House Panel Approves Bill to Increase Oversight of Financial Regulators
A House panel has approved a bill to increase oversight of financial regulators, a measure supported by Republicans and CU groups. Learn why.
NAFCU and GOP support measure requiring regulators to provide reports on banks and credit unions’ examination records.
The House Financial Services Committee on Wednesday approved legislation that Republican supporters said would increase “transparency” of the federal financial regulators.
Democrats, on the other hand, contend that the bill—a compilation of several pieces of legislation—would hinder regulators in their efforts to respond to issues they discover.
H.R. 3556 would, among other things, require regulators—including the NCUA—to provide congressional banking committees with a semi-annual confidential report identifying banks and credit unions that received poor examinations. It also would require the regulators to testify semi-annually before those committees.
Backstory and Context
House Financial Services Committee Chairman Rep. Patrick McHenry, R-N.C., said the bill was a response to recent bank failures.
“Throughout our examination into recent bank failures, one thing has become abundantly clear: both the days before and after these failures have highlighted flaws in the bank regulators’ authorities and duties,” he said. “There is also a woeful lack of transparency and accountability with respect to the federal regulators’ decision making.”
What Would the Legislation Do?
The bill would place Congress on equal footing with the administration, according to McHenry, as well as “ensure that Congress is informed as decisions are made and not provided with self-serving information after the fact.”
House Financial Institutions and Monetary Policy Subcommittee Chairman Rep. Andy Barr, R-Ky., accused regulators of the recently failed banks of producing hasty, politicized self-assessments.
He said that the Financial Stability Oversight Council, which consists of the regulators, was “asleep at the wheel,” and that the council was too busy examining the supposed impact climate change would have on financial institutions to conduct proper oversight.
The bill would restrict FSOC funding and require the council to submit proposed policies to Congress.
“There is a clear need for sunshine on those regulators,” Barr said.
Pushback from Democrats
However, Financial Services Committee ranking Democrat Rep. Maxine Waters of California said that Republicans “are pushing for deregulation and seeking to make it harder for regulators to respond to situations like this in the future by requiring more paperwork and other burdensome requirements.”
She added that committee Democrats were prepared to offer solutions that would hold bank executives accountable, “reverse Trump-era deregulation, and enhance supervision of the large banks to better protect our banking system.”
Waters said the legislation does not accomplish those goals, stating, “I’m failing to see how this bill would avoid another bank failure.”
She further singled out a provision in the bill that would require the Federal Reserve’s vice chairman of supervision to either have been a supervisor of a financial institution or to have worked in one. Waters said the provision was an “unscrupulous” attack on Michael Barr, who currently holds that position and has criticized Trump-era changes to the Dodd-Frank Act that he said loosened supervision of financial institutions.
Andy Barr responded, saying, “the idea that this underlying legislation hampers regulators is just false.”
Response From Credit Union Group
In a letter to the committee, NAFCU Vice President of Legislative Affairs Brad Thaler said the trade group supports the bill.
“This semiannual testimony will give Congress an opportunity to check in on an Administration’s plans and actions related to regulation of our nation’s credit unions and act accordingly,” he wrote.
However, Americans for Financial Reform sharply criticized the legislation, focusing on the FSOC provisions, which they said would weaken the council by subjecting its designation authority to congressional review.
“This would render the FSOC designation authority under Title I of Dodd-Frank futile—given that any company large enough to be designated certainly has the resources to successfully lobby Congress—and unnecessarily politicizes the agency’s efforts to monitor companies that pose an outsized risk to our financial system,” the group stated.
In addition, they noted that the bill would cap FSOC funding at its FY22 level—starving the agency of needed backing.
Finally, the group said, the legislation would require the president to appoint an “independent” voting member who is of a different party from the president and ban the council from establishing any advisory committees. FSOC has formed an advisory panel on climate change.
“These provisions are painstakingly obvious attempts to politicize the work of the agency,” Americans for Financial Reform concluded.