House Financial Services Committee Warns Against "Eleventh-Hour Rulemakings"
Commentary by Steven Lofchie and Sebastian Souchet
The House Financial Services Committee urged regulatory agencies "to preserve information and refrain from partisan rulemaking as a new administration enters."
In separate letters, House Financial Services Committee Chair, Patrick McHenry, and the incoming Chair, French Hill, sent instructions to financial regulators (to Treasury, HUD, the SEC, the Fed, the FDIC, the CFPB, the OCC and the FHFA) to: (i) "refrain from partisan rulemaking" and (ii) "preserve all existing and future documents, communications, and other information, including electronic information and metadata, that are or may potentially be responsive to a congressional inquiry, request, investigation, or subpoena that may be initiated or otherwise undertaken by a committee of Congress or any other investigative entity."
In addition, the Committee asked the following agencies to respond to outstanding requests:
- SEC: to produce communications regarding digital asset custody, SAB 121 and related regulatory treatment before March 31, 2022.
- Federal Reserve and OCC: to provide records on digital asset custody and the Interagency Custody Statement before March 31, 2022.
- FDIC: to submit records on crypto-asset custody, policy sprints and related internal communications, including transcripts of messages and documents from Board meetings.
- FHFA: to provide documents on the "Title Acceptance Pilot" program and related communications from January 2023 onward.
Commentary
At least in the case of the SEC, the outgoing majority shows no inclination to exit gracefully. Yesterday, the majority approved a regulatory reporting requirement over two Republican dissents, and today, the majority approved a big spend for the PCAOB over two dissents. One can reasonably guess that the agency will not comply with the document production request before the Chair leaves office.
Commentary
As the House Financial Services Committee letters are also signed by the incoming Chair, they may be interpreted as an expression of willingness to try to use authorities under the Congressional Review Act to overturn federal agency actions taken in the final months of the Biden administration (a potent challenge given that Republicans will control both houses of Congress.)
In addition, many of the letters reference digital asset-related issues. This reinforces the likelihood that cryptocurrency regulatory issues will be a high priority for the new Congress.