May Markup

House Financial Services Committee
Full Committee Markup
Wednesday, May 24, 2023


  • The committee marked up and reported six pieces of legislation favorably to the House.
  • The most contentious bills were H.R. 3556, the Increasing Financial Regulatory Accountability Transparency Act, and H.R. 3564, the Middle Class Borrower Protection Act, which both received no Democratic support.
  • The other four bills were reported favorably with bipartisan support, with H.R. 2622 receiving all but two Democratic votes.


  • H.R. 2622, a bill to amend the Investment Advisers Act of 1940 to codify certain Securities and Exchange Commission no-action letters that exclude brokers and dealers compensated for certain research services from the definition of investment adviser, and for other purposes

Opening Statements

Chairman Patrick McHenry (R-NC)

In his opening statement, McHenry discussed how the Committee’s examination of recent bank failures highlighted the flaws in bank regulators’ authorities and duties and exposed a woeful lack of transparency and accountability. He pledged the Increasing Financial Regulatory Accountability and Transparency Act would address the opacity and lack of accountability by placing Congress on equal footing with the Administration. McHenry described the bill as a strong first step to ensure bank regulators are acting within the authorities provided by Congress. He pledged the Committee would continue its work to enhance capital formation opportunities by considering H.R. 1553, which would expand angel investing, providing greater access to capital for entrepreneurs and small businesses, and H.R. 3063, which would provide much needed parity for the retirement plans of employees of non-profit charities and public education institutions.  McHenry noted H.R. 2627 removes an SEC staff level position that places an arbitrary limit on the amount of assets a closed-end fund may invest in private funds and said raising this threshold would open up additional opportunities for everyday investors. He concluded that H.R. 3564 will bring fairness and accountability back to the FHFA’s mortgage process.

Ranking Member Maxine Waters (D-CA)

In her opening statement, Waters noted the U.S. could default on its debt for the first time in one week and criticized Republicans for manufacturing a crisis by using the debt limit to extort radical and harmful concessions.  She noted the financial markets are responding negatively to the threat of a default, with investors demanding a higher premium of 1.4% for Treasury bills that mature in June to take on the potential risk of not being paid on time. Waters warned that if the government defaults and that kind of premium is baked into the price of buying Treasury securities, this could increase the government’s borrowing costs by more than $4 trillion.

Waters described the bills being considered as harmful to consumers, homebuyers, investors, and retirees, and noted the strong opposition from advocates, pension funds, and state regulators. She described the bills as huge giveaways to Wall Street, and noted the Middle Class Borrower Protection Act of 2023 would increase fees on middle class homebuyers, while the Retirement Fairness for Charities and Educational Institutions Act would put the retirement funds of public interest professionals at risk. Waters called for the Committee to work on capital formation in a way that protects consumers.

Consideration of Legislation

H.R. 3556, the Increasing Financial Regulatory Accountability and Transparency Act

Rep. Andy Barr (R-KY) offered an ANS and explained the bill. He said supervisory failures contributed to recent bank failures, and blamed regulators for letting a bank run dissolve into a systemic event. Barr said FSOC did nothing to promote financial stability during the panic, and noted his bill provides additional sunlight and requires increased accountability and transparency from the Federal Reserve, FDIC, and FSOC. He explained how his bill enhances FDIC transparency by increasing the reporting and documentation requirements of emergency actions and enhances Fed transparency by requiring more documentation and increased guardrails around any future 13 (3) facilities. Barr added that his bill enhances FSOC transparency by taking back Congressional power that was given away in the Dodd-Frank Act.  He concluded that recent bank runs and systemic instability revealed federal financial regulators and the Treasury are opaque, especially during emergencies, and emphasized the need for sunshine and enhanced accountability.

Rep. Barry Loudermilk (R-GA), Rep. Young Kim (R-CA), Rep. Monica De La Cruz (R-TX), and Rep. Scott Fitzgerald (R-WI) criticized federal regulators response to recent bank failures and voiced their support for the bill.

Waters said the bill would hamstring regulators’ ability to respond to future failures and make it harder to invoke a systemic risk exemption. Rep. Sean Casten (D-IL) and Rep. Brad Sherman (D-CA) both criticized the bill for placing blame entirely on regulators and urged Republicans to focus on the debt ceiling.

Rep. Stephen Lynch (D-MA) offered an amendment to ensure that more banks can participate in the bidding process to purchase failed banks by directing the FDIC to only consider the bids of a mega-bank with more than 10% of total deposits if no other bank offers a qualified bid. He noted having a more democratic process, as opposed to just making mega-banks bigger, would make the system better. Waters voiced her support for the amendment, while Rep. Bill Foster (D-IL) called for a more tailored approach. Rep. Blaine Luetkemeyer said he agreed with the sentiment, but noted the problem was more complex.

Sherman offered an amendment to adopt the Basel III standards and require banks with over $100 billion to reflect unrealized losses from available for sale securities on their balance sheets. Barr said the amendment was not relevant to the bill being considered, and urged Sherman to introduce it at another time. Waters voiced her support for the amendment, but the ANS failed on a voice vote.

Casten offered an amendment to codify federal laws requiring that large banks have a chief risk officer (CRO) and require these banks to notify their supervisors within 24 hours of the CRO position being vacant. Banks would also be required to provide their regulators with a plan detailing how they intend to fill the vacancy and notify shareholders and the public if the position remains vacant after 60 days. If the bank fails to fill the position with 60 days, the amendment would place a cap on the bank’s asset growth. Barr argued this amendment did not fit within his legislation, and that the amendment would lead to banks filling the CRO role with unqualified individuals. Waters supported the amendment.

Sherman offered an amendment to require regulators overseeing banks to conduct stress tests for interest rates. The amendment failed on a voice vote.

Rep. Al Green (D-TX) offered an amendment to require regulators involved in the resolution of a failed financial institution to submit reports to Congress within 60 days of the declaration of a systemic risk exception. Waters supported the amendment. Barr said there is no need for the amendment.

Rep. Brittany Pettersen (D-CO) offered an amendment that would bar any bank with more than $50 billion in assets from providing discretionary bonus payments to senior executive officers until any outstanding MRIAs are resolved. Rep. Mike Lawler (R-NY) said the amendment would decrease clarity in the examination process, result in needless litigation, and deprive executives of due process. Barr opposed the amendment, which he said distracted from the real issue of supervisory failure. Waters supported the amendment.

Waters offered an amendment to give the FDIC the same clawback authority for failed banks that it has for other large financial institutions that are resolved through orderly liquidation authority under Title II of Dodd-Frank, strengthen the FDIC’s ability to bar executives of a failed bank from holding jobs in the industry going forward, and expand the FDIC’s ability to fine executives of failed banks when their actions contributed to the failure of the firm. Barr argued the FDIC doesn’t use the tools they already have, and should not be given expanded authorities. Rep. Tlaib (D-MI) supported the amendment, noting the American people want to see clawbacks.

Tlaib offered an amendment to defer the compensation of senior executives from major banks and bank holding companies and use the compensation to pay any civil or criminal fines levied against the bank or bank holding companies, in addition to ensuring that uninsured depositors would not endure losses if the bank fails. Barr urged his colleagues to reject the amendment, which he said defunds bank executives and was unserious and overinclusive. Waters supported the amendment.

Green offered an amendment to prevent community banks, CDFIs, and MDIs from paying for the special assessment caused by the significant losses incurred by the DIF related to the recent bank failures. Barr said he wanted to work with Green on the issue, but argued the FDIC already tailored the special assessment. Rep. Sylvia Garcia supported the amendment, as did Waters, who argued it was an impactful way to show support for community banks.

The ANS was agreed to by a recorded vote, and H.R. 3556, as amended, was reported favorably to the House by a vote of 26-22.

H.R. 3564, the Middle Class Borrower Protection Act of 2023

Rep. Warren Davidson (R-Ohio) offered an ANS and explained the bill. He noted his bill would provide critical oversight of the FHFA and eliminate unfairness in their pricing grids. Davidson noted the FHFA has a broad and highly unusual rule to preserve and conserve the assets of Fannie Mac and Freddie Mac. He explained that his bill would bring much needed oversight to the process for setting Fannie/Freddie’s upfront fees (LLPAs) and place a one-year freeze on their ability to make additional fee changes. He concluded that his legislation would require the FHFA to use risk-based principles when setting its fees and prohibit the FHFA from implementing rules on debt-to-income ratios.

Waters criticized the bill’s proposal to eliminate the FHFA’s recent changes to its upfront fees. She said the premise of this bill is factually incorrect and regurgitates Fox News talking points. Waters affirmed that borrowers with lower credit scores are not subsidizing borrowers with higher credit scores, and said Republicans are ignoring their own hearing witnesses who have debunked such false claims. Waters argued FHFA’s pricing changes are helping lower-income borrowers gain fair access to the housing market, and urged her colleagues to oppose the bill.

Rep. Tom Emmer (R-Minn.) criticized the Biden Administration’s credit score redistribution plan, noting it was supportive of those with a history of irresponsibility and fundamentally wrong. He argued socialism will never prevail, and affirmed H.R. 3564 will hold the FHFA accountable.

The ANS was agreed to by a recorded vote, and H.R. 3564, as amended, was reported favorably to the House by a vote of 26-22.

H.R. 2627, the Increasing Investor Opportunities Act

Rep. Ann Wagner (R-MO) offered an ANS and explained the bill. She noted that under current SEC staff guidance, closed-end funds may only invest up to 15% of net assets into private funds, unless the shares are sold to credited investors. Wagner explained that her bill would eliminate this SEC guidance and provide greater access to the types of investments that private funds hold while maintaining investor protection. She affirmed her legislation gives retail investors access to the type of investments reserved for the wealthy.

Wagner thanked Rep. Gregory Meeks (D-NY) for his support for her legislation.

Meeks affirmed his support for Wagner’s bipartisan legislation, which he explained will provide opportunities for enhanced exposure to private funds through closed-end funds.

Waters opposed the bill, which she said should be entitled the Increasing Investor Risk Act, due to the significant risks it poses to retail investors. She explained that private funds are subject to less regulation and disclosure, and argued the current 15% restriction is reasonable, as most private fund investments fail due to their high risk.  Waters concluded H.R. 26267 provides zero safeguards to mitigate the new risks it introduces.

Green offered an amendment to ensure that a closed-end fund may not invest in a private fund unless it determines that the private fund has policies in place that are substantially similar to the protections of the Investment Company Act. He explained Wagner’s legislation creates a pass-through vehicle for retail investors to indirectly invest in private funds, whose assets are inherently risky. Green cited a recent Harvard Business School study, which found that 70% of venture backed companies never return cash to their investors. He argued Congress should not be creating avenues where retail investors are exposed to such a high probability of loss. Waters supported the amendment, noting it ensures proper safeguards and mitigates risk.

Wagner said Green’s amendment would dramatically reduce the number of investable private funds and does not meet the intention of the bill. She said investors in closed-end funds have the full protection of securities laws which address the goal of Green’s amendment.

The ANS was agreed to by a recorded vote, and H.R. 2627, as amended, was reported favorably to the House by a vote of 37-11. 

H.R. 1553, the Helping Angels Lead Our Startups (HALOS) Act

Rep. Mike Lawler (R-NY) offered an ANS and explained the bill. He said Congress should be doing everything it can to foster entrepreneurship and innovation, noting his bill will promote access to investment capital for small companies and ensure startups can continue to generate interest and connect with investors. He explained his bill would accomplish this by ensuring demo days, pitch competitions, and community economic development events with no specific investment offering are not considered general solicitation under Reg. D. Lawler said this will allow companies to engage with a wider audience of investors, allowing businesses to expand and develop, while creating a more diverse universe of entrepreneurs and founders. He noted this will expand opportunities for underrepresented communities facing access to capital challenges.

Rep. Nydia Velazquez (D-NY) noted the bill defines the definition of an angel investor for the purpose of federal securities laws and clarifies the definition of general solicitation contained in the Securities Act to ensure startups can discuss their business plans at events known as demo days. She said she is glad her colleagues on the other side of the aisle agreed to strike a more appropriate balance between capital formation and investor protection by including her language in the base text of the bill. However, Velazquez argued the bill is overly broad and expands the types of eligible sponsor beyond what the SEC thought was appropriate when they promulgated similar changes in 2020. She added that passage of the bill will further accelerate growth in the rapidly expanding and largely unchecked private market, and affirmed her opposition.

Wagner voiced her support for the legislation, while Waters expressed her concerns. Waters said it’s not appropriate to market high risk investment opportunities in churches and schools. She noted Lawler’s bill codifies a controversial Trump-era SEC rule that is opposed by many investor advocates.

The ANS was agreed to by a recorded vote, and H.R. 1553, as amended, was reported favorably to the House by a vote of 35-12.

H.R. 2622, a bill to amend the Investment Advisers Act of 1940 to codify certain Securities and Exchange Commission no-action letters that exclude brokers and dealers compensated for certain research services from the definition of investment adviser, and for other purposes

Rep. Pete Sessions (R-TX) offered an ANS and explained the bill, which he said is necessary because the SEC suddenly decided to withdraw a non-action letter issued in response to the EU’s markets and financial instruments directive. He said the SEC’s action will unnecessarily disrupt markets and has no benefit to investor protection.

Rep. Josh Gottheimer offered an amendment to extend the SEC’s order by 6 months and direct the SEC to conduct a balanced study to examine the impacts of a permanent extension of this no action letter. Gottheimer’s amendment was agreed to by a voice vote.

The ANS was agreed to by recorded vote and H.R. 2662, as amended, was reported favorably to the House by a vote of 45-2.

H.R. 3063, the Retirement Fairness for Charities and Educational Institutions Act

Rep. Frank Lucas (R-OK) offered an ANS and explained the bill, which will allow 403(b) plans to invest in collective investment trusts and insurance company separate accounts. He noted the measure originated in Secure 2.0 last Congress, and said Congress has limited investment options for public servants for too long. Lucas explained that his bill will allow for consistency across retirement plans, adding the lack of parity for 403(b) plans is astonishing.

Rep. Wiley Nickel (D-NC) said he is proud to cosponsor the legislation, which he noted lowers the cost of retirement for public sector employees.

Garcia offered an amendment which would only allow the relaxing of regulations on 403(b) plans that are also Employee Retirement Income Security Act (ERISA) plans. She said her amendment would extend valuable and market-tested protections to public sector employees, and noted Lucas’ bill would create too much risk in 403(b) plans by removing meaningful safeguards. Waters supported Garcia’s amendment, but Lucas said the amendment would compromise the intent of his bill.

The ANS was agreed to by a recorded vote, and H.R. 3063, as amended, was reported favorably to the House by a vote of 35-12.


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