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Washington Wrap — GOP reaches agreement to advance Dodd-Frank reform

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 Capitol Hill

On May 8, House Speaker Paul Ryan, R-Wis., announced an agreement with Senate Majority Leader Mitch McConnell, R-Ky., to mint a second legislative bill that would reform the postcrisis Dodd-Frank regulatory framework. But sources on Capitol Hill expressed some skepticism that an actual deal had been reached.

Ryan promised "to be moving different pieces of legislation" that would include provisions that House Financial Services Committee Chair Jeb Hensarling, R-Texas, had originally tried to negotiate into the Senate's existing package. In return, the House would move to vote on the Senate bill as-is to get it to President Donald Trump's desk sooner rather than later.

But GOP aides in both the House and Senate said they had not previously heard of such an agreement.

Compass Point analyst Isaac Boltansky speculated May 9 that the vague agreement is "little more than a maneuver providing sufficient political cover for [Hensarling] to yield" on his demands for more legislative changes. Boltansky added that the political posturing is ultimately designed to clear passage of the Senate bill, which leadership hopes to accomplish before Memorial Day, May 28.


On May 8, the U.S. House voted 234 to 175 to kill the Consumer Financial Protection Bureau's guidance warning of discrimination in indirect auto lending. With the Senate having approved the same measure in mid-April, the resolution now awaits President Donald Trump's signature.

An S&P Global Market Intelligence analysis shows that since the CFPB issued the guidance in 2013, total auto lending growth at U.S. banks has decreased. But the trend may reflect deteriorating credit quality in the market.


The House Financial Services Committee is also teeing up legislation reforming the Bank Secrecy Act by lowering the threshold at which U.S. banks need to flag possible money laundering activities. Rep. Blaine Luetkemeyer, R-Mo., said formal legislation on BSA reform should come soon, adding that negotiations are still ongoing over customer due diligence rules that went into effect today.

The committee is scheduled to discuss the customer due diligence rule May 16.

At the CFPB

On May 9, CFPB Acting Director Mick Mulvaney continued to reshape the agency from within, by folding a key office dealing with student loan issues. Mulvaney told CFPB staff that he would be consolidating the "Students & Young Consumers" office within the consumer education and engagement division. Mulvaney also plans on establishing a cost-benefit analysis office that will cross-check agency actions.

The next day, Mulvaney further scaled back agency efforts to police student loans by releasing a rulemaking agenda that notably scrapped work on a proposed rule that would have targeted the education finance industry. The agenda also halted work on a rule that would target overdraft products.

At the Fed

President Donald Trump's two latest picks to the Federal Reserve will face the Senate Banking Committee May 15.

Trump has selected Richard Clarida, a PIMCO managing director and Columbia University economics professor, to become the Fed's vice chairman. He also picked Michelle Bowman, the Kansas commissioner of banking, to fill a long-vacant spot on the Fed’s Board of Governors designated for community banking specialists.

In February, the committee narrowly signed off on economist Marvin Goodfriend’s nomination for a vacant spot on the Fed board. But his nomination has languished in the full Senate, where Sen. Rand Paul, R-Ky., has said he opposes his nomination.

The Fed board currently has four of its seven seats unfilled.

On the regulatory front, some of the divisions among Fed officials on a recent proposal reappeared. At a Hoover Institution conference May 4, Fed Vice Chairman for Supervision Randal Quarles highlighted the plan to tweak leverage requirements for the largest U.S. banks as a "win-win," but Kansas City Fed President Esther George indicated she opposed the proposal.

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