8 FOCUSREPORT/Year in Preview
If – and it is a big if – Congress is going to enact regulatory overhaul for the financial services industry, the next
step must be the passage of a bill
in the Senate.
A bipartisan group of 24 sena-
tors, led by Banking Committee
Chairman Mike Crapo (R-Id.), has
set the stage for the Senate to act
by approving an overhaul bill that
some are calling “modest.”
It now awaits floor action. While
credit unions and other financial
services organizations have en-
dorsed the Senate bill, consumer
groups have condemned it, stat-
ing it rolls back many of the safe-
guards established in Dodd-Frank
following the financial crisis.
The delicate bipartisan deal that
resulted in the bill was solidified
during the Banking Committee
markup last month. Several sponsors of the bill made it clear they
would oppose any changes proposed by other senators in an effort
to ensure support for the measure.
represents a significant breakthrough
in bipartisan negotiations, and contains many provisions that would
improve the operating environment
for credit unions
and allow them to more effectively help their members realize their
financial goals,” CUNA President/
CEO Jim Nussle said in a letter
supporting the measure.
NAFCU officials also expressed
support for the bill, although they
said they had hoped for a more
ambitious piece of legislation.
“While the bill does not have
would like to see in
a package, S 2155
contains a number
of key provisions …
that will help credit
to meet the needs
of their members,”
Carrie Hunt, NAFCU’s EVP of gov-
ernment affairs and chief counsel,
said in a letter to senators.
The consumer groups, on the
other hand, expressed concern
about the bill.
“We understand and support
the need for appropriate and tai-
lored regulatory flexibility for small
depositories,” the Center for Re-
sponsible Lending, National Com-
munity Reinvestment Coalition
and National Consumer Law Cen-
ter said in a letter to senators. “We
oppose any effort to use regulatory
relief for community banks and
credit unions as a vehicle for larger
financial institutions to avoid hav-
ing the regulatory scrutiny and
oversight that proved lacking in the
build up to the financial crisis.”
If the Senate passes the bill, law-
makers could face a difficult task:
Reconciling their bill with the
bill already passed by the House.
The Financial CHOICE Act, spon-
sored by House Financial Services
Chairman Jeb Hensarling (R-Tex-
as), is a much more ambitious
rollback of Dodd-Frank.
It includes provisions that roll
back many of the CFPB’s powers;
senators steered clear of includ-
ing CFPB changes. And while the
Senate bill is a bipartisan compro-
mise, the House bill passed with
no Democratic support.
Any House-Senate conference
report would likely have to garner
60 votes in the Senate, and many
senators have expressed support
for the CFPB. It is unclear whether
the House would be willing to jetti-
son some of its more controversial
features in an effort to enact more
modest changes to Dodd-Frank.
Nonetheless, credit union trade
groups said there are several specific provisions in the Senate bill
that appeal to them.
For instance, Nussle said one sec-
tion would offer relief from some of
the requirements of the so-called
qualified mortgage rule for some
lenders that hold mortgage loans
in their portfolios. He said treating
loans held on balance sheets in this
way is particularly appropriate for
credit unions because they retain
all the risk for these mortgages and
are subject to safety and soundness
supervision from the NCUA. In ad-
dition, he said, credit unions have
unique relationships with their
members and are more aware of
their financial conditions than oth-
er financial institutions.
Hunt said many of the loans held
by credit unions fit the spirit of the
Qualified Mortgage Standards even
if they do not fit into the QM “box.”
One provision of the bill specifically applies to credit unions.
It would specify that loans made
for one-to-four-unit, non-owner-occupied residential properties
would not be considered business
loans. Banks already count those
types of loans as residential real
“This is a key provision for credit unions and we would urge you
to oppose any efforts to remove
this provision from the legislation,” Hunt wrote in her letter.
Nussle said as much as $4 billion in capital could be freed up if
Congress makes this change.
The bill also contains a credit
union-endorsed provision that
would provide legal immunity
for trained financial services em-
ployees who disclose information
concerning the financial exploita-
tion of senior citizens.
During the Banking Committee
markup, the committee adopted
a bi-partisan amendment that
makes several changes to the bill.
The amendment added a provision that would require the NCUA
to publish its budget in the Federal Register and hold a public hearing on its proposal.
For the past two years, the
NCUA board has held a hearing
and made its budget public before
adopting the document.
However, the bill’s provision
would require the board to insti-
tute such transparency measures.
Hunt also called for the Senate to require the NCUA to repeal
its risk-based capital rule, stating
credit unions must have modernized capital standards that reflect
a 21st Century marketplace.
She said NCUA Chairman J.
Mark Mc Watters has expressed a
desire to repeal the rule.
The House Financial Services
Committee has passed separate
legislation that would repeal the
risk-based capital rule, but the
House has not yet considered the
Senate Passage Next Step for Regulatory Overhaul Effort