Capital Thinking: Financial Services

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Legislative Activity

This Week’s Hearings:

  • Thursday, October 10: The Senate Banking Committee is scheduled to hold a hearing titled, “Impact of a Default on Financial Stability and Economic Growth.” The presidents of the American Bankers Association (ABA), Investment Company Institute (ICI), National Association of Realtors, and Securities Industry and Financial Markets Association (SIFMA) are scheduled to testify at the hearing.
  • Thursday, October 10: The House Education & Workforce Subcommittee on Health, Education, Labor, and Pensions is scheduled to hold a hearing titled, “Strengthening the Multiemployer Pension System: How Will Proposed Reforms Affect Employers, Workers, and Retirees?” This is a follow-up to the Subcommittee’s June 12 hearing on the same topic.

Regulatory Activity

Shutdown Impacts Financial Regulatorrs

Financial regulators are feeling the impact of the government shutdown in various ways. The Securities and Exchange Commission (SEC) is likely one of the least affected government agencies, as its appropriations language allows the commission to continue to use unspent funds until they are expended. An SEC spokesperson estimated that the commission will be able to continue operations “as usual” for several weeks under the shutdown, although they did not specify the amount of money the SEC has left to spend before it must begin to cut back on its operations.

The shutdown came at a very inconvenient time for Commodity Futures Trading Commission (CFTC), which was in the process of reviewing swap execution trading facility (SEF) applications and monitoring the new SEF trading system. The CFTC also planned to vote on draft rules on commodity speculation, work on new customer fund protection rules, and continue negotiations on agreements with foreign regulators this month. However, because the CFTC relies directly on congressional appropriations, the commission was forced to furlough most of its staff due to the shutdown.

The Federal Housing Administration (FHA) has stated it will be able to keep a small staff on hand and insure new home loans for a short time, but warned that, if the government shutdown extends beyond a few weeks, the housing market will be adversely impacted.

Treasury releases report on possible consequences of U.S. Default

The Department of the Treasury (the Treasury) released a six-page report on Thursday, October 3, two weeks before the United States is expected to reach its borrowing limit, warning about the possible “catastrophic” economic consequences of a congressional failure to raise the debt ceiling. The Treasury report states that allowing an unprecedented government default would have far-reaching market consequences that could lead to another economic recession, similar or worse than that of 2008. House Financial Services Committee Chairman Jeb Hensarling (R-TX) issued a video response to the Treasury’s report, stating that House Republicans have made many proposals to ensure the government will always pay its sovereign debt and that Washington is must rein it its spending before raising the debt ceiling again.

Topics:  CFTC, FHA, Government Shutdown, SEC, SEFs, U.S. Treasury

Published In: Elections & Politics Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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