Hill Update – February 2023
March was an extremely busy month on Capitol Hill, as both Chambers were in session for a large part of the month. March also kicks off Appropriations season as the White House releases the President’s budget proposal. Committees continue their oversight roles of appropriate agencies and start subcommittee work. The 2nd half of the month was dominated by the banking crisis when Silicon Valley Bank (SVB) and Signature Bank collapsed.
Fed Chair Jerome Powell Testifies to Congress
March’s legislative calendar kicked off with testimony by the Federal Reserve Chairman Powell. Prior to the hearing, Powell received a letter led by Senate Banking Ranking Member Tim Scott (R-SC) and signed on by many Senate Banking Republicans, that aggressively pushed back on the current review of capital requirements being conducted by the Vice Chair of Supervision Michael Barr. They expressed concerns that this review would lead to higher capital requirements. Better Markets released a letter fighting back against these points, urging Chair Powell to reject the call by the Senate Banking Republicans and allow Vice Chair Barr to conduct his review without pressure from the Chair. During the hearings, Chair Powell reaffirmed that Vice Chair Barr has the authority to conduct his review and will do so without input from the Chair. Our release on the letter sent to Chair Powell can be read here.
Senate Agriculture Holds CFTC Oversight Hearing
The Senate Agriculture Committee held their first CFTC oversight hearing of the year with Chair Rostin Benham. Previous testimonies from Chair Benham have focused solely on crypto following the collapse of FTX last Fall, this hearing was set for oversight of all the agency’s priorities and authorities for 2023. While crypto remained a large focal point of the hearing, other important topics of discussion included oversight of the derivatives markets, the need for CFTC reauthorization, the climate crisis effects on agriculture markets, as well as important diversity and inclusion efforts at the agency. Prior to the hearing, Better Markets released a number of key questions that Chair Benham should answer in front of the Committee, be sure to read those questions here.
House Financial Services Digital Assets Subcommittee Holds First Hearing
The newly created Digital Assets Subcommittee in the House held it’s first hearing of the 118th Congress entitled “Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem.” The hearing was led by Chairman French Hill (R-AR) and Ranking Member Stephen Lynch (D-MA) and largely featured crypto-industry friendly witnesses who attacked the administration for their stance on crypto exchanges needing to register and comply with existing laws. Better Markets pushed back on these talking points on an updated crypto fact sheet released in advance of the hearing. The hearing will be the first of many, as Chair McHenry has stated that digital asset legislation is a top priority of his. Be sure to read our full crypto fact sheet here.
House Agriculture Committee Holds Hearing on Commodity Derivatives Markets
The House Agriculture Committee held a hearing entitled “Rising Risks: Managing Volatility in Global Commodity Derivatives Markets.” This was a full committee hearing which looked to examine the commodities markets and all the reasons for volatility within these markets, including the pandemic and Russia’s invasion of Ukraine. Better Markets released a fact sheet that pointed to financial speculators being another reason for skyrocketing prices. The fact sheet lays out how these speculators raise prices for consumers while making record profits. While the industry witnesses tried to highlight the need for speculators in the market, we pushed back on those talking points in our full fact sheet here.
White House Budget Release
The White House released their full budget request earlier this month. This budget includes toplines for the entire Federal government, but also drills down into requests for important agencies such as the SEC and the CFTC. The budget request included important increases in topline funding for these agencies, however more can be done. Following the release of the Budget, Sec. Yellen went to Capitol Hill in order to testify to lawmakers on the justification of the White House’s topline numbers. Additionally, the Chairs of both the CFTC and SEC went in front of their respective Appropriations Subcommittees of jurisdiction to answer questions from lawmakers and explain their budget requests. You can read Better Markets release on the SEC and CFTC budget request here.
House and Senate Oversight Hearings on Bank Failures
The House Financial Services and Senate Banking Committees both held the first of what is promised to be a series of hearings on the recent bank failures of both SVB and Signature Bank. The hearings were held on back-to-back days and featured Vice Chair of Supervision Michael Barr, FDIC Chairman Martin Gruenberg, and the Under Secretary for Domestic Finance at the Department of Treasury, Nellie Liang. Prior to the hearing, Better Markets released a fact sheet showing how the Fed’s deregulatory agenda led to the failures of the banks earlier this month. The hearings covered many topics related to the banking crisis including, the regulatory and supervisory response, and what should be done moving forward. Members from both Chambers not only looked to blame the former executives of the banks, but also the Fed’s role in the crisis, including the impact of continuing rising interest rates that led to SVB’s collapse.
Additionally, lawmakers also pressed if issues at SVB and Signature could lead to changes for smaller community banks, if changes in the Deposit Insurance Fund are required, and if adjustments to capital requirements and stress tests for regional banks are needed. Lawmakers will continue to look for answers and create a legislative response to the failures at SVB and Signature, as well as continue to hold hearings to fully investigate what led to these events. Read Better Markets fact sheet that breaks down how the deregulatory landscape at the Fed led to these collapses here.
Committee Leadership Responds to Bank Failures
In addition to holding oversight hearings, lawmakers released statements to keep the public informed on what was happening and wrote letters to relevant agencies as well as the banking executives to understand what went wrong with both SVB and Signature Bank. Senate Banking Committee Chairman Sherrod Brown (D-OH) and House Financial Services Committee Ranking Member Maxine Waters (D-CA) released a joint statement on March 12th, showing their appreciation for the Fed, Treasury, and FDIC to come together in response to the banking collapse. Senate Banking Chair Brown and Ranking Member Tim Scott (R-SC) released a joint statement calling on the former CEOs of both SVB and Signature Bank to come in front of their committee to testify. Additionally, Chair Brown pressed on Treasury, the FDIC and the Fed to conduct a full, comprehensive, review of the failures of SVB and Signature Bank.
House Financial Services Chair Patrick McHenry (R-NC) and Ranking Member Maxine Waters (D-CA) sent a joint letter to the GAO to immediately conduct an investigation and evaluate the events that happened within the financial system in the 2nd half of the month, as well as any regulatory actions by the FDIC, Fed, and the Treasury took in response to the banks collapse. Ranking Member Waters also sent a letter to the FDIC to ensure that SVB’s $11.2 billion commitment to low and moderate income communities through Community Reinvestment Act (CRA) activities in both California and Massachusetts are honored during the sale of the bank.
