April 19, 2017


 
Contents:
Congressman to Reintroduce Legislation Overhauling Dodd-Frank
State Regulators Submit Economic Proposals to Senators Crapo, Brown for Consideration
ICBA Urges Senate Committee to Advance Reg-Relief Provisions
Heritage Study Says Dodd-Frank Repeal Could Give Economy $340 Billion Boost
CFPB Issues Proposal to Clarify Mortgage Data Rule



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  • House Financial Services Committee Chairman Jeb Hensarling (R-TX) began distributing a summary of changes for the reintroduction of the Financial CHOICE Act.  The effort, sometimes referred to as the "CHOICE Act 2.0," introduces several changes to the original legislation. The CSBS Examiner covered the first version of the bill in previous issues.
    New provisions to the bill include that:
    • Banks must only meet a 10% leverage ratio to gain relief via the capital election. Banks that meet a 10% leverage ratio are also entirely exempt from stress tests.
    • The CFPB's leadership will remain a sole directorship, removable at will - The CHOICE Act originally envisioned a five member, bipartisan commission as heading up the agency.
    • The CFPB will no longer have supervisory authority, and its enforcement authority is limited to enumerated consumer protection laws. Additionally, the Bureau's consumer complaint database will be made private.
    • For rules with an impact of $100 million or more, financial agencies will be required to file a written statement explaining their process and evaluation and to select the most cost-effective, least burdensome alternative (unless explained otherwise).
    • The bill will still propose repealing Chevron deference, but will delay implementation for two years after enactment of the CHOICE Act.
    • Financial agencies required to minimize duplication between state and federal authorities in enforcement actions, determine when joint investigations and enforcement actions are appropriate, and designate a "lead agency" in joint investigations and enforcement actions.
    • The Comptroller of the Currency and CFPB Director will no longer serve on the FDIC Board of Directors, but leaves in place the seat for a member with state bank supervisory experience.
    The bill will codify the "valid when made" doctrine, essentially overturning the Madden v. Midland ruling that limited interest rates of loans sold to non-banks.
    •
    CSBS has submitted a letter to the Senate Banking Committee today that urges Congress to take action on five policy proposals in order to boost economic growth in the United States.
    The letter was a response to a request from Senate Banking Committee Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) for ideas on how to grow the economy. In the letter, CSBS proposes Congress take five actions:
    • adopt an activities-based approach to community bank regulation;
    • simplify the complexity of community banks' capital requirements in order to encourage more lending;
    • encourage mortgage lending by granting QM status for loans held in portfolio;
    • empower and encourage examiner discretion in compliance examinations; and
    • amend the Bank Service Company Act to foster more information sharing and coordination among state and federal regulators
    The request from Senators Crapo and Brown comes as the House prepares for an overhaul of the Dodd-Frank law this summer. And according to recent media reports, Rep. Jeb Hensarling, Chairman of the House Financial Services Committee, expects to reintroduce his financial Choice Act by the end of April.
    ICBA submitted to the Senate Banking Committee suggested legislative language to implement several provisions of its Plan for Prosperity regulatory relief platform. Following the committee's request for proposals to foster economic growth, ICBA urged Congress to:
    • expand exemption thresholds and repeal new data points under the Home Mortgage Disclosure Act,
    • provide automatic qualified mortgage status for loans held in portfolio,
    • exempt non-systemically important financial institutions from Basel III capital standards,
    • relieve community bank portfolio lenders of escrow and appraisal requirements, and
    • repeal onerous new data-collection requirements for small-business loans.
    ICBA continues advocating its comprehensive Plan for Prosperity agenda, which contains nearly 40 separate legislative recommendations to alleviate excessive burdens and promote lending. Community bankers and allies can express support for the platform with ICBA's Plan for Prosperity petition.

    Sign the Petition....

    Republican lawmakers who support repealing or significantly changing the dollar_bill.jpg Dodd-Frank Act have argued that getting rid of the 2010 law would save the federal government money and stimulate growth. Two conservative economists on Wednesday introduced an economic rationale to make that case.

    A six-page paper provided exclusively to Morning Consult features preliminary calculations by Heritage Foundation economists Norbert Michel and Salim Furth estimating that repealing Dodd-Frank could bring billions of dollars into federal coffers over a 10-year window.

    Using their most expansive estimate, Michel and Furth said repealing Dodd-Frank would lead to a $340 billion boost over a decade, and as much as $817 billion over 20 years. Under the most conservative scenario, revenues would increase by $64 billion in a decade and $202 billion over two decades. The projections do not include revenues from Social Security.

    The economists cautioned that their estimates are intended only to be a preliminary analysis of the effects of a Dodd-Frank repeal using a "dynamic" model that's favored by conservatives. With that method, economists incorporate new revenue that they say could result from projected increases in private investment and economic growth stimulated by deregulation.

    Furth told Morning Consult on Wednesday that he and Michel wrote the paper to provide a "ballpark" estimate of the effect Dodd-Frank's passage had on the U.S. economy, and sketch out the possible long-term effects of repeal under different economic scenarios. Current research on the issue barely exists, he said.

    Furth added that estimating the economic effects of repeal is difficult because Dodd-Frank is primarily a regulatory law, and as a general matter doesn't have a direct effect on federal spending or taxes. But that shouldn't stop Congress or the Congressional Budget Office from taking on the task, according to Furth.

    "The tools are out there," he said. "And the fact that the work hasn't been done is not an excuse not to do it."

    CBO's involvement would be key if congressional leaders decide to move Dodd-Frank changes in a budget reconciliation vehicle, which would put the overhaul on a fast-track to enactment by requiring only a simple majority for passage in the Senate. Sen. Pat Toomey (R-Pa.), a member of the Senate Banking Committee, said in a December floor speech that using that legislative tool has precedent, even though it's not his "preferred way to do it."

    In the esoteric world of calculating budget effects, dynamic scoring is a controversial issue. Republicans, in general, favored it over static scoring, saying it's important to factor in how deregulation or cutting taxes would stimulate the economy. Democrats, however, have dismissed the concept as a continuation of " trickle-down" policies that ultimately hurt the federal budget.

    Furth said that because the Heritage analysis is preliminary, he hopes for pushback from the academic community.

    "My hope is that some people will get really mad that we did this, and succeed us and do better work," he said.
    Proposal Would Clarify Requirements and Help Companies Comply
    The Consumer Financial Protection Bureau (CFPB) issued a proposal to facilitate compliance with the 2015 updates to the Home Mortgage Disclosure Act (HMDA) rule. The changes proposed would help financial institutions comply with the 2015 HMDA Final Rule by clarifying the information they are required to collect and report about their mortgage lending.

    "The Home Mortgage Disclosure Act shines a much-needed spotlight on the mortgage market, which is the largest consumer financial market in the world," said CFPB Director Richard Cordray. "Today's proposal reflects the Bureau's ongoing and substantive engagement with stakeholders in the marketplace, and will help industry meet its new reporting obligations."

    HMDA, which was originally enacted in 1975, requires many lenders to report information about the home loans for which they receive applications or that they originate or purchase. The public and regulators can use the information to monitor whether financial institutions are serving the housing needs of their communities, to assist in distributing public-sector investment so as to attract private investment to areas where it is needed, and to identify possible discriminatory lending patterns.

    As directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB updated the HMDA regulation in 2015 to improve the quality and type of data reported by financial institutions. Most of the updated requirements take effect in January 2018, and the industry is working to bring operations into compliance. Through public outreach and engagement the CFPB has identified opportunities to clarify parts of the 2015 HMDA Final Rule, which would help financial institutions comply.


              


    See the ICBA Plan for Prosperity




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