Posted by Staff on March 27, 2015
Committee Passes 11 Bipartisan Regulatory Relief Bills and Establishes Task Force to Investigate Terrorism Financing

The Committee marked up and passed 11 bipartisan regulatory relief bills this week.  The bills are designed to help strengthen the economy, preserve consumer choice and allow more Americans an opportunity to achieve financial independence.

As the Committee began debate on the bills, Chairman Jeb Hensarling (R-TX) said “it is difficult, perhaps even impossible, to be more bipartisan or less controversial than these 11 bills that we consider today -- which means because they are bipartisan, they are modest. Although they are modest, they are not insignificant to our fellow citizens back home or to the community banks and credits unions that our fellow citizens depend on," he said.

Financial Institutions and Consumer Credit Subcommittee Chairman Randy Neugebauer (R-TX) said, “Today, the Financial Services Committee has begun to move the pendulum closer to the direction of reasonable regulation by taking the first step to address much-needed regulatory relief for our Main Street financial institutions and the consumers they serve.”

This week the Committee also approved a resolution to create the bipartisan Task Force to Investigate Terrorism Financing.  The resolution passed unanimously by voice vote. Serving as the Chairman and Co-Chairman of the Task Force are Rep. Michael Fitzpatrick (R-PA) and Rep. Robert Pittenger (R-NC).  Rep. Stephen Lynch (R-CT) will serve as the Ranking Member on the Task Force.

“As the United States pushes back against the tide of terror and extremism that is the enemy of freedom and peace everywhere, it must do so with every tool available – including within the financial system,” said Rep. Fitzpatrick.

Rep. Pittenger said, “America remains the primary target of radical Islamist jihadists, who seek to destroy our way of life and the freedoms we cherish.  We must do all we can to mitigate that threat.”

Subcommittee Examines FDIC's Role in Operation Choke Point

 The Oversight and Investigations Subcommittee held a hearing to further examine the Federal Deposit Insurance Corporation's (FDIC) role in Operation Choke Point. Operation Choke Point is a program spearheaded by the Department of Justice (DOJ) that has unfairly forced several legal businesses to shut down by closing their bank accounts with certain financial institutions. These businesses have been deemed "high risk" by DOJ and financial regulators due to an alleged higher incidence of consumer fraud, regardless of whether the business has done anything illegal.

The sole witness, FDIC Chairman Martin Gruenberg, admitted that it was a mistake for government officials, including those at the FDIC, to cut off access to financial institutions for businesses deemed as “high risk” regardless of their individual merit.

"Using the term 'reputational risk,' they [FDIC examiners] are warning banks that if they do business with gun dealers, short-term lenders, payday lenders, ammunition manufacturers, smokes apps, and other legal businesses, they will meet the wrath of the FDIC.  And if you disagree, Mr. Chairman, we have emails and memos from the FDIC to prove it," said Oversight and Investigations Subcommittee Chairman Sean Duffy (R-WI). "Their purpose is to choke off the business they don't like from the banking system. I've asked Chairman Gruenberg to testify today because I want to know where he got the target list from several years ago and like the IRS, I fear that activists at the DOJ and the FDIC are abusing their power and authority and they're going out to legal businesses and in fact, they're weaponizing government to meet their ideological belief."

Rep. Mick Mulvaney (R-SC) shared the story of a constituent who owns a pawnshop.  The bank where she had a 25-year business relationship with told her it could not lend to her because of the nature of her business.

Despite the FDIC's efforts to retract the initial "high risk" list and guidance that prevented innocent business owners from accessing lines of credit, the FDIC has failed to hold accountable government officials who pressured banks to stop servicing businesses.

Committee Reviews SEC's Budget Request and Operations

The Committee held a hearing to review the Securities and Exchange Commission's (SEC) agenda, operations, and Fiscal Year 2016 budget request.

While many Democrats claim the SEC is “underfunded,” Chairman Hensarling pointed out in his opening statement that the SEC budget “has grown tremendously over the years.”

“In fact,” he said, “the SEC’s current budget of $1.5 billion represents an increase of almost 35% since the passage of the Dodd-Frank Act not yet five years ago. In fact, over a 20-year period since 1995, the SEC’s budget has increased by nearly 400%. That is three times greater than our national defense budget has grown at a time when we have to fight the international war on terror.”

The hearing also gave Committee members an opportunity to question the SEC’s rulemaking activities at a time when the SEC and the Department of Labor are crafting more regulations for financial advisers.

Rep. Bruce Poliquin (R-ME) expressed concerns that the proposed regulations will make it more difficult for low and moderate income Americans to save for retirement.

Rep. Ann Wagner (R-MO), who has proposed legislation that would give Americans more freedom to seek sound financial advice, urged SEC Chair Mary Jo White to consider the "potential for increased costs" for investors as a consequence of the Department of Labor's proposed fiduciary rules.


Rep. Scott Tipton | Tipton seeks to aid small banks

Rep. Scott Tipton, R-Cortez, introduced legislation Tuesday aimed at reducing compliance burdens for highly rated community banks.

Weekend Must Reads

New York Times | End This Corporate Welfare
The Export-Import Bank does not weigh the jobs it supports against those it destroys. By providing loans to foreign companies that compete with domestic ones, Ex-Im is actively eliminating American jobs.

Washington Examiner | Washington Examiner: Wall St. attacked, Main St. wounded

Dodd-Frank's impact on the financial industry is massive and burdensome. Some might respond, "Good. They deserved it!" But who really bears these burdens? It's not Wall Street but Main Street.

    In the News

Bloomberg | House Panel Passes Banking Relief Bills; Legislation Is Repeat of Old Congress

The Hill | House panel advances Dodd-Frank tweaks

The Hill | House Republicans demand FDIC punish 'Operation Choke Point' operators

Washington Times | Small business owners victimized by Operation Choke Point decry government overreach

American Banker | House Banking Panel to Take Up Slate of Dodd-Frank Changes

The Hill | Republicans grill SEC chief over financial adviser regs

Washington Examiner | Operation Choke Point claims more victims, ignores due process

The Hill | House panel advances Dodd-Frank tweaks

Credit Union Times | Credit Union Reg Relief Bills Approved

American Banker | House Panel Passes Reg Tweaks

Daily Signal | Republicans to Government Official: Why Has No One Been Fired Over Choke Point?

Green Bay Gazette | Duffy pushes FDIC on 'Operation Chokepoint'

Credit Union Times | FDIC Chairman Grilled Over Operation Choke Point
Posted by Staff on March 20, 2015
Washington’s Regulatory Burden Harming Consumer Choice and Financial Independence

Witnesses told the Committee on Wednesday that Washington’s growing regulatory burden doesn’t just affect a bank or credit union’s bottom line, it also restricts consumers’ choices and access to affordable credit.

This is especially true for Americans with low and moderate incomes.

"It’s not an exaggeration to say that every single week we hear from another financial institution that is having trouble meeting the needs of their customers,” said Chairman Jeb Hensarling (R-TX). I have one message here from a bank in Arkansas that says due to the Qualified Mortgage rule that they have had to cease funding mobile homes 'which have long been a source of homeownership for low to moderate income consumers in our markets.' Here is one from a credit union in California who says due to federal regulation that one of their members can no longer wire funds to a family member in Ukraine. Here is one from a bank in Massachusetts -- 'we have experienced a spike in loan declines to women,' for their investigation identified that women attempting to buy the family home to settle their divorce and stabilize their family were being declined at a high rate due to the Dodd-Frank Qualified Mortgage rules and the ability to pay rules."

In its coverage of the hearing, the Mobile Press-Register quoted witness Tyrone Fenderson.  "This job has been made much more difficult by the avalanche of new rules, guidance and seemingly ever-changing expectation of regulators,' Fenderson said. 'It is this regulatory burden and the fear of even more regulation that often pushes small banks to sell to banks many times their size.'"

Witness Peggy Bosma-LaMascus urged Congress to require “realistic and robust cost-benefit analyses of proposed regulations,” the American Banker reported, “so the result would be smarter regulation.”

Committee Examines Impact of the International Financial System on U.S. Banks

The Committee’s hearing on Tuesday gave Members the opportunity to question Treasury Secretary Jacob Lew on a variety of important issues ranging from the international financial system to the growing regulatory burden to the ongoing transparency controversy surrounding former Secretary of State Hillary Clinton.

Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (R-MI) questioned the Obama Administration’s plans for the IMF, asking “why should hardworking, middle-income American taxpayer dollars be used to bail out other countries, especially after suffering from bailout fatigue in our own backyard dealing with Fannie Mae, Freddie Mac, FHA and a number of others?”

Others voiced concerns that the Financial Stability Oversight Council (FSOC) has ignored the harmful consequences the Dodd-Frank Act has had on community financial institutions and their customers. "The administration's insistence on defending the Dodd-Frank brand at all costs is made all the more mystifying by the fact that the primary author of the law, our former colleague Barney Frank, has identified a number of provisions that he believes should be revisited. What's more, then-Fed Chairman Bernanke, in his last hearing with us, listed multiple bipartisan legislative reforms that policy makers could unite around to improve our financial regulatory system,” said Rep. Randy Hultgren (R-IL). "They both recognized that a law that runs to 2,300 pages and imposes at least 400 mandates cannot possibly be perfect, and that changes are, therefore, warranted.”

The Durango Herald reported that Rep. Scott Tipton (R-CO) questioned why FSOC “has not reviewed the effects of these regulations on the local banks in the over 40 FSOC meetings since 2010, despite being legally required to do” under Dodd-Frank.

Committee Members also sought answers from Secretary Lew regarding former Secretary Clinton's use of a personal email address for official business.  For much of the first two years of the Obama Administration, Secretary Lew served as Deputy Secretary of State for Management and Resources, making him the department’s chief operating officer.

However, Secretary Lew failed to shed any light on the issue, saying he had “no recollection” if he ever had any conversations with anyone about the State Department’s email policy and the he “didn’t pay a lot of attention to what e-mail” Secretary Clinton was using.

Subcommittee Calls for Fairness and Protection of Shareholders in the SEC's Use of Enforcement

On Thursday, the Capital Markets and Government Sponsored Enterprises Subcommittee held an oversight hearing on the Securities and Exchange Commission’s (SEC) Division of Enforcement.

Subcommittee Chairman Scott Garrett (R-NJ) questioned the SEC’s increased use of Administrative Proceedings rather than federal courts. “I strongly support the proper and stringent enforcing of our nation’s securities laws. However, the enforcement of those laws, like any other, should be done in an even-handed manner, removed from politics, with appropriate due process protections for defendants. The current SEC enforcement policies and procedures do not meet this standard and need to be improved. The SEC should be less concerned about the press releases it sends out and the headlines it receives, and more concerned about having a clear and consistent approach to enforcing the law.”


Rep. Randy Hultgren | Congressman's Interest in Munis Comes from Experience

And that's not all Hultgren has done on the muni bond front since joining Congress in 2011. The 49-year-old has been one of the most vocal supporters of municipal bonds in the House and a leading co-sponsor of legislation on bank-qualified bonds. He serves on the House Financial Services Committee, which has jurisdiction over munis and other securities.

Rep. Ann Wagner |
Financial crisis: Americans deserve freedom to grow, save

The president and Sen. Warren claim their new rule will have no impact on investors. They claim, falsely, that if you like your broker, you can keep your broker. But we have seen this Washington double speak before when the president famously said about Obamacare, "if you like your plan, you can keep your plan." In reality, this rule will restrict options and choice and will limit your freedom to keep your broker and invest in your future.

Weekend Must Reads

American Banker | Dangers of Housing Policy 'Hidden in Plain Sight' No More

Necessary reform of the U.S. housing finance system will only be possible when we understand how government policy shaped the financial crisis.

Washington Times | Sunshine Week should turn up the heat

The company is also raising separation of powers arguments because of the multiple roles FSOC members play, serving as rule-maker, investigator, prosecutor, judge and jury. The company brief states: "FSOC members perform a legislative function by adopting rules that purport to set the standards used to determine whether to designate companies (as SIFIs); an executive and prosecutorial function by proposing companies to be subject to the standards they have promulgated, investigating those companies, and building the case for designation; and an adjudicative function by issuing final decisions adopting their own proposed rationales. Not only is each of these functions performed by the same body, they are also performed by the same individuals, without even a separation into offices or divisions."

Investor's Business Daily | Amid Renewed Bailout Fear, Watt Turns Fannie, Freddie Into Welfare Agencies

Recent moves by Federal Finance Housing Agency chief Mel Watt to ease mortgage terms for delinquent and underwater borrowers could further hurt Fannie's and Freddie's profitability — and even put taxpayers on the hook for more losses.

    On the Horizon 

March 24, 2015 10:00 a.m.
Full Committee Hearing

"Examining the SEC’s Agenda, Operations, and FY 2016 Budget Request"

 March 24, 2015 2:00 p.m.
Oversight and Investigations Subcommittee Hearing

"The Federal Deposit Insurance Corporation’s Role in Operation Choke Point"

  In the News

Wall Street Journal | Treasury Secretary Lew: No Recollection of Clinton Email System

Durango Herald | Tipton questions impact of rules on local banks

Mobile Press-Register | Mobile community banker calls for relief from 'avalanche of new rules' created by Dodd-Frank

Wall Street Journal | How Foreigners Became America’s Financial Regulators

Wall Street Journal | Ending Federal Loan Fraud

American Banker | 'Time Is of the Essence' to Save Small Institutions, Lawmakers Warn

Lubbock Avalanche-Journal | Local banker to speak on behalf of community banks at Congressional hearing

Bloomberg | Lew Says He Didn’t Pay Attention to Clinton’s E-Mail Account

Reuters | U.S. Treasury Secretary Jack Lew dodges Clinton email questions

Weekly Standard | Former State Department Official Refuses to Testify About Hillary's Emails

American Banker | Treasury's Lew on Volcker, Systemic Threshold and the State of Regulation

CNN | GOP hits Fed on leaks

Bloomberg | House Financial Services Chairman Says Criminal Probe Opened Into 2012 Fed Leak

Posted by Staff on March 06, 2015
Committee Pushes for Accountability and Transparency at the CFPB

Tuesday’s hearing with Consumer Financial Protection Bureau Director Richard Cordray was another opportunity for Republicans to promote reforms to make the Bureau accountable and transparent to hardworking taxpayers.

Republicans on the Committee are pushing for reforms to make the CFPB accountable and transparent because the Bureau is, by design, not accountable or transparent to Congress or taxpayers. Republican Members understand that real consumer protection puts power where it belongs: in the hands of consumers, not Washington bureaucrats.

“The CFPB undoubtedly remains the single most powerful and least accountable Federal agency in all of Washington,” said Chairman Jeb Hensarling (R-TX) in his opening remarks. “When it comes to the credit cards, auto loans and mortgages of hardworking taxpayers the CFPB has unbridled, discretionary power not only to make those less available and more expensive, but to absolutely take them away."

With its authority unchecked, the Bureau restricts, limits and infringes on the economic freedoms of the very consumers it is supposed to protect.

Financial Institutions and Consumer Credit Subcommittee Chairman Randy Neugebauer (R-TX), said, “I remain concerned that many Bureau actions demonstrate a regulatory paternalism that assumes the American consumer doesn’t know how to make choices for themselves. It is a dangerous scenario when government bureaucrats start making financial choices for people. 

“In my district there is a single mother with three kids who use prepaid cards to budget finances and overdraft protection for the occasional cash shortage scenario. This single mother is barely in the financial mainstream,” continued Chairman Neugebauer.  “As the Bureau moves forward with rulemaking in these areas, it must truly understand the qualitative and quantitative costs and benefits of each rule.”

Committee Republicans also continued to seek answers about why the Bureau is spending more than $215 million in renovation costs for a building it rents.

When Rep. Ann Wagner (R-MO) asked CFPB Director Richard Cordray who authorized the renovations, he outrageously replied: “Why does that matter to you?”

"Because it's $215 million of taxpayers' money!" declared Rep. Wagner.

Watch this exchange between Rep. Wagner and Director Cordray here.


Rep. Robert Hurt | Robert Hurt: The Federal Reserve must be transparent and accountable

Until we can institute more transparent policies for the Federal Reserve, we must continue to provide rigorous congressional oversight. Last Wednesday, Federal Reserve Chair Janet Yellen testified before the House Financial Services Committee hearing entitled, “Monetary Policy and the State of the Economy.” I appreciate Chair Yellen’s testimony, particularly because I have serious concerns about Federal Reserve policies that make life more difficult for hardworking Americans and disproportionately diminish the ability of Main Street banks to provide vital capital in our rural communities.

Rep. Robert Pittenger | Pittenger renews push on advisory board for small businesses

In a statement Thursday, Pittenger said the board would “give small business owners, credit unions and community banks a seat at the table.” “Small businesses create jobs. Community banks and credit unions support small businesses. Too often, Washington regulators don’t pay attention to how their rules create unnecessary burdens for small business owners, killing job growth,” he said.

Weekend Must Reads

New York Post | White House looking to creep into 401(k)s

It’s all about control. It’s your money, America. The system functions quite well. Adding more pages of red tape will not improve performance, but it just may get your broker to drop your account, just as many credit lines were closed after Dodd-Frank passed.

American Action Forum | Re-inflating the Housing Bubble?

In this light, recent policy decisions are especially troubling. The Federal Housing Finance Agency recently announced that Fannie Mae and Freddie Mac would again purchase and guarantee mortgages with as little as 3 percent down. It also decided to fund the Housing Trust Fund and Capital Magnet Fund. And, as discussed in recent testimony, the FHA announced a wrong-headed cut in the premiums it charges for insuring mortgages against default. These are carbon copies of the kind of pro-cyclical housing policies that prevailed prior to the crash.

Wall Street Journal | A Recovery Waiting to Be Liberated

Hope flickered last year when the economy grew at more than a 4% clip in the second and third quarters. But then came last week’s news that fourth-quarter growth slowed to 2.2%, a gloomy revelation that the rebound was temporary. Economic growth for 2014 clocked in at about 2.3%—the same disappointing pace since the recession officially ended in 2009. What is the problem?

    In the News

Holland Sentinel | Huizenga talks about Federal Reserve in weekly Republican address

Wall Street Journal | Hensarling Wants Quicker Responses From ‘Stonewalling’ Agencies

The Hill | Hensarling rips Obama for ‘unprecedented secrecy’

Bloomberg | House Republicans Seek Changes to CFPB; Call for Restructuring Regulatory Agency

Credit Union Times | Cordray Defends CFPB Payday Lending Action

Housing Wire | House Committee grills Cordray on QM, mortgage regulations

The Hill | GOP bill would overhaul consumer agency

Washington Examiner | How government debt actually affects you

The Hill | Let’s stifle Operation Choke Point

Posted by Staff on February 27, 2015
Committee Pushes for Accountability and Transparency Reforms at the Federal Reserve

Republicans at this week’s hearing with Federal Reserve Chair Janet Yellen raised questions about how much influence the executive branch holds over the central bank and argued in favor of accountability reforms to both protect the Fed’s independence in its conduct of monetary policy and to help give the economy greater certainty.

In its coverage of the hearing, the Associated Press reported that Republicans on the committee “challenged the central bank’s lack of accountability”

Members “seized on Ms. Yellen’s official calendar records and an October speech on inequality, just before the midterm elections, as evidence she was leaning towards the Obama administration and Democrats,” reported the Wall Street Journal in its coverage of the hearing.

While Chair Yellen and Democrats argued reforms would open the Fed to political influence, “Republicans at the hearing countered that Ms. Yellen’s calendars show the executive branch has far more access, and potentially more influence, than Congress,” the Journal reported.    

“Opponents argue any reforms threaten the Fed’s monetary policy independence, but the greatest threat to that independence comes from the executive branch, not the legislative branch,” said Chairman Jeb Hensarling (R-TX).  “While the Federal Reserve Chair testifies publicly before this committee twice a year, she meets weekly with the Treasury Secretary in private.  And for decades there has been a revolving door between Treasury officials and Fed officials which continues even today…Fed reforms are needed and I for one believe Fed reforms are coming.”

The Federal Reserve has proven time and time again that its government knows best approach doesn't hold the cure for what ails the economy," said Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (R-MI). "It's time we restore certainty as well as fiscal responsibility, and we must lift the veil of secrecy to ensure that the Fed is accountable to the people's representatives, the same people that created the Federal Reserve in the first place."

Capital Markets and Government-Sponsored Enterprises Subcommittee Chair Scott Garrett (R-NJ) said, "In theory, having a technocrat like the Fed to simply implement monetary changes based on basic facts, it sounds appealing. But in practice, that is not anywhere close to what happens at the Fed." 

Subcommittee Examines FHA's Financial Health

The Housing and Insurance Subcommittee held a hearing Thursday on the Federal Housing Administration (FHA), the second in a series that began earlier this month with the full committee’s hearing with HUD Secretary Julian Castro.

“House Republicans have argued that the FHA was wrong to make a cut to its annual mortgage insurance premium before its reserve fund reached a statutory minimum – and witnesses agreed,” reported the American Banker in its coverage of the hearing.  Witnesses told the subcommittee that the FHA’s premium reduction “is undercutting the private sector and expanding the government’s role in the housing market.”

Subcommittee Chairman Blaine Luetkemeyer (R-MO) said, "The underlying problems at FHA have existed for years and continue to pose a threat to all Americans. If a private business like the ones represented on our panel today operated in a fashion similar to FHA, it would be placed into receivership. Yet FHA continues unapologetically down a dangerous path that we’ve traveled before."

"It never ceases to amaze me that Washington doesn't seem to be able to learn the lessons of history and recent history. So here we have Fannie Mae and Freddie Mac jumping back in and offering 30-year loans for borrowers that can only afford a 3% down payment. These loans are exempt from the requirements that another federal agency says are required under the qualified mortgage rule, the Consumer Financial Protection Bureau that are supposed to prevent a recurrence of loose lending," remarked Rep. Andy Barr (R-KY). "This is a double-standard. The American people are tired of Washington living by one set of rules and the private sector and the American people living by another set of rules."


Rep. Ann Wagner | Wagner bill clashes with Obama proposal to regulate financial advisers

Wagner said Obama’s reforms could drive up the cost of financial advice for low- and middle-income holders of retirement accounts, thereby depriving them of that service. Wagner also said Obama was pushing the tougher rule without adequately studying its need and potential impact.

Rep. Randy Neugebauer | Overregulation Harmed America’s Financial Sector

In the midst of the financial crisis, the Democrat-controlled Congress did not do the responsible thing. Instead of comprehensively studying the crisis, Democrats in Washington threw a blanket over the financial sector in the form of the Dodd-Frank Act.

Weekend Must Reads

American Enterprise Institute | The Fed and inequality returns

The Fed chair shouldn’t sound like a left-leaning politician opining about hot-button political issues.

American Banker | An Open Letter to Elizabeth Warren on the Future of Community Banks

Facts should be the foundation for forming opinions. To suggest that community banks are doing just fine after Dodd-Frank is contrary to facts.

Bloomberg | CFPB Proves Its Critics Right

When Dodd-Frank was being debated in Congress, critics warned that the CFPB would have little accountability and would therefore be inclined to overreach. On this issue, the agency seems determined to prove that fear right.

Wall Street Journal | Obama vs. Savers

Ignoring existing regulation, Mr. Obama is making his usual argument that consumers are helpless against the predations of businesspeople. The solution naturally involves lawyers making lots of money. And in order to avoid industrywide chaos, the Washington bureaucracy will issue a flood of exemptions. At least Mr. Obama hasn’t promised that if you like your broker you can keep your broker.

    On the Horizon 

March 3, 2015 2:30 p.m.
Full Committee Hearing

"The Semi-Annual Report of the Bureau of Consumer Financial Protection"

March 5, 2015 9:00 a.m. Capital Markets and Government Sponsored Enterprises Subcommittee Hearing
"Oversight of the SEC’s Division of Enforcement"

  In the News

CNBC Video | Chairman Hensarling Reacts to Fed Chair’s Testimony

Bloomberg | Rep. Huizenga Calls for More Fed Transparency

CNBC | Are community banks doomed to fail?

Wall Street Journal | Fed’s Yellen Fends Off Charges of Partisan Tilt

American Banker | House GOP Hammers Yellen Over White House Meetings

Fiscal Times | HUD Gives $37 Million in Housing Subsidies to the Wrong People

The Hill | Ex-Im critics pounce after bank yanks data

MainStreet | Dodd-Frank's Unintended Consequences - Wall Street Reaps Benefits of D.C. Regulation

Wall Street Journal | Fannie, Freddie Weak Earnings Raise Possibility of Future Bailouts

The Hill | GOP bill aims to block financial adviser regs
American Banker | FHA Premium Cut Keeping Private Sector Out of the Market, Industry Claims

Washington Examiner | Fed's already political, GOP argues in oversight push

The Hill | Ex-Im worker accused in bilking scheme
Posted by on February 26, 2015

“If independence is an issue, than we really ought to examine the independence of the Fed
from the executive branch of government.  That’s where the real threat is,
not from the legislative branch”

House Financial Services Committee Chairman Jeb Hensarling (R-TX) was interviewed on CNBC’s “Closing Bell” Wednesday following the committee’s hearing with Federal Reserve Chair Janet Yellen. 

You can watch the entire interview by clicking on the image, and below are excerpts that may be of particular interest.

On his reaction to Chair Yellen’s testimony:

“Well, I was disappointed because what we have seen now is that middle income families are still struggling in the slowest, weakest recovery in the postwar era, and yet it seems that we will continue on extraordinary measures that were employed back in 2008 and here we are in 2015.  And yet they are not more transparent, they are not more accountable, and the real issue is, economists I know believe that we are best served when the Federal Reserve will communicate to the public what their monetary policy will be, and yet we didn't hear it in this particular testimony.”

On the Federal Reserve’s independence:

“[M]any of us believe that if independence is an issue, than we really ought to examine the independence of the Fed from the executive branch of government.  That’s where the real threat is, not from the legislative branch that merely has asked the Fed -- you make up monetary policy, you can waive it, you can change it, but you ought to have an obligation to communicate it to the rest of us, and when you don't, you hinder economic growth, you hinder a healthy economy, you hinder middle income America that now has smaller paychecks and a smaller bank account.”

On making the Fed more transparent and accountable:

“The House Financial Services Committee moved a bill that, again, would simply ask the Fed to reveal its policy -- it's really about transparency and accountability -- just as long as they reported it to the rest of us and to ensure that the Fed, as you know, just doesn't have to do with monetary policy, it has to do with being a prudential banking regulator.  And yet they are exempt from any of the provisions like cost-benefit analysis that other prudential regulators are required to do.  We moved that bill in the last Congress.  I intend to move a similar bill in this Congress.”

Posted by Staff on February 25, 2015
1). The Ex-Im Bank may harm as many jobs as it claims to support.

Government export finance assistance programs like Ex-Im “largely shift production among sectors within the economy rather than raise the overall level of employment in the economy.” - Government Accountability Office, “Export-Import Bank: Key Factors in Considering Ex-Im Bank Reauthorization

“[A]t best the Ex-Im Bank creates jobs in export industries by destroying jobs in non-export industries.” – Donald Boudreaux, Ph.D, Professor of Economics at George Mason University

“By some estimates, the [Ex-Im] Bank’s loan guarantees have resulted in up to 7,500 lost U.S. carrier jobs, and up to $684 million of lost income for U.S. airline employees annually.” – Delta Airlines

2). The Ex-Im Bank doesn’t necessarily return money to the taxpayers.

The non-partisan Congressional Budget Office reports that if Ex-Im followed more accurate accounting rules – Fair-Value Accounting – its ledger would show a cost to taxpayers of $200 million/year, or $2 billion over 10 years. -- CBO Fair-Value Estimate

3). Only 1% of 1% of America’s Small Businesses Benefit from Ex-Im.

Congress requires that 20% of Ex-Im’s authorizations go to small businesses, but Ex-Im consistently fails to meet this statutory requirement.  In reality, only .01% of America’s small businesses receive any help at all from Ex-Im.

Instead, Ex-Im’s subsidies overwhelmingly benefit very large corporations.

4). The Ex-Im Bank uses American taxpayers’ money to help foreign corporations, including  businesses that are owned by the governments of China, Russia, Saudi Arabia, and the United Arab Emirates.

Of the 50 largest loans or guarantees approved by the Ex-Im Bank between FY2007-mid FY2014, 46% went to state-owned foreign companies or to a joint-venture that includes a state-owned company.  

5). The Ex-Im Bank is not critical to our economy.  It financed only about 1% of total U.S. exports in 2014.

Posted by Staff on February 13, 2015
Committee Examines Risky Practices at FHA

The committee held a hearing on Wednesday to examine the fiscal health of the Federal Housing Administration (FHA) and heard testimony from Housing and Urban Development Secretary Julian Castro.

"We all recall the famous admonition from Spanish philosopher Santayana who said, 'Those who do not remember the past are condemned to repeat it.' History has taught us that the root cause of the financial crisis was not deregulation but dumb regulation and helping put people into homes they could not afford to keep. Now the FHA, with exceedingly low down payments and a recently announced approximately 40 percent cut in its premiums, appears to be doing that. All at a time where the FHA continues to violate federal law by keeping a woefully insufficient capital reserve and right after receiving its first ever taxpayer bailout,” remarked Chairman Jeb Hensarling (R-TX).

In its coverage of the hearing, the Wall Street Journal noted that since 2009 the FHA has been in violation of the law which requires the agency to have a capital buffer equal to at least two percent of the loans it guarantees.  While Secretary Castro told the committee the premium cuts would push back the FHA’s return to the two percent threshold by only “a few months,” the Journal reported that Moody’s Analytics Chief Economist Mark Zandi and others have said “the fund might not return to the two percent level until 2018, two years later than an estimate made by the FHA’s independent actuary in November.”

After questioning from Rep. Sean Duffy (R-WI), “Castro acknowledged that the 50-basis-point reduction in fees would slow full restoration of the fund," noted the American Banker. "Duffy said it was proof of Republican arguments."

“Republicans cite the FHA’s need for a $1.7 billion draw from the Treasury in 2013 to shore up its reserve fund as reason to be concerned about the agency’s failure to move faster toward the two percent level,” The Hill reported in its coverage of the hearing.

Coming to your inbox on Sunday afternoon in this week’s Video Message:  Rep. Andy Barr (R-KY) will discuss why hardworking taxpayers should be concerned the FHA is putting them and homebuyers at risk.

Committee Holds Markup of Views and Estimates

At Thursday’s full committee markup, Chairman Hensarling said “[The] debt….represents roughly $160,000 of debt for every American household.”

"That particular debt you see on the clock today represents roughly $160,000 of debt for every American household. That comes out of their American dream. That is funds that cannot be used to send kids to college. Those are funds that can no longer be used to pay for health care premiums that have risen. They are funds that cannot be used to capitalize a new small business so that again they can achieve their American dream," said Chairman Hensarling.

"The Budget Views and Estimates that have been put together today will help this committee and help the Budget Committee guide our proceedings to ensure that we can help low and middle-income Americans in their pursuit of happiness and that we can ensure that we do not leave a legacy of debt for our children and our grandchildren and betray the American dream; which is not the fancy new car, it is not the new home with the kitchen and the granite countertops. The American dream is ensuring that our children and grandchildren have greater opportunities, greater freedom and a higher standard of living than we have enjoyed," added Chairman Hensarling.


Rep. Andy Barr | Congressman holds roundtable with bankers
A reintroduced bill could allow for more homeowners in Scott County, as well the creation of new jobs, said U.S. Rep. Andy Barr of Kentucky at a roundtable discussion with Scott County bankers. The Portfolio Lending and Mortgage Act would “expand the access of mortgage credit to the citizens of Scott County and all across the country,” he said.

Weekend Must Reads

American Action Forum | Dodd-Frank Rulemaking Excluded From Regulatory Review

An effort to reduce red tape by financial regulators excludes one of the most burdensome financial laws in recent memory, the Dodd-Frank Act.

Fiscal Times | The Spectacular Too Big Failure of Dodd-Frank

If the point of Dodd-Frank was to eliminate TBTF, it’s clearly failed. Instead, what it has done is prove the point of conservatives, who have consistently argued that regulatory expansion disproportionately impacts smaller players in any market. If the point of Dodd-Frank was to help consumers, that too has been a failure. Consolidation reduces both choice and proximity for most consumers, and the data from Harvard amply demonstrates that in the wake of Dodd-Frank. Rather than provide more competition for service and price, consolidation has left borrowers more and more at the whims of fewer and fewer providers. About the only success we see from Dodd-Frank is the strengthening of lobbyists on Capitol Hill, particularly from Wall Street.

The Hill | Overregulation is endangering our credit unions

The mounting costs and growing complexity of credit unions’ compliance burden are driven by two key components of overregulation: regulators’ overestimation of risk and the need to regulate it, and their underestimation of the time it takes to comply with a rule that, in the end, confers little benefit. Unfortunately, the result has become abundantly apparent as more and more credit unions, not-for-profit, member-owned financial institutions, have ceased doing business. Since 2007, the number of credit unions has declined by 1,600. That’s a whopping 21 percent drop. Under these circumstances, it is no surprise credit unions and NAFCU believe “enough is enough” when it comes to overregulation.

    In the News

Wall Street Journal | HUD Secretary Defends Decision to Lower FHA Fees

American Banker | Republicans Hammer Castro Over FHA Premium Reduction

The Hill | Castro grilled over lowering mortgage insurance premiums

Bloomberg | Working on ‘Sustainable Housing Policy' A Priority for Republicans, Hensarling Says

Charlotte Observer | Pittenger: Regulations harming community banks the most

Financial Times | Regulations hit smaller US banks hardest

Washington Post | New study finds that Dodd-Frank has promoted industry consolidation and killed community banks

El Paso Inc. | Community banks lobby for relief

The Hill | Republican vows to address 'the unfinished work of welfare reform'

Investor's Business Daily | Economic Optimism Index Dives Among Middle Class: Poll

Investor's Business Daily | Studies Confirm Dodd-Frank Strangling Small Lenders

Real Clear Politics | The Truth About Obama's Job Record

Bloomberg |
Financial regulators should embrace cost-benefit analysis

Posted by Staff on February 10, 2015
Several months ago this blog noted that Australia’s richest citizen secured a nearly $700 million loan for a new mining project from American taxpayers thanks to the U.S. Export-Import. Now the Australian Business Review is reporting that the project “is set for very large losses.”

In the short term, the capital costs for Gina Rinehart’s Roy Hill mine are almost certain to blow out — and a lower iron ore price will make matters worse.

If the current iron ore price decline continues into 2017 and beyond, then Gina Rinehart’s massive $10 billion Roy Hill mine project is set for very large losses when it starts production next year.

And if the reports of safety problems in the construction phase are right, then the capital costs will blow out beyond $10bn, especially if unions start playing hard ball, as they often do when there is a safety cause.

Now we know why banks & investors wouldn’t take the risk – but, American taxpayers did. #ThanksExIm
Posted by Staff on February 06, 2015
Subcommittee Examines Legal and Ethical Violations at HUD

The Oversight and Investigations Subcommittee heard testimony at its hearing on Wednesday that senior officials at the Department of Housing and Urban Development broke federal law and faced minor consequences for various ethical and legal violations.

In its coverage of the hearing testimony, the Washington Post reported the alleged violations include financial fraud, sexual harassment, nepotism and conflicts of interest.

"I want to make clear to committee members that these are different allegations against different employees in different departments and divisions responsible for very different tasks, but they seem to display the same cavalier attitude that shows these employees do not believe in following the rules and they do not care about getting caught. And when they do get caught, they do not care that they are obstructing an investigation or Congress," said Subcommittee Chairman Sean Duffy (R-WI). "It’s an attitude I think Americans are learning is prevalent throughout this Administration. And it’s an attitude I think we’re quickly getting tired of."

The Washington Times noted in its coverage of the hearing that, among various violations, HUD officials violated federal law by using taxpayer money to lobby Congress for increased HUD funding.

A witness from the Government Accountability Office told the Subcommittee that her agency concluded HUD officials violated federal law by engaging in “indirect or grassroots lobbying” when they urged individuals at organizations that receive HUD funding to contact members of Congress regarding HUD’s pending appropriations bill. 

A report issued last year from HUD’s Inspector General into this same matter also revealed that HUD officials attempted to cover up their illegal lobbying activity by obstructing the investigation.

NOTE: Coming to your e-mail inbox on Sunday afternoon -- this week’s Video Message will include some highlights of the Subcommittee’s hearing, with appearances by Chairman Sean Duffy and Reps. Michael Fitzpatrick (R-PA) and Bruce Poliquin (R-ME).


Rep. Michael Fitzpatrick | Fitzpatrick bill protects small businesses, families, taxpayers

No matter how well intentioned the more than 2,000 pages of Dodd-Frank regulations — and tens of thousands of other federal rules — there is always room to be made more effective and responsible. This is what the CLO provisions in Fitzpatrick’s bill (as well as the 10 other bipartisan measures) do: They work to protect consumers while letting small banks and businesses do their job. Why then a sudden uproar when Congress considered Fitzpatrick’s bill? Rep. Fitzpatrick’s colleague from across the aisle, and the Delaware River, Rep. John Carney (Del.) even offered this about the bill: “The provisions in this bill have passed Congress overwhelmingly in years past. Only now has it become distorted and mischaracterized for political purposes.”

Weekend Must Reads

Gallup | The Big Lie: 5.6% Unemployment

I hear all the time that "unemployment is greatly reduced, but the people aren't feeling it." When the media, talking heads, the White House and Wall Street start reporting the truth -- the percent of Americans in good jobs; jobs that are full time and real -- then we will quit wondering why Americans aren't "feeling" something that doesn't remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class.

Palm Beach Post | 3 Ways to Level the Economic Playing Field

Many longstanding federal and state policies privilege some businesses and not others. This tilted playing field isn’t just unfair; it’s grossly inefficient. It undermines competition, discourages innovation, and prompts businesses to expend billions of dollars in socially wasteful efforts to win the favor of politicians. But it need not be this way. A serious agenda to level the economic playing field appeals to both the progressive impulse to stick up for the powerless and the conservative urge to check government’s scope and power.

Investor's Business Daily | Collapsing Homeownership Proves Folly Of Federal Housing Policies

The government's homeownership scheme, like so much of what the meddling do-gooders inside the Beltway do, was viewed as grand and noble — until it all came crashing down on everyone. They turned the American Dream into a nightmare. But the social engineers never learned their lesson. In fact, they're doubling down on their mistakes.

    On the Horizon 

February 11, 2015 10:00 a.m.
Full Committee Hearing

"The Future of Housing in America: Oversight of the Federal Housing Administration"

  In the News

Washington Examiner | Housing projects use tax dollars to lobby for more tax dollars

Washington Times | Millions in HUD money went to lobbying, not housing

Fiscal Times | HUD Execs Flagged for Ethics, Lobbying Violations

Washington Post | Va. Democrat official accused of lobbying violation while in federal government 

Foreign Policy | How Dodd-Frank Is Failing Congo 

American Banker | Luetkemeyer Tries Again on Anti-Choke Point Bill 

Business Wire | CAGW Announces 2014 Porker of the Year Nominees

Detroit News | Editor’s Note: Who’s watching the watchdog?

Kentucky Educational Television | Rep. Andy Barr: One to One from Washington  

Washington Post | The diminishing returns of today’s homeownership policies

Investor's Business Daily | Watt Moves To Take Fannie, Freddie Off Sound Credit Standard

Posted by Staff on January 30, 2015
Washington ‘Rolling the Dice’ Again on Risky Housing Schemes

At a hearing on Tuesday, members of the committee voiced their strong concerns to the Director of the Federal Housing Finance Agency regarding recent FHFA actions that could repeat the same mistakes that led to the financial crisis.

"Contrary to the fable told by the left, the root cause of the financial crisis was not deregulation but dumb regulation. Regulations and statutes that either incented or mandated financial institutions to loan money to people to buy homes they ultimately could not afford to keep. Exhibit one, Fannie and Freddie’s affordable housing goals. 70 percent of all troubled mortgages were backstopped by Fannie, Freddie and other federal agencies," said Chairman Jeb Hensarling (R-TX).

"Regrettably, Washington appears to be rolling the dice yet again. Within the last 12 months FHFA has announced three different policies that are harmful to transitioning us to a sustainable housing finance system that protects both homeowners and taxpayers," added Chairman Hensarling.

Housing and Insurance Subcommittee Chairman Blaine Luetkemeyer (R-MO) noted, "At today’s hearing, FHFA Director Mel Watt agreed that there are certain tenants of responsible lending; Fannie Mae and Freddie Mac do not adhere to those tenants, and that could ultimately leave taxpayers in the position of once again footing a massive bailout. Director Watt confirmed today that taxpayers are backing Fannie Mae and Freddie Mac and will continue to be on the hook until housing finance reform is enacted. It is unfathomable that Director Watt thinks it is acceptable to take no action to protect taxpayers, particularly given that our nation is just a few years removed from a financial crisis that saw record numbers of foreclosures and the largest taxpayer funded bailout in history."

Rep. Mia Love (R-UT) said, "As I witnessed as a mayor, I have actually seen how these heavily involved government policies have actually hurt many cities in their ability to thrive and to grow. We have watched homes being built and actually seen those homes a year later completely empty, and hardworking families lose their credit and their ability to get into a home.”


Rep. Blaine Luetkemeyer | Luetkemeyer leads effort to end Operation Choke Point

“We’re very pleased they’ve acknowledged their wrongdoing and they’ve accepted our suggestions to put in place measures to stop this activity,” Rep. Blaine Luetkemeyer, R-Mo., told The Daily Signal in a phone call this morning. Luetkemeyer, a member of the House Financial Services Committee and leader in the fight to end Operation Choke Point, met with FDIC Chairman Martin Gruenbery and Vice Chairman Thomas Hoenig earlier today as a follow-up to concerns voiced last November.

Weekend Must Reads

Investor's Business Daily | Free Spending In Washington In A Time Of Frugality

Given half-trillion-dollar deficits, this is supposed to be an era of belt-tightening for governmental agencies. But you wouldn't know it from the fat-and-happy spending by some of them. Fannie Mae and the Consumer Financial Protection Bureau, for example, have both announced they're moving on up into glitzy new downtown Washington, D.C., office buildings costing taxpayers hundreds of millions.

McClatchy | Federal debt will explode over next 10 years, CBO says

The improving deficit numbers are temporary. Budget deficits are projected to begin going up again in 2018, and to nearly double by 2024 as retiring baby boomers strain the health and retirement systems, the economy grows more slowly and interest on the nation’s outstanding debt rises.

Real Clear Policy | The Crushing Burden of Government Regulation

Three years ago, Democrats and Republicans joined together to enact the Jumpstart Our Business Startups (JOBS) Act to reform U.S. securities law and make it easier for small businesses to raise capital. That law was a good start, but more needs to be done. So, Rep. Patrick McHenry (R., N.C.) is building support for a JOBS Act II, whose passage should be a no brainer for legislators of both parties.

    On the Horizon 

February 4, 2015 10:00 a.m.
Oversight and Investigations Subcommittee Hearing

"Exploring Alleged Ethical and Legal Violations at the U.S. Department of Housing and Urban Development"

  In the News

Wall Street Journal | Hensarling’s Housing History Lesson

Bloomberg | Bipartisan Support for Dodd-Frank Changes: Neugebauer

Wall Street Journal | Fannie, Freddie Regulator Defends Actions

Wall Street Journal | FDIC: Examiners Must Give Banks Written Notice on Risky Accounts

American Banker | FSOC's Proposed SIFI Reforms Are 'Too Little, Too Late': Critics

Washington Post | Mr. Obama’s economic optimism ignores the ongoing battle with federal debt

Reuters | U.S. housing regulator signals guarantee fee decision this quarter