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Washington Wrap — Amid noise, some indicators of real regulatory relief


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Washington Wrap — Amid noise, some indicators of real regulatory relief

The Washington Wrap is a weekly look at regulation, news and chatter from the Capitol. Send tips and ideas to

On Capitol Hill

Despite fervent public interest in the testimony of James Comey, the former FBI director fired by President Donald Trump, markets were relatively ambivalent. While Comey was in front of Senators, the House of Representatives was busy passing the Financial CHOICE Act, a sweeping piece of legislation that would roll back many of the regulatory provisions in the Dodd-Frank Act.

However, considering the bill passed along party lines, there seems little chance the legislation will make any headway in the Senate. The CHOICE Act "has no path to passage in the Senate," wrote Isaac Boltansky, an analyst with Compass Point Research & Trading, in a June 9 note. Edward Mills, an analyst with FBR & Co., offered a similar assessment, calling the bill's House passage "likely the end of the line" for the legislation's prospects in a June 9 note.

Mills and Boltansky both wrote that financial regulation legislation would happen in early 2018 at the earliest. Sen. Mike Crapo, R-Idaho, chairman of the Senate Banking Committee, said the Senate will need 12 to 24 months to consider legislation, Mills wrote. Democrats and consumer advocates used the vote to paint Republicans as being in Wall Street's pockets, with Rep. Maxine Waters, D-Calif., issuing a statement that described the legislation as "shameful" and "setting the stage for Wall Street to run amok."

Republicans, on the other hand, painted the CHOICE Act as a crackdown on Wall Street, arguing that large banks dislike the legislation and that it eliminates bailouts. On Twitter, the House Financial Services Committee made an appeal to the younger demographic with a celebratory video clip that included former President Barack Obama dropping a microphone while a Wiz Khalifa and Iggy Azalea song played in the background.


Congress continued to consider a couple of other significant pieces of legislation for the financial sector. Perhaps most significantly for community banks, the Senate Banking Committee on June 8 held a hearing on the CLEAR Relief Act of 2017.

Taking a narrower approach to regulatory relief, the legislation might have better chances of passing — particularly considering it has some traction in the more august body. The House of Representatives does have a companion piece of legislation, but Republicans in that body appear focused on the CHOICE Act. Among various provisions, the Senate version of the bill would exempt banks with less than $10 billion in assets from the Volcker rule and offer the safe harbor protections afforded by the "qualified mortgage" status to any mortgages held in portfolio at such banks. The Independent Community Bankers of America has expressed support for the bill. Back in May, Boltansky wrote that there appeared to be bipartisan support for CLEAR Relief but that imminent passage seemed unlikely considering the focus on the CHOICE Act and a tight legislative calendar.

The calendar appears to be the largest stumbling block for legislative regulatory relief as Comey's testimony highlighted that Democrats are keen to continue focusing on the investigation into Russian meddling in the electoral process. Boltansky noted that the Senate and House are both in session for just 27 more days until the August recess.

Among regulatory agencies

While banks eager for regulatory relief might not be able to count on congressional action, it appears some level of easing is on its way. On June 5, Trump announced his pick to lead the Office of the Comptroller of the Currency, a regulator that oversees the nation's largest depositories. Trump tabbed Joseph Otting, former president and CEO of OneWest Bank FSB, for the position.

Otting is closely aligned with Treasury Secretary Steven Mnuchin, who led the group of investors who bought OneWest. Industry groups lauded the pick while Democrats and consumer advocates expressed concern. As a close ally of Mnuchin, some analysts said they expect Otting to deliver on the deregulatory agenda administratively.


On the other hand, the Consumer Financial Protection Bureau, or CFPB, appears set on maintaining a high level of scrutiny on the financial industry. On June 8, the regulator issued guidance warning retailers and credit card issuers about the use of deferred-interest promotions, which charge zero interest for a period of six or 12 months. But if the balance is not paid by the end of the promotional period, the accrued interest is added to the outstanding balance. Previously, the agency has issued such guidance ahead of enforcement actions.

Also on June 8, CFPB Director Richard Cordray offered an update on the agency's debt collection rulemaking effort in a speech that also touched on the deferred-interest issue. Cordray said the agency would be splitting its debt collection rulemaking into two separate rules. One would focus on "right consumer, right amount" issues, meaning the debt collector is contacting the correct person and has the amount owed correct. That will allow the agency to "move forward more quickly" with a rule focused on ensuring collectors inform consumers of their rights and that collectors treat consumers "with dignity and respect."

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