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.
Consumer Financial Protection Bureau Acting Director Mick Mulvaney this week addressed a common Republican critique of the agency by establishing an office to conduct cost-benefit analyses of the CFPB’s activities, but supporters of the bureau say the move is both political and unnecessary, MorningConsult.com reported. In a Wednesday memo to CFPB staff, Mulvaney said the Office of Cost Benefit Analysis will be housed in the director’s office. An agency spokesman said yesterday that the office will review the economic impacts of regulatory issues, as well as CFPB enforcement and supervision activities. The new office is modeled after the Federal Trade Commission’s Bureau of Economics, according to a CFPB spokesman. That FTC unit is charged with providing commissioners with economic analysis regarding how rulemaking and enforcement actions would affect consumers and businesses.
Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, will move the agency’s student loan division into the bureau’s consumer information unit, a shift that career officials fear will sidetrack a major enforcement case the agency is pursuing against Navient, the nation’s largest student loan collector, the New York Times reported. The change, outlined in an email sent to the bureau’s staff yesterday, is part of an effort by Mulvaney to refocus the agency away from its consumer finance enforcement and rule-writing mission and more toward providing consumers with information about their legal rights. It follows a similar move Mulvaney made in February, when he folded the bureau’s fair lending division into the consumer unit, telling staff it would “continue to focus on advocacy, coordination and education.”
The House will take up a Senate-passed bill rolling back banking regulations, breaking an impasse that imperiled passage of the legislation that is backed by the White House, Republicans and some Democrats, the Washington Post reported. House Speaker Paul D. Ryan (R-Wis.) told reporters yesterday that an agreement had been reached and that “we will be moving the Dodd-Frank bill” along with a companion package of legislation supported by House Financial Services Committee Chairman Jeb Hensarling (R-Tex.). Hensarling had been pushing to amend the Senate version of the bill undoing or shrinking portions of the Dodd-Frank Act that was passed in the wake of the financial crisis a decade ago. But the bipartisan coalition of senators who got the bill through the Senate — over the objections of liberals like Sen. Elizabeth Warren (D-Mass.) — warned that changing their delicate compromise would end up killing the bill. In the end, Hensarling backed down, leaving the legislation a clear path to passage. It has moved through the Senate and appears to have plenty of support to pass the House. The House will now vote on the Senate’s version of the bill unchanged and send it to President Trump for his signature.
Some of the biggest names on Wall Street are warming up to Bitcoin, a virtual currency that for nearly a decade has been consigned to the unregulated fringes of the financial world, the New York Times reported. The parent company of the New York Stock Exchange has been working on an online trading platform that would allow large investors to buy and hold Bitcoin. The news of the virtual exchange came after Goldman Sachs went public with its intention to open a Bitcoin trading unit — most likely the first of its kind at a Wall Street bank. The moves by Goldman and Intercontinental Exchange, or ICE, the parent company of the New York Stock Exchange, mark a dramatic shift toward the mainstream for a digital token that has been known primarily for its underworld associations and status as a high-risk, speculative investment.
The Federal Reserve reported that consumer credit increased at a seasonally adjusted annual rate of 3.6 percent in March, down from a 4.3 percent rate in February, according to the ABA Banking Journal. Total outstanding credit increased $11.7 billion during the month (compared with $13.6 billion in February) to $3.87 trillion. Revolving credit, largely a reflection of credit card debt, declined at an annual rate of 3.0 percent to $1.03 trillion, compared to a 0.6 percent decrease in February. Non-revolving credit rose at a 6.0 percent annual rate, or $14.2 billion. Total non-revolving credit is now $2.85 trillion. Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 41.5 percent of outstanding credit. Depository institutions and finance companies are secondary and tertiary holders, with 25.0 percent and 17.7 percent, respectively, of outstanding non-revolving credit.
Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, told banking industry executives yesterday that they should press lawmakers hard to pursue their agenda, and revealed that, as a congressman, he would meet only with lobbyists if they had contributed to his campaign, the New York Times reported. Mulvaney, who also runs the White House budget office, is a longtime critic of the Obama-era consumer bureau, including while serving in Congress. He was tapped by President Trump in November to temporarily run the bureau, in part because of his promise to sharply curtail it. Since then, he has frozen all new investigations and slowed down existing inquiries by requiring employees to produce detailed justifications. He also sharply restricted the bureau’s access to bank data, arguing that its investigations created online security risks. And he has scaled back efforts to go after payday lenders, auto lenders and other financial services companies accused of preying on the vulnerable.
A Democratic senator who supports rolling back some of the financial rules put in place after the 2008 financial crisis warned bankers yesterday that the legislation will stall if it comes back to the Senate for another vote, the Associated Press reported. Sen. Mark Warner's (Va.) comments are a warning shot to House Republicans, who are insisting on adding to Senate-passed legislation that would scale back the law known as Dodd-Frank. "This bill will not pass if it comes back to the Senate," Warner said. "We stretched this about as far as we can go. The House of Representatives needs to accept this legislation." The Senate passed legislation in March targeting relief for all but the biggest banks. The House had earlier passed a more expansive bill that also went after the Consumer Financial Protection Bureau. The House version passed with no Democratic support.
In a long-expected move that would affect the roughly 43 million households with brokerage or retirement accounts, the Securities and Exchange Commission voted yesterday to propose rules that would require brokers to put their customers’ financial interests ahead of their own, the New York Times reported. But not everyone is convinced the rules — if passed as proposed — would go far enough to improve consumer protections, including some of the SEC’s own commissioners. Some of the five commissioners said that they had concerns with different pieces of the proposal, suggesting that it may be difficult for them to coalesce around a final rule. Kara M. Stein, an SEC commissioner, called the proposed rules a squandered opportunity to provide meaningful change, and suggested a new name for the proposal, now called Regulation Best Interest.
The Senate on Wednesday moved to eliminate a 2013 consumer protection measure intended to combat discrimination in auto lending, marking an expansive new use of its power to kill federal regulations. The lawmakers voted 51-47 to gut the Consumer Financial Protection Bureau‘s guidance, which Republicans attacked as harmful to auto dealers and lenders. The House is expected to pass the measure soon, and President Donald Trump will likely sign it. The consequences of the vote will ripple beyond the confines of the CFPB, which is already on a deregulatory path under the leadership of Mick Mulvaney, Trump‘s White House budget chief. It was the first time the Senate has used its authority under the 1996 Congressional Review Act to strike down an action taken by an agency years ago, instead of just within the narrow window prescribed by the law. The move also marked a broadening of how Congress has generally used the Review Act to include regulatory guidance and not only formal agency rules that were recently issued. "It's important for Congress to reassert its role in policymaking from the executive branch," said Sen. Jerry Moran (R-Kan.), who introduced the bill that would undo the regulation.