The Democrats captured a majority in the House of Representatives and Representative Maxine Waters (D-Calif) is in line to lead the House Financial Services Committee. As such, it is expected that a significant shift in legislative efforts during 2019 relating to the financial services industry will occur. During the first Financial Services Committee hearing since the election, Waters (who will become chair in January 2019) announced that deregulation efforts are finished. "Make no mistake", she said. "Come January, the days of this committee weakening regulations and putting our economy once again at risk of another financial crisis will come to an end."
Last week, Waters circulated a memorandum to members of the House Democratic Caucus outlining "the values [she intends] to fight for as Chairwoman". There has been speculation that Waters will focus on investigations next Congress, but she has said, "that's simply one piece of the business that we have to do." She says that she will:
prioritize protecting consumers and investors from abusive financial practices, making sure that there are strong safeguards in place to prevent another financial crisis, expanding and supporting affordable housing opportunities, tackling the homelessness crisis, encouraging responsible innovation in financial technology, promoting diversity and inclusion in the financial services sector, working to strengthen our housing finance system, and ensuring that hardworking Americans and small businesses have fair access to the financial system and opportunities to thrive.
Key matters for financial services industry
Investigations and oversight A divided Congress might face legislative gridlock, but Democratic committee chairs, including Waters, will have virtually unchecked investigatory power to issue subpoenas, demand documents, call hearings and compel witnesses to testify. In the House, one of the majority's most significant powers is the ability of committee chairs to issue subpoenas unilaterally (in the Senate, the rules require authorisation from both a committee's chair and the ranking minority member).
Nominations and confirmations Republicans expanded their Senate majority by two seats, which means that President Trump and the Senate continue to have the opportunity to reshape the leadership of financial regulatory bodies. Pending nominations include Kathleen Kraninger to head the Consumer Financial Protection Bureau (CFPB) and Nellie Liang and Marvin Goodfriend to serve on the Board of Governors of the Federal Reserve. In addition, the term of Federal Housing Finance Agency Director Mel Watt expires at the end of 2018. Watt was appointed by President Obama, and Trump will have the opportunity to name Watt's successor.
Consumer protection Efforts to change the leadership or funding structure of the CFPB are likely dead with Democrats in control of the House. However, it is expected that Waters will closely scrutinise the CFPB's decisions and rulemakings and look for ways to unwind CFPB policies instituted by Acting Director Mick Mulvaney. For example, in September, Waters introduced HR 6972, the Consumer First Act. That bill would, among other things:
- limit the number of political appointees that may be hired;
- restore the full duties of enumerated offices, including the Office of Fair Lending;
- re-establish a dedicated student loan office; and
- require adequate agency staffing, including for supervision and enforcement, to fully carry out the CFPB's statutory mandates.
Cannabis Representative Nancy Pelosi (D-Calif), the House Democratic Leader, declined to list cannabis normalisation as a top Democratic priority during the 2018 campaign. However, Democratic control of the House increases the likelihood that leadership will try to advance either a limited bill providing a safe harbour for banks to serve marijuana businesses or a broader bill to remove marijuana from the list of controlled substances.
Credit reporting Waters says she wants the Financial Services Committee to consider legislation to overhaul the nation's credit reporting system. Last year, she introduced HR 3755, the Comprehensive Consumer Credit Reporting Reform Act, which could provide a framework for reform. The bill would direct the CFPB to create a nationwide consumer reporting agency registry. It would also expand access to credit reports and scores free of cost to the consumer, limit the role of credit reports in employment checks and shorten the period during which certain information remains on a report.
For further information on this topic please contact Michael E Borden or William S Reardon at Sidley Austin LLP by telephone (+1 202 736 8000) or email ([email protected] or [email protected]). The Sidley Austin website can be accessed at www.sidley.com.
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