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Washington Wrap: The Not-credibles


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Washington Wrap: The Not-credibles

The Washington Wrap is a weeklylook at regulations, news and chatter from the Capitol. Send tips and ideas to


On thesame day that JPMorgan Chase & Co.kicked off big-bank earnings season, the Federal Reserve and the FDIC released theirresponses to eight companies'resolution plans, commonly called living wills.

The plansof JPMorgan, Bank of America Corp.,Wells Fargo & Co.,State Street Corp. and werefound by both regulators to be "not credible." The living wills of and were found to be deficientby one of the two regulators, and CitigroupInc. passed in general, with shortcomings it must address.

The regulatorsreleased far more information than when they rejected 11 living wills in August 2014. The Government AccountabilityOffice had released a reporta day before saying that the living will process lacked transparency and had a timelinethat was not feasible.

OliverIreland, partner at Morrison & Foerster, said in an interview that the livingwills process is far from over. "My own take is that the lack of understandingon the part of the banks as to what the regulators are looking for is probably reflectingsome lack of clarity in regulators' own thinking," he said. Determining thesystemic risk and structuring the legal and business side of a company "isa very ambitious idea," he said.

The increaseddisclosure and the regulators' leanings on certain banks were by The Wall Street Journal the afternoon before. The FDIC and the Fed haveasked their inspectorsgeneral to look into that.

FDICVice Chairman Thomas Hoenig said assumptions behind the process — such as presumingthat GSIBs could absorb the shock of another GSIB's failure — were "."

And investors,by and large, didn't seem to act negatively on the news, pushing the largest banks'stocks higher in the firsthalf-hour of trading after the announcement and through the rest of the day.


TheFed is joining the in taking its own look at thefintech industry and how it might be best regulated, Fed Governor Lael Brainardsaid. The Federal Reserve System plans to form a working group to analyze the sector."As policymakers, we want to facilitate innovation where it has the potentialto yield public benefit, while ensuring that risks are thoroughly understood andmanaged," Brainard said.

While some analysts' expectations for 2016 federal funds targetrate increases have dropped to zero, San Francisco Fed President John Williams saidtwo or three raises are "reasonable,"given current economic data. Williams, a Federal Open Market Committee member, saidunemployment has actually performed better than expected along with a helpful increaseto the labor force participation rate. He did caution, though, that his statementwas not a prediction because "every time we make a forecast, the data changesand the outlook changes."

Sen. David Vitter, R-La., sent a letterto Consumer Financial Protection Bureau Director Richard Cordray on April 14 askinghim to look into a potential conflict of interest regarding CFPB Assistant DirectorCorey Stone's role in drafting the bureau's pending payday rule. Vitter wrote inthe letter that he is concerned that Stone worked at MicroBilt Corp., a credit dataand debt collection company, prior to joining the CFPB. In the letter, he asks whetherthe CFPB is aware of Stone selling shares of MicroBilt stock to his brother andasks for a document related to an ethics review of Stone by the agency.

Big banks' reliance on a government bailout in case of a failurehas "destabilized the banking ecosystem" Camden Fine, president and CEOof the Independent Community Bankers of America, wrotein a letter to The Wall Street Journalon April 13. The letter was in response to JPMorganChase & Co. CEO Jamie Dimon's op-edon April 5 arguing that big banks and small banks are allies and should work together.


TheHouse passed two bills related to the financial industry April 14.

would raise the maximumasset size of banks under the Federal Reserve's Small Bank Holding Company PolicyStatement from $1 billion to $5 billion. The measure passed by a vote of 247-171.Banks that meet the qualifications of the policy statement can operate with higherlevels of debt and are exempt from the Fed's consolidated risk-based capital andleverage capital rules. The threshold had recently been raised from $500 millionin May 2015.

H.R.3340 would place the Financial Stability Oversight Council and the Office of FinancialResearch into the congressional appropriations process. Additionally, the OFR wouldbe required to give at least a 90-day public notice and comment period before issuingany report, rule or regulation.

The Housealso passed a bill thatallows for a new bankruptcy system for financial companies with more than $50 billionin assets. The bill, called the Financial Institution Bankruptcy Act of 2016, isdesigned to shift the burden of risk and losses to a company's shareholders andcreditors in the event of a failure.

A markup of the Puerto Rico Oversight, Management and EconomicStability Act was delayed April 13, Reuters reported.The debt relief package was slated for a markup April 14 but negotiations are stillongoing, the newswire reported.

The Consumer Financial Protection Bureau addedsix new leaders to its bureau, according to an April 12 press release. The new leadersinclude Elizabeth Ellis as deputy associate director for the external affairs division,Seth Frotman as the student loan ombudsman and assistant director for the officefor students and young consumers, Katherine Gillespie as the deputy associate directorfor the consumer education and engagement division, Grady Hedgespeth as the assistantdirector for the office of small business lending markets, Chris Johnson as theassistant director for the office of consumer response, and John Schroeder as theMidwest regional director for the office of supervision examinations.