Banking/Financial Institutions

Sen. Sherrod Brown (D-Ohio), one of Wall Street's harshest critics, could end up leading the Senate Banking Committee if Democrats retain control of the Senate in 2014.

Chairman Tim Johnson (D-S.D.), who has led the Banking Committee since 2011, will announce Tuesday he does not plan to seek reelection, according to multiple industry sources.

The seat, in red-state South Dakota, will be difficult for Democrats to defend, but it also could set off a scramble to for the coveted chairmanship of the Banking panel.

Depending on how that plays out, it's possible that noted bank-basher Brown could take over the chairman's gavel. One industry source said it was "very likely" Brown would take control of the committee in 2014 if Democrats retain control of the chamber.

Top Republicans on the House Financial Services Committee believe the Securities and Exchange Commission (SEC) is mishandling its regulation of credit rating agencies.

Specifically, the lawmakers are questioning a move by the regulator to advance work on a provision of the Dodd-Frank financial reform law studying the credit rating industry before finishing work on a separate provision of the law pertaining to raters.

Committee Chairman Jeb Hensarling (R-Texas) and Rep. Scott Garrett (R-N.J.), who chairs the panel's Capital Markets subcommittee, warned that such a move could run counter to the intent of the law by entrenching the power of the top three credit raters — Moody's Investors Service, FitchRatings and Standard & Poor's — instead of reforming them and encouraging competition.

"Only by removing the government 'Good Housekeeping' seal of approval can we increase competition among rating agencies, lessen investors' reliance on ratings, and reduce the likelihood of future crises based upon fundamentally flawed credit risk analysis," they wrote to SEC Chairman Elisse Walter Friday, according to a copy of the letter obtained by The Hill.

Old-fashioned placards that notify consumers about ATM fees are coming down.

Federal regulators have issued new rules that allow operators to take down the signs about fees and charges and replace them with touch-screen notifications.

Financial institutions and trade groups lobbied Congress for the rule change last year, arguing the placards had become a costly anachronism that opened them up to frivolous lawsuits. The Credit Union National Association said complying with the regulation could cost as much as $2,000 per institution. 

The nation's biggest and most powerful financial institutions took a few hits during the marathon Senate budget debate.

Among the hundreds of amendments introduced during the debate that stretched into the early hours of Saturday morning, the Senate easily cleared a handful of amendments that, while nonbinding, fire warning shots across the bow of Wall Street's major players.

In a chamber that is divided on almost everything, members agreed unanimously to an amendment offered by Sens. David Vitter (R-La.) and Sherrod Brown (D-Ohio) that would end federal subsidies for banks that are "too big to fail."

“This is a really impressive sign that we mean business on ending too-big-to-fail,” said Vitter. “Mega-banks are still receiving special handouts that create an uneven playing field — making it harder for our community banks and credit unions to compete with the mega-banks."

The amendment would end any subsidies or funding advantages massive banks enjoy due to their size, targeting banks worth more than $500 billion. It passed 99-0.

"Being against 'too big to fail' is like being in favor of motherhood and apple pie," said Brian Gardner, senior vice president for Washington research at Keefe, Bruyette and Woods. "In some ways, it's a 'check the box.' You have to be on the right side of it."

Community banks are employing a powerful weapon to pressure regulators writing new regulations — Congress.

A top Senate Republican is pressing for approval of an amendment that would prohibit any increase in the guarantee fee that is charged by Fannie Mae and Freddie Mac to offset any additional federal spending. 

Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee, is co-sponsoring on an amendment to the budget resolution that is part of a broader bill to wind down the government-controlled mortgage finance agencies.

"The reality is that if Congress were to spend g-fee revenue from the GSEs on other programs, reforming Fannie and Freddie would become nearly impossible," Corker said.  

"I believe this amendment, as well as my standalone bill, takes a necessary step to ensure housing finance reform can happen as soon as possible.”

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Sen. Chuck Grassley (R-Iowa) has introduced an amendment to the Senate Democrats' budget that calls for an independent inspector general at the Consumer Financial Protection Bureau (CFPB).

The amendment, while nonbinding, would put senators on the record in support or opposition of such a watchdog at the new bureau, which remains a point of partisan contention.

Republicans contend that the agency, created as part of the Dodd-Frank financial reform law, lacks oversight and accountability. Currently, the CFPB does not have its own independent watchdog, but rather is overseen by the Federal Reserve's inspector general, where the bureau is technically housed.

“Inspectors general serve as watchdogs, keeping an eye on the executive branch for Congress and the American people,” Grassley said.  “Because this agency is housed within and predominantly funded by the Federal Reserve, there is little independent oversight of it. Sunlight is the best disinfectant, and an inspector general would help create accountability, oversight and transparency in this new government bureau.” Read more...

The embattled head of a consumer protection bureau continues to have an aggressive agenda for the agency, according to a speech on Friday.

Richard Cordray spoke at the National Community Reinvestment Coalition Conference and seemed unfazed by the frequent GOP jabs that aim to take him down.

“At the consumer bureau, we are fierce advocates for a consumer financial marketplace that allows people to pursue a path to opportunity. We are working to ensure that path is not disrupted by deceptive marketing or products that land consumers in debt traps,” he said. “We have a new role to play to help consumers avoid dead ends or discrimination.”

The Consumer Financial Protection Bureau (CFPB) announced Thursday that it was cracking down on auto lenders that may be discriminating against certain borrowers.

The consumer watchdog issued a bulletin laying out its authority to punish lenders who illegally mark up borrowing rates for certain borrowers, including minorities, effectively informing the industry that the bureau is taking a close look at this activity.

“Consumers should not have to pay more for a car loan simply based on their race,” said CFPB Director Richard Cordray. “Today’s bulletin clarifies our authority to pursue auto lenders whose policies harm consumers through unlawful discrimination.”

A top House Democrat is cinching up pressure on a federal housing regulator after a report released Thursday showed that the agency did not oversee the proper handling of customer complaints. 

Maryland Rep. Elijah Cummings, ranking member of the House Committee on Oversight and Government Reform, released a new report on Thursday issued by the Inspector General of the Federal Housing Finance Agency (FHFA) showing that mortgage companies servicing loans backed by Freddie Mac "did not adequately process consumer complaints" and "could not provide reasonable assurance that alleged fraud and improper foreclosures were addressed efficiently and effectively."

"Today’s report reveals the latest in a sorry string of failures by FHFA leadership to protect American homeowners," Cummings said. 

"After so many reports documenting the abuses homeowners have suffered at the hands of mortgage servicers, it is unconscionable that FHFA has failed to require mortgage servicers to properly handle tens of thousands of homeowner complaints."