Dodd-Frank News Center

Cummings and Warren release GAO report on credit reporting agency regulation

This story appeared in Bank Digest.                                     

House Oversight and Reform Committee Chairman Elijah Cummings (D-Md) and Sen. Elizabeth Warren (D-Mass) have released the findings of a Government Accountability Office report that focuses on federal regulation of consumer credit reporting agencies and makes recommendations for actions to improve oversight and better protect consumers. They released the report in advance of a hearing of the House Oversight and Reform Subcommittee on Economic and Consumer Policy to examine the GAO's recommendations, as well as efforts by the Federal Trade Commission and the Consumer Financial Protection Bureau to oversee consumer reporting agencies' handling of consumer data.

According to an Oversight and Reform Committee press release, Cummings and Warren requested the report in September 2017, shortly after credit reporting agency Equifax publicly announced that the company had allowed a massive data breach that ultimately affected more than 145 million Americans. The release said the GAO recommended that the FTC be given stronger civil penalty authority to enforce laws that protect consumer data and that the CFPB improve its oversight and supervision of CRAs.

GAO issues report on GSIB actions to mitigate obstacles to orderly resolution

This story appeared in Bank Digest.

The Government Accountability Office has issued a report regarding actions U.S. global systemically important bank holding companies took to mitigate financial and legal obstacles they could face under the Bankruptcy Code that could undermine an orderly resolution. The GAO focused on five U.S. GSIBs with large portfolios of derivatives (because of resolution obstacles such financial contracts pose).

According to the report, the five U.S. GSIBs in the GAO's review incorporated procedures and other controls in their 2017 resolution plans to mitigate financial and legal obstacles to orderly resolution under the Bankruptcy Code. In their review, the Federal Deposit Insurance Corporation and Federal Reserve Board found no deficiencies with the GSIBs' 2017 plans.

Most experts the GAO interviewed viewed GSIB controls to mitigate financial obstacles as potentially somewhat effective, but these experts had mixed views on the potential effectiveness of GSIB controls to mitigate creditor challenges and other legal obstacles.

CFPB issues FY 2018 financial report

This story appeared in Bank Digest.                                   

The Consumer Financial Protection Bureau has released its financial report for fiscal year 2018, which provides summary results of the Bureau's operational activity. According to a message from Acting Director Mick Mulvaney, "The Bureau's new strategic priorities are to recognize free markets and consumer choice and to take a prudent, consistent, and humble approach to enforcing the law." 

As required by the Dodd-Frank Act, the Bureau prepared comparative financial statements for fiscal years 2018 and 2017. The report contains the Government Accountability Office auditor's report on the results of its audits of these financial statements. 

The GAO found that: (1) the Bureau's financial statements were presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles; (2) the Bureau maintained, in all material respects, effective internal control over financial reporting as of Sept. 30, 2018; and (3) there was no reportable noncompliance for fiscal year 2018 with provisions of applicable laws, regulations, contracts, and grant agreements the GAO tested.

GAO report assesses effects of regulation on community banks, small business lending

This story appeared in Bank Digest.                                     

The Government Accountability Office has issued a report assessing the effects of regulatory changes since 2010 on community banks and small business lending. The GAO's analysis found that the regulatory environment likely had a generally modest effect on various aspects of community banks and their small business lending since 2010, although the report said the data banks report to regulators have characteristics that make it difficult to determine how community banks' small business lending changed during this period. Specifically, according to the GAO, the data community banks report to regulators do not accurately capture lending to small businesses because the data exclude some loans to small businesses and could include small loans to large businesses. 

The GAO made three recommendations to banking regulators to reevaluate and modify, as needed, the data they collect to measure small business lending.

GAO issues report on threats to independence in large bank supervision

This story appeared in Bank Digest.                                   

The Government Accountability Office has issued a report on risks of regulatory capture and threats to supervisory independence in the Large Institution Supervisory Coordinating Committee program, which was created by the Federal Reserve Board in 2010 to strengthen supervision of the largest U.S. financial institutions that pose the greatest risk to the economy. Regulatory capture occurs when a regulator acts in service of private interests, such as the interests of the regulated industry, at the expense of the public interest.

According to the report, the Fed has not finalized and implemented its enterprise risk management framework and therefore may have limited ability to manage risks across the LISCC program, including regulatory capture. The GAO also found weaknesses in the implementation of policies designed to mitigate threats to independence for supervisory staff and conflict-of-interest and other ethics policies for supervisory employees.                                  

The GAO made six recommendations to help improve the Fed's implementation of enterprise risk management and to strengthen internal controls to more effectively mitigate risks of regulatory capture and threats to supervisory independence across the LISCC program.                                   

In response to the report, House Financial Services Committee Ranking Member Maxine Waters (D-Calif) issued a statement, saying, "This report is yet more evidence that the Federal Reserve and other prudential regulators need to take the supervision of large banks much more seriously. Regulators must strengthen the independence of their large bank supervisory programs and fully enforce the law when it comes to wrongdoing by megabanks."

GAO reports on swaps push-out-rule

This story appeared in Bank Digest. 

A Government Accountability Office report analyzes the effects of the amended and original versions of Section 716 of the Dodd-Frank Act--the "swaps push-out rule"--which requires banks registered as swap dealers, in effect, to stop engaging in certain swap activities to remain eligible for federal financial assistance but allows them to "push out" such activities to nonbank affiliates within the same bank holding company. As originally enacted, section 716 would have covered certain equity, commodity, and credit default swaps activities, but amendments made in 2014 now cover only certain swap activity based on asset-backed securities. 

The GAO reported that: (1) a significantly larger volume of swaps would have been pushed out under the original section 716; (2) Section 716 increases risks and costs for BHCs and end-users; and (3) other Dodd-Frank Act provisions mitigate risks.

GAO issues report on TARP housing programs

This story appeared in Bank Digest.

The Government Accountability Office has issued a report on the status of the Treasury Department's Troubled Asset Relief Program housing programs as of Oct. 31, 2016 (GAO-17-236). According to the report, as of that date, Treasury had disbursed $22.6 billion (60 percent) of the $37.51 billion TARP funds obligated to the three housing programs: the Making Home Affordable program, which was closed to applicants on Dec. 31, 2016; the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (Hardest Hit Fund); and the Federal Housing Administration Short Refinance program.

The GAO made no new recommendations in the report but said that of the 29 recommendations it has previously made related to the TARP-funded housing programs, five remain open or not fully implemented. The GAO said it will continue to monitor and assess the status of these recommendations.

GAO issues report on status of Community Development Capital Initiative

This story appeared in Bank Digest.

The Government Accountability Office has issued a report on the status of the Troubled Asset Relief Program's Community Development Capital Initiative, which was established in 2010 to help banks and credit unions certified as Community Development Financial Institutions maintain services to underserved communities after the 2007-2009 financial crisis.

The GAO found that as of Sept. 30, 2016, the Treasury Department had approximately $420 million, or 75 percent, of the original CDCI investment of $570 million outstanding. In addition, 55 of the original 84 participating institutions remained in the program, and Treasury has received about $144 million in principal repayments and about $61 million in dividend and interest payments from program participants.

The report also said that as part of its ongoing effort to wind down TARP, Treasury began offering participating CDCI institutions an opportunity to repurchase their outstanding securities owned by Treasury at fair value. The GAO made no new recommendations in the report.

GAO issues report on improving CFPB internal controls and accounting procedures

This story appeared in Bank Digest.

The Government Accountability Office has issued a report identifying improvements to be made in the Consumer Financial Protection Bureau's internal controls and accounting procedures. In its November 2015 audit of the CFPB's financial statements for fiscal years 2015 and 2014, the GAO had identified deficiencies in the bureau's internal control over accounting for property, equipment, and software that collectively constituted a significant deficiency in the bureau's internal control over financial reporting. The GAO also identified deficiencies related to reviewing and approving financial statements that it did not consider to be material weaknesses or significant deficiencies but that it believes warrant the attention of CFPB management.

The purpose of the current report was to (1) present additional information regarding the significant deficiency identified in the GAO's November 2015 financial audit report, along with related recommendations; (2) communicate other less significant deficiencies identified but not reported during the GAO's fiscal year 2015 audit; and (3) provide the status of the GAO's prior recommendations reported in its May 2, 2014, management report to the CFPB.

The report makes five recommendations to address the deficiencies identified by the GAO during its fiscal year 2015 CFPB audit. The bureau stated that it agreed with the recommendations the GAO made in the report and has implemented or is in the process of implementing actions to address the issues the GAO identified.

GAO issues report on Capital Purchase Program

This story appeared in Bank Digest.

The Government Accountability Office has issued a report on the status of the Capital Purchase Program, the financial condition of institutions remaining in the program, and the Treasury Department's strategy for winding down the program. According to the GAO, the CPP was established as the primary means of restoring stability to the financial system under the Troubled Asset Relief Program.

The report stated that the CPP has largely wound down and that Treasury's returns on CPP investments surpassed the original amount disbursed. The GAO said that as of Feb. 29, 2016, 16 of the 707 institutions that originally participated in CPP remained in the program, and most of these remaining institutions have continued to exhibit signs of financial weakness. The report also said that Treasury expects most remaining CPP institutions to exit through restructurings but has not set time frames for winding down the program.