Friday, November 30, 2018

CONGRESS IN TRANSITION | Financial Services Committee

The following email from Dana Chasin is posted here by permission. He called it "Update 315 — Rough Waters Ahead for Banks?"

The subject is the takeover of the  House Financial Services Committee by Rep. Maxine Waters (CA). The contrast between her and retiring Rep. Jeb Hensarling (R-TX) is one of the greatest in policy and style in the 116th Congress.

Clear Waters

Rep. Waters’ bedrock issues have long been housing, consumer protection, and big bank regulation. In the 115th Congress, Waters focused on protecting the Community Reinvestment Act, designed to prevent discriminatory credit practices, and guarantee fair housing protections.

Bills introduced by Waters during the Congress now ending (capping a six-year tenure as Ranking Member of HFSC) indicate her priorities:

  • Public Housing Tenant Protection and Reinvestment Act of 2017 — H.R. 3160: The bill reforms the public housing demolition and disposition rules to require one-for-one replacement and tenant protections, and provides public housing agencies with additional resources and flexibility to preserve public housing.
  • Comprehensive Consumer Credit Reporting Reform Act of 2017 — H.R. 3755: The bill enhances requirements on consumer reporting agencies, like Equifax, TransUnion, and Experian, to better ensure that the information on credit reports is accurate and complete.
  • Megabank Accountability and Consequences Act — H.R.3937: The bill would give authority to federal banking regulators to break up banks that mistreat their customers.
  • Consumers First Act —H.R.6972: The bill would reverse the harmful changes to the Consumer Financial Protection Bureau imposed by the Trump Administration and restore the agency’s supervisory and enforcement powers.
  • Restoring Fair Housing Protections Eliminated by HUD Act of 2018 — H.R.6220: The bill would restore several fair housing protections that HUD Sec. Ben Carson eliminated.
Crossing the Party Bar

During her tenure as Ranking Member on the Committee, Rep. Waters supported bipartisan legislation, notably the third iteration of the JOBS and Investor Confidence Act. The bill includes provisions aimed at “decreasing the regulatory burden” for some financial institutions, as well as others that aim to increase protections for consumers.

In a similar vein, she partnered with Sen. Sherrod Brown on S. 1491, the Community Lender Regulatory Relief and Consumer Protection Act of 2015. The bill would give banks and credit unions with under $10 billion in assets relief from the Consumer Financial Protection Bureau’s (CFPB) “Qualified Mortgage” rule.

Appealing to Waters’ passion for housing reform, the measure would make permanent expired provisions that protect tenants from eviction when their landlord or property owner has entered foreclosure. When it comes to her bedrock issues, Waters may be more willing to compromise to ensure she reaches her legislative goals.

She has also reached across the aisle to work with Republicans to reauthorize the Export-Import Bank, and used her political savvy to get Republicans on board with a reauthorization of the National Flood Insurance Program. While she will look to make some strides in these areas as Financial Services Chair, she has expressed firm and progressive stances regarding systemic risk and oversight.

Mitigating Systemic Risk

Importantly, Rep. Waters at the helm of the HFSC means two things for systemic risk:
  • the “tide” of deregulation of the financial sector is “at an end”
  • regulators and agencies should be prepared to will have their feet held to the fire more often
Heading into the next Congress, a key item on Waters’ agenda will be monitoring systemic and other risks in big banks. The financial industry has enjoyed several months of continuous deregulatory activity under an HFSC headed by Rep. Hensarling and a Republican-controlled Congress. Under her leadership, the Committee will be limited in its ability to stall measures at the federal regulator level, but it will be able to increase oversight and change rhetoric to keep a check on agency overreach.

In the words of Waters, “as we saw in the last crisis, it is the average hard-working Americans that will suffer the consequences if Washington deregulates Wall Street megabanks again.”

Oversight

A robust oversight agenda will accompany the legislative priorities of the Committee under Waters. This agenda will likely focus on four distinct areas: firms, rulemaking, agencies, and the presidency.

On the firms, Waters has expressed indignation about the slap-on-the-wrist treatment of Wells Fargo in light of the improper and unfair foreclosures on its customers. Many were erroneously denied loan modifications to lower their mortgage payments.

A Democrat-controlled House cannot do much in the way of affirmative rulemaking, but it will no longer have to play defense against further attempts at deregulation. Much of Waters’ oversight in this area will be over agencies, ensuring that the Trump appointee-controlled CFPB, FSOC, and OFR are operating according to their original statutory purposes and with the resources they need. This will likely take the form of hearings, subpoenas, and investigations.

Waters has been steadfast in her position that investigation into the president’s alleged illegal financial dealings is on her agenda, but it’s not her top priority. In a Bloomberg interview earlier this month, Rep. Waters was clear that she would use her authority to get more information, using subpoenas if necessary, but was far more eager to discuss Wells Fargo and the CFPB.

Summing Up: An Able Veteran

Waters is a skilled and seasoned legislator. Her turn with the gavel at HFSC is very welcome news and signals the end of the tide of deregulation. It also signals an end to a period of free-reign for regulators (or should we say deregulators) dogmatically pursuing an agenda that puts Wall Street megabanks ahead of ordinary Americans. Her agenda will be limited by the Republican-controlled Senate, but it will set the tone and pave the way for future legislation that will curb the rollbacks of Dodd-Frank that have occurred in recent years.