SAVE THE DATE FOR BANK DEREGULATION — The bank deregulation bill that was years in the making is expected to clear the House next week — its final step before the president’s desk. The legislation would ease many of the Dodd-Frank Act’s rules, particularly for small and regional banks, but also has some perks for the big guys (recap on that here ). The vote will take place Tuesday, a GOP aide tells our Zach Warmbrodt. It’s the first major slate of changes to Dodd-Frank and a victory for Senate Banking Committee Chairman Mike Crapo, who shepherded one of the only big bipartisan legislative proposals this Congress. It’s also deeply worrying to financial reform advocates, who see it as giving regulators appointed by President Donald Trump more tools to hollow out post-crisis rules.
Soon attention will turn to the follow-up package that Republican congressional leaders have promised to House Financial Services Committee Chairman Jeb Hensarling. But the jury’s out on whether Senate Democrats will actually play ball on yet another deregulation bill in an election year. “I’m not sure who the speaker’s reached a deal with,” Sen. Mark Warner (D-Va.), one of the banking bill’s co-authors, told Zach last week. Be sure to check out our Ben White’s interview with Hensarling on Thursday morning.
SIMPLIFIED VOLCKER COMING LATER THIS MONTH — But that’s not all. Financial regulators are preparing to propose changes to the Volcker rule, the provision of Dodd-Frank that banks say has created huge compliance headaches. Under one of the proposed changes, banks will no longer need permission to engage in short-term trading, people familiar with the matter tell MM. Essentially, regulators are planning to scrap the rule’s presumption that trades held for less than 60 days automatically fall within its scope. (Recall that the Volcker rule prevents banks from making trades solely to profit off short-term price changes in financial markets.)
“The current rule collects volumes of data that is little used,” Tom Hoenig, who stepped down last month as FDIC vice chairman, tells MM. “I have suggested that the rule should remain in place for all banks. However, the presumption should be that banks comply. The CEO must attest that the bank has policies and procedures to assure compliance. Examiners then sample and verify compliance. Simpler, more understandable and much more straightforward to enforce.”
In addition to scrapping the “rebuttable presumption,” regulators are expected to tweak the definitions of “proprietary trading” and “covered funds,” as well as the part of the rule that requires banks to avoid holding much more of a particular asset than what they normally sell, sources say. There will also be tailoring based on a bank’s level of trading activity, according to a person familiar with the matter. This is all part of a proposed rule expected in late May. Shout out to Bloomberg’s Jesse Hamilton and Benjamin Bain, who were first with reporting on this.
This has all been proceeding with the cooperation of FDIC Chairman Marty Gruenberg, an Obama appointee who still runs the agency while his replacement, Jelena McWilliams, pends before the Senate floor. MM also hears that this might be the first of multiple proposals to simplify the rule.
Speaking of McWilliams, no specific word from Chuck Schumer’s office, but MM has heard from congressional sources on both sides of the aisle that the holdup over her nomination is just a matter of floor time; Senate Majority Leader Mitch McConnell is focused on confirming judges. This makes sense because McWilliams was approved in committee by voice vote (though Sen. Elizabeth Warren asked to be recorded as a no). So she should be confirmed “soon,” whatever that means.
FED NOMINEES UNSCATHED — Fed nominees Richard Clarida and Michelle Bowman on Tuesday had what could be characterized as a boring hearing, which is presumably the definition of success for the Fed staff charged with prepping them. The hour-and-a-half-long hearing stood in stark contrast to Marvin Goodfriend’s contentious appearance before the Senate Banking Committee, where Democrats hammered him for past statements, including his contention that the Fed should focus more on keeping inflation at its target than on reducing unemployment.
Clarida, nominated for vice chairman, did draw the ire of Warren for not identifying a single area of regulation that needed strengthening. But overall, we didn’t really learn much of anything about their views.
Notably, Clarida told senators that President Donald Trump never gave him any reason to worry about the independence of the Fed during the process of choosing him for the post. “At no time did I ever have any reason to question the independence of the Federal Reserve,” Clarida said of his meetings with administration officials, including Trump. He also said the president did not ask him how he would vote on interest rate hikes. (That wasn’t Kevin Warsh’s experience .)
IT’S WEDNESDAY — Ben White...