At the Fed
In his first press conference as chairman of the Federal Reserve, Jerome Powell said March 21 that he is not sure if he would change the frequency of the Comprehensive Capital Analysis and Review stress tests from annual to periodic, as the Senate's Dodd-Frank revision bill would allow for. Powell said the Fed needs to assess the logistic challenges of changing the timing of the stress tests, adding that "we would want to think very carefully about that."
The recently passed Senate package would loosen some postcrisis Dodd-Frank mandates over how the Fed supervises financial institutions. For example, the bill would give the Fed discretion over how it applies enhanced prudential standards to banks between $100 billion and $250 billion in total assets. Powell said he is "fully prepared" to apply those standards "where we think it's appropriate."
The Federal Open Market Committee opted for its first interest rate hike under Powell, increasing the federal funds rate by 25 basis points. Afterwards, Powell said inflation appears to be rising toward the central bank's 2% target, but the data does not suggest that "we're in the cusp of an acceleration of inflation."
On Capitol Hill
Lawmakers are running up against the clock to pass a spending bill that appeases Democrats, far-right Republicans and President Donald Trump. On March 22, lawmakers unveiled a $1.3 trillion omnibus bill that will fund the government through Sept. 30. Both the House and the Senate approved the bill, but the White House is fueling drama by threatening to veto the bill because of immigration-related issues.
If no omnibus is signed into law by the end of the day March 23, the government will shut down.
The proposed spending bill abandoned Trump's wishlist for changes at the financial regulators, notably keeping the Consumer Financial Protection Bureau intact and proposing no downsizing at the Office of Financial Research.
The omnibus also included two bills minted by the House Financial Services Committee: one that would allow business development companies to operate on higher leverage and another that would require the Securities and Exchange Commission to report on small businesses affected by hurricanes or other natural disasters.
Compass Point analyst Isaac Boltansky noted that the inclusion of both bills to the omnibus means two fewer bills that House Financial Services Committee Chair Jeb Hensarling, R-Texas, will need to jam into the Senate's bipartisan Dodd-Frank revision bill. With the bill having already cleared the Senate, Hensarling and House Republicans remain the final hurdle to getting the financial regulatory package to Trump's desk. Hensarling insists on having his committee's bills added to the Senate bill, but Senate Democrats warn that substantial changes could force them to rethink the legislative compromise.
The House Financial Services Committee continued to churn out more one-off financial regulatory bills March 21. The panel moved forward on a bill that would streamline enforcement of the Volcker rule by making the Fed the exclusive rulemaking and examination authority. The bill also includes text similar to that of the Senate Dodd-Frank revision bill, exempting institutions with less than $10 billion in total assets and low levels of trading assets and trading liabilities from Volcker compliance.
Another bill proposes that the Federal Deposit Insurance Corp. nullify its 2013 guidance discouraging depository institutions from offering deposit advance products. The bill would also require the regulators to issue standards on small-dollar lending and exempt insured depository institutions and insured credit unions from the CFPB's payday rule.