trending Market Intelligence /marketintelligence/en/news-insights/trending/B4RO_glk171yIOxK7ASg0A2 content esgSubNav
In This List

Washington Wrap — Trump promises 'severe' penalties for misbehaving banks

S&P Capital IQ Pro | Powered by Expert Insights

Blog

Beyond ESG with Climate Stress Testing: Getting Practical at Banks & Insurers

Blog

Enterprises are missing out on 24B by not optimizing cloud spending not going multicloud

Blog

Using Credit Analytics to Avoid Mispricing Insurance Premiums


Washington Wrap — Trump promises 'severe' penalties for misbehaving banks

The Washington Wrap is a weekly look at regulation, news and chatter from the Capitol. Send tips and ideas to brian.cheung@spglobal.com and polo.rocha@spglobal.com.

On Twitter

After Reuters reported Dec. 7 that Consumer Financial Protection Bureau acting head Mick Mulvaney was considering letting Wells Fargo Bank NA off for improperly charged mortgage rate lock extension fees, President Donald Trump took to Twitter to insist his administration is intent on cracking down hard on the banks.

"Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs [sic] but make penalties severe when caught cheating!" Trump tweeted Dec. 8.

Mulvaney has said he is actively reviewing investigations initiated by his predecessor, Richard Cordray, but the Reuters report alleges that Mulvaney is also reviewing a pending settlement with Wells Fargo in the "tens of millions of dollars."

Wells Fargo & Co. declined to comment and a spokesperson for Mulvaney did not respond to a request for comment.

Trump's tweet suggests that he may push the CFPB and its other regulators, the Office of the Comptroller of the Currency and the Federal Reserve, to more aggressively enforce wrongdoing at Wells Fargo, despite all of those regulators being independent of the executive branch.

At the Fed

The Fed took another step toward easing burdens of bank stress tests, proposing to disclose more information to some of the country's largest institutions on how their stress tests are conducted. Randal Quarles, the Fed's vice chairman for supervision, said the "enhanced transparency will bolster the credibility of our stress tests and help the public better evaluate the results."

The American Bankers Association said it was encouraged by the proposals and looks forward to providing comments to the agency.

"For too long, banks have been subject to secret standards that are unknown to the regulated banks and public, which is just bad policy," said Hugh Carney, ABA's vice president of capital policy. "Regulations that are designed for safety and soundness should not be mystery."

Ian Katz, a Capital Alpha Partners analyst, wrote in a research note the announcement fits the pattern of the Fed relaxing some requirements but ensuring it "doesn't destroy the core of Dodd-Frank protections."

Also this week, officials are prepping for next week's Federal Open Market Committee meeting, where another rate hike appears to be certain.

Analysts say new jobs numbers released Dec. 8 bolstered the case for a rate increase, which would be the third this year. The figures from the Bureau of Labor Statistics show the U.S. added 228,000 jobs in November, and the unemployment rate stayed at a 17-year low of 4.1 percent.

And in Fed personnel news, the Richmond Fed has named McKinsey executive Thomas Barkin as its new president. Barkin will be a voting member of the FOMC next year and will replace former Richmond Fed president Jeffrey Lacker, who resigned this year after acknowledging he shared confidential information with an outside analyst in 2012.

On Capitol Hill

Republican U.S. senators teamed up with four moderate Democrats on Dec. 5 to advance a legislative package that would pare back portions of the postcrisis Dodd-Frank bill. In a 16-7 vote, the Senate Banking Committee cleared the bill, which among other things proposes raising the $50 billion threshold to $250 billion and removing company-run stress tests for banks under $250 billion in total assets.

Sen. Elizabeth Warren, D-Mass., made it clear that she disagreed with the bill and was a leading voice in a bloc of Democrats that proposed amendments to the bill for hours Dec. 5. None of the amendments passed.

"I think it undercuts our credibility that we understand what went wrong in 2008," Warren said of the division among Democrats.

The bill will now be scheduled for consideration by the entire Senate. The bill has enough Democratic co-sponsors to defeat a 60-vote filibuster, assuming all 52 Republicans vote to pass it.

SNL Image