As former director Cordray left the CFPB last week he named an acting director to minimize operational disruption in his words; the White House on the other hand thinks he meant to provoke a response from the administration; the agency now is broiled in confusion over who is the true interim leader as the White House appointed their own interim leader; Mr. Cordray is working off of language in the Dodd-Frank Act to appoint a successor, while the White House is acting on the Federal Vacancies Reform Act that gives the President authority to appoint interim leaders; each leader will have a different mandate and the confusion will need to be cleared up soon. Source.
Bank of America CEO Brian Moynihan says that the big bank point of view of Dodd-Frank is that the law is fine; he explained that none of the big banks are trying to touch the law and it has made the financial system safer; small banks have been pushing to roll back some of the regulations associated with Dodd-Frank because they feel it is too burdensome; the interview at the Economic Club of Washington also touches on fintech, blockchain and other bank related issues. Source.
While the recent revisions to the tax code were done along party lines, the newly proposed updates to Dodd-Frank have the backing of a bipartisan group of legislators; the bill is looking to target banks in the $50bn to $250bn range who many feel have been disproportionately effected by the 2010 Dodd-Frank law; changing the definition of the banks from systemically important financial institutions or SIFI’s will free up the banks from certain requirements; while their is optimism for a deal that crosses party lines, Congress has a ways to go as they look to get this done later in the month. Source.
The current market perspective is that banks aren't lending because of regulatory constraints; President Donald Trump even says that many of his friends in the business world would like to borrow money but can't because of regulatory restrictions; while market statistics show that banks are lending and have been doing so at an increasingly higher rate, it is true that there are constraints; however insight from the New York Times suggests that efforts to deregulate could be futile and that with lower capital requirements banks would instead prefer to use capital for increasing dividends and stock buybacks. Source
Congressman Patrick McHenry and Congressman Jeb Hensarling have both released comments supporting President Donald Trump's executive order on Dodd-Frank; the executive order on Dodd-Frank signed on Friday outlines core principles for regulating the United States financial system and asks the Treasury secretary and regulators to come up with a plan for replacing Dodd-Frank; Congressman Jeb Hensarling has proposed the Financial Choice Act to overhaul Dodd-Frank; if new policies are enacted it would ease lending requirements for banks making credit more available for consumers and small businesses from mainstream financial institutions. Source
President Donald Trump has issued an executive order requiring the Treasury secretary and regulators to come up with a plan to overhaul Dodd-Frank and its over 400 regulations; the banking industry's tighter regulations have been a factor helping the success of marketplace lenders since the financial crisis and deregulation in the sector could create new challenges and increased competition for marketplace lenders; as the government begins to take deregulatory actions for traditional banks it also seems that marketplace lending has reached a phase likely to see increased regulations and involvement from regulators; these two forces along with other market factors could change the competitive landscape for the marketplace lending industry. Source
The focus of the weekly update centered around how the Trump administration will try to ease the regulatory environment for banks and an explanation of the risk retention rule that recently went into effect; banks welcomed the executive orders signed by Trump, the regulatory burden has been high and cost of capital has continued to rise to meet the demands of Dodd-Frank; as of December 24, 2016 all asset types are required to adhere to a 5% risk retention requirement or skin in the game; this is meant to align investor interests with sponsor interests and make the securitization deal safer; PeerIQ goes into a detailed explanation and helps to provide answers to some of the questions surrounding the rule's implementation. Source
The US Senate's Banking Committee majority leader says a full reform of Dodd-Frank is unlikely but the Committee will seek to pass targeted reforms; the Banking Committee majority leader also sees larger regulatory changes coming mainly from the independent agencies; the outlook means the Financial Choice Act led by House Financial Services Committee Chairman Jeb Hensarling is also unlikely to be passed in the Senate; "The Choice Act is our omnibus legislation, but we will also reintroduce its component bills," says Hensarling; a previous executive order from President Trump which halts new federal regulations or requires regulators to repeal two rules for every new one issued is also slowing the regulatory process. Source
The House Financial Services Committee has scheduled a hearing for March 28 with a panel of banking executives to gain greater insight into how Dodd-Frank has affected lending in the banking industry; the House Financial Services Committee works within the House of Representatives and is the main group governing regulation of the financial services industry; the hearing will help to gain insight into the effects on bank lending from Dodd-Frank which will help in directing Trump administration reform; the House Financial Services Committee is led by Jeb Hensarling who has previously reported the Financial CHOICE Act which is presented as a replacement for Dodd-Frank. Source