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.
At the White House
Although the news cycle was dominated by the abrupt cancellation of the North Korea summit, the Republican-led Congress passed a number of legislative items that will give President Donald Trump several financial regulatory-related victories.
On May 24, Trump signed S.2155, the bipartisan legislation from the Senate Banking Committee that reforms portions of the postcrisis Dodd-Frank financial regulatory framework, seen as a main pillar of former President Barack Obama's economic policy.
Trump described Dodd-Frank as a "disaster" and said the revisions would lead to more de novo bank formations and cheaper compliance costs for community banks.
"They fixed it or at least have gone a long way toward fixing it," Trump said at a signing ceremony attended by a number of Congressional Republicans but only one Democrat, Sen. Heidi Heitkamp of North Dakota. Seventeen Democrats in the Senate supported the bill and 33 Democrats joined the GOP in the House vote May 22.
But the celebration was short for the senators in attendance, who had to race back to the U.S. Capitol to cast votes on the confirmation of Jelena McWilliams as chair of the Federal Deposit Insurance Corp. The Senate confirmed McWilliams in a 69-24 vote, with 22 Democrats voting in the affirmative.
McWilliams, who most recently served as chief legal officer of Fifth Third Bancorp, will replace Martin Gruenberg, who is currently the last Obama-era bank regulator still serving as an agency head.
Before signing S.2155, Trump vaguely referred to the possibility of more banking regulatory reform. In what appeared to be an off-the-cuff remark, Trump said he would be interested in revisiting the costs of regulations on too big to fail banks.
"Maybe we're going to have to start looking at that also, for the larger institutions, because they are also put at a disadvantage in terms of loaning money to people wanting to open up businesses," Trump said.
In an interview, Senate Banking Committee Chair Mike Crapo, R-Idaho, said the White House has not advised Congress on any review of regulations on large banks. Crapo added that the next financial regulatory reform package will address capital formation.
At the Fed
With Trump-appointed personnel soon to be fully in place, the Federal Reserve is ready to take its first steps in overhauling the Volcker rule.
For months, regulators across five agencies responsible for implementing the rule have discussed ways to streamline it. The rule, which has been in effect since 2014, prohibits banks from conducting proprietary trading.
The Fed's Board of Governors said this week it would hold a May 30 open meeting to weigh a proposal making changes to the requirement. The plan would be open for public comment.
In March, Fed Vice Chairman for Supervision Randal Quarles had said regulators would look to make "material changes" to the current framework, which he described as overly complex.
Other News
On May 21, Trump also signed a disapproval resolution officially nullifying the Consumer Financial Protection Bureau's 2013 guidance warning of discrimination in the indirect auto lending market.
In a statement, acting CFPB Director Mick Mulvaney said he will use the disapproval as a springboard to review the agency's enforcement of the Equal Credit Opportunity Act. Mulvaney also said the agency will provide Congress with a list of other rules that may be subject to repeal through the Congressional Review Act, the legislative tool used to scrap the indirect auto guidance.
Comptroller of the Currency Joseph Otting released a bulletin May 23 encouraging banks to re-enter the small-dollar lending space by clarifying its stance on installment loans with maturities longer than 45 days. The bulletin advises banks to support borrower affordability and state usury laws, but does not imply any added enforcement beyond existing protocol.
Fifteen Senate Democrats, worried about the implications of Trump-appointed regulators, sent a letter to the Fed, FDIC and OCC on May 25 urging the agencies to strengthen, not weaken the Community Reinvestment Act. The policymakers particularly asked the Fed and the FDIC not to adopt a recent OCC policy change tightening the CRA exam process. The letter argues that if adopted by all the regulators, banks with poor CRA ratings may expand their branch networks and conduct discriminatory credit practices without consequence.

