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From Banking and Finance Law Daily, January 21, 2015

Financial Services Committee finalizes oversight plan

By Jim Hamilton, J.D., LL.M. and John M. Pachkowski, J.D.

Against the backdrop of a judicial challenge to the Financial Stability Oversight Council’s (FSOC) designation of Met Life, Inc. as a systemically important financial institution (SIFI) under the Dodd-Frank Act, the House Financial Services Committee said that it would conduct significant oversight of the FSOC this year to assess its effectiveness in carrying out its statutory responsibility to make financial markets more stable and resilient and to ensure that it conducts its deliberations with an appropriate level of transparency.

Similarly, the Committee’s oversight plan indicated that the Committee will conduct oversight of the Office of Financial Research, which supports FSOC, to ensure that the OFR is transparent and accountable, that it makes progress towards fulfilling its statutory duties, that its requests for data are not unduly burdensome or costly, and that the confidentiality of the data that it collects is strictly maintained.

Dodd-Frank Act. The Committee’s oversight plan also calls for closer examination of the other aspects of the Dodd-Frank. For example, the Committee will examine financial regulators’ implementation of section 619 of the Dodd-Frank Act, known as the “Volcker Rule,” and the effect of the Volcker Rule on the strength and international competitiveness of U.S. capital markets. Likewise, implementation of titles I and II of the Dodd-Frank Act and the goal of ending “too big to fail” will be in the committee’s crosshairs.

Monetary policy. The operations and activities of the Federal Reserve Board, including its conduct of monetary policy, its regulation and supervision of the financial services sector, and its role in the payment system are also targeted for Committee oversight.

Consumer credit. The Committee also intends to oversee the regulatory, supervisory, enforcement, and other activities of the Consumer Financial Protection Bureau and how those activities affect regulated entities and consumers, and the governance structure and funding mechanism of the CFPB. Also, the Committee will also closely review recent rulemakings by the CFPB and other agencies on a variety of mortgage-related issues; and monitor the coordination and implementation of these rules and the impact they are having on the cost and availability of mortgage credit.

Capital standards. The Committee will also explore the “twin subjects” of bank capital and liquidity, and, in so doing, examine closely the guidelines developed by the Basel Committee on Banking Supervision and how domestic financial regulators are implementing or planning to implement those guidelines in the U.S.

Banks Secrecy Act. The oversight plan also provides a number of items related to the Bank Secrecy Act. Specifically, the Committee intends to: examine the operations of the Financial Crimes Enforcement Network and its ongoing efforts to implement its regulatory mandates; review the application and enforcement of anti-money laundering and counter-terrorist financing laws and regulations, and whether such laws and regulations are sufficient to counter threats posed by terrorist organizations and international criminal syndicates; and examine the operations of Money Services Businesses (MSBs) and assess the effectiveness of FinCEN and Internal Revenue Service regulation of MSBs.

Housing finance. Finally, the Committee will examine proposals to modify or terminate Fannie Mae’s and Freddie Mac’s statutory charters, harmonize their business operations, and wind down any legacy business commitments. The Committee will also examine the overall size of the GSEs’ footprint in various aspects of the housing finance system and ways to reduce or constrain their large market share and develop a vibrant, innovative and competitive private mortgage market. The plan also calls for monitoring the activities and initiatives of the Federal Housing Finance Agency; and the financial stability of the Federal Home Loan Bank System, as well as the FHLB System’s ability to fulfill its housing and community economic development mission and provide liquidity to the cooperative’s member banks in a safe and sound manner.

Although the oversight plan contains a number of oversight initiatives, a committee memorandum noted that the plan is not “an exhaustive list” of areas that the Committee will review.

Prior to unanimous approval of the plan, Committee Chairman Jeb Hensarling (R-Texas) delivered a statement noting “this committee will continually and vigilantly monitor every agency and every program under our jurisdiction.” He added that the oversight plan was “designed and written in a bipartisan spirit” and “its implementation can be bipartisan.”

Companies: Fannie Mae; Freddie Mac; Met Life, Inc.

MainStory: TopStory BankSecrecyAct BankingOperations CapitalBaselAccords ConsumerCredit CFPB DoddFrankAct FOMC FederalReserveSystem FinancialStability GovernmentSponsoredEnterprises Mortgages Receiverships SecuritiesDerivatives VolckerRule

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