President Donald Trump is scheduled to meet with almost a dozen chief executives from U.S. community banks today, seeking their input on which regulations may be crimping their ability to lend to consumers and small businesses, Bloomberg News reported today. Billed as a listening session of Trump’s National Economic Council, the meeting will include Camden Fine, the CEO of the Independent Community Bankers of America, and Robert Nichols, president of the American Bankers Association, both industry trade groups. Trump recently ordered Treasury Secretary Steven Mnuchin to scrutinize U.S. financial regulations and come back to him in June with a report.
Changes in banking regulations could result in a big windfall for the industry, much of which would make its way into investors' pockets, according to a Goldman Sachs analysis, CNBC.com reported yesterday. In a best-case scenario, the Trump administration’s proposed regulatory cuts in the banking industry would result in as much as $218 billion in excess capital which "could either be returned to shareholders or reinvested in the business," Goldman said in a report for clients this week. That excess cash would result from likely reduced requirements for banks to retain buffers against emergencies. Reforms under the Dodd-Frank law in 2011 sought to make sure the industry doesn't suffer another crisis like the one that began 10 years ago and nearly capsized the global economy. The current level of excess capital is $131 billion. While the White House has yet to lay out specifics about what regulations will look like, Goldman believes they'll center around easing stress test requirements, rolling back the way banks have to count risk assets, and bringing capital requirements imposed by the U.S. Federal Reserve more in line with other organizations such as the international Financial Stability Board.
The House could pass a forthcoming Dodd-Frank replacement bill before this summer, a senior member of the House Financial Services Committee said yesterday, MorningConsult.com. “The timeline on it is somewhere in the next two to three months to get it out of the House, hopefully get it in the Senate,” Rep. Blaine Luetkemeyer (R-Mo.), chairman of the subcommittee on financial institutions and consumer credit. The legislation, known as the Financial CHOICE Act, was introduced in September by Committee Chairman Jeb Hensarling (R-Texas), who is expected to introduce a revised version in the coming weeks. Hensarling, who also spoke at today’s conference, said the new measure is coming “soon.” Luetkemeyer also shed light on how Republicans plan to handle the Consumer Financial Protection Bureau, a key target of their Dodd-Frank overhaul efforts, following an appeals court decision last month to rehear a case that would allow the president to fire the CFPB director at will. He said that one significant revision to the forthcoming CHOICE Act would codify the president’s authority to dismiss the head of the agency, rather than restructure its leadership as a bipartisan commission. But he said that provision might not remain intact over in the Senate. “When the bill goes to the Senate, I think what you’ll see is a compromise down to the commission,” he said, adding that he expects “a lot of bipartisan support” for that measure. Democrats, he explained, would likely want some sway at the agency if a Republican-appointed director takes the helm.
As Republicans prepare to dismantle the 2010 Dodd-Frank law, the Heritage Foundation is ready to weigh in with a blueprint for financial regulation that calls for transferring the Consumer Financial Protection Bureau’s authorities to the Federal Trade Commission, according to a document reviewed by Morning Consult. The framework, which sets conservative goalposts for the Trump administration and GOP lawmakers, advocates for reducing federal deposit insurance, loosening securities disclosure rules, eliminating a key market structure rule and placing financial regulators under the congressional appropriations process. The document, co-authored by several conservative and libertarian policy experts and edited by Heritage research fellow Norbert J. Michel, praises but proposes changes to legislation proposed last year by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) known as the Financial CHOICE Act. In a chapter on the CHOICE Act, the report expresses support for the measure but suggests eliminating Federal Reserve stress tests and raising and simplifying the leverage ratio to determine which banks — those holding higher capital — should be exempt from certain regulatory requirements.
Key Republicans in the U.S. House told the Federal Reserve not to issue new rules until President Donald Trump’s pick to lead regulation of Wall Street at the agency is confirmed, Bloomberg News reported yesterday. Should the Fed defy the request, lawmakers may undo their work, according to a letter to Fed Chair Janet Yellen yesterday from Jeb Hensarling, chairman of the House Financial Services Committee, and 33 other Republicans on the panel. “We will work with our colleagues to ensure that Congress scrutinizes the Federal Reserve’s actions — and, if appropriate, overturns them," according to the letter. Trump hasn’t announced his selections for any of the three vacancies at the seven-member Fed board, including the never-filled role of vice chairman for supervision, which was created by the 2010 Dodd-Frank financial overhaul law. Among the three positions is that of Daniel Tarullo, who has served as the Fed’s point man on financial regulation, and plans to step down in April.
U.S. Treasury Secretary Steven Mnuchin’s seriousness about overhauling the nation’s $10 trillion mortgage market will soon be tested, Bloomberg News reported today. A federal appeals court on Tuesday dealt a major blow to hedge funds that own Fannie Mae and Freddie Mac shares, ruling that investors weren’t entitled to billions of dollars of profits. The decision clears an obstacle to addressing an issue that has vexed policy makers for almost a decade: What to do with the government-controlled companies that guarantee 43 percent of U.S. mortgages. Yet some housing industry groups and analysts say that they’re skeptical anything will happen quickly because Republican lawmakers have bigger priorities, such as repealing Obamacare and overhauling the tax code. And while most everyone agrees something must be done about Fannie and Freddie, there isn’t much consensus over how to proceed. Read more.
A federal appellate court announced Thursday that it would review a decision finding that the structure of the Consumer Financial Protection Bureau is unconstitutional, temporarily undoing an earlier decision that said the president is allowed to fire the agency's director at will, the Washington Examiner reported yesterday. The U.S. Court of Appeals for District of Columbia Circuit said that the full court would rehear the case, PHH Corporation, et al v. CFPB, which has major implications for the future of consumer financial regulation under the administration of President Trump. In October, a three-judge panel had ruled that the bureau's single-director set-up was unconstitutional. Oral hearings before the full court are set for May 24.
Judge Nancy G. Edmunds of Federal District Court in Detroit has ruled that one of the nation’s largest providers of seller-financed homes must comply with a demand for documents and other information from the Consumer Financial Protection Bureau (CFPB), the New York Times reported today. The CFPB has been looking into whether the terms of some of these sales violated federal truth-in-lending laws. The agency filed a lawsuit in November after one such provider, Harbour Portfolio Advisors of Dallas, refused to comply with an administrative subpoena. Harbour Portfolio had argued that the agency had no authority to investigate its sale of formerly foreclosed homes to poor people through high-interest installment payment contracts — often referred to as contracts for deed.
Steven Mnuchin, President-elect Donald Trump’s pick for treasury secretary, said yesterday that he supports the Volcker Rule, but suggested that he wants to make some changes to the Dodd-Frank regulatory framework, MorningConsult.com reported. During his confirmation hearing before the Senate Finance Committee, Mnuchin said in response to a question from Sen. Mike Crapo (R-Idaho) that while he supports the Volcker Rule — a product of the 2010 Dodd-Frank law that restricts banks from placing risky bets with their own capital — he wants to examine its effects on market liquidity. “I think the concept of proprietary trading does not belong in banks with FDIC insurance,” Mnuchin said, referring to the Federal Deposit Insurance Corp. He added that the Volcker Rule’s impact on liquidity is “something I would absolutely want to look at,” and he cited a recent Federal Reserve report examining the issue.
Yellen told members of the Senate Banking Committee that Congress could exempt small institutions from some regulations in the 2010 Dodd-Frank Act, and she pointed to the Volcker Rule ban on proprietary trading and restrictions on incentive-based compensation as areas that are ripe for changes. She also said that the Fed has already taken steps to address regulatory complaints, such as making the bank examination process easier for small banks. However, she said “all firms” should be required to follow capital standards, including community banks. The Fed is not subject to a recent executive order that requires regulators to rescind two regulations for each new rule, Yellen noted. The central bank’s leader indicated that easing regulations in line with the executive order’s goal will remain appropriate.