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May 30, 2023

Capitol Hill Update – Month in Review Newsletter – May 2023

It was another busy month on Capitol Hill as Congress continued their oversight role in the banking crisis, bringing in failed bank executives as well as banking regulators to testify. Congress also considered the status of crypto regulation and its impact on the financial system. 

Joint Committee Hearing on Crypto

On May 10th the House held a rare joint subcommittee hearing with both House Financial Services Digital Assets subcommittee and the House Agriculture Commodity Markets and Digital Assets subcommittee, the two committees of jurisdiction over the SEC and the CFTC. The hearing was entitled “The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Asset Markets,” and is a continuation of previous hearings last month in both subcommittees that are focused on identifying claimed gaps within the crypto ecosystem. The industry friendly witnesses continued to push  their special interest agenda, using talking points claiming  clarity is needed in the crypto space when all they need to do is follow the law like others in the financial industry.

Better Markets continues to push back on these industry talking points, showing that crypto needs to follow the law like everyone else and that the SEC needs the necessary resources and staffing to protect investors from a lawless crypto industry. Be sure to read our fact sheet on crypto regulation here.

House Oversight Hearing on ESG

The House Oversight Committee held their first hearing attacking ESG proposals entitled “ESG Part I: An Examination of Environmental, Social, and Governance Practices with Attorneys General.” As the title indicates, this is only the latest in the ongoing attack on ESG disclosures by the House Majority and shows how debates concerning traditional issues within the Financial Services Committee are spilling into other committees. Better Markets will continue to inform the public of the facts and defend ESG regulations as an important way to protect investors by giving them the information they need to make informed decisions.

Failed Bank Executives Hearing

The former executives of Silicon Valley Bank, Signature Bank, and First Republic Bank, as well as the state regulators of New York and California also testified on the Hill this month. Executives from Signature Bank and Silicon Valley Bank testified to the Senate Banking Committee on May 16th. This hearing comes after continued calls from Chairman Sherrod Brown for the executives to answer questions from the Committee and ensure that they answered for their failed banks. While straight answers from the executives were in short supply, the Senators grilled them on decisions leading up to their banks failing, as well as their compensation, bonuses and roles in deregulation of the banking sector during the Trump administration.

The executives, along with the former CEO of First Republic, gave testimony to the House Financial Services Committee the following day. However, this hearing was not held by the full Committee but instead by a joint hearing between the Financial Institutions and the Oversight subcommittees. Ranking Member Maxine Waters accused the Republican Majority of trying to diminish the role of bank executives in their bank failures by holding the hearing at a subcommittee level as opposed to allowing the full committee to question the bank executives. This hearing was largely a mirror of the Senate hearing, with bank executives dodging the tough questions and refusing to take responsibility for their bank failures. Follow along Better Markets coverage of the banking crisis here.

Banking Regulators Oversight Hearings

The same week the failed bank executives were on the Hill, so were the lead banking regulators from the Fed, FDIC, OCC, and NCUA. The Fed’s Vice Chair for Supervision, Michael Barr, continued to defend his ongoing review of capital requirements which is a popular target of attacks from Republicans in both the House and Senate. Chairman Brown emphasized the need for the regulators to keep consumers front of mind during the ongoing banking crisis and ensure that they are protected. Ranking Member Waters continued to press that bank executives would be held accountable for their failures leading to the banking crisis as well as highlighting Trump-era regulation leading to these bank failures. Acting Comptroller of the OCC answered questions on the sale of First Republic to JP Morgan, making the largest bank in America even larger, and reviewing how that can create more risk and consolidation in our banking system. Another topic of discussion during both hearings was the recent reports from the Fed and FDIC on their review of the recent bank failures.

Fed IG Oversight Hearing

The Senate Banking Economic Policy subcommittee held a hearing on May 17th entitled “Strengthening Accountability at the Federal Reserve: Lessons and Opportunities for Reform.” This hearing was Chaired by Sen. Elizabeth Warren who grilled the Fed’s Inspector General (IG) on his lack of independence from the Fed and the Chair that he is supposed to be acting as a watchdog over. Chair Warren also pressed the Fed IG on his financial incentive to overlook wrongdoing by Fed Board Members, due to the IGs salary being determined by the bonuses of the same people the IG is supposed to be critical of. Better Markets continues to press the case for a fully independent IG overlooking the Fed to ensure that any wrongdoing by the Board is properly investigated.

House Stablecoin Hearing

On May 18th, the House Financial Services Digital Assets subcommittee held a hearing focused on stablecoins entitled “Putting the ‘Stable’ in ‘Stablecoins:’ How Legislation Will Help Stablecoins Achieve Their Promise.” This hearing continues a priority of full Committee Chairman McHenry to pass digital asset legislation this year. While stablecoins continue to be an area where some believe bipartisan legislation could pass both the House and the Senate, the two bills posted for the hearing show that both sides are far apart. Better Markets released a fact sheet that highlights how dangerous and ‘un’stable these coins are to investors and the traditional financial system. The fact sheet shows that the history of so-called stablecoins has been the opposite of stable, and that  the risks of legitimizing stablecoins need to be very carefully considered. Be sure to read the full fact sheet here.

House Oversight Hearing on the SF Fed

On May 24th, the House Oversight Healthcare and Financial Institutions subcommittee held a hearing entitled “A Failure of Supervision: Bank Failures and The San Francisco Federal Reserve.” This hearing was a continued attempt by the House Republican Majority to blame supervision and shift the focus away from deregulation and the bankers at the failed banks, a familiar narrative of the oversight hearings held this month. However, Ranking Member Katie Porter fought back against those talking points and broke down how deregulation led to the collapse of Silicon Valley Bank. This hearing is a continued example of how high-profile issues such as the banking crisis can spill outside of the traditional Committee jurisdiction.

Members of Congress Defend the CFPB

Senate Banking Chairman Sherrod Brown, Ranking Member Maxine Waters, led 144 current and former Members of Congress in an amicus brief defending the CFPB’s funding structure in front of the Supreme Court. The amicus brief argues that the CFPB’s funding is in line with similar funding structures that have been used since the early days of the United States. They highlight the importance of CFPB’s independence funding process to be removed from the unpredictability of year-to-year funding to be an effective defender of consumer protections. The lawmakers highlight the role that Congress plays in CFPB oversight outside of the appropriations process and receiving regular testimony from the Director of the CFPB. Better Markets agrees and also sent an amicus brief in the case defending the CFPB that you can read here.



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