A post-election financial services federal legislative analysis conducted by the Greenberg Traurig firm concluded that there will be an opportunity for Dodd-Frank Act legislative corrections in the 114th Congress. The panelists, who included Former Rep. Albert Wynn, Democrat of Maryland and former Senator Tim Hutchinson, Republican of Arkansas, noted that the key will be to get 60 Senators to agree to the corrections. Assuming that the Republicans have 54 seats in the new Senate, panelists thought it will be possible to get six Senate Democrats to agree to corrections so long as they do not fundamentally alter the Dodd-Frank Act. For example, there could be legislation exempting non-financial end users from Dodd-Frank derivatives provision s, as well as broadening the definition of points and fees under the risk retention qualified mortgage rule. Other changes that could happen would be adjusting the threshold for designating banks as SIFIS, and giving the Fed more discretion in setting prudential standards for non-banks designated as SIFIs.
According to former Rep. Wynn, there could also be Democratic support for financial institutions bankruptcy legislation, but not for the elimination of Title II of Dodd-Frank. In addition, he said that some Democrats are willing to have a conversation on the issue of collateralized loan obligations and the recently adopted risk retention rules.
There was a discussion of the dynamics between Rep. Jeb Hensarling (R-TX), Chair of the House Financial Services Committee, and the expected incoming Chair of the Senate Banking Committee, Senator Richard Shelby (R-AL). While Chairman Hensarling has a conservative view of what financial reform legislation should look like, panelists believe that he will tailor financial reform legislation out of the committee to work with Senator Shelby in order to pass the legislation in the Senate. It was also noted that Senator Shelby is term limited as Chair for two years and has an incentive to get things done in the 114th Congress.
Panelists also feel that the 114th Congress will attempt to pass legislation to change the CFPB to a Commission form of governance and bring the agency under congressional appropriators. But accountability is viewed as a proxy for weakening the CFPB and would be opposed by Senate Democrats. While Democrats might agree to an Inspector General for the CFPB, panelists thought that the President would veto any change in the CFPB funding stream.
The differences in philosophies of Rep. Hensarling and Senator Shelby was discussed, with Shelby seen as more of a populist. The regulatory philosophical differences between the two oversight Chairs was cast into stark relief by the issue of mortgage securitization reform legislation in the 113th Congress. Chairman Hensarling reported a bill out of the Financial Services Committee, the Protecting American Taxpayers and Homeowners (PATH) Act that would end Fannie Mae and Freddie Mac and the federal government’s role in the securitization process. Senator Shelby believes that the government should continue to play a role and does not want to go as far as eliminating Fannie and Freddie. But he also did not agree with the Johnson-Crapo legislation, the Housing Finance Reform and Taxpayer Protection Act, voting against it in the Senate Banking Committee. Senator Shelby was concerned that the legislation would have established the Federal Mortgage Insurance Corporation (FMIC) as an new, independent federal agency to develop standard form credit risk-sharing mechanisms, products, and security agreements that require private market holders of a covered security insured under the Act to assume the first loss position with respect to losses incurred on such securities.