The priorities of the congressional committees that oversee financial services are changing. The contours of that change are beginning to take shape as Democrats take control in the House of Representatives and leadership from both parties announce committee assignments. This article takes a look at the agendas of Representative Maxine Waters (D-CA), the new Chair of the House Financial Services Committee, and Senator Mike Crapo (R-Idaho), Chair of the Senate Banking Committee. Their dynamic will set the stage for potential political confrontation, possible bipartisan legislation, and certain administrative and regulatory oversight impacting the financial services industry.
It would be hard to overstate the breadth of jurisdiction of the committees these two lawmakers oversee. Together they have oversight over the Federal Reserve, CFPB, the FDIC, the Office of the Comptroller of the Currency, the SEC, HUD, and the Federal Housing Finance Agency, to name only a few. They also have oversight over national security and law enforcement at the Treasury and Commerce Departments, including the Committee on Foreign Investment in the United States (CFIUS); and the Office of Terrorism and Financial Intelligence, (including OFAC and FinCEN, among others). The leadership of these two Committees influence the policy priorities and enforcement actions of these regulators.
Maxine Waters is not a newcomer to the House Financial Services Committee (HFC). She served on the HFC, the Committee that oversees all U.S. financial services affecting securities, insurance, banking and housing since 1991. Since 1995, she has served as either Ranking Member or Chair of every Subcommittee of the Committee.
Since her appointment as Chair, Representative Waters moved quickly to set her agenda. On January 24th, 2019 Chair Waters announced new leadership for HFC Subcommittees. (She even changed some Subcommittee names and created a new Subcommittee on Diversity and Inclusion.) See herefor the appointments and preliminary statements of the Subcommittee Chairs from New York, Missouri, Ohio and Texas. A few days later, Chair Waters announced membership assignments.
In her first meeting, Chair Waters highlighted the broad themes of consumer protection, expanding affordable housing, encouraging responsible innovation in financial technology and promoting diversity in—and financial access to—the financial services system as the key agenda items for the Committee.
On consumer protection, Chair Waters stated that she will seek to strengthen Dodd-Frank financial regulation that protects consumers and investors. She has been a frequent critic of administration efforts to weaken the Consumer Financial Protection Bureau and made clear that she will be using HFC oversight to ensure regulators are fulfilling their obligations as well as holding bad actors accountable.
On housing, Chair Waters said the Committee will focus on affordability and homelessness. She intends to re-raise a bill to provide $13.27 billion in new funding over five years to federal programs and initiatives on the issue. On housing finance, she wants to reform Fannie Mae and Freddie Mac to ensure that underserved borrowers and communities have access to affordable mortgage credit, as well as access to affordable rental housing, and ensure rigorous enforcement of fair housing laws. She said the HFC will be conducting robust oversight of the administration’s activities in the Department of Housing and Urban Development (HUD).
On FinTech, Chair Waters stated that she will focus the Committee on ways to foster "responsible innovation with the appropriate safeguards in place to protect consumers and without displacing community banks and credit unions." In this regard, her focus is on “opportunities for those who have been excluded from access to responsible credit.” Similarly, Chair Waters expressed her intention to shut down abusive payday lending practices and protect minority communities from lending discrimination.
In a speech earlier this year, she also described areas of international concern that the HFC would address, including reviewing governance at the International Monetary Fund and World Bank, Russia sanctions, reauthorization of the expiring Terrorism Risk Insurance (TRIA) and the Charter of the Export-Import Bank.
Senator Mike Crapo (R-ID) continues his role as Senate Banking Committee (SBC) Chair in the new Congress. His announced priorities reflect continuity, yet with an open offer for bipartisanship. On January 29, 2019, he set forth specific goals to (i) advance bipartisan legislative efforts, and (ii) ensure Committee oversight and federal agency implementation over legislation enacted in the last Congress, notably, the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA), Foreign Investment Risk Review Modernization Act (FIRRMA), and the Countering America’s Adversaries Through Sanctions Act (CAATSA).
On housing, Chair Crapo’s agenda includes finance reform of Fannie Mae and Freddie Mac, enhancements to HUD’s Family Self-Sufficiency program and streamlined compliance for Public Housing Authorities.
On capital markets reform, Chair Crapo said that he will continue to press for some thirteen bills that would encourage capital formation, reduce burdens for small businesses and improve corporate governance.
On digital security, Chair Crapo relayed that the Committee will consider legislative solutions so that consumers would have more control over their financial data and that any privacy breach would be disclosed to consumers in a timely way. As for FinTech, the Chair committed the SBC to work to ensure that the regulatory landscape welcomes innovation. He pledged that the Committee would “consider appropriate ways to advance innovation and coordination to protect the integrity of the U.S. financial system in a smart way.”
On access to financial services, Chair Crapo said the Committee will continue to examine whether regulation should be tailored for financial companies to ensure they can adequately deliver credit to local communities. He also said the Committee will conduct oversight of financial companies that might “use their market power to manage social policy by withholding access to credit or services to customers and industries they disfavor.” On consumer credit, the Chair noted that the Committee would explore targeted reforms of the credit bureau system, such as improving consumers’ ability to interface with credit bureaus and to dispute inaccuracies.
On international affairs, Chair Crapo stated that the Committee will conduct oversight of agencies tasked with national security and law enforcement missions. He pointed out that the Committee held hearings last year that “lay the groundwork for modernizing the decades-old anti-money laundering and beneficial ownership regime.”
Finally, the Chair stated that SBC will review the efficacy of many expiring programs as part of the reauthorization process for programs such as TIRA (which expires at the end of 2020); the National Flood Insurance Program (NFIP) (which expires end of May); the Export-Import Bank’s charter expires (which expires the end of September 30); the Fixing America’s Surface Transportation (FAST) Act (which expires the end of 2020).
Despite the fact that these leaders are considered to be at two opposite ends of the political spectrum, they both have significant records of legislative success. As their overall agendas suggest, there are identifiable areas of alignment. There may also be areas of common ground on data privacy and security, FinTech, anti-money laundering and housing reform. Their preliminary nods to reaching across the aisle may be nothing more than that, but there may emerge a few bipartisan surprises in 2019.