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Financial Services Law Insights and Observations


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  • Senate Committee on Banking, Housing and Urban Affairs Hears Testimony About National Flood Insurance Program

    Federal Issues

    On May 4, the Senate Committee on Banking, Housing, and Urban Affairs held the second in a series of hearings entitled “Reauthorization of the National Flood Insurance Program, Part II,” to further debate the reauthorization of the National Flood Insurance Program (NFIP). Committee Chairman Mike Crapo (R-Idaho) opened the full committee hearing asserting that by “[w]orking together, and balancing reforms that protect taxpayers and assist consumers, we can reauthorize the Program on time.” However, Sen. Crapo further stressed the need to answer important questions including “[h]ow to offer consumers more choice by growing the private market and ensuring shared risk by both the government and private sector and how long the Program should be reauthorized,” among others. The May 4 hearing included testimony and recommendations to help modernize and reform the NFIP from the following witnesses:

    • Mr. Steve Ellis, Vice President of Taxpayers for Common Sense (TCS), on behalf of the Smarter Safer coalition (testimony). Ellis stated that TCS supports the flood insurance reforms released by Smarter Safer, which include the following: (i) “[r]isk analysis and mapping must be up to date and must provide property level elevation data”; (ii) “[r]ates must be tied to risk, with support for mitigation and premium support for low-income homeowners”; (iii) “[i]ncreased federal investments and efforts on mitigation both at a property level and community wide, so that we are reducing rates by reducing risk”; and (iv) “[e]nsuring consumer choice and private sector competition to reduce taxpayer exposure.” TCS also argued for a five-year reauthorization schedule as opposed to a longer one that would “delay adjustments and reforms to the program.”
    • Mr. Michael Hecht, President and CEO of Greater New Orleans, Inc., on behalf of the Coalition for Sustainable Flood Insurance (CSFI) (testimony). Hecht stressed that CSFI is focused on “advocating for a stronger policy framework for the National Flood Insurance Program that recognizes the economic, cultural, defense, and other national contributions made by communities exposed to flood risk,” and introduced four primary policy areas that will foster this stronger framework: Mitigation, Mapping, Affordability, and Program Participation.
    • Mr. Larry Larson, Director Emeritus of the Association for State Floodplain Managers (ASFPM) (testimony). Larson testified that ASFPM recommends, among many other things, that Congress: (i) consider a “shorter multi-year reauthorization of 2-3 years so FEMA can more fully develop affordability recommendations”; (ii) “develop a threshold above which the federal government will backstop claims resulting from catastrophic events for the NFIP based on an evaluation of the program’s current financial capacity”; (iii) “forgive the current NFIP debt”; and (iv) “give FEMA the flexibility to offer additional flood insurance policy options and make changes to existing options without the need for extensive rulemaking.”

    As previously covered in InfoBytes, draft bipartisan legislation to reauthorize the NFIP for 10 years was introduced on April 26.   The current version of the NFIP expires at the end of September.

    Federal Issues Flood Insurance National Flood Insurance Program Senate Banking Committee

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  • FHFA Director Appeared Before the Senate Banking Committee on May 11; Discussed Fannie/Freddie, Proposed "Underserved Markets Plans"

    Federal Issues

    On May 11, the Senate Committee on Banking, Housing, and Urban Affairs met in open session at 10:00 a.m. to discuss “The Status of the Housing Finance System After Nine Years of Conservatorship.” Federal Housing Finance Agency (FHFA) Director Mel Watt was the only witness scheduled to testify.

    The hearing comes after Fannie Mae (Fannie) and Freddie Mac (Freddie) published their first quarter financial reports. On May 2, Freddie announced $2.2 billion in net income in the first quarter—all of which Freddie expects to distribute to the Treasury, bringing the total to $108.2 billion in dividends. Notably, the $2.2 billion figure was down from its fourth quarter net income of $4.8 billion. Similarly, on May 5, Fannie reported net income of $2.8 billion in the first three months of 2017, money that will be sent to Treasury, which brings its total payments to $162.7 billion. The net income was a significant decline from the $5 billion it reported for the fourth quarter of 2016.

    Fannie and Freddie also recently released their respective “Underserved Markets Plans” for public comment. As previously covered by InfoBytes, FHFA published a final rule in the December 18 Federal Register implementing certain Duty to Serve provisions of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008. Among other things, these provisions require Fannie and Freddie to each adopt a formal “Underserved Markets Plan” to improve the availability of mortgage financing for residential properties that serve “very low-, low-, and moderate-income families” in three specified underserved markets: manufactured housing, affordable housing preservation, and rural markets. The Plans can be accessed through the following links:

    As explained on the FHFA’s DTS Underserved Markets Plan page, the activities and objectives in each of these Plans may be subject to change based on factors including public input, FHFA comments, compliance with the Enterprises' Charter Acts, safety and soundness considerations, and market or economic conditions. To this end, “views of interested stakeholders are sought on whether the proposed Plans would effectively serve the underserved markets if carried out as proposed, or if there are modifications that each Enterprise should consider making to its proposed Plan to better serve these underserved markets.”  The period during which the Enterprises are receiving public input on the proposed Plans will end on July 10. 

    Pursuant to the same new rule, FHFA has also published a Proposed Evaluation Guidance to provide: (i) FHFA's expectations regarding the development of the Underserved Markets Plans, and (ii) the process by which FHFA will evaluate Fannie’s and Freddie’s achievements under their Plans each year.  The deadline for public input on FHFA’s Proposed Evaluation Guidance is June 7.

    Federal Issues FHFA Congress Senate Banking Committee Fannie Mae Freddie Mac Department of Treasury

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  • Supporting America’s Innovators Act of 2017 Passes in House Vote

    Federal Issues

    On April 6, a bipartisan bill entitled, Supporting America’s Innovators Act of 2017 (H.R. 1219) was received in the Senate after passing through the House by a 417-3 margin. The securities-related bill – which is now pending before the Senate Committee on Banking, Housing, and Urban Affairs, amends the provisions of the Investment Company Act of 1940 that require venture capital funds with more than 100 investors to register with the SEC. As previously reported in InfoBytes, the bill would serve to raise the cap on the number of investors from 100 to 250, thereby facilitating greater access to venture capital funding for small businesses and startups. In a press release issued by the House Financial Services Committee, the bill’s sponsor, Rep. Patrick McHenry explains that H.R. 1219 is intended to, among other things, “address the challenges facing angel investing so that startups and small businesses can have better access to capital,” by “creating a regulatory framework that encourages innovation and growth, while ensuring that shareholder and investor protections remain strong.”

    Federal Issues House Financial Services Committee Securities Senate Banking Committee

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  • Securities-Related Bills Advanced Through Committees in Both Senate and House


    On March 9, the Senate Banking Committee and the House Financial Services Committee introduced and advanced five securities-related bills out of committee.  The bills—listed below—now await scheduling for consideration by each chamber in full.

    • S. 327 / H.R. 910 - Fair Access to Investment Research Act of 2017. This legislation will direct the SEC to provide a safe harbor for certain investment fund research reports.
    • S. 444 / H.R. 1219 - Supporting America’s Innovators Act of 2017. This legislation will amend the Investment Company Act of 1940 by expanding “the limit on the number of individuals who can invest in certain venture capital funds before those funds must register with the SEC as ‘investment companies.’”
    • S. 462 / H.R. 1257 - Securities and Exchange Commission Overpayment Credit Act. This legislation will require the SEC to refund or credit excess payments made to the Commission under a 10-year statute of limitations.
    • S. 484 / H.R. 1366 - U.S. Territories Investor Protection Act of 2017. This legislation will amend the Investment Company Act of 1940 to terminate an exemption for companies located in Puerto Rico, the Virgin Islands, and any other possession of the United States.
    • S. 488 / H.R. 1343 - Encouraging Employee Ownership Act. This legislation will increase the threshold for disclosures required by the SEC relating to compensatory benefit plans.

    H.R. 1312 - The Small Business Capital Formation Enhancement Act. The House Financial Services Committee also approved a sixth bill, which seeks to amend the Small Business Investment Inventive Act of 1980 to require an annual review by the SEC of any findings set forth in the annual government-business forum on capital formation.

    Securities Senate Banking Committee House Financial Services Committee SEC

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  • Senate Confirms Ben Carson for HUD Secretary

    Federal Issues

    On March 2, Dr. Ben S. Carson was sworn in as the 17th Secretary of the U.S. Department of Housing and Urban Development. Vice President Mike Pence administered the oath of office. Earlier in the day, the Senate confirmed the retired neurosurgeon as the new secretary of the HUD Secretary in a 58-41 vote, primarily along party lines. The Senate Banking, Housing, and Urban Affairs Committee unanimously voted to move Carson out of committee on January 24. Dr. Carson’s full biography is available here.

    Federal Issues HUD Senate Banking Committee U.S. Senate

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  • House Financial Services Committee Chairman Called for End of CFPB; Senate Banking Committee Ranking Member Responds

    Federal Issues

    In a February 10 blog post, House Financial Services Committee Chairman Jeb Hensarling called for the abolition of the CFPB, and recommended that the President “immediately fire CFPB Director Richard Cordray.” Specifically, Rep. Hensarling expressed his belief that the CFPB is “arguably the most powerful, least accountable agency in U.S. history,” and his concern that the agency “defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process.” For these reasons, Rep. Hensarling  stated  he believes that “even with good policy, the CFPB would still be unconstitutional.” Ultimately, he argued that the CFPB “must be functionally terminated,” which he said could be achieved by ending the Bureau’s funding through a reconciliation bill.

    The same day, Senate Banking Committee Ranking Member Sherrod Brown issued a statement responding to Rep. Hensarling’s proposal to abolish the Dodd-Frank Act. Senator Brown’s response noted, among other things, that “71 percent of Americans approve of the [CFPB]’s mission,” and that “[t]he Hensarling proposal would transform the Bureau from an effective watchdog into a toy poodle.”

    Federal Issues Consumer Finance CFPB Dodd-Frank House Financial Services Committee Senate Banking Committee

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  • Legislation Introduced in Both Houses Seeking to Curb Authority of the CFPB and Other Financial Regulators

    Federal Issues

    On February 14, Senator Mike Rounds, a member of the Senate Banking Committee, introduced S. 365, which seeks to amend the Consumer Financial Protection Act of 2010 to bar the transfer of funds from the Board of Governors of the Federal Reserve System to the CFPB. The bill also would require the CFPB to turn over all penalties it obtains to the United States Treasury. Sen. Rounds also reintroduced the “Taking Account of Institutions with Low Operation Risk (TAILOR) Act” (S. 366)–a bill intended to ease regulatory burden on local banks and credit unions. Specifically, the TAILOR Act would require financial regulators to take into consideration the risk profile and business models of individual financial institutions and tailor those regulations accordingly. The TAILOR Act also would require regulators–including the OCC, the Fed, the FDIC, the NCUA and the CFPB–to conduct a review of all regulations issued since the 2010 passage of the Dodd-Frank Act and revise any regulations that do not conform to the TAILOR Act’s requirements. In addition, the regulatory agencies would be required to provide an annual report to Congress outlining the steps they have taken to tailor their regulations.

    On February 15, Senator David Perdue (R-Ga.), along with Sens. John Barrasso (R-Wyo.), John Boozman (R-Ark.), Ted Cruz (R-Tex.), Steve Daines (R-Mont.), Mike Enzi (R-Wyo.), Joni Ernst (R-Iowa), John Hoeven (R-N.D.), Johnny Isakson (R-Ga.), Ron Johnson (R-Wis.), John Kennedy (R-La.), Mike Lee (R-Utah), Rand Paul (R-Ky.), Marco Rubio (R-Fla.), and Thom Tillis (R-N.C.), have introduced legislation S. 387 to amend the Consumer Financial Protection Act so that the CFPB would be subject to the regular appropriations process.

    Senator Ted Cruz and Representative John Ratcliffe also introduced legislation in their respective chambers that would abolish the CFPB. The pair of bills–S. 370  and H.R. 1031–would “eliminate the Consumer Financial Protection Bureau by repealing title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Consumer Financial Protection Act of 2010.” As explained by Senator Cruz in a joint press release, the proposed legislation would give “Congress the opportunity to free consumers and small businesses from the CFPB’s regulatory blockades and financial activism, which stunt economic growth.”

    Federal Issues Consumer Finance CFPB Congress Dodd-Frank Senate Banking Committee

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  • Congress Seeks Answers from Bank CEO and Federal Bank Regulators

    Consumer Finance

    On September 20, the CEO of a major national bank faced questions from the House Financial Services Committee over consumer account practices uncovered during a recent enforcement action by the CFPB. The CEO will return to Capitol Hill on September 29 for additional testimony in front of the Committee. In addition, the Director of the CFPB and the Comptroller of the Currency faced scrutiny from the Senate Committee on Banking, Housing & Urban Affairs on their agencies awareness of, and failure to prohibit, the bank’s alleged actions for more than two years. In prepared testimony, Director Cordray indicated that the civil penalty levied against the bank was the “largest fine by far that the Consumer Bureau has imposed on any financial company to date” calling it a “dramatic amount as compared to the actual financial harm to consumers” but also “justified here by the outrageous and abusive nature of these fraudulent practices on such an enormous scale.” Director Cordray further stated that this enforcement action should help clarify how the CFPB will continue to analyze and enforce the prohibition on “abusive” practices under its mandate.  Meanwhile Comptroller Curry explained how this enforcement action demonstrates the complimentary roles played by the OCC and the CFPB in supervising bank practices.

    CFPB OCC U.S. Senate U.S. House Senate Banking Committee House Financial Services Committee

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  • U.S. Senate Banking Committee Schedules Hearing on Federal Reserve Reform

    Consumer Finance

    On March 3, the Senate Banking Committee will hold a hearing entitled, “Federal Reserve Accountability and Reform.” The hearing comes after Dallas Fed President Richard Fisher’s February 13 remarks on the growing concern regarding the Federal Reserve’s current governance structure. Additionally, Senator Rand Paul’s (R-KY) “Audit the Fed” proposed legislation has brought increased attention to the transparency of the Federal Reserve operations and monetary policy. Scheduled witnesses for the hearing include Dr. John B. Taylor of Stanford University and Dr. Paul Kupiec of American Enterprise Institute.

    Federal Reserve Senate Banking Committee

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  • Federal Banking Regulators Testify on "Regulatory Relief"

    Consumer Finance

    On February 10, officials from federal and state banking authorities – the Fed, FDIC, NCUA, OCC, and the CSBS – testified at a U.S. Senate Banking Committee on ways the agencies can provide “regulatory relief” to community banks and credit unions, which disproportionately incur burdens to implement the rules and provisions of the Dodd-Frank Act.  Specifically, officials from each of the federal banking agencies detailed current initiatives and proposals that would provide less burdensome compliance costs.

    FDIC Federal Reserve OCC NCUA CSBS Community Banks Senate Banking Committee

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