On Wednesday, May 15, the Senate Banking Committee, chaired by Senator Mike Crapo (R-ID), held a hearing on the oversight of financial regulators. Intending to examine the current state and priorities of the nation’s four prudential regulatory agencies, the Committee heard testimony from four witnesses: Rodney Hood, Chairman, National Credit Union Administration (NCUA); Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation (FDIC); Joseph Otting, Comptroller, Office of the Comptroller of the Currency (OCC); and, Randal Quarles, Vice Chairman of Supervision, Board of Governors of the Federal Reserve System.
The hearing focused on leveraged loan risk, collateralized loan obligations, and developing lender protection issues. Crapo emphasized the importance of administrative objectivity, asking that agencies “remain neutral, un-biased and non-political, especially when . . . reviewing bank mergers and applications.” Ranking member Sherrod Brown (D-OH) challenged President Trump’s deregulatory agenda, citing rising household debt and industry volatility as evidence of an impending financial crisis. “I know the President appointed all of you to your jobs,” Brown told witnesses, “but you are independent financial regulators. Your job is to make the economy work for everyone – not just people like him.”
On Thursday, May 16, the House Committee on Financial Services, chaired by Congresswoman Maxine Waters (D-CA), held a hearing on the oversight of prudential regulators. Intended to examine the “safety, soundness and accountability” of megabanks and subsidiary financial institutions, the Committee heard testimony on the LIBOR transition, Valid-When-Made, and comprehensive Volcker Rule reform. The same four witnesses from the Senate Banking Committee’s precursory hearing testified for House members.
Legislators expressed concerns about the Trump administration’s deregulatory agenda, citing the impact of congressional regulatory efforts since the financial crisis of 2007-2009. Through the Dodd-Frank Act and Basel III capital reforms, regulators have substantially strengthened the resiliency of the American banking system since 2010. Bill S. 2155, passed by House Republicans in 2018, includes various deregulatory provisions opposed by Committee Democrats. Waters reviewed several legislative proposals, the Megabank Oversight Act, the Prudential Regulator Oversight Act, and the Shutdown Guidance for Financial Institutions Act, intended to reemphasize the oversight responsibilities of prudential regulators.
SFIG staff met with Capitol Hill banking and financial services staffers in advance of both hearings and will continue to stay engaged on the issues of importance to SFIG’s members.