House Financial Services Committee
Wednesday, September 30, 2015
Key Topics & Takeaways
- Wagner Bill: H.R. 1090 was approved in a 34-25 vote, with all Republicans and Rep. David Scott (D-Ga.) voting in favor.
- Democrats were defensive of DOL Secretary Perez, arguing that he has been open to hearing the concerns of industry and Congress and expressing confidence that issues would be addressed in a final rule.
- CEO Pay Ratio Rule: H.R. 414, which would repeal Section 953(b) of the Dodd-Frank Act, was approved in a 32-25 vote.
- H.R. 414, the Burdensome Data Collection Relief Act
- H.R. 957, the Bureau of Consumer Financial Protection-Inspector General Reform Act of 2015
- H.R. 1090, the Retail Investor Protection Act
- H.R. 1266, the Financial Product Safety Commission Act of 2015
- H.R. 2769, the Risk-Based Capital Study Act of 2015
In his opening statement, Chairman Jeb Hensarling (R-Texas) noted that the majority of the bills to be considered in this session are bipartisan, and reminded members that the Committee has a responsibility to fight for consumers who are seeing less choice and increased costs. He then turned to the Department of Labor’s (DOL) proposed fiduciary rule, commenting that it would make financial advice unavailable or unaffordable for many Americans trying to save for retirement. Hensarling noted that more than half of Democrats in the House of Representatives have expressed similar concerns with the proposal.
In her opening statement, Ranking Member Maxine Waters (D-Calif.) criticized the proposed bills before the Committee, saying they “threaten to hamper critical protections” for consumers. On the DOL’s proposed rule, she expressed her concern with efforts to “delay and weaken” an initiative whose importance “cannot be understated.” She claimed that the DOL has “worked tirelessly to craft a rule that works” by incorporating extended comment periods, a four-day public hearing, and meetings with industry and consumer groups.
H.R. 2769, the Risk-Based Capital Study Act of 2015
Rep. Stephen Lee Fincher (R-Tenn.) introduced H.R. 2769, which would require the National Credit Union Administration (NCUA) to conduct a study of appropriate capital standards for credit unions and prohibit the NCUA from moving forward on capital standards without providing such information to Congress.
Amendment from Rep. Heck
Rep. Denny Heck (D-Wash.) offered an amendment that would reauthorize the Export-Import Bank. A motion to table a vote on the amendment was passed in a 28-23 vote.
H.R. 2769 was adopted by the Committee in a 50-9 vote.
H.R. 957, the Bureau of Consumer Financial Protection-Inspector General Reform Act of 2015
Rep. Steve Stivers (R-Ohio) introduced H.R. 957, a bill to create an independent inspector general for the Consumer Financial Protection Bureau (CFPB) that would be confirmed by the Senate. He noted the bill’s passage by the Committee last Congress with bipartisan support.
Waters agreed that the CPFB should have an independent inspector general, but spoke against having the position nominated by the president and approved by the Senate.
H.R. 957 was adopted by the Committee in a 56-3 vote.
H.R. 1090, the Retail Investor Protection Act
Rep. Ann Wagner (R-Mo.) introduced H.R. 1090. Wagner said the DOL’s fiduciary rule would make sweeping changes to the ways that Americans receive retirement advice and warned that it could force millions of Americans from the retirement advice market. Those that would stay in the market, she continued, would face significantly higher fees. She commented that the DOL “has demonstrated at every possible instance” that it does not have the “capability or desire” to listen to concerns about the rule, and reminded members that Congress directed the Securities and Exchange Commission (SEC) to explore a fiduciary standard rather than the DOL, saying her bill was about restoring Congressional intent. Wagner also noted that the SEC and Financial Industry Regulatory Authority (FINRA) already regulate financial advisors, and called the proposed rule “one thousand pages of regulatory overreach.”
Hensarling questioned the absence of support from the “zealous protectors of Dodd-Frank” on the Democratic side, reminding them that the law explicitly gave authority to the SEC to act in this space. He called the bill a “wonderful opportunity” to protect Dodd-Frank. Hensarling then stressed the need to grow bipartisan support for the legislation and called it “one of the most important things we will do this year.”
Rep. Scott Garrett (R-N.J.) stated that the legislation is being considered to protect those who would be hurt by the DOL proposal – middle-class working people who would lose the opportunity to have a stable retirement plan in place. He then recalled that the DOL’s Physllis Borzi commented last year that regulation is now a new way to lead social change due to Congress’ ineffectiveness, and he criticized the potential replacement of elected representatives with “faceless, unelected bureaucrats in Washington.”
Rep. Robert Hurt (R-Va.) urged his colleagues to “reject political rhetoric” and insisted that the rule was unworkable. He reminded the Committee that SEC Chair Mary Jo White has said her agency will act on a fiduciary standard, and also insisted that the DOL should not move forward without close coordination with the SEC.
Rep. Andy Barr (R-Ky.) stated that all the members of the Committee agree that advisors should act in the best interests of their clients. However, he added that he does not believe a “complex, burdensome rulemaking that will cut off access to professional advice” is in investors’ interest. He warned against any initiative that threatens to cut access to advice that could improve Americans’ savings rates.
Rep. French Hill (R-Ark.) stressed that under current rules from the SEC and FINRA, conflicts are already disclosed and clients go through a process to ensure the products sold to them are in their best interests. He then criticized the DOL for relying on a study that has been “completely discredited” and does not take into account the losses for investors who lose access to advice.
Waters came out strongly against the proposal, arguing that it seeks to “stop dead in its tracks” a DOL effort to close a loophole in retirement advice that costs retirees and workers “an astounding $17 billion a year.” She insisted that the rule is workable and that the DOL has been “more than generous” in holding many meetings with Congress and stakeholders.
Rep. Gwen Moore (D-Wis.) noted that she has been very vocal with her concerns about the DOL proposal in meetings with DOL Secretary Thomas Perez and his staff. However, she questioned the value of stopping the rulemaking now with its comment period having just ended. While she had voted for the legislation in the previous Congress, she withheld her support for the current bill and suggested waiting to see the final rule.
Rep. Carolyn Maloney (D-N.Y.) offered her support of the DOL rulemaking, defending it for advancing the principle that advisors should put their clients’ interests first and said the rule would “plug one of the key holes in our regulatory regime.” Maloney admitted that the proposal was not perfect and voiced her concerns with the best interest contract exemption, but added that she has found the DOL to be very responsive to every request she has sent. She further said it is “completely appropriate” for the SEC and DOL to come up with separate rules because they have different mandates.
Rep. William Lacy Clay (D-Mo.) dismissed concerns that the DOL has not been open to working with stakeholders, explaining that his interactions with Secretary Perez have been different and that Perez has always “come to the table with an offer to negotiate.”
Rep. Stephen Lynch (D-Mass.) suggested that the Wagner bill means that Congress would “do nothing and wait for the SEC to act,” noting that any SEC rulemaking would not happen “any time soon.” He urged that the DOL is suggesting a very basic principle in calling for advice to be given in the best interest of clients, stressing that “that’s all they’re saying.”
Rep. Al Green (D-Texas) argued that the DOL is only seeking to prevent advisors from steering clients to riskier products because of their own financial incentives.
Amendment from Rep. Foster
Rep. Bill Foster (D-Ill.) offered an amendment in the nature of a substitute that he said would remove uncertainty about good policy changes the DOL could make to its rule, including the possibility for a reproposal. He said it would be unproductive to “scrap work that has been done” by the DOL and called the Department’s work to date “promising.” He admitted that he is “generally” concerned that the current proposal will constrict access to advice for low-income investors, but reiterated that he is encouraged by the DOL’s responsiveness.
Foster withdrew his amendment without a vote.
Amendment from Rep. Lynch
Rep. Stephen Lynch (D-Mass.) offered an amendment that would in effect reverse the original text of the bill by requiring the SEC to issue a fiduciary rule within 60 days of the implementation of a DOL final rule, and that the SEC would have to coordinate with the DOL to ensure the standards are harmonized.
Hensarling urged members to reject the amendment, insisting that the SEC should move before the DOL. Wagner agreed and stated that the amendment “completely reverses and guts my bill” and “also guts Congressional intent.”
The amendment was rejected by voice vote.
H.R. 1090 was adopted by the Committee in a 34-25 vote.
H.R. 1266, the Financial Product Safety Commission Act of 2015
Rep. Randy Neugebauer (R-Texas) introduced H.R. 1266, which would change the leadership of the CFPB into a five person commission.
Hensarling offered his support for the bill, and noted that the bill would not diminish any CFPB powers or funding. He stressed it was only a “good governance” provision.
Lynch and Maloney spoke against the bill, insisting that a commission structure would make the CFPB less effective and more slow-moving with rulemakings.
H.R. 1266 was adopted by the Committee in a 35-23 vote.
H.R. 414, the Burdensome Data Collection Relief Act
Rep. Bill Huizenga (R-Mich.) introduced H.R. 414, which would repeal the Dodd-Frank requirement for listed companies to disclose a CEO to median worker pay ratio. Huizenga voiced his concern about significant costs of compliance and little perceived benefit to such a disclosure.
Waters questioned why Republicans are concerned with the pay ratio rule. She then noted that the Committee has never held a hearing on the provision and insisted that Republicans have rejected Democratic offers to provide more flexibility with the rule. She argued that the rule provides value in that it allows investors to find companies with fair compensation practices and punish those with significant gaps between CEO and employee pay.
H.R. 414 was adopted by the Committee in a 32-25 vote.
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