Magazine | Rep. Royce Calls Out Castro on GSE Reform 

Wall Street Journal | Dodd-Frank Turns Five

American Banker | Lawmakers Spar Over TRID 'Grace Period'

Wall Street Journal | Yellen: Fed Was Advised Against Fully Complying With Subpoena on Leak Probe

Bloomberg | Bill to Change CFPB Governance Structure Draws Support, Criticism at House Hearing

Wall Street Journal | Kill the Export-Import Bank 

CNBC | Chart: What’s the real unemployment rate?

American Banker | Mortgage Lenders Continue Push for TRID 'Grace Period'

Wall Street Journal | SF Fed Sees Involuntary Part-Time Workers Remaining Elevated

New York Times | Mergers Might Not Signal Optimism

The Maine Wire | Poliquin: The Export-Import Bank Must Be Held Accountable

CNBC | How the Fed screwed up the bond market