In the Shadow of a Shutdown, the Beat Goes On
Resolving a Federal budget impasse that threatens the first government-wide shutdown since 1995 will undoubtedly be Congress’s top priority when it returns on Monday following a week-long President’s Day recess. But who says lawmakers can’t walk and chew gum at the same time? Below is a preview of next week’s critical financial services hearings on Capitol Hill, as both chambers continue to oversee the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and discuss various proposals for reforming the housing finance sector.
GSE Reform
Treasury Secretary Timothy Geithner will make his first appearance of the year before the full House Financial Services Committee (HFSC) on Tuesday to discuss the Obama Administration’s long-awaited report to Congress—unveiled on February 11—that details both short-term administration initiatives and long-term options for reforming Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. House Republicans have targeted GSE reform as a key agenda item for the 112th Congress, as the HFSC has already conducted three separate hearings related to housing finance this Congress.
In addition, HFSC Chairman Spencer Bachus (R-AL) announced yesterday that his committee will be marking up four separate bills that will seek to terminate Obama administration foreclosure and housing assistance programs that Bachus argues are “doing more harm than good for struggling homeowners.” The Home Affordable Modification Program (HAMP), the Neighborhood Stabilization Program, the FHA Refinance Program, and the Emergency Homeowner Relief Program would all be terminated under the GOP proposals.
Republicans have been particularly critical of HAMP, a program spearheaded in March of 2009 by the Obama administration to assist struggling homeowners avoid foreclosure by providing federal incentives for borrowers, servicers and investors to modify delinquent home loans. HAMP has led to over 500,000 permanently modified home loans, yet has fallen far short of the Obama administration’s initial goal of 3 to 4 million modifications.
Consumer Financial Protection Bureau (CFPB)
On Wednesday, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit – chaired by West Virginia Republican Shelley Moore-Capito – will conduct a hearing entitled "The Effect of Dodd-Frank on Small Financial Institutions and Small Businesses.” The CFPB’s potential impact on U.S. job creation and commercial credit access are likely to dominate the discussion.
The hearing follows the House’s passage on February 19 of a Continuing Resolution (CR) – a bill to fund government operations through September 30, 2011—that would cap the Federal Reserve’s funding for the CFPB at $80 million, representing a steep cut from the $134 million the White House requested for the agency’s FY11 start-up costs. Under the Dodd-Frank legislation, once the CFPB is officially established in July 2011, its funding will derive from the Federal Reserve’s operating expenses budget and could be as high as $500 million in FY12.
During the House budget debate, Chairwoman of the Appropriations Subcommittee on Financial Services Jo Ann Emerson (R-MO) defended the hefty cuts. "Providing half a billion dollars a year without any congressional oversight to the bureau is, I believe, a very irresponsible abdication of a constitutional check and balance," said Emerson.
Derivatives
Newly-minted Chairwoman of the Senate Agriculture, Nutrition and Forestry Committee, Debbie Stabenow (D-MI) will hold a hearing on Thursday to review agency implementation of Dodd-Frank’s provisions related to the regulation of over-the-counter swaps markets.
The hearing will primarily focus on Dodd-Frank’s imposition of enhanced regulatory requirements on the derivative market and its participants, including a requirement for stringent margin and capital requirements for all derivative market participants. During a HFSC oversight hearing on February 15, Commodity Futures Trading Commission Chairman Gary Gensler attempted to alleviate lawmaker and industry concerns that the new derivatives regulations will negatively impact so-called commercial “end-users” – those businesses ranging from farm equipment manufacturers to breweries -- who seek to hedge against interest rates and raw material prices through derivatives contracts. Gensler testified that the CFTC, which has been given broad leeway in determining the businesses who will be exempted under the law, does not intend to target legitimate commercial end-users.
Stay tuned for hearing updates next week.
