House Financial Institutions and Consumer Credit Subcommittee Examines Transparency in the Financial Regulatory System

Federal Issues House Financial Services Committee Bank Regulatory Bank Compliance

On March 6, the House Financial Institutions and Consumer Credit Subcommittee held a hearing to consider the need to increase transparency in the financial regulatory system and examine opportunities for reform. According to a committee memorandum, the purpose of the hearing was to examine both (i) “the impact the rules and processes from federal financial agencies . . . have had on financial companies and their customers”; and (ii) “opportunities for reform of these federal financial agencies, with the aim of improving transparency, accountability and due process for regulated persons and entities and their customers.” As explained by Chairman Blaine Luetkemeyer in a committee press release following the hearing, “ambiguous guidance, contradictory rules, and aggressive enforcement has led to confusion for financial companies seeking to comply with Dodd-Frank and other Obama-era rules.” And, the Chairman continued, “the greatest impact is on the customers of those financial companies, who in many cases have been left clamoring for access to financial services, and paying more for the ones they’ve been able to retain.”

Four witnesses offered testimony and answered questions before the committee:

• Greg Baer, President of the Clearing House Association, focused his testimony on the critical importance of the due process clause and the Administrative Procedure Act, and how “a transparent [rule-making] process tend[s] to produce better regulation,” while the lack thereof has “adverse consequences on the quality of rules being administered and the ability of our banking system to support economic growth.”
• Norbert Michel, a senior Research Fellow at the Heritage Foundation, testified, among other things, that “for decades, the U.S. regulatory framework has increasingly made it more difficult to create and maintain jobs and businesses that benefit Americans,” and that, “[o]ne of the main reasons the regulatory regime has been counterproductive for so long is because it allows regulators to micromanage firms’ financial risk, a process that substitutes regulators’ judgments for those of private investors.”
• Amias Moore Gerety, Former Acting Assistant Secretary for Financial Institutions, U.S. Department of the Treasury discussed both (i) how the post-crisis Wall Street Reforms “strengthened our financial system and supported our economic recovery,” and (ii) how “the ability to deliver regulation that is appropriate to the risk is the central question for policy makers designing financial regulation—both of individual institutions and for the constantly evolving financial system as a whole.”
• Bill Himpler, an Executive Vice President at the American Financial Services Association shared what he viewed as a contradiction between his belief that “[c]redit should not be limited to the wealthy or those with perfect credit scores,” and his observation that the “CFPB seems to believe that credit should only be extended to those borrowers who do not present any risk.”