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WEEK IN REVIEW


Washington, Sep 30 -

Fraud is Fraud and Theft is Theft

The Committee heard testimony from Wells Fargo Chairman and CEO John Stumpf on Thursday regarding the fraud perpetrated when bank employees opened accounts without customers’ permission.

“While the fine Wells Fargo will pay – roughly 3 percent of the bank’s second quarter profits – is tiny by Wall Street’s standards, the harm caused to consumers and employees is not,” said Chairman Jeb Hensarling (R-TX).  “To the factory worker who just had her credit score dinged because of the fraud Wells Fargo perpetrated, the cost is big.  To the waiter at the local diner living paycheck to paycheck who had to pay fees associated with a fraudulent account created, the cost is big.  To the Wells Fargo employee with kids to support who lost her job because she refused to participate in theft and fraud, the cost is big. We will make sure those betrayed by Wells Fargo are not forgotten.  It is on their behalf that our committee has launched an in-depth investigation of your bank’s practices.”

“You have failed,” Rep. Patrick McHenry (R-N.C.) said, telling Stumpf that he had broken longstanding law, defrauded his customers and neglected to meet his own company’s ethics guidelines. “How can you rebuild trust?”

“I’m amazed at what you do not know about your business,” said Rep. Roger Williams (R-Texas). “I’ve heard more ‘I don’t knows’ from a CEO than I think I’ve ever heard in my life.”

Members of the Committee also questioned why Washington regulators apparently failed to protect consumers.

“The CFPB has one job,” said Rep. Scott Garrett (R-N.J.).  “They completely blew it.”

“If OCC had examiners on site at Wells Fargo during the time when these fraudulent accounts were opened and the CFPB was conducting regular examinations, why did it take the L.A. Times to expose it?” asked Chairman Hensarling.  “Why did it take almost 18 months for the CFPB to initiate a ‘supervisory review’?”

Rep. Mick Mulvaney (R-S.C.) also took aim at federal regulators.  “Everything that we’re talking about here today…happened since CFPB and Dodd-Frank,” he said.

Committee Members Question Fed Chair Yellen

Federal Reserve Chair Janet Yellen was questioned by the Committee on Wednesday about the Fed’s regulation and supervision of the financial sector.

In its coverage of the hearing, the Wall Street Journal reported on the exchange between Oversight and Investigations Subcommittee Chairman Sean Duffy (R-WI) and Chair Yellen about whether the Fed has ended “too big to fail.”

Reuters focused its coverage on Capital Markets and Government Sponsored Enterprises Subcommittee Chairman Scott Garrett’s questions “over media reports that Fed Governor Lael Brainard might take a top job in the next administration if Democrat Hillary Clinton” is elected president.

"The Fed has an unacceptably cozy relationship both with the Obama administration and with higher ups in the Democratic Party," Rep. Garrett said.  

Subcommittee Examines the Financial Stability Board

On Tuesday, the Monetary Policy and Trade Subcommittee held a hearing to examine concerns with the work and transparency of the Financial Stability Board (FSB), an international organization largely controlled by European central bankers and financial regulators.

“It is very troubling that American regulators would relinquish any regulatory authority to unelected European bureaucrats who meet behind closed doors in a secretive fashion to determine the fate of U.S. financial institutions,” said Subcommittee Chairman Bill Huizenga (R-MI).  “Because very little is known about the FSB, I have very serious concerns about its arbitrary decision-making process used to formulate policy that is devoid of any and all public participation.”

Housing Subcommittee Discusses Potential Covered Agreement with the EU

The Housing and Insurance Subcommittee held a hearing on Wednesday to examine international factors affecting domestic insurance markets.  The hearing gave members the first real opportunity to examine the covered agreement negotiations between the United States and the European Union.

“While I believe that insurers are best regulated at the state level, a covered agreement with the European Union, when structured properly and with input from state insurance commissioners and stakeholders, presents a unique opportunity to level the playing field for U.S. insurers and reinsurers,” explained Subcommittee Chairman Luetkemeyer (R-MO) in his opening statement. “That’s particularly important given the actions we are beginning to see out of European regulatory bodies.”

Subcommittee Examines Legislative Proposals to Address Consumer Access to Banking

On Tuesday, the Financial Institutions and Consumer Credit Subcommittee held a hearing to review several legislative proposals designed to help consumers access banking services.

“I am pleased our Committee members on both sides of the aisle have taken thoughtful approaches to tackle issues that affect the daily lives of the American consumer,” said Chairman Randy Neugebauer (R-TX). “From a bill that would ensure a competitive environment for the selection of credit scoring models at GSEs, to a bill ensuring the continued offering of credit education and counseling services, to bills that would ensure that new and innovative consumer products can continue to be offered without unnecessary regulatory constraints, today’s hearing will ensure we consider all policy issues and make informed and thoughtful decisions as we move these bills forward.”

For more information on the specific legislative proposals discussed, please click here.

Member Spotlight

Rep. Bill Posey (R-FL) |Republican lawmaker is leading the fight to get the feds out of local banks

Washington regulators are hurting small banks, and by extension the communities they serve, according to Florida Rep. Bill Posey, whose proposed Common Sense Economic Recovery Act would prohibit bureaucrats from micromanaging loan classifications.

Weekend Must Reads

Investor’s Business Daily | Sorry, Hillary, You And Bill — Not Tax Cuts — Caused The Financial Crisis

To be as kind as possible, the idea that "tax policies" -- including the 2003 tax cuts — were the root cause of the financial panic is an idea espoused by no one we're aware of in the economics profession. It was those tax cuts that in fact revived the economy, which had begun failing in the waning months of the Clinton administration.

Wall Street Journal | Who’s the Systemic Risk Now?

Regulators like to bray about the dangers of systemic financial risk, but they seem not to care when they’re the source of the risk. Consider the U.S. assault on Deutsche Bank that has tanked European bank shares this week.

USA Today | Repeal Dodd-Frank

After the bank bailouts of 2008, the public was promised “never again.” Unfortunately the same congressional architects of that bailout, Sen. Chris Dodd and Rep. Barney Frank, enacted legislation giving regulators the permanent option of bailouts, as enshrined in the Dodd-Frank Act.

Wall Street Journal | The Wells Fargo Standard

There’s also the issue of scale. Jack Lew’s Citigroup consumed a series of multi-billion-dollar taxpayer bailouts and helped trigger a world-wide financial panic. Wells Fargo mistreated its customers, but its $2.6 million in remediation for those affected is a rounding error at a bank with $86 billion in annual revenue. If J.P. Morgan’s famous 2012 trading loss was triggered by a “London whale,” as a financial matter this is the San Francisco minnow.

In the News

WSJ | Lawmakers Take More Swings at Wells Fargo CEO John Stumpf

Associated Press |House lawmakers heap blistering criticism on Wells Fargo CEO

The Hill |Fed finds community banks face challenges after financial crisis

LA Times | Republicans say there's another villain in the Wells Fargo scandal

WSJ |U.S. Signed Secret Document to Lift U.N. Sanctions on Iranian Banks

Politico Pro |Home loans remain elusive for blacks, defying Obama's efforts

Morning Consult| Hensarling Calls Fed's Stress-Test Revamp a 'Very Small Step' in Right Direction

Washington Examiner | The Clintons' big fat Greek bond wedding