House Financial Services Committee markup of legislation

House Financial Services Committee

Markup of Legislation

Tuesday and Wednesday, December 12-13, 2017

 

Key Topics & Takeaways

  • All the measures below were favorably reported.

Legislation

  • HR 3864, the “Native American Housing Assistance and Self-Determination Reauthorization Act of 2017”
  • HR 2219, the “End Banking for Human Traffickers Act of 2017”
  • HR 4546, the “National Securities Exchange Regulatory Parity Act”
  • HR 4519, To amend the Securities Exchange Act of 1934 to repeal certain disclosure requirements related to resource extraction, and for other purposes.
  • HR 4529, the “Accelerating Access to Capital Act of 2017”
  • HR 1457, the “Making Online Banking Initiation Legal and Easy Act of 2017”
  • HR 4545, the “Financial Institutions Examination Fairness and Reform Act”
  • HR 435, the “Credit Access and Inclusion Act of 2017”
  • HR 2948, To amend the S.A.F.E. Mortgage Licensing Act of 2008 to provide a temporary license for loan originators transitioning between employers, and for other purposes.
  • HR 3179, the “Transparency and Accountability for Business Standards Act”
  • HR 4464, the “Common Sense Credit Union Capital Relief Act of 2017”
  • HR 4560, the “GSE Jumpstart Reauthorization Act of 2017”
  • HR 4537, the “International Insurance Standards Act of 2017”

 

Opening Statements

No opening statements were made at this markup.

Markup

H.R. 3864, the “Native American Housing Assistance and Self-Determination Reauthorization Act of 2017”

Rep. Steve Pearce (R-N.M.) introduced his bill, which would reauthorize the Native American Housing Assistance Self Determination Act of 1996 (NAHASDA) for five years (through 2022). The bill also encourages tribes to seek out private capital for housing developments and creates new administrative reforms. The minority supported reauthorizing NAHASDA but was generally critical of the substitute amendment offered by Pearce.

The amended measure was favorably reported by a vote of 37-23.

HR 2219, the “End Banking for Human Traffickers Act of 2017”

Rep. Ed Royce (R-Calif.) introduced his bill, which would help law enforcement and financial institutions identify and report suspected human traffickers and enhance anti-money laundering (AML) programs to better target human trafficking activities. The bill had bipartisan support, to include Rep. Carolyn Maloney (D-N.Y.), who stated that current AML rules “aren’t good enough,” and that the bill is a “wonderful step forward.” Other members who voiced their support included Reps. Pearce, Joyce Beatty (D-Ohio), and David Scott (D-Ga.).

Amendment Offered by Rep. Royce

Royce explained that his amendment will put the bill on the “same page” as the Senate version, adding language to include new technologies and virtual currencies. Reps. Ruben Kihuen (D-Nev.) and Ed Perlmutter (D-Colo.) also voiced their support. The amendment was agreed to by voice vote.

The amended measure was favorably reported by a vote of 59-0.

HR 4546, the “National Securities Exchange Regulatory Parity Act”

Royce introduced his “common sense” bill, explaining that it strikes references to stock exchanges currently in the Securities Act that no longer exist, and makes it clear that state-by-state exemption is extended to all exchanges registered by the SEC. Chairman Jeb Hensarling (R-Texas) voiced his support, stating that if the bill does not pass, there will be an unlevel playing field and market innovation will be harmed. Reps. Bill Huizenga (R-Mich.) and Randy Hultgren (R-Ill.) also voiced their support.

Ranking Member Maxine Waters (D-Calif.) voiced her opposition to the bill, arguing that it removes a baseline standard and rolls back the bipartisan compromise requiring the SEC develop core quantitative listing standards. Rep. Stephen Lynch (D-Mass.) also opposed the bill, claiming that it will eliminate state supervision of securities if listed on an exchange and would create a “race to the bottom” for listing standards, potentially harming investors.

The measure was favorably reported by a vote of 46-14.

HR 4519, to amend the Securities Exchange Act of 1934 to repeal certain disclosure requirements related to resource extraction, and for other purposes.

Huizenga introduced this bill, which would repeal Section 1504 of the Dodd-Frank Act, which requires certain issuers to disclose payments made to foreign governments for the commercial development of oil, natural gas, or minerals. Huizenga said the bill is necessary to limit the ability of the Securities and Exchange Commission (SEC) to reintroduce rules that have previously been voided under the Congressional Review Act (CRA) earlier this year. Huizenga said the bill would not prevent the Department of Justice (DOJ) and other law enforcement agencies from using the Foreign Corrupt Practices Act (FCPA) to punish bribery and illegal payments by U.S. companies to foreign government officials.

The minority opposed the bill, and Waters was critical of the CRA resolution that voided the SEC’s resource extraction payment rules. Rep. Gwen Moore (D-Wis.) spoke in opposition to the bill, stating it eliminates disclosure rules for “extractive companies.” Moore noted Section 1504 has been used as a model for 30 other countries, who have found it to be materials to the best interests of their investors. Moore said the committee should be “demanding more transparency, not less,” saying there cannot be free and fair markets without addressing corruption.

The measure was favorably reported by a vote of 33-27.

HR 4529 the “Accelerating Access to Capital Act of 2017

Rep. Ann Wagner (R-Mo.) introduced her bill, stating it revises the requirements for Form S-3, extending the ability to utilize the form to smaller companies that have already met prior reporting requirements with the SEC. Wagner said the simplified registration would reduce costs for such companies and allow them to access public funds in a cost-effective manner that would increase capital formation. Wagner noted that her bill builds upon other efforts to provide simplified disclosure requirements to lower the cost of raising capital, and called on the committee to “provide immediate relief.” Hultgren also spoke in support of the bill, saying it would help companies avoid additional delays in the offering process and lower compliance cost, such that companies will be able to direct more capital back into their business. Hensarling also spoke in support of the bill, stating that with so many businesses fighting for capital, the committee should support avenues for capital formation.

Waters spoke in opposition to the bill, saying it “dangerously expands” the number of companies who can utilize Form S-3, allowing companies to “avoid SEC review.” Lynch spoke in opposition, noting that the shelf registration provision was intended to help “well-known, seasoned” companies access the markets more quickly, but is being “misused” by this legislation. Scott spoke in opposition, noting that the legislation raises “serious market manipulation concerns.”

The measure was favorably reported by a vote of 34-26.

HR 1457, the “Making Online Banking Initiation Legal and Easy Act of 2017”

Rep. Scott Tipton (R-Colo.) introduced his bill and his amendment, which he said would improve the ability of banks to offer mobile products and make it easier for customers to report personal identifying information to banks through mobile devices to set up accounts. Tipton noted that the bill also requires financial institutions to delete sensitive information submitted by consumers once it is no longer needed to protect this data from bad actors. The bill drew support from Republicans and Democrats, including Waters, Hultgren, Scott,  Hensarling, and Rep. Keith Rothfus (R-Pa.).

The amended measure was favorably reported by a vote of 60-0.

HR 4545, the Financial Institutions Examination Fairness and Reform Act

Tipton introduced his bill, which he said would address industry concerns about federal financial institution examination appeals. Tipton noted that many credit unions expressed dissatisfaction with their examinations in a 2012 survey, and that many financial institutions have expressed concerns about retaliation from regulators when examination results are appealed. He explained that the bill would prohibit retaliation and establish deadlines for issuances of final exam reports while creating an independent review office within the Federal Financial Institutions Examination Council (FFIEC). Maloney, a cosponsor, spoke in favor of the bill. She said the bill was written with community banks in mind, and said she would support the amendment that would cap application of the bill to community banks (she said the bill “was written for community banks.”). Maloney also noted that examination fairness issues have long been on the Committee’s radar. Maloney noted that the regulators covered by the bill no longer oppose the measure.

Waters criticized the bill, saying while it was intended for community banks, its scope has been broadened to include large banks, an expansion she opposed. Waters introduced an amendment that would exclude banks with more than $10 billion in assets from the new exam procedures. Rep. Nydia Velazquez (D-N.Y.) praised the bill but also endorsed the Waters amendment. Lynch and other Democrats criticized the bill for its de novo review process that they alleged would allow banks to draw out the examination process to avoid corrective actions for misconduct. Maloney was absent for the discussion about the Waters amendment, though in her initial statement she did express support for the amendment.

The Waters amendment was voted down by a vote of 34-26. The measure was favorably reported by a vote of 50-10.

HR 435, The Credit Access and Inclusion Bill of 2017

Rep. Keith Ellison (D-Minn. introduced his bill, which would allow utility companies to report on-time payments to credit reporting agencies as well as make it easier for the Department of Housing and Urban Development (HUD) to report the on-time payments of tenants. Ellison stated that the measure would help improve the credit scores of “millions” of people, noting the bill had 27 cosponsors, 16 of which are on the Financial Services Committee. Ellison said that the bill would help people who are “credit invisible” and those with low credit scores that don’t accurately reflect their risk access credit.

Rep. Robert Pittenger (R-N.C.) spoke in support of the bill, saying that adding more information to credit reports would allow low and moderate-income Americans to establish a credit score and therefore be able to buy homes and cars, build wealth, and strengthen the economy. Rothfus also spoke in support of the bill, noting that 26 million Americans are “credit invisible” and 19 million have a “thin file,” and that the bill would help these individuals gain access to the financial system. Rep. Andy Barr (R-Ky.) noted the bill would help people access lower-cost and safer credit. Rep. Mia Love (R-Utah) also spoke in support of the bill, as did Waters.

Waters offered an amendment that would require the Government Accountability Office (GAO) to issue a report on the impacts of the bill, and expressed concern about unintended consequences, such as a possible preemption of federal and state privacy and consumer protections. Hensarling recommended the committee accept the amendment and the underlying bill.

The amendment was agreed to by a voice vote. The measure was favorably reported by a vote of 60-0.

HR 2948, to amend the S.A.F.E. Mortgage Licensing Act of 2008 to provide a temporary license for loan originators transitioning between employers, and for other purposes.

Rep. Steve Stivers (R-Ohio) introduced his bill, which would allow loan originators to continue working while transferring between certain employers and allow those originators to obtain a 120-day temporary license. Stivers noted that the bill cleared the House Financial Services Committee last Congress by a vote of 56-0, and noted that the Senate Banking Committee’s recently marked-up bipartisan banking bill contains a similar provision. Waters praised the legislation as “common sense.”

The measure was favorably reported by a vote of 60-0.

HR 3179, the “Transparency and Accountability for Business Standards Act

Rep. Trey Hollingsworth (R-Ind.) introduced his bill, which would put requirements on regulators implementing international regulatory standards in the U.S. Hollingsworth argued that the authorization of international standards by domestic regulators has been done on an overly stringent basis, harming loan growth and credit availability, and putting large financial institutions at a competitive disadvantage relative to their international peers. Hollingsworth said his bill would require a cost-benefit analysis for domestic rules that are more stringent than international standards would require, noting it would not prevent more stringent standards from being implemented, but would only bring accountability to regulatory measures. Supporters of the bill praised it as a pro-competitive and pro-transparency measure.

Waters criticized the bill, saying it would “answer Wall Street’s call” to end gold-plating and prevent U.S. regulators from implementing more stringent rules by creating an “onerous” burden on regulators. Waters also said the bill would encourage risky behavior and noted comments by Federal Deposit Insurance Corporation (FDIC) Chairman Thomas Hoenig in support of having higher capital requirements for U.S. banks.

The measure was favorably reported by a vote of 34-26.

HR 4464, the “Common Sense Credit Union Capital Relief Act of 2017”

Rep. Bill Posey (R-Fla.) introduced the bill, which would repeal the National Credit Union Administration’s (NCUA) rule on Risk-Based Capital. Posey said the rule was harming credit unions and that the NCUA lacked the property authority to issue the rule. Waters spoke against the bill.

The measure was favorably reported by a vote of 33-25.

HR 4560, the “GSE Jumpstart Reauthorization Act of 2017”

Rep. French Hill (R-Ark.) introduced his bill, which would prevent Treasury from selling its government-sponsored entity (GSE) senior preferred shares and prevents the GSEs from contributing funds to the Housing Trust Fund unless they have first paid their obligations to Treasury. Hill explained that under his bill, the GSEs would not be allowed to “retain profits” or “build capital.” Hill noted that Congress should work “constructively” with Treasury to craft a solution that will put the secondary mortgage market “back on sound footing.” Hensarling spoke in support of the bill, saying it “simply extends current law” and requires the GSEs to make their mandatory payments before their voluntary payments. Rep. Sean Duffy (R-Wis.) also spoke in support of the bill.

Waters spoke in opposition to the bill, stating that it “threatens funding” for the Housing Trust Fund, an “important affordable housing program.” Waters said that allowing the GSEs to operate with zero capital “creates uncertainty and risk for the housing market” and could increase the chances that the GSEs will need an additional draw from Treasury. Waters offered an amendment that would strike section three of the bill related to the conservation of capital by the GSEs. Waters said it was “important that the GSEs retain a capital buffer.” Hill and Duffy spoke in opposition to the amendment. The amendment was not adopted.

The measure was favorably reported by a vote of 33-27.

HR 4537, the “International Insurance Standards Act of 2017”

Duffy introduced his bill, which would ensure state-based regulation of insurance is “protected” when negotiating international agreement, require the consultation of state insurance commissioners during the negotiation process, and give Congress an oversight role in negotiations. Rep. Denny Heck (D-Wash.) spoke in support of the bill, noting it was a collaborative, bipartisan process. Heck said that because insurance, unlike banks and securities, is primarily regulated by the states, we need “different rules” during international negotiations. Waters noted a point of concern with language that could prevent negotiators from making any international agreements, and Duffy and Heck agreed to work with her to clarify the concern. Reps. Dennis Ross (R-Fla.), Hensarling, Scott, Love, Huizenga, Warren Davidson (R-Ohio), Hultgren, Michael Capuano (D-Mass.), Rothfus, Tom MacArthur R-N.J.), Blaine Luetkemeyer (R-Mo.), and Beatty also spoke in support of the bill.

Amendment Offered by Rep. Duffy

Duffy offered an amendment that would clarify language in section three of the legislation to “improve clarity and functionality.”

The amended measure was favorably reported by a vote of 56-4.

For more information on this markup, please click here.