On November 16, House Financial Services Committee Chairman Jeb Hensarling of Texas gave a major speech before the Exchequer Club in Washington, DC, outlining what he intends to be the Financial Services Committee's agenda for the coming year, acting in coordination with President-elect Trump. Hensarling described a very expansive, ambitious agenda that includes repeal of much of Dodd-Frank and a renewed effort to move forward with legislation that would wind down Fannie Mae and Freddie Mac and take a more free market approach to housing finance. On November 17, Hensarling, who is rumored to be one of the finalists to become the next Treasury Secretary, met at Trump Tower with President-elect Trump, presumably, among other things, to discuss the possibility of his joining the Trump administration.
Chairman Hensarling argues that the federal government has drifted far from the Founders’ vision of a limited government comprised of three accountable branches, and that instead power has become concentrated into a large and intrusive centralized government, ruled not by “we the people” but by so-called experts in a new fourth branch that reaches further and deeper into the lives of individuals and seeks to make decisions for them. Decrying the undue influence of what he termed this “unaccountable fourth branch of government” and pledging to end it, Hensarling says that doing so is indispensable to delivering the change that working Americans sought by electing President Trump. In order to protect the people’s right to both self-government and due process, Hensarling contends that “it is time for Congress to take greater responsibility for federal regulations.”
Whether or not, Chairman Hensarling ends up becoming the Treasury Secretary, his Exchequer Club speech provides important insights into many of the major financial services-related changes we can expect from congressional Republicans and the Trump White House during the next four years. He cites the Department of Labor’s so-called fiduciary rule, which will affect how investment advice is provided to every 401(k) plan, every IRA and every rollover or distribution to or from either as an example of how unelected, unaccountable government hurts working people and says that the Trump administration and the Republican majority should “make sure this harmful, bureaucratic rule does not go into effect as planned in just five months.” Similarly, Chairman Hensarling says he hopes that Congress and the new President will reverse the CFPB's proposed small dollar loan rule that would essentially ban payday lending, terming it another example of a rule “promulgated by the unelected and the unaccountable” that would hurt struggling citizens “without a single vote ever being cast in Congress.”
To promote accountability, Chairman Hensarling says that he will renew his push for the Republican plan to repeal and replace Dodd-Frank, the Financial Choice Act. Under this Act, except for the Federal Reserve’s conduct of monetary policy, all financial regulatory agencies, including the CFPB would be on budget and made subject to the federal appropriations process. Every financial regulatory agency presently headed by a single director—the CFPB, the Office of Comptroller of the Currency and the Federal Housing Finance Agency—would be converted into bipartisan commissions. Moreover, the act would require all major financial regulations to first be approved by Congress before they can take effect.
The so-called Chevron doctrine that requires the federal judiciary to give deference to an agency's interpretation of the law also would be repealed. In order “to end too big to fail once and for all,” Dodd-Frank's orderly liquidation provisions would be replaced by a new subchapter of the Bankruptcy Code tailored to specifically address the failure of a large, complex financial institution. To protect the taxpayers, Chairman Hensarling also promises that the Congress will pass a flood insurance reauthorization bill that “…begins the transition to a competitive, innovative and sustainable flood insurance market where consumers have real choices.”
Finally, Hensarling says the Committee will take on the “heavy lift” of pursuing housing finance reform. To that end, he says that America needs the PATH Act, an act that he says principally relies upon private capital and market discipline to create a sustainable and housing finance system and that will remedy Dodd-Frank's failure to do anything about Fannie Mae and Freddie Mac, despite what he asserts was the GSEs' enormous and unique contribution to the financial crisis.
Effort to prevent the CFPB's small dollar lending rule, the DOL fiduciary rule and the CFPB's arbitration rule from taking effect are likely to be early priorities for the Trump administration, closely followed by legislative efforts to repeal Dodd-Frank, in whole or in large part, through bills that will convert single-director financial regulators into multi-person commissions and require the CFPB to be funded through the annual appropriations process rather than from guaranteed funding through the Federal Reserve. While housing finance reform may well eventually be pursued by the Trump administration, it will come further down the road and not likely have as high a priority as, for example, initiatives to reduce regulatory burden on community banks and credit unions.
