Dodd-Frank News Center

Senators request update on FSOC's progress in reforming nonbank designation process

This story appeared in Bank Digest.  

Senators Thom Tillis (R-NC), Mike Rounds (R-SD), Tom Cotton (R-Ark), and David Perdue (R-Ga) have written a letter to Treasury Secretary Steven Mnuchin requesting an update on the progress being made by the Financial Stability Oversight Council to reform the systematically important designation process for nonbank financial companies in accordance with recommendations the Treasury Department made in a November 2017 report.

The Dodd-Frank Act established the FSOC with the authority to determine that certain nonbank financial companies would be supervised by the Federal Reserve Board and subject to enhanced prudential standards.

In their letter, the senators said Treasury "should prioritize the enactment of reforms recommended in its report as soon as possible" and that the FSOC must make "fundamental changes to the way in which it operates." They went on to say, "Particularly troubling is its history of flawed designations that have subjected individual companies to inappropriate and burdensome regulation by the Federal Reserve." The senators asked for answers to several questions on the implementation of the recommended reforms.

Perdue introduces bill to provide relief from costs of 'duplicative capital buffers'

This story appeared in Bank Digest.                                   

Senator David Perdue (R-Ga) has introduced a bill (S. 3682) intended to provide relief from financial regulatory burdens and extra costs that are passed down to small business owners, farmers, and consumers. According to Perdue's press release, after the 2008-2009 financial crisis, federal bank regulators increased the amount of capital held by banks for certain "risky" activities. This included the supplemental leverage ratio (SLR), which requires banks to hold a certain amount of capital.

But according to the release, the SLR did not account for the initial margin that customers pay, and as a result, duplicative capital buffers were built as banks had to hold additional capital aside. The cost of this trapped capital was ultimately passed on to the end users, such as farmers and business owners.

Senate confirms Kraninger nomination by one-vote margin

This story appeared in Bank Digest.                                   

The nomination of Kathy Kraninger to be director of the Consumer Financial Protection Bureau was confirmed by the Senate by a vote of 50 to 49 on Dec. 6, 2018. Kraninger will be the second Senate-confirmed CFPB director, following Richard Cordray. Mick Mulvaney has been serving as acting director since Cordray's resignation. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) congratulated Kraninger on her confirmation and said he was "confident that with her experience and knowledge of budget management, Kathy will excel as Director of the Bureau."

Committee Ranking Member Maxine Waters (D-Calif) said Mulvaney had taken "a series of actions to weaken the agency's ability to carry out its important mission" and called on Kraninger "to put consumers first by rolling back the anti-consumer actions taken by her predecessor and allowing the Consumer Bureau to resume its work of protecting hardworking Americans from unfair, deceptive or abusive practices."

Brown and Luetkemeyer differ on Fed proposals to revise prudential standards framework

This story appeared in Bank Digest.                                     

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) and Rep. Blaine Luetkemeyer (R-Mo) have issued contrasting statements regarding recent proposals by the Federal Reserve Board to establish a revised framework for applying prudential standards to large U.S. banking organizations based on risk, consistent with Section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. 

One proposal would tailor the application of prudential standards to U.S. bank holding companies and apply enhanced standards to certain large savings and loan holding companies. A second proposal--which would be issued jointly with the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation--would tailor the application of the agencies' capital and liquidity rules. 

According to Brown, "This Administration and Congress continue to fail hardworking Americans by weakening protections that guard taxpayers from big bank risk." But Luetkemeyer said, "It is refreshing to see regulators finally propose a more reasonable and responsible supervisory framework."

Sanders and Sherman introduce bill to cap size of financial institutions

This story appeared in Bank Digest.                                   

Senator Bernie Sanders (I-Vt) has introduced the Too Big to Fail, Too Big to Exist Act (S. 3542), which would break up the nation's biggest banks and risky financial institutions in order to safeguard the economy and prevent another costly taxpayer bailout. Representative Brad Sherman (D-Calif) will introduce a companion bill in the House. According to a press release issued by Sanders, the bill would cap the size of the largest financial institutions so that a company's total exposure is no more than 3 percent of GDP. 

The release said that by applying a cap on the size of financial institutions, the bill would break up the six largest banks in the country: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. The bill also addresses large nonbank financial service companies such as Prudential, MetLife, and AIG.

Student Loan Ombudsman resigns, offers criticism of Bureau leadership

This story appeared in Bank Digest.   

Citing concerns that the Consumer Financial Protection Bureau is no longer concerned with protecting consumers, the Bureau's Student Loan Ombudsman has offered his resignation effective Sept. 1, 2018. In a letter to Acting Director Mick Mulvaney, Seth Frotman accused current Bureau leadership of hurting American families, particularly student loan borrowers.

Under Mulvaney's leadership, charged Frotman, the Bureau has abandoned these consumers and now serves "the wishes of the most powerful financial companies in America." Frotman points to the following "sweeping changes" that the CFPB has made in the last few months, including: undercutting enforcement of the law; undermining the Bureau's independence; and shielding bad actors from scrutiny. While pledging to continue fighting on behalf of student loan borrowers trapped in a broken system, the letter criticizes the damage that has been done to the CFPB and the "financial futures of millions of Americans in communities across the country." 

Following Frotman's announcement, Sen. Sherrod Brown (D-Ohio), Ranking Member of the Banking Committee, stated, "Shady lenders and predatory for-profit schools gained an ally at the CFPB, while students have lost their chief watchdog," said Brown. "The CFPB needs an independent Director who will fight for servicemembers and students." Brown previously introduced the legislation that created the Student Loan Ombudsman and fought for its inclusion as part of the CFPB during consideration of the Dodd-Frank Act. According to Brown, since 2011, the Office for Students has secured more than $750 million in relief for student loan borrowers including servicemembers, veterans, and older Americans with student loan debt.

Democrats urge CFPB to maintain examinations of lenders for MLA compliance

This story appeared in Bank Digest.  

                                   

Senate Democrats have sent a letter to Consumer Financial Protection Bureau Acting Director Mick Mulvaney regarding reports that the CFPB "will no longer protect servicemembers and their families by including the Military Lending Act (MLA) as part of the CFPB's routine lender examinations due to a purported lack of authority." The senators asserted that the Bureau does have the authority to enforce the MLA through these examinations, and they sought Mulvaney's "commitment that you will utilize all of the authorities available to the CFPB to ensure that servicemembers and their families continue to receive all of their MLA protections."

 

According to a press release by Sen. Jack Reed (D-RI), one of the leaders of the letter, the MLA was passed in 2006 with bipartisan support to help safeguard active-duty military members and their families from financial fraud, predatory loans, and credit gouging. The letter was signed by every Democratic member of the Senate, as well as two Independents.   

 

Warren requests delay on Kraninger nomination vote until requested information released

This story appeared in Bank Digest.                                     

Senator Elizabeth Warren (D-Mass) has sent a letter to Senate Banking Committee Chairman Mike Crapo (R-Idaho) urging him to delay a committee vote on the nomination of Kathy Kraninger to be director of the Consumer Financial Protection Bureau until the Trump Administration provides all relevant and non-privileged material committee members have requested about Kraninger's management record. According to Warren's press release, Kraninger has still not answered a June 2018 letter Warren and Committee Ranking Member Sherrod Brown (D-Ohio) sent asking for documents related to Kraninger's involvement in the separation of thousands of children from their families at the U.S. southern border. 

The release went on to say that in recently submitted written responses to Questions for the Record submitted by Warren and other committee members, Kraninger suggested she was extensively involved in the implementation of the child separation policy, underscoring the need for committee members to get a more detailed account of her specific role in this policy.

 

Democrats urge greater transparency in Volcker Rule enforcement

This story appeared in Bank Digest.   

Senators Sherrod Brown (D-Ohio), Jeff Merkley (D-Ore), and Elizabeth Warren (D-Mass) have written a letter urging federal financial regulators for more transparency about how the Volcker Rule is currently being enforced. A Senate Banking Committee minority press release described the Volcker Rule, which requires a separation of hedge fund-like activities from traditional banking, as one of the most significant provisions of the Dodd-Frank Act and said the senators' letter "was sent amid ongoing efforts by Trump appointees to weaken the rule." 

In their letter, the senators complained of "the limited transparency into the data and metrics used by the federal financial regulators in order to understand if the provision has been effective at obtaining the change that Congress intended." They requested that the regulators "share with Congress quantitative data and metrics demonstrating banks' activities under the Volcker Rule, along with the agencies' standards used to demonstrate compliance, the penalties for non-compliance, and banks' success or failure at achieving compliance."

Brown speaks on Wall Street regulation after financial crisis

This story appeared in Bank Digest.   

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) delivered the keynote speech at an Americans for Financial Reform event entitled "Regulating Wall Street--10 Years Later" on July 24, 2018. In his prepared remarks, Brown said, "The financial crisis followed decades of deregulation of the financial industry, culminating with a Bush Administration that ignored the escalating risks." 

 He went on to say that the Dodd-Frank Act did many good things but that lobbyists for the financial industry "have spent every day since 2010 fighting to weaken and roll back the rules." He added, "While Wall Street rakes in tax breaks and rule rollbacks, Main Street is struggling." 

According to Brown, "We need policies that restructure our economy so that workers share in the profits they create, and Wall Street doesn't determine when workers keep their jobs or how much is in their paychecks."