By Leslie Sack
Despite strident partisanship on the national media stage and a truncated legislative calendar, we expect Congressional Committees to build on their success from 2019 in passing bipartisan legislation. The quick reauthorization of the Terrorism Risk Insurance Act in 2019 shows the Senate Banking and House Financial Services Committees can and will work swiftly when the right mix of issues arise. But history has shown that an election year often stunts legislative action as Members’ time in Washington, D.C. is more limited, and their party politics become more pronounced with each passing day until November 3, 2020.
Now that the impeachment trial has concluded, the Senate Banking Committee will turn its focus back to legislative activity, though the threat of gridlock remains. Chairman Mike Crapo is expected to continue to focus on advancing beneficial ownership legislation that will require companies to disclose to FinCEN information about the businesses’ beneficial owners. Another bank industry priority involves the potential for legislation that will make it easier for financial services companies to provide banking services to cannabis businesses in states that have legalized marijuana. Both the beneficial ownership and cannabis banking bills have passed the full House. The Senate Banking Committee will also potentially consider a series of nominations, including possible Federal Reserve Board of Governors, Treasury nominees and a Securities and Exchange Commission Commissioner.
Over in the House Financial Services Committee, Chairwoman Maxine Waters intends to continue working on the priorities she outlined when she assumed the role of Chair. These priorities include oversight of the Consumer Financial Protection Bureau, a focus on investigations of large financial institutions, affordable housing, bipartisan financial sector reform, and an emphasis on diversity and inclusion in the financial sector. These areas of concern were front and center in the hearing topics covered by the Committee and its Subcommittees in January this year.
Let’s not forget the Administration and regulatory agencies are ready and willing to act, especially when it comes to the housing finance regulatory landscape. Although legislative change was preferred at the outset, in the wake of an election year, we expect to see administrative changes made by the Federal Housing Finance Agency (FHFA) to eliminate regulatory and compliance uncertainties that are currently clouding the market. FHFA Director Mark Calabria has already asked Congress to grant the agency authority to issue new market charters, third-party examination authority, and discretion to tailor RBC and leverage requirements for MBS guarantors. Given the magnitude of impact a post-GSE conservatorship secondary market transition may carry, the agency is positioning itself for greater autonomy with tactical tools at the ready. Congress, however, inherently reluctant to cede any authority, may feel compelled to rein in these efforts with its own stamp of limitations. Other areas of interest regulators could focus on include ILC charters, addressing the common law “Valid-When-Made” doctrine, QM requirements, CECL, CRA measurements, and debt collection rules, among others. For all regulatory activity, agencies are focusing on a soft deadline of May for new rules to avoid CRA challenges to any regulatory relief that could be overturned by a new administration in 2021.
Legislative vehicles will exist, and issue wins remain in play, even as impeachment and primary election one-liners snag the headlines. We expect to see a combination of single-issue stand-alone bills and riders attached to the year-end spending bill. But 2020 is a year to keep watch on the regulatory agencies, with several significant bank regulatory agency rulemaking proposals currently awaiting comment and pending final approval. Both Republicans and Democrats will be ramping up the rhetoric in the coming months to deliver constituent wins and controlling issue narratives will be critical in any and all advocacy efforts.
SFA is here to help.