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AABD Legislative Counsel Jim Butera reports on banking bill:

With Congress returning for the second half of the 2015 Congressional session, the banking industry is focused on the regulatory relief legislation sponsored by Senate Banking Committee Chairman Richard Shelby (R-AL).  From a procedural standpoint, that bill, S. 1484,  was placed on the Senate Legislative Calendar on June 2, but there it awaits some form of  departure from the party-line division which has characterized the bill to date.

On July 22, 2015 a Senate appropriations subcommittee added S. 1484 to an appropriations bill.

All the Democrats on the Senate Banking Committee voted against the bill during committee consideration, and the Democratic leadership in both the House and Senate have promoted a much more narrow regulatory relief measure.  Industry remains committed to supporting the Shelby legislation and described below are the bill’s major provisions:

  • Section 104 – Establishes an Examination Ombudsman responsible for investigating complaints about bank examinations.
  • Section 106 – Treats residential loans held in the portfolio of depository institutions as “Qualified Mortgages.”  [Meets Ability to Pay Rule.]
  • Section 109 – Increases the asset size for well-capitalized banks to be examined every 18 months instead of every twelve months from $500 million to $1 billion.
  • Section 110 – Increases the exemption from examination by the CFPB from $10 billion to $50 billion.  [Amendment by Sen. Toomey (R-PA).]
  • Section 113 – Overrides the Federal Reserve regulation limiting a mutual holding company’s ability to waive the receipt of dividends on its subsidiary bank.
  • Section 115 – Exempts banks and bank holding companies with $10 billion in assets or less from the Volcker Rule.
  • Section 119 – Authorizes Camel 1 and 2 banks to submit abbreviated Call Reports in alternative quarters.
  • Section 124 – Overrides the Federal Housing Finance Agency proposed regulation restricting Federal Home Loan Bank Membership. [Captive insurers.]
  • Section 201 – Increases the asset size for designation as a Systemically Important Financial Institution (SIFI) from $50 billion to $500 billion, while providing discretionary authority for the regulators to place bank holding companies between $50 billion and $500 billion into the SIFI category.
  • Section 202 – Increases the asset size for mandatory annual stress testing from $10 billion to $50 billion.
  • Section 508 – Provides that the head of the Federal Reserve Bank of New York shall be appointed by the President and confirmed by the Senate.
  • Section 702 – Prohibits income from any increase in Fannie Mae or Freddie Mac guarantee fees from being used as a budget offset for any extraneous federal legislation.
  • Section 703 – Prohibits the sale or disposition of Fannie or Freddie preferred stock except by Act of Congress.
  • Section 706 – Mandates increased annual levels of GSE mortgage securitizations in which the first loss position is transferred to the private sector.

These are significant provisions but modest in the context of the accumulating scope of regulations implementing the Dodd-Frank Act and its numerous predecessors.  Banking industry pressure has been building to break the unified Democratic opposition, and this appears to be making some progress.  Over the coming months, the lobbying focus will be aimed primarily at the roster of pro-business Democratic Senators which usually includes the following individuals:

Colorado                 Michael Bennet                       Missouri                      Claire McCaskill

Delaware                 Tom Carper, Chris Coons      New Hampshire          Jeanne Shaheen

Florida                     Bill Nelson                            New Jersey                  Robert Menende

Indiana                    Joe Donnelly                          New Mexico               Martin Heinrich

Maine                      Angus King (I)                       North Dakota              Heidi Heitkamp

Michigan                 Gary Peters                            Pennsylvania               Robert Casey

Minnesota               Amy Klobuchar                       Virginia                       Tim Kaine, Mark Warner

                 Jon Tester                              West Virginia              Joe Manchin

In the meantime, the Congressional appropriations process which is where progress on Dodd-Frank reform was made last Congress, is going forward.  No one expects this to result in numerous individual FY ’16 spending bills being enacted (and none have yet to  pass the Senate) but these can be predecessors to the Continuing Resolution(s) regularly used when the new fiscal year arrives on October  1, 2015.

The House Financial Services and General Government Appropriations bill, which places the CFPB under standard Congressional funding rules, has already passed Committee and is headed for floor approval later this month.  The Senate version of this appropriations bill is expected to come up for a committee vote in the coming weeks where the Shelby bill could also receive some consideration as an amendment given the seniority which Senator Shelby also holds at that committee.