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.”
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 EnforcementOn 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.”
MEMBER SPOTLIGHT
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