When President Donald Trump took office, many in the financial industry were confident that a looming retirement-savings rule they had opposed for years would soon be dead. To their dismay, the core principle of the rule was implemented today, the Wall Street Journal reported. The resilience of the “fiduciary rule” is partly attributable to delays in appointing senior officials at the Labor Department, the rule’s creator, who would be capable of unwinding a major regulation so close to its implementation, according to industry representatives and consumer advocates involved in the process. Labor Secretary Alexander Acosta didn’t take up his post until late April, after Trump’s first pick for the role withdrew from consideration. Other top positions at the Labor Department remain vacant, leaving career officials—who had helped to write the original rule — to shepherd a review of the rule that the president requested in February. Aversion toward the risk of litigation from consumer groups has also made the administration reluctant to delay the rule long enough to allow for an overhaul or kill it altogether, industry representatives and consumer advocates say.
The U.S. House passed on Thursday a massive bill designed to repeal many Obama-era Wall Street regulations.
The new legislation, known as the Financial CHOICE Act, is the signature legislative effort of U.S. Rep. Jeb Hensarling, R-Dallas, during his tenure as the House Financial Services Committee chairman. It passed the House on a mostly party-line vote of 233-186. The Texas delegation vote broke down along party lines, with the exception of U.S. Rep. Sam Johnson, R-Richardson, who was absent. The bill dismantles much of the 2010 Dodd-Frank Wall Street overhaul, which was drafted in response to the 2008 financial crisis and became a signature accomplishment of the Obama administration. While the bill breezed through the House chamber, its path forward in the U.S. Senate is far less certain, where Democratic support would be needed to draw the necessary 60 votes.
The House voted (233-186) today for passage of the Financial CHOICE Act, an opening Republican bid to encourage economic growth by loosening regulation of the financial sector, the Wall Street Journal reported. The bill, authored by House Financial Services Committee Chair Jeb Hensarling (R-Texas), would unwind major parts of Dodd-Frank by relieving healthy banks of some regulatory requirements and forcing failing firms through bankruptcy rather than a liquidation process spearheaded by the regulators. It would subject new financial rules to cost-benefit analyses, boost penalties for financial wrongdoers, and repeal the Volcker rule restricting banks from speculative trading. Supporters of the plan say scrapping what they view as onerous regulatory requirements will ultimately help smaller businesses, allowing them to grow and create jobs. The bill is expected to face stiff resistance in the Senate, but aspects of the Financial CHOICE Act could be approved by Congress in smaller pieces or be implemented by the Trump administration.
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said Thursday he’s considering seeking contempt of Congress charges against the director of the Consumer Financial Protection Bureau (CFPB). Hensarling said CFPB Director Richard Cordray has refused to turn over documents his panel requested for its investigation into Wells Fargo’s sales practices. A report from the Financial Services Committee’s Republican staff released Tuesday argued that Cordray’s refusal was grounds to pursue contempt of Congress charges. “It’s nothing personal against Mr. Cordray, but I’ve got a job to do,” Hensarling said at a briefing with reporters Thursday. “We will use whatever legal means necessary to get those documents.” The CFPB fined Wells Fargo $100 million in September 2016 for opening and charging fees for more than 2 million bank and credit accounts for customers without their authorization. The Office of the Comptroller of the Currency (OCC) and the City of Los Angeles were also involved in the investigation of practices first revealed by the Los Angeles Times in 2013. GOP lawmakers on the panel have argued that Cordray and the CFPB were “asleep at the wheel” and jumped into the investigation late to take credit.
The U.S. House is expected to pass sweeping legislation Thursday sponsored by Texas Republican Jeb Hensarling that would roll back major pieces of the Dodd-Frank Act, the banking law passed by Democrats in the wake of the 2007-2008 financial crisis. The expected party-line vote will represent a milestone for Hensarling, an eight-term congressman who led the opposition to the George W. Bush administration's 2008 bank bailout. As chairman of the House Financial Services Committee, he has focused on loosening the regulatory burdens on banks. The vote in the Republican-dominated House will set up a tough battle in the Senate, where Democrats who see the legislation as an attack on consumer protections appear to have the votes to block it. Hensarling's 600-page bill, known as the Financial Choice ACT of 2017, would repeal some of President Obama's signature financial reforms, chiefly the so-called Volcker Rule limiting certain types of speculative investments by banks. More controversially for Democrats, the bill would weaken the Obama-era Consumer Financial Protection Bureau which was set up to investigate consumer complaints against financial institutions.
The Supreme Court ruled unanimously yesterday that U.S. Securities and Exchange Commission enforcement actions requiring companies to return illegally obtained profits must conform to a five-year federal statute of limitations, MorningConsult.com reported. The decision in the case, Kokesh v. SEC, further restricts the securities regulator’s ability to require the forfeiture of funds, known as disgorgement. As part of the decision, which Justice Sonia Sotomayor authored, the court rejected a government argument that the disgorgement requirements shouldn’t be ordered because they are a remedial, and not punitive, measure. “This limitations period applies here if SEC disgorgement qualifies as either a fine, penalty, or forfeiture,” Sotomayor wrote. “We hold that SEC disgorgement constitutes a penalty.” Despite being limited in scope to the statute of limitations issue, SEC experts said that the decision could have long-term consequences for SEC disgorgement actions because of the court’s ruling that disgorgement is a penalty instead of a remedy.
Fewer subprime borrowers are paying off their auto loans early, a possible sign that consumers with weaker credit scores are struggling more, according to a report by Wells Fargo & Co. researchers, Bloomberg News reported yesterday. Borrowers are making fewer extra payments on loans that were bundled into bonds in 2015 and 2016, compared with loans in 2013 and 2014 bonds, according to Wells Fargo analysts led by John McElravey. The data on prepayments may offer another sign that subprime consumers are having more trouble paying their bills, the analysts wrote in a note on Tuesday. Borrowers are already defaulting on a growing amount of auto debt. Last decade, slower monthly payment rates on credit cards were an early sign of the consumer credit cycle changing for the worse, the analysts wrote. For auto loans, slower prepayment may be more of a coincident indicator than a leading one, they wrote.
Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending. S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget. “Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance,” Ted Hampton, Moody’s analyst, said in a statement. “During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.”
The director of the Consumer Financial Protection Bureau, Richard Cordray, defended the need for the agency, which has been under near-constant attack from Republicans this year, saying yesterday that it provides important protections for consumers, Reuters reported. Cordray rarely addresses political moves or the lawsuit that could defang his agency, which was created after the financial crisis to protect individuals from fraud in lending. In a speech at a community development conference, Cordray did not mention names or specifics. But he argued at length for maintaining the CFPB's rulemaking work, its enforcement powers, and its public database of consumer complaints — all at the heart of current assaults on the agency. "Consumers want and need to have someone stand on their side to see that they are treated fairly. We seek to protect them against unfair surprises, frustrating runarounds and bad deals that ruin their credit, cost them their homes and saddle them with further problems," Cordray said.
Jay Clayton, who left Sullivan & Cromwell, the prominent New York law firm, to become the chairman of the Securities and Exchange Commission, is expected to tap his former colleague Steven R. Peikin to serve as the commission’s co-director of enforcement, the New York Times reported. Peikin, a Sullivan & Cromwell partner and former federal prosecutor, is said to be friends with Clayton, and many New York lawyers speculated for weeks that he would get the job. Clayton is expected to also name Stephanie Avakian, the agency’s acting enforcement director and a former white-collar defense lawyer, as co-director with Peikin.