TRP Financial Services Report

Looking Ahead

Further Out 

The Past Week
Legislative Branch

 
House
FHFA Director Watt Defends Administration Housing Finance Policy
On Tuesday, FHFA Director Mel Watt came before the Financial Services Committee as part of a hearing entitled, “Sustainable Housing Finance: An Update from the Director of the Federal Housing Finance Agency.” During the hearing, which lasted more than four hours, Members grilled Director Watt on a variety of issues including his decision to delay the scheduled increase in the so-called “G Fees” whether the current down payment requirements are adequately set and how to best achieve housing finance reform. 
 
Agriculture Committee Chairman Indicates Legislation To Ease Derivative Trade Rules on Agenda
Speaking at a Commodity Markets Council conference in Miami on Monday, new Agriculture Committee Chairman Michael Conway (R-TX), offered some insight into the Committees agenda, including that it intends to hold hearings in April on legislation to modify how the CFTC sets limits on speculation in markets, as well as overseas reach of regulations.  The Chairman made clear that there was no intention to repeal Dodd-Frank, but to modify segments of the Commodities Exchange Act. 
 
Later in the week, the Committee announced its subcommittee rosters, including the new Commodity Exchanges, Energy and Credit Subcommittee, whose Chairman and Ranking member – Austin Scott (R-GA) and David Scott (D-GA) — could very well be the name of a 70’s Cop Show – “Scott and Scott.” 
 
Senate
Banking Committee Passes Iranian Sanctions Bill
On Thursday, by a vote of 18-4, the Senate Banking Committee passed legislation that would impose additional sanctions on Iran if a comprehensive agreement to roll back its nuclear program is not reached by June 30.  Six Democrats joined in voting for the measure which has already garnered a veo threat.  However, based on an agreement brokered between Senator Menendez and the White House, the measure will not come before the Senate floor until at least March 24^th.  According to published reports, Menendez has 10 Democratic Senators willing to support the bill and provide the Republicans with a veto proof majority. 
 
Finance Committee Democrats Outline Principles for Tax Reform
On Thursday, the Democrats on the Finance Committee released a letter sent to Chairman Hatch that outlined their principles for getting tax reform accomplished.  First on the list was ensuring that the reform process went through regular order and not reconciliation.  Other principles including addressing differences between wage and capital income, adding revenue for infrastructure, protecting social security and funding education, and ensuring that the US code is internationally competitive.
 
Senator Paul Reintroduces “Audit the Fed Bill.”
On Tuesday, Senator Rand Paul (R-KY) reintroduced his bill to require the GAO to audit the Federal Reserve.  The Senator was joined by 30 of his colleagues, all Republicans, except for Senator Hirono (D-HI).  Current Fed Chair Janet Yellen has expressed her opposition to the measure, though Senate Majority Leader McConnell, not only cosponsored but publicly tweeted his support for the bill.
 
Warren Continues to Push Banks on Swaps
On Thursday, Sen. Elizabeth Warren (D-MA) and Rep. Elijah Cummings (D-MD) sent a letter to JPMorgan Chase, Citibank, Goldman Sachs and Bank of America, seeking information about the bank’s swap trading practices in light of the roll back of Section 716 of Dodd-Frank.  The letter also requested that the banks share their responses with their regulators, the OCC and the Fed. 
 

Select Highlights from the Administration

 
Federal Reserve Board
Fed Releases Paper on Payments
On Monday, the Federal Reserve released a paper intended to continue the conversation about how to best modernize the payments system.  As part of this process, Esther George, President of the Kansas City Fed, and Fed Board Governor Jerome Powell, held a webcast to discuss the results of the paper.   The paper made five recommendations and is part of an ongoing process that began in 2013. 
 
Federal Deposit Insurance Corporation (FDIC)
On Wednesday, the FDIC released a letter instructing the banks they regulate not to shun entire industries but rather to evaluate customer risks on a case-by-case basis.  The announcement comes after pressure from Congress in response to reports that the FDIC was participating in a Department of Justice program known as Operation Chokepoint.  Many groups, from payday lenders to gun stores claimed that their access to bank accounts for business purposes was cut off by Operation Chokepoint. 
In addition, the FDIC also announced that it would begin requiring their examiners to issue a formal written report for suggesting a bank cut off a relationship due to suspected fraud.
 
Securities and Exchange Commission (SEC)
Commission Announces Upcoming Events
This past week the SEC announced two upcoming events.  First up, on Wednesday of this week, the Commission will meet to approve the Public Company Accounting Oversight Board’s (PCAOB’s) budget for 2015.  The Commission also announced that it would be holding a roundtable on ways to improve the proxy voting process on February 19^th.
 
Consumer Financial Protection Bureau (CFPB)
CFPB Wants to Increase Access to Credit in Rural Areas
On Thursday, the CFPB issued a proposal to modify the definitions of “small creditor” and “rural and underserved areas” from its QM rule issued in 2013 and went into effect last year.    Under that rule, small lenders are able to meet QM status by keeping the loan on its book, even if they exceed other limits that define a loan as QM.  Under Thursday’s proposal the CFPB is looking to expand the number of allowable loans to 2000 per year, a substantial increase over the current 500 loans per year limit.  The proposal also would create a grace period for small lenders who exceed the current limit, as well as extend until April 1, 2016 the time that these lenders can write loans with balloon payments.  Additionally, the CFPB’s proposal would consider expanding the definition of “rural” to include all census blocks not in areas defined as urban by the Census Bureau.  Comments are due by March 30^th.
 
CFPB & Financial Services Roundtable Combine to Advance Financial Literacy
On Wednesday, the CFPB joined the FSR in announcing a joint initiative to promote financial literacy.  As part of this initiative, the groups will work together to find ways to promote effective financial education for kids in school; help older Americans avoid financial exploitation and abuse; and improve workplace financial education. 

 
Next Week’s Schedule
 
On Tuesday Feb 3rd at 10:30am  in 215 Dirksen the Senate Finance Committee will hold a hearing entitled "Internal Revenue Service Operations and the President's Budget for FY2016."

On Tuesday Feb 3rd at 10:00am in 1300 Longworth, the Ways and Means Committee will hold a hearing entitled, “The President's FY2016 Budget Proposal."  Treasury Secretary Jacob Lew will be the sole witness.

On Wednesday Feb. 4^th at 10:00am in 2167 Rayburn, the Financial Services Oversight and Investigations Subcommittee will hold a hearing entitled, ““Exploring Alleged Ethical and Legal Violations at the U.S. Department of Housing and Urban Development”
 
On Wednesday Feb 4th, at 10:00 am in 253 Russell, the Senate Commerce Committee will hold a hearing entitled, "Building a More Secure Cyber Future: Examining Private Sector Experience with the NIST Framework."

On Wednesday, Feb 4th at 2:15pm in 562 Dirksen, the Special Committee on Aging will hold a hearing entitled, "Broken Trust: Combating Financial Exploitation of Vulnerable Seniors."

On Thursday, Feb 5th, at 10:00am in 253 Russell, the Senate Commerce Consumer Protection, Product Safety, and Insurance Subcommittee will a hearing entitled, “Data Breach Notification Legislation in the 114th Congress.”
 
On Thursday, Feb 5th at 10:00 am in 215 Dirksen, the Finance Committee will hold a hearing entitled, “The President’s Budget for Fiscal Year 2016”.  Treasury Secretary Jacob Lew will be the sole witness.