The Securities and Exchange Commission voted 3-to-2 yesterday to seek public comment on the Volcker revamp, the last of five agencies that needed to sign off on the proposal, Bloomberg News reported. After reviewing feedback from financial firms, lawmakers and Wall Street critics, regulators will likely hold a second round of votes on whether to make the changes final. The plan for revising Volcker, which was named for former Federal Reserve Chairman Paul Volcker, is a significant win for banks that have long argued the original rule was overly complex and costly to comply with. The Federal Reserve became the first agency to move the proposal forward last week, followed by the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Commodity Futures Trading Commission and now the SEC. The proposal maintains Volcker’s ban on proprietary trading, in which banks invest for their own profits rather than on behalf of customers. But it would remove an important assumption that positions held by lenders for fewer than 60 days are proprietary and make it easier for banks to determine whether trades are prohibited. Regulators also want to give firms more leeway to take advantage of exemptions in Volcker that permit trades that hedge market risk and are done for market-making purposes.
The Supreme Court yesterday resolved a split of circuits by holding that a false statement about one asset must be in writing to provide grounds for rendering a debt non[-]dischargeable under Section 523(a)(2), according to a special analysis by ABI's Bill Rochelle. The 15-page opinion by Justice Sonia Sotomayor focused primarily on the plain language of the statute and the meaning of the word “respecting.” The opinion was unanimous, except that Justices Clarence Thomas, Samuel A. Alito Jr. and Neil M. Gorsuch did not join in a section of the decision where Justice Sotomayor buttressed her conclusion by relying on legislative history surrounding the adoption of the Bankruptcy Code in 1978.
The interim head of the Consumer Financial Protection Bureau announced Thursday he would lift the freeze on the bureau’s collection of private consumer data, which helps its examiners oversee financial institutions, the Wall Street Journal reported. “Out of an abundance of caution and a desire to protect Americans’ privacy, I placed a hold on the collection of personally identifiable information and other sensitive data,” Mick Mulvaney said in a memo to agency staff. “We can lift that hold.” Mulvaney said that the concerns he had raised when he implemented the freeze in December had been assuaged after an independent review of the CFPB’s cybersecurity defenses. “The independent review concluded that ‘externally facing bureau systems appear to be well-secured,’” he said. Mulvaney added the review had uncovered other vulnerabilities when employees opened unsafe emails that could have contained viruses.
Big banks are getting a big reprieve from a post-crisis rule aimed at curbing risky behavior on Wall Street, the New York Times reported. Federal bank regulators yesterday unveiled a sweeping plan to soften the Volcker Rule, opening the door for banks to resume some trading activities restricted as part of the 2010 Dodd-Frank law. The changes would give the largest banks significant freedom to engage in more complicated — and possibly riskier — activities by largely leaving it up to Wall Street firms to determine which trading is permissible under the rule and which is not. The Federal Reserve, along with four other regulators, took steps yesterday to ease several parts of the Volcker Rule, which was put in place to prevent banks from making risky bets with depositors’ money.
Student loan borrowers looking to get a fresh start in bankruptcy have little hope. That’s the overwhelming sentiment in more than 400 comments submitted this week to the Department of Education. The comments came in response to a request from the Department earlier this year for input on what loan holders should consider when evaluating a borrower’s request to have their student loans discharged in bankruptcy. It’s difficult to wipe away a student loan in bankruptcy. Borrowers have to prove that paying down the debt would create “an undue hardship,” a notoriously hard standard to meet. Historically, the government has fought borrowers with federal loans aggressively in court as they try to prove their finances are so hopeless that they’ll never be able to pay down their student debt.
Rates for home loans throttled higher, nipping at the heels of a housing market that’s so far managed to absorb pricier financing on top of surging home prices, MarketWatch.com reported. The 30-year fixed-rate mortgage averaged 4.66 percent in the week ending May 24, mortgage finance provider Freddie Mac said yesterday, a jump of five basis points during the week. While housing demand remains robust, the continued rise in rates has housing industry participants watching closely. So far in 2018, rates have increased in 15 out of the first 21 weeks of the year, Freddie Mac Chief Economist Sam Khater noted.
A leading U.S. bank regulator yesterday said banks should consider offering more short-term, small-dollar loans, inviting the industry to engage in lending it had once actively discouraged, Reuters reported. The new guidance from the Office of the Comptroller of the Currency (OCC) makes explicit that the regulator would be open to banks offering such short-term loans, inviting banks to compete with alternative financial products like payday loans. The three-page bulletin from the OCC does not alter any existing regulations, but makes clear an about-face at the national bank regulator. Under the Obama administration, the OCC had actively discouraged short-term lending by banks, issuing rules in 2013 that effectively drove banks away from that type of lending by imposing strict limitations on what customers could be extended that type of credit and on what terms. The OCC rescinded those rules in 2017, and Otting said that the purpose of yesterday’s bulletin was to make clear where the regulator now stands.
A decade after the global financial crisis tipped the United States into a recession, Congress agreed on yesterday to free thousands of small- and medium-sized banks from strict rules that had been enacted as part of the 2010 Dodd-Frank law to prevent another meltdown, the New York Times reported. In a rare demonstration of bipartisanship, the House voted 258-159 to approve a regulatory rollback that passed the Senate this year. The bill stops far short of unwinding the toughened regulatory regime put in place to prevent the nation’s biggest banks from engaging in risky behavior, but it represents a substantial watering down of Obama-era rules governing a large swath of the banking system. The legislation will leave fewer than 10 big banks in the U.S. subject to stricter federal oversight, freeing thousands of banks with less than $250 billion in assets from a post-crisis crackdown that they have long complained is too onerous.
President Trump has repealed auto-lending guidance from the Consumer Financial Protection Bureau (CFPB), revoking a rule that was put in place to protect minority customers from predatory practices, The Hill reported. Trump’s signature on a congressional resolution erases the CFPB’s 2013 guidance targeting “dealer markups,” the additional interest that is added to a customer’s third-party auto loan as compensation for the dealer. Auto dealers, banks and their allies in Congress said that the CFPB policy was an unfair and unfounded attack on an essential and harmless financing tool. Republicans and a small group of Democrats voted to repeal the CFPB guidance under what is known as the Congressional Review Act (CRA). That law allows a simple majority of lawmakers in the House and Senate to vote to repeal a federal rule; it also bans the agency from replacing a rule with a similar measure in the future. The resolution cleared the House earlier this month after clearing the Senate in April.
Wall Street is poised to get a big reprieve from the Volcker Rule, as U.S. agencies prepare to scrap a restrictive presumption that most short-term trades violate the post-crisis regulation, Bloomberg News reported. In a much-anticipated overhaul, the Federal Reserve and other regulators are planning to drop an assumption written into the original rule that positions held by banks for less than 60 days are speculative — and therefore banned. Instead, banks would have leeway to conclude that their trades comply with the rule, putting the onus on regulators to challenge such judgments. The change is one of many that regulators appointed by President Donald Trump are expected to propose in the coming weeks when they unveil their revamp, known internally as “Volcker 2.0,” said the people who requested anonymity because it hasn’t been made public.