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
Legislators returned from the Memorial Day break and churned out a number of bills concerning financial regulation.
On June 7, the House Financial Services Committee passed six bills, including one from Arkansas Republican French Hill that proposes a safe harbor for financial institutions asked to keep accounts open at the request of law enforcement agencies. Hill said the legislation is designed to provide clarity for banks that are issued a "keep-open letter" for law enforcement reasons but want to close an account to comply with Bank Secrecy Act and anti-money laundering laws.
Two of the other bills concern SEC rules on venture exchanges and shareholder proposals; one bill addresses small-company disclosure requirements; and the remaining two bills propose changes at the Community Development Block Grant Disaster Recovery program and the U.S. Treasury Department's Federal Insurance Office.
In the Senate, Colorado Republican Cory Gardner and Massachusetts Democrat Elizabeth Warren teamed up to introduce the "Strengthening the Tenth Amendment Through Entrusting States Act" on June 7, which would allow state-law-compliant operators of cannabis-related businesses to obtain access to the financial system. The banking industry has been hesitant to serve the industry given federal ambiguity around the legal status of cannabis.
The legislation could get a boost from the White House; President Donald Trump told the White House press pool June 8 that he "probably will end up supporting" the legislation.
The legislation notably has bipartisan support in both the Senate and the House, where Ohio Republican David Joyce and Oregon Democrat Earl Blumenauer have introduced a matching bill. But Compass Point analyst Isaac Boltansky says passage is still a bit of a moonshot, given the lack of a legislative vehicle to pass the bill and Congress' preoccupation with the 2018 midterm elections. Boltansky added that the bill is "an important mile marker in the slow, but steady march toward federal clarity on cannabis policy."
At the CFPB
Acting Consumer Financial Protection Bureau Director Mick Mulvaney made waves this week when he abruptly announced that he will be clearing the agency's advisory board tasked with offering industry and community input. On June 6, the CFPB informed members of the Consumer Advisory Board that the agency would be rebooting the panel in a smaller format in the fall of 2018 and would not allow current members to return. Community advocates that served on the board expressed concern that the agency is trying to quell their participation in favor of more industry-friendly voices.
The CFPB countered that the costs of maintaining the program were too high, preferring to have more external outreach done in town halls.
On June 8, Mulvaney held a town hall meeting in Topeka, Kan., in which he said the groups were too large to offer valuable input, but promised that community advocates will "absolutely" continue to have a role in future boards.
The Mulvaney-led CFPB on May 31 moved to further punt the implementation of the payday lending rule by tying its compliance timeline to its legal tie-up with the Community Financial Services Association of America. The CFPB and the CFSA agreed to ask a U.S. District Court to delay the lawsuit itself until the CFPB completes its review of the regulation, which is not expected until the first quarter of 2019. The joint motion also requests a stay on the implementation of the small-dollar lending rule until after the lawsuit is wrapped up.
The court has yet to decide on whether or not it will grant the joint motion.
The CFPB has also formally dismissed its case against PHH Corp., which entangled the agency in a yearslong legal tussle that questioned the constitutionality of the agency's structure. In January 2018, a court ruled that the agency's structure is constitutional and stayed a lower court's ruling to overturn the agency's $109 million fine on PHH.
Other news
The Office of the Comptroller of the Currency has wrapped up its investigation of more than 40 banks' retail sales practices in the wake of Wells Fargo & Co.'s unauthorized accounts scandal. The agency reportedly concluded that there were no systemic issues among the nation's largest banks, but said it had identified "some weaknesses" in some banks' risk governance frameworks. A spokesperson for the OCC said the banks had taken "timely actions" to resolve those issues but declined to offer specific details on whether or not "matters requiring attention" guidance or enforcement actions were issued.
A Senate panel will vote June 12 on the approval of Federal Reserve nominees Richard Clarida and Michelle Bowman.
The two testified at the Senate Committee on Banking, Housing and Urban Affairs last month and would need approval from the full Senate if the panel signs off on their nominations.
The Fed's Board of Governors currently has four of its seven spots unfilled.
The Fed board is also getting ready to finalize a rule that looks to prevent the largest banks from having too much credit exposure to a single party. The Fed will vote on finalizing its proposed single-counterparty credit limits rule June 14.
The Fed also announced that it will release its Dodd-Frank Act stress test results on June 21 and Comprehensive Capital Analysis and Review results on June 28.

