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House Financial Services Committee bank regulator oversight: Live coverage

Patrick McHenry
Graeme Sloan/Bloomberg

The House Financial Services Committee is holding its final oversight hearing of the three major bank regulators before President-elect Donald Trump is inaugurated in January. 

Today's hearing will help set the stage for Congress and the White House's posture toward the banking industry for the next four years. A new crop of Republican lawmakers who are more aggressive toward bankers is coming into the House and the Senate, while Democratic legislators have softened toward industries that they once eschewed, such as crypto. 

The top Republican lawmakers are also vying for a vaunted spot atop of the House Financial Services Committee, and the opportunity to take the lead in authoring legislation that would affect the banking industry, and set up a framework for how cryptocurrencies and stablecoins are governed in the United States, which could have huge implications for banking. 

Particularly important to watch are Reps. French Hill, R-Ark., and Andy Barr, R-Ky., who are considered the frontrunners in that race. Reps. Bill Huizenga, R-Mich., and Frank Lucas, R-Okla., also shouldn't be counted out. The stances they take at the hearing could hint at what sort of chairman they would be.

The hearing comes on the heels of Federal Deposit Insurance Corp. Chairman Martin Gruenberg's announcement that he will retire from the agency where he's worked for roughly two decades. He will step down amid turmoil over the agency's culture and the role that his temperament played in it, with no sign from the Senate Banking Committee that his Democratic replacement, Christy Goldsmith Romero, will be confirmed. 

It will also be a tense day for Fed Vice Chair for Supervision Michael Barr, who's made enemies on the committee for his Basel III proposal. Barr has until July 2026 until his term expires, but the Trump administration could try to push him out sooner.

Acting Comptroller of the Currency of the Currency Michael Hsu, meanwhile, can be ousted on day one of the new administration if the president chooses. It's unclear how long Trump will allow Hsu to stay given the relatively low priority put on OCC appointments, but the agency was seen as a way to advance fintech and crypto aims during Trump's first term. 

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2m ago

Hill: Feeling 'good' about chances for bank committee gavel

Rep. French Hill, R-Ark., said he's optimistic about his chances of clinching the chairmanship of the House Financial Services Committee.

Hill's bid has been dealt a few blows. He dropped his attempt at a seat on the House Republican Steering Committee, telling American Banker that he's "focused on the committee at this point." He was running against Rep. Julia Letlow, R-La., a staunch ally of Rep. Steve Scalise, currently the majority leader of the House.

Hill is considered more in line with former speaker Rep. Kevin McCarthy, R-Calif. Still, Hill said he remains well-positioned, citing the $4.6 million he's raised across his fundraising committees and his experience as a community banker before entering politics.

Hill said he's been a "great partner in this Congress with my colleagues."

"I have the most experience working on policy with the Trump administration officials, the most experience working with the executive branch and the Senate and the House on policy development, and I've got a great track record working on a bicameral basis," he said.
6m ago

Republicans calls for Biden appointees to stand down

French Hill
Rep. French Hill, R-Ark., shown June 13, 2023, says the election of Donald Trump as president is a mandate to reform the regulatory system.
Al Drago/Bloomberg
Rep. French Hill, R-Ark., said the election of Donald Trump is a mandate to reform the regulatory system writ large, including the agencies overseeing banks. Hill, one of several Republicans jockeying for Financial Services Committee chairmanship in the next Congress, urged the agency heads to stop pursuing regulatory reforms out of respect for that mandate.

"The people of the country have elected President Trump. They want change," Hill said. "We're going to have change in the independent agencies in the executive branch, and so we don't want to spend the last few weeks of the Biden administration fighting over bad policy ideas."

Rep. Zach Nunn, R-Iowa, asked each of the regulators gathered to confirm that they would pause their reform pursuits or amend them to meet voter preferences for less regulation. Acting Comptroller Hsu said the OCC would continue to "do its job" but would not put forth new proposals. Gruenberg and Barr similarly said they wouldn't withdraw the currently pending proposals but noted that nothing new was likely to materialize before the end of the year.
20m ago

Velázquez challenges FDIC chair on deposit insurance fairness

Nydia Velaquez
Rep. Nydia Velázquez, shown in August 2023.
Cristobal Olivares/Bloomberg
Rep. Nydia Velázquez, D-N.Y., pressed FDIC Chair Martin Gruenberg on the fairness of the current deposit insurance system, referencing comments made by CFPB Director and FDIC board member Rohit Chopra.

Velázquez cited Chopra's statement during a recent FDIC board meeting, where he argued that the status quo disproportionately benefits large banks at the expense of smaller institutions. "Director Chopra stated that big businesses can deposit their money in big banks and enjoy free deposit insurance, while smaller businesses depositing in smaller banks don't receive the same protection," Velázquez said.

She pointed to a recent bank failure in rural Oklahoma where some depositors suffered losses after the failure of a small community bank due to fraudulent activity, as an example of the disparity. Depositors at the considerably larger Silicon Valley Bank, in contrast, received full deposit insurance coverage, even for balances well above the $250,000 statutory limit.

Velázquez asked Gruenberg if he agreed with Chopra's assessment that the current system is unfair to smaller institutions and their depositors. Gruenberg acknowledged room for improvement in the deposit insurance framework. "I think there are changes that can be made that would be helpful in that regard," he said. He referenced an FDIC report from last year that explored options for deposit insurance reform, noting that one viable option focused on business payment accounts — a point raised by Chopra in his statement.

Congress alone can alter deposit insurance. "I hope this is an issue that this committee can tackle in the future," Velázquez said.
40m ago

Fed's Barr says he isn't going anywhere

Fed Vice Chair for Supervision Michael Barr said he has no plans to leave his post anytime soon. Barr, in response to a question from Rep. Maxine Waters, D-Calif., the ranking member of the House Financial Services Committee, said he plans to remain as vice chair until his term ends in 2026. "We serve fixed terms of office, and I intend to serve my fixed term of office," he said. Waters stressed the importance of Fed independence, tying it to Barr's continued service. "I hope my colleagues on both sides of the aisle will join me in supporting you and your power to defend that," she told Barr.
51m ago

McHenry: 'Era of post-financial crisis regulation is over'

Waters and McHenry
Rep. Maxine Waters, D-Calif., and Rep. Patrick McHenry, R-N.C., chat on May 15.
Graeme Sloan/Bloomberg
Chair Patrick McHenry, R-N.C., opened the committee hearing with scathing remarks against the Biden administration's bank supervisors, declaring twice that the "era of post-financial crisis regulation is over."

"It's clear our banking regulators under Democratic leadership have been busy fighting the last war," McHenry said. "It's clear our banking regulators, under Democratic leadership, are working in a different way than Hill Democrats are about these subject matters. Your backward-looking approach to regulations harmed our financial system innovation and consumers."

McHenry directed criticism toward Fed Vice Chair for Supervision Michael Barr, Federal Deposit Insurance Corp. Chair Martin Gruenberg and Acting Comptroller Michael Hsu individually.

McHenry also issued grave warnings that their actions could undermine the independence of their agencies, something he said is "important" but under threat on multiple fronts.

"This administration's regulators have repeatedly advanced rules that reduce access and increase costs to the financial products used by everyday Americans because of your actions, the political independence and authority of your agencies is in danger of being reduced, whether it's by Congress, the president or the courts," he said.

The remarks didn't stop at McHenry's opening statement. Rep. Maxine Waters, D-Calif., asked if Republicans "want [Gruenberg to] get up out of his seat and walk out the door?"

"Yes," a group of Republicans chorused.
1h 8m ago

McHenry blasts Biden over OCC leadership

Michael Hsu
Acting Comptroller of the Currency Michael Hsu
Bloomberg News
House Financial Services Committee Chair Patrick McHenry, R-N.C., sharply criticized the Biden administration's handling of the Office of the Comptroller of the Currency leadership during his opening statement.

Speaking to Acting Comptroller Michael J. Hsu, McHenry highlighted the unprecedented four-year period during which the OCC has been led by an acting head, with no permanent nominee.

While acknowledging Hsu's qualifications, McHenry characterized Hsu as beholden to the other financial regulators. "Yet, Mr. Hsu, you have gone along with every politicized initiative put forward," McHenry said, addressing Hsu directly. "And yet the president never put you forward for a nomination, even though you have enormous credibility, though I disagree with your approach and how you've gone along with the other regulators."

"You could have gotten confirmed by a Democratic Senate," McHenry said.

His remarks reflect growing Republican frustration with what they perceive as a lack of independent oversight at the OCC, a critical regulator of the banking industry. Hsu has served as acting comptroller since May 2021 after being appointed by Treasury Secretary Janet Yellen. Hsu oversaw the OCC amid significant challenges in the banking sector, including tightening supervision following recent bank failures and the emergence of digital assets. Despite this, President Biden has not formally nominated Hsu or any other candidate to the post, leaving the agency's leadership in a state of limbo.
1h 42m ago

What to watch from opening statements

Michael Barr
Michael Barr, vice chair for supervision at the Federal Reserve
Allison Robbert/Bloomberg
Vice Chair for Supervision Michael Barr: Barr's opening statement is pretty short and to the point. He's in danger of being pushed out by the incoming Trump administration before his term officially ends in 2026. On the Basel III endgame proposal, Barr said he and the Fed will "continue to seek an approach that helps to ensure financial system resilience and supports the flow of credit to households and businesses through the economic cycle."

Federal Deposit Insurance Corp. Chairman Martin Gruenberg: Gruenberg, who announced that he will retire from the agency before President-elect Donald Trump is sworn in, doesn't address his impending departure from the agency in his opening statement. That said, hearing watchers can expect House Republicans to press him on it. The panel's GOP leadership released their final staff report on harassment and misconduct at the agency — in which Gruenberg was never implicated. Still, Oversight and Investigations Subcommittee Chairman Bill Huizenga, R-Mich., and  Financial Institutions and Monetary Policy Subcommittee Chairman Andy Barr, R-Ky., had readied a resolution calling for Gruenberg's removal, cosponsored by all the committee's Republicans.

In his opening statement, Gruenberg highlighted some risks to the banking sector, particularly in large regional banks' commercial real estate portfolios: "The largest banks tend to have lower concentrations of such loans in relation to total assets and capital than smaller institutions, mitigating the overall risk," he said. "The next tier of banks, those with between $10 billion and $250 billion in assets, generally have greater concentrations in non-owner occupied CRE loans and reported some stress in these loans compared to prepandemic noncurrent rates."

Acting Comptroller of the Currency Michael Hsu: Hsu, who heads the OCC on an acting basis, is almost surely out the door when the Trump administration takes the reins of Washington in a few months. He took time in his opening statement to promote work done among the banking agencies to address issues like regulatory gaps when it comes to fintechs like Synapse. "Whatever steps the OCC and other federal banking agencies take, as long as fintechs remain licensed and regulated solely at the state level, there is likely to remain a regulatory gap that some nonbanks will continue to exploit," he said.

He said he supports the Treasury Department's call for federal payments regulation and a regime for chartering nonbanks."If well designed, such a system -– which could be modeled on the dual banking system with distinct roles for federal versus state authorities -– would provide the guardrails necessary to close regulatory gaps, protect consumers, and promote more responsible innovation and competition," he said.
1h 54m ago

What bankers should watch for next year

Mike Johnson
From left, Rep. Andy Harris, R-Md.; Rep. Dusty Johnson, R-S.D.; and House Speaker Mike Johnson, R.-La.
Tierney L. Cross/Bloomberg
With Washington entering an era of unified Republican control in the White House and both houses of Congress, conditions could be ripe for earnest legislating to be done. "If you have [party] unity across three branches, you won't have the same push-and-pull with executive actions being met by Congressional action and trying to figure out a way to undo it," Jennifer Schulp, director of financial regulation studies at the Cato Institute, said. "It kind of opens up Congress to focus on their own individual priorities, and we just don't know what that's going to look like yet."

Bankers should look to the expiring Trump tax cuts — which Republicans will need to extend or allow taxes on low- and middle-income Americans to increase significantly — early in the president's term as a bellwether for how banking interests are incorporated into the new Congress' politics. Republicans will likely look to expedite the passage of those tax breaks via reconciliation.

Peter Roskam, a partner at Baker Hostetler and former Republican representative in the U.S. House from Illinois who served as tax policy subcommittee chairman on the Ways and Means Committee, said banks could be vulnerable to the ways that Republicans look to pay for the tax cuts via higher taxes. "They'll be vulnerable to pay-fors, and these could be esoteric things that are not well understood by the public," he said. "There's a populist sentiment within the GOP that's fairly new, and yet it's significant."

And while the specific revisions that might impact banks have not yet been articulated, bankers should anticipate that lawmakers will prioritize their interests lower than they have in the past, Roskam said. "Who is going to hold a candlelight vigil for the banks?" he said. "If it's between middle-income tax relief and the banks, the banks are going to lose." 

Read the whole article here.
2h 16m ago

Gruenberg's last House party

FDIC Chairman Martin Gruenberg
FDIC Chair Martin Gruenberg
Drew Angerer/Bloomberg
This will be FDIC Chairman Martin Gruenberg's last Oversight of Prudential Regulators hearing. In May, he faced criticism from House Financial Services Committee Chair Patrick McHenry, R-N.C., and other Republicans for what they saw as insufficient transparency and his rumored temper toward employees following a report that found pervasive misconduct at the FDIC. Gruenberg said Tuesday that he would step down on Jan. 19, the day before President-elect Donald Trump is sworn in, even though previously he had said he would wait until his successor was finalized. The White House has tapped Christy Goldsmith Romero to succeed Gruenberg, but outgoing Sen. Sherrod Brown, D-Ohio — who chairs the Senate Banking Committee — has since signaled doubt that Romero's nomination will advance before the next Congress is seated. Gruenberg's departure is likely to leave the FDIC deadlocked along party lines until a new chair is named.

Read the full article here.