House panel moves bills on brokered deposits, CFPB — will Senate bite?

WASHINGTON — The House Financial Services Committee advanced a dozen bills Thursday, including bipartisan measures to revise the definition of deposit brokers and to require the Consumer Financial Protection Bureau to establish a process for issuing guidance.

The House committee has steadily moved regulatory reform legislation this year. But most reform provisions face a stiffer challenge in the Senate, where a coalition of Republicans and moderate Democrats enacted a targeted regulatory bill last spring.

“I don't believe most, if any, of these bills will be going anywhere in the Senate,” Brandon Barford, an analyst at Beacon Policy Advisors, said of the legislation considered Thursday. “I think they are mostly doing it because House members want to be able to show progress on issues they care about and their job as a co-equal branch is to pass legislation that is a priority for House Republicans and their constituents, rather than worry about what the Senate may or may not do.”

Rep. Maxine Waters
Representative Maxine Waters, a Democrat from California and ranking member of the House Financial Services Committee, speaks during a hearing on Capitol Hill in Washington, D.C., U.S., on Thursday, July 27, 2017. Mnuchin ruled out prioritizing U.S. debt payments if Congress fails to raise the borrowing limit and repeated his call for quick action by lawmakers. Photographer: Zach Gibson/Bloomberg

While the bills are unlikely to pass Congress during the current session, the committee's approval of the measures are a sign of which financial services legislation Republicans and Democrats will prioritize in the upcoming Congress.

One of the bills, by Rep. Scott Tipton, R-Colo., would exclude affiliates and subsidiaries of insured depository institutions from the definition of deposit broker. The measure, which had two Democratic co-sponsors, has support from the banking industry.

In a letter to Tipton, the American Bankers Association lauded the effort, saying the Federal Deposit Insurance Corp. has “continually applied an ever broader interpretation of what deposits are ‘brokered,’ unnecessarily subjecting a broad swath of deposits to supervisory stigma, limits, and additional regulatory costs, even when held by well-capitalized banks.”

But some Democrats on the committee, including ranking member Maxine Waters of California and Bill Foster of Illinois, were concerned that the bill had not been properly vetted by the full committee through a legislative hearing.

“While there may be bipartisan recognition of the problem the bill would remedy, I’m disappointed that the committee has skipped regular order and neither studied this issue in great depth or held a legislative hearing to evaluate the bill before us,” Rep. Waters said.

Waters offered an amendment to the bill that would attempt to ensure regulators have the “ability to oversee this activity consistent with safety and soundness.”

That amendment was supported by one of the bill’s Democratic co-sponsors, Rep. Lacy Clay of Missouri, but it was ultimately struck down by the committee, which advanced Tipton’s original bill 34-17.

The committee also passed a bill 38-14, co-sponsored by Reps. Sean Duffy, R-Wis., and Ed Perlmutter, D-Colo., that would mandate that the CFPB publish definitions, criteria and processes for providing guidance.

The measure comes the same week that the CFPB and four other regulators put out a statement clarifying that guidance does not have the same force an effect of the law.

But debate on the bill turned into a broader discussion about the CFPB as an agency.

Waters, who will likely chair the committee if Democrats take control of the House after the November midterm elections, told Perlmutter she appreciated his interest in working to fix some of the concerns with the process for agencies to issue guidance, but that his co-sponsor’s main intention was to weaken the CFPB.

“Your goals are different from his goals,” Waters said of Duffy. “Your goals are such that you truly want to do something that would ensure that it is understood, it’s not substituting for rulemaking, etc. His goal is to destroy the Consumer Financial Protection Bureau working with [Acting CFPB Director Mick] Mulvaney and others who have day in and day out, month in and month out, year in and year out, have done everything that they possibly can to get rid of this centerpiece of the Dodd-Frank reforms.”

Other members of the committee, including Reps. Keith Rothfus, R-Pa., and David Scott, D-Ga., urged the committee to work on legislation to change the CFPB’s structure from a single director to a bipartisan, five-member commission. Industry groups have continued to push for that change, but it likely won’t get enough Democratic support to meet the Senate's 60-vote legislative threshold.

Several other measures were approved by the committee unanimously, including a bill to protect affordable mortgages for veterans and a bill to require the chairman of the Federal Reserve, or a designee of the chairman, to provide written testimony and appear before Congress if the vice chairman for supervision position is vacant.

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Regulatory reform Regulatory guidance Deposit insurance Regulatory guidance Maxine Waters House Financial Services Committee FDIC CFPB
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