House Passes the ''Fed Oversight Reform and Modernization Act of 2015'' and other Bills Affecting Financial Services
Commentary by Steven Lofchie
The U.S. House of Representatives passed the Fed Oversight Reform and Modernization Act of 2015 and other bills affecting financial services. The bills include:
- H.R. 3189, the Fed Oversight Reform and Modernization Act of 2015, would impose a variety of requirements on the FRB, including the manner in which the FRB sets interest rates, and would impose a requirement that the FRB perform a cost-benefit analysis when it adopts regulations, and, in certain cases, perform a post-implementation analysis of the effect of the regulations;
- H.R. 1210, the Portfolio Lending and Mortgage Access Act, would provide Truth in Lending Act safe harbor for certain residential mortgages;
- H.R. 1737, the Reforming CFPB Indirect Auto Financing Guidance Act, would rescind certain guidance that the CFPB has issued with respect to indirect auto financing;
- H.R. 1317, to amend the Commodity Exchange Act and the Securities Exchange Act of 1934 to specify how clearing requirements apply to certain affiliate transactions, and for other purposes - the bill would provide a quite limited and complicated exemption for clearing swap transactions between affiliates;
- H.R. 3032, the Securities and Exchange Commission Reporting Modernization Act of 2015, would eliminate a report that the SEC is required by statute to make to Congress;
- H.R. 1478, the Policyholder Protection Act of 2015, would limit the ability of the banking regulators to use insurance company assets to support a failing bank; and
- S. 2036, the Equity in Government Compensation Act of 2015, would cut the pay of the CEOs of FNMA and the Federal Home Loan Mortgage Corporation.
Commentary
Some Governors of the FRB have strongly criticized H.R. 3189. While the attention that the bill has received largely focuses on the constraints the bill would put on the FRB's power to set interest rates, perhaps the more interesting section of the bill deals with the FRB's regulatory authority. It is not obvious why the FRB when acting as a regulator should be subject to lower standards than other financial regulators. In addition, the FRB should be in a better position than any regulator to perform a cost-benefit analysis with respect to its rulemakings. If the FRB were to become subject to such a requirement, and then take it seriously, it is easy to imagine that it could serve as a shining beacon of cost-benefit analysis from which other regulators would benefit.