THE BIG PICTURE

Congress last week passed a two-week stopgap funding bill, which will fund the government until December 22 and give lawmakers more time to agree on a budget. Congress also passed a temporary funding bill that will extend the National Flood Insurance Program to December 22.

Consumer Financial Protection Bureau Deputy Director Leandra English continues her court battle to take the helm at the agency. On December 6, she filed an amended complaint seeking a preliminary injunction in the U.S. District Court for the District of Columbia. Mick Mulvaney has said that he has no plans to fire English. A New York credit union has also sued President Donald Trump and Mulvaney, claiming that the president violated the Constitution when he placed Mulvaney at the head of the CFPB. Senators Sherrod Brown (D-OH) and Gary Peters (D-MI) led a group of Senators in a letter urging President Trump to swiftly nominate a permanent and aggressive director of the CFPB who will "put working families ahead of Wall Street."

Senator Al Franken (D-MN) announced that he will resign in the coming weeks, and Rep. Trent Franks (R-AZ) announced that he will resign immediately. Rep. John Conyers (D-MI) also announced last week that he'll be resigning from his seat. Conyers endorsed his son to replace him once he leaves Congress.

Richard Cordray, former head of the Consumer Financial Protection Bureau, announced last week that he is indeed running for governor in the state of Ohio. . The Supreme Court upheld President Trump's latest iteration of his travel ban. Rulings in the lower courts gave an exemptions from restrictions for foreigners with "bona fide" family, business or educational ties to the United States, but the Supreme Court said that the ban can be enforced even on individuals with connections to the United States.

Rep. Al Green (D-TX) led an effort in the House to impeach President Trump, which overwhelmingly failed. Some Democrats split from the effort, saying that the move was premature.

GOP leaders have announced that the House will not take up a tax reform bill this week.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Subcommittee Holds Hearing on Housing Reform: On December 6, the Housing and Insurance Subcommittee held a hearing entitled “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform, Part IV.” The purpose of the hearing was to provide the Subcommittee with views and perspectives and perspectives on the need to enact comprehensive housing reform, the legal, statutory or regulatory impediments to the return of private capital to the housing finance system, and what factors and metrics Congress should consider to reform the housing finance system. Witnesses included:

  • Mr. Michael S. Canter, Director, US Multi-Sector and Securitized Assets, Alliance Bernstein L.P.
  • Dr. Susan M. Wachter, Sussman Professor, Professor of Real Estate and Finance, The Wharton School, Co-Director Penn Institute for Urban Research, University of Pennsylvania
  • Mr. Andrew Rippert, Chief Executive Officer, Global Mortgage Group, Arch Capital Group, Ltd.
  • Mr. Patrick Sinks, Chief Executive Officer, Mortgage Guaranty Insurance Corporation, on behalf of the U.S. Mortgage Insurers

Subcommittee Holds Hearing on Office of Financial Research: On December 7, the Oversight and Investigations held a hearing entitled "Examining the Office of Financial Research." The purpose of the hearing was to fulfill a Dodd-Frank statutory mandate and examine the OFR's activities to fulfill its statutory mandate; the OFR's management and structure; the OFR's public work-product; the results of OFR's Federal Employees Viewpoint Survey; the OFR's interaction with other federal agencies from which the OFR may compel data; and the OFR's cooperation with Congress and oversight bodies such as the Government Accountability Office and the Treasury Department's Office of Inspector General. The sole witness was The Honorable Richard Berner, Director of the Office of Financial Research, U.S. Department of the Treasury. Berner testified that according to the OFR's annual report, the agency is concerned that rapid price increases in the stock and bond markets could threaten financial stability.

It is likely that the OFR will see budget cuts in the near future, as the Government Accountability Office recently told Congress that the agency has had "repeated problems with gaining access to both people and documents" while it was auditing the OF in recent years.

Subcommittee Examines Regulatory Legislation: On December 7, the Financial Institutions and Consumer Credit Subcommittee held a hearing entitled "Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part II." The purpose of the hearing was to consider the following legislation:

Witnesses included:

  • Mr. Anthony Cimino, Senior Vice President and Head of Government Affairs, the Financial Services Roundtable
  • Mr. Brian Ducharme, President and Chief Executive Officer, MIT Federal Credit Union, on behalf of the National Association of Federally-Insured Credit Unions

Hensarling Shows Willingness to Negotiate on Mortgage Reform: House Financial Services Committee Chairman Jeb Hensarling (R-TX) signaled his willingness to negotiate on mortgage reform, as his mortgage reform bill, the PATH Act, is unlikely to become law. "While I personally have not changed my principles or my mind, and I still believe the best path forward is the PATH Act, I do not see the PATH Act's passage likely. I stand ready to negotiate with an open mind."

A draft mortgage reform bill is floating around with Senate Banking Committee members. The legislation would preserve much of the system currently in place, including keeping Fannie Mae and Freddie Mac.

Also last week, it was announced that the Federal Housing Administration will increase the size of mortgages insured by the agency, beginning next year.

SENATE BANKING COMMITTEE

Committee Votes on Federal Reserve Nominee and S. 2155: On December 5, the Senate Banking Committee held an Executive Session to consider the nomination of The Honorable Jerome H. Powell to be Chairman of the Board of Governors of the Federal Reserve System and S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. The bill aims to cut the number of banks subjected to increased Federal Reserve supervision by raising the asset threshold from US$50B to US$250B. It also eases some regulation on credit unions and community banks in an effort to boost lending. Both the legislation and Powell's nomination were reported out of the Committee favorably, with Only Senator Elizabeth Warren (D-MA) opposed the nomination of Powell.

ON THE FLOOR

House Passes Small Business Bill: On December 7, the House passed the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017 by a vote of 426-0. The legislation provides an exemption from registration with the Securities and Exchange Commission for certain brokers who facilitate the merger or acquisition of small businesses.

LEGISLATION INTRODUCED AND PROPOSED

Republicans Introduce Measure to Repeal Payday Lending Rule: Republicans introduced a resolution on December 5 that would use the Congressional Review Act to repeal the CFPB's recently-issued payday lending rule. Ranking Member Maxine Waters (D-CA) said that "once again, Republicans are shamelessly pushing to roll back and important rule that protects consumers." Senator Pat Toomey (R-PA) said that he will "do everything in [his] power to repeal this ill-conceived rule using the Congressional Review Act."

NEXT WEEK ON THE HILL

Tuesday, December 12

House Financial Services Committee, Markup, 10:00 AM in 2128 Rayburn HOB

  • H.R. 435, the “Credit Access and Inclusion Act of 2017”
  • H.R. 1457, the “Making Online Banking Initiation Legal and Easy Act of 2017”
  • H.R. 2319, the “Consumer Financial Choice and Capital Markets Protection Act of 2017”
  • H.R. 2948, To amend the S.A.F.E. Mortgage Licensing Act of 2008 to provide a temporary license for loan originators transitioning between employers, and for other purposes.
  • H.R. 3864, the “Native American Housing Assistance and Self-Determination Reauthorization Act of 2017”
  • H.R. 4464, the “Common Sense Credit Union Capital Relief Act of 2017”
  • H.R. 4519, To amend the Securities Exchange Act of 1934 to repeal certain disclosure requirements related to resource extraction, and for other purposes.

Thursday, December 14

House Financial Services Subcommittee on Monetary Policy and Trade, Hearing entitled “Examining the Operations of the Committee on Foreign Investment in the United States (CFIUS),10:00 AM in 2128 Rayburn HOB

THE REGULATORS

Financial Stability Oversight Council (FSOC) Meeting: FSOC will be meeting on December 14. At the meeting, the Council will discuss designations of Systemically Important Financial Institutions (SIFIs). The Commodity Futures Trading Commission will also provide an update on its efforts to simplify regulatory compliance.

Government Accountability Office Report on Large Bank Supervision: GAO is making six recommendations to help improve the Federal Reserve's implementation of enterprise risk managment and to strengthen internal controls to more effectively mitigate risks of regulatory capture and threats to supervisory independence across the Large Institution Supervisory Coordinating Committee program.

Federal Reserve Board Requests Comment on Proposals to Increase Transparency of Stress Testing Program: The Federal Reserve Board on December 8 requested comment on a package of proposals that would increase the transparency of its stress testing program while maintaining the Federal Reserve's ability to test the resilience of the nation's largest and most complex banks.

In response to feedback, one of the proposals would release greater information about the models the Federal Reserve uses to estimate the hypothetical losses in the stress tests, including as applied in the Comprehensive Capital Analysis and Review (CCAR). In particular, the following information would be made public for the first time:

  • A range of loss rates, estimated using the Board's models, for loans held by CCAR firms;
  • Portfolios of hypothetical loans with loss rates estimated by the Board's models; and
  • More detailed descriptions of the Board's models, such as certain equations and key variables that influence the results of those models.

Federal Reserve Board Requests Public Comment on Proposal to Amend Regulation A: The Federal Reserve Board on December 4 requested public comment on a proposal to amend its Regulation A, which governs extensions of credit by Federal Reserve Banks, to make certain technical adjustments including to reflect the expiration of the Term Asset Backed Securities Loan Facility (TALF) program. The proposed amendments would revise the provisions regarding the establishment of the primary credit rate at the discount window in a financial emergency, and would delete obsolete provisions relating to the use of credit ratings for collateral for extensions of credit under the former TALF program.

Federal Housing Finance Agency Updates Progress on the Single Security Initiative and Common Securitization Platform: The Federal Housing Finance Agency (FHFA) today published An Update on Implementation of the Single Security Initiative and the Common Securitization Platform detailing progress toward further implementation of the Common Securitization Platform (CSP) and launch of a single, common security called the Uniform Mortgage-Backed Security (UMBS). As announced previously, Fannie Mae and Freddie Mac (the Enterprises) and their joint venture, Common Securitization Solutions (CSS), will implement the Single Security Initiative (SSI) and issue the first UMBS in the second quarter of 2019.

Banking Regulators Announce Deal on Capital Rules to Make Banks Safer: After a meeting in Frankfurt, the Basel Committee's oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), endorsed the outstanding Basel III post-crisis regulatory reforms. "Today's endorsement of the Basel III reforms represents a major milestone that will make the capital framework more robust and improve confidence in banking systems," said Mario Draghi, Chairman of the GHOS and President of the ECB. Mr Draghi added: "The package of reforms endorsed by the GHOS now completes the global reform of the regulatory framework, which began following the onset of the financial crisis."

Treasury Sanctions Jamaica-based ISIS Recruiter for Terror Support: On December 5, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) took action targeting Abdullah Ibrahim al-Faisal (Faisal), a Jamaica-based Islamic cleric who provided recruitment services to the Islamic State of Iraq and Syria (ISIS). Faisal was named as a Specially Designated Global Terrorist pursuant to Executive Order 13224 for assisting in, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, ISIS. As a result of today's designation, all property and interests in property of Faisal subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with him.

COMINGS AND GOINGS AT THE AGENCIES

Housing and Urban Development Chief of Staff to be Detailed to CFPB: Sheila Greenwood, Chief of Staff at the Department of Housing and Urban Development, will be detailed to the CFPB on an interim basis.

Richmond Fed Announces Next President: The Federal Reserve Bank of Richmond announced that Thomas Barkin will serve as its next president, starting next year. Barkin is currently a senior partner and chief risk officer at McKinsey & Co.

Federal Reserve System Announces New Payments Security Strategy Leader: The Federal Reserve System today announced the appointment of its payments security strategy leader, Kenneth Montgomery, the first vice president and chief operating officer of the Federal Reserve Bank of Boston. In this role, Montgomery will lead the Federal Reserve's effort to reduce fraud risk and advance the safety, security and resiliency of the U.S. payment system. His responsibilities will include chairing the Secure Payments Task Force, which is comprised of more than 200 industry stakeholders.