12.6.19
This week the House Financial Services Committee and Senate Banking Committees held oversight hearings with Prudential Regulators. Perhaps the most contentious topic in the hearings was the FDIC’s and OOC’s recent proposed regulation in response to the valid-when-made doctrine and the Madden decisions. Some Democrats specifically asked about the long standing doctrine in relation to “rent-a-bank schemes” in which banks seek to evade usury laws at the state level. FDIC Chairman Jelena McWilliams stressed that this rulemaking is meant to clarify FDIC’s position, reassert the existing common law doctrine that Madden ignored, and that the “true lender” issue and “valid-when-made” doctrine should not be conflated. Republicans and Democrats also expressed concerns about the recent volatility in the repo market and the Fed’s intervention as well as inquired as to whether these shortcomings in the repo market could be exacerbated with the new SOFR standard. In a separate hearing with Treasury Secretary Steven Mnuchin, members doubled down on their concerns regarding the transition away from LIBOR in 2021. In preparation for these hearings, SFA staff met with Senate Banking and House Financial Services committee staff, as well as financial services staff from members’ personal offices, to convey SFA membership positions on these issues. To watch these hearings in their entirety, please refer to the following links: