U.S. Financial Regulatory Week Ahead
Christmas may be around the corner, but the financial regulatory world in Washington is as busy as ever this coming week. While there are important regulatory meetings at the SEC, CFTC, and Financial Stability Oversight Council (FSOC), the real action this coming week will be the growing focus on scandals at the FDIC and OCC and a congressional hearing questioning the role of FINRA.
Pressure on FDIC Chair Marty Gruenberg significantly grew this past week as Senate Banking Committee Ranking Republican Senator Tim Scott (R-SC) joined a growing chorus of members of Congress demanding Gruenberg’s resignation. This all comes in the wake of shocking revelations Gruenberg ignored bad behavior among the FDIC staff, including sexual harassment.
We think there is little chance he will step down and will almost surely try to fight through the scandal. If Gruenberg steps aside, the Republican FDIC Vice Chair, Travis Hill, would become the acting chair. Hill is an opponent of Gruenberg’s (and the Federal Reserve’s) new bank capital increase and would likely put it on ice.
Gruenberg took heat on another issue this past week from two unlikely critics: Senator Elizabeth Warren (D-MA) and Senator J.D. Vance (R-OH). Warren and Vance sent Gruenberg a letter aggressively questioning and criticizing Gruenberg for the agency’s sale of First Republic Bank to J.P. Morgan earlier this year. Warren and Vance accused Gruenberg of “using a loophole to ignore viable bids, and instead held the nation’s largest bank grow even bigger.” The letter goes on to demand the FDIC’s reasoning and legal rationale for accepting the J.P. Morgan bid and why there was a $20 billion spread between competing bids (something Gruenberg indicated in answering a question by Senator Vance in a recent Senate Banking Committee hearing).
The other bank regulator to take heat this past week is Acting Comptroller of the Currency, Michael Hsu. Three House Financial Services Committee members fired off a letter to Hsu demanding to know how Hsu, who in October 2022 announced the creation of a new senior position called “the Financial Technology Officer,” then filled the position with someone with shockingly false credentials. Specifically, Hsu hired Prashant Bhardwaj in March for the role. The OCC announcement stated, “Mr. Bhardwaj joins the agency after nearly 30 years of experience serving a variety of roles across the financial sector.” But doing that math, that would have meant he started working on Wall Street when he was 13 years old.
Moreover, Bhardwaj claimed to have been the Chief Information Officer at Fifth Third Bank before taking a similar role at Huntington Bank. In fact, he never worked at either bank. He also falsely claimed educational credentials and concealed his extensive criminal record. All this puts Hsu – who the Biden Administration has never put up for Senate confirmation, preferring to keep him in an acting role – in a very uncomfortable position with Congress.
Finally, FINRA, facing a grave threat to its very existence via a current Supreme Court case, will take further heat this week at the House Financial Services Committee’s Subcommittee on Capital Markets. FINRA President & CEO Robert Cook will testify Tuesday – along with Financial Accounting Standards Board (FASB) Chair Richard Jones and the Public Company Accounting Oversight Board (PCAOB) Chair Erica Williams – on the “agenda of regulators, SROs (Self-Regulatory Organizations), and Standard Setters for Accounting, Auditing.”
In advance of the hearing, Cook received a letter this past week from the Subcommittee Chair, Representative Blaine Luetkemeyer (R-MS), and two other Subcommittee members charging that “In recent years, FINRA has deviated from its role as a member-driven [self-regulatory organization]...into a quasi-private, quasi-governmental entity that wields largely unchecked executive powers with virtually no regulatory or legislative accountability.” It is likely to be a rough hearing for Cook.
Finally, back to more normal regulatory activities, we will watch closely as the SEC holds an Open Meeting on Wednesday to consider reforms to the U.S. Treasury Market. The CFTC also has an open meeting to consider four new regulatory proposals, including new capital and financial reporting requirements for swap deals. Last, Treasury Secretary Janet Yellen will chair a Financial Stability Oversight Council (FSOC) meeting on Thursday to review various issues ranging from hedge fund oversight to climate regulations to cybersecurity.
Below is a listing of all issues and events U.S. regulators are engaged in this week, along with relevant think tank and trade association events. Please let us know if you have any questions.
U.S. Congressional Hearings
U.S. Senate
December 12, 10:00 a.m. – The Senate Judiciary Committee holds a hearing on “Cleaning up the C-Suite: Ensuring Accountability for Corporate Criminals.”
December 13, 3:00 p.m. – The Senate Judiciary Committee’s Subcommittee on Competition Policy, Antitrust, and Consumer Rights holds a hearing on “The New Invisible Hand? The Impact of Algorithms on Competition and Consumer Rights.”
House of Representatives
December 12, 10:00 a.m. – The House Financial Services Committee’s National Security, Illicit Finance, and International Financial Institutions Subcommittee holds a hearing on "Restricting Rogue-State Revenue: Strengthening Energy Sanctions on Russia, Iran, and Venezuela." Testifying will be The Honorable Marshall Billingslea, Senior Fellow, Hudson Institute; Dr. Anna Mikulska, Senior Fellow, Kleiman Center for Energy Policy at the University of Pennsylvania; Dr. Ryan Berg, Director, Americas Program, Center for Strategic and International Studies, Claire Jungman, Chief of Staff, Against Nuclear Iran, and Adam Smith, Partner, Gibson, Dunn & Crutcher LLP.
December 12, 2:00 p.m. – The House Financial Services Committee’s Capital Markets Subcommittee holds a hearing on "Examining the Agenda of Regulators, SROs (Self-Regulatory Organizations), and Standards-Setters for Accounting, Auditing." · Testifying will be Erica Williams, Chair of the Public Company Accounting Oversight Board (“PCAOB”), Richard Jones, Chair of the Financial Accounting Standards Board (“FASB”), and Robert Cook, President and CEO of the Financial Industry Regulatory Authority (“FINRA”).
December 13, 9:00 a.m. – The House Financial Services Oversight and Investigations Subcommittee holds a hearing on "Moving the Money Part 2: Getting Answers from the Biden Administration on the Iranian Regime's Support of Terrorism."· Testifying will be Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing and Financial Crimes, and Abram Paley, Deputy Special Envoy to Iran.
US Regulatory Meetings & Events
Federal Reserve Board and Federal Reserve Banks
December 12 – 13: The Federal Reserve’s Federal Open Market Committee holds a closed meeting to consider interest rates. Federal Reserve Board Chair Jay Powell will hold a press conference at 2:30 p.m. on the 13th.
U.S. Treasury Department
December 14, 4:15 p.m. – The Financial Stability Board will meet at the US Treasury Department (Treasury Secretary Janet Yellen will chair). The preliminary agenda for the executive session includes an update on the Council’s Nonbank Mortgage Servicing Task Force; an update on the Council’s Hedge Fund Working Group; an update on the Council’s Climate-related Financial Risk Committee; and an update on cybersecurity developments. The preliminary agenda for the public session includes the Council’s 2023 annual report.
December 13, 1:00 p.m. – The Treasury Department holds a virtual meeting of the Federal Advisory Committee on Insurance. The agenda includes: a discussion of topics related to climate-related financial risk and the insurance sector; discussion on cyber insurance developments and international insurance issues; status updates from each of its subcommittees and from FIO on its activities, as well as consideration of any new business
Securities and Exchange Commission
December 13, 10:00 a.m. – The SEC will hold an Open Meeting to consider rules to improve Risk Management in Clearance and Settlement and to Facilitate Additional Central Clearing for the U.S. Treasury Market.
Commodities Futures Trading Commission
December 11, 9:30 a.m. – The CFTC holds a meeting of the Market Risk Advisory Committee to discuss current topics and developments in the areas of central counterparty risk and governance, market structure, climate-related risk, and innovative and emerging technologies affecting the derivatives and related financial markets.
December 13, 9:30 a.m. – 4:00 p.m. – The CFTC will hold an Open Meeting to consider four proposed rules. These include:
Operational Resilience Framework for Futures Commission Merchants, Swap Dealers, and Major Swap Participants
Capital and Financial Reporting Requirements for Swap Dealers and Major Swap Participants
Protection of Clearing Member Funds Held by Derivatives Clearing Organizations
Amendments to Swap Data Recordkeeping and Reporting Requirements
They will also consider an Amended Application of the Binomial Clearinghouse, LLC for Registration as a Derivatives Clearing Organization.
December 14, 9:00 a.m. – The CFTC holds a meeting of the Agricultural Advisory Committee to discuss topics related to the agricultural economy, including geopolitical and sustainability issues, as well as recent developments in the agricultural derivatives markets.
Federal Deposit Insurance Corporation
December 12, 2:00 p.m. – FDIC Director Jonathan McKernan will give a keynote speech and participate in a fireside chat at the ISDA Trading Book Capital: Basel 3 Implementation Conference in New York.
Office of the Comptroller of the Currency
December 10, 6:45 p.m. – Acting Comptroller Michael Hsu will participate in a discussion about the state of financial inclusion with Operation Hope founder and CEO John Hope Bryant during the Hope Global Forum 2023 Annual Meeting in Atlanta, Georgia.
The Consumer Financial Protection Bureau
No significant events are scheduled at this time.
National Credit Union Administration
No significant events are scheduled at this time.
Federal Trade Commission & Department of Justice Antitrust Division
No significant events are scheduled at this time.
Farm Credit Administration
December 14, 10:00 a.m. – The Farm Credit Administration holds a meeting on a quarterly report on economic conditions and farm credit system condition and performance and a semiannual report on Office of Examination operations.
Farm Credit System Insurance Corporation
December 13, 10:00 a.m. – The Farm Credit System Insurance Corporation holds a meeting of the board of directors. Agenda includes: (Open) Quarterly FCSIC financial reports; Quarterly report on insured obligations; Quarterly report on annual performance plan; Strategic Plan 2024-2029 (Closed) Report on insurance risk; Federal Managers Financial Integrity Act review; Audit plan for the year ended December 31, 2023; and Executive session of the Audit Committee with the auditor.
Trade Associations & Think Tank Events
Trade Associations
December 12, 1:30 – 5:00 p.m. – ISDA holds its “Trading Book Capital: Basel 3 Implementation Conference.” FDIC Director Jonathan McKernan will give a keynote speech and participate in a fireside chat.
December 14, 10:00 a.m. – The Institute for International Finance holds a virtual report on Emerging Market Capital Flows for Latin America (in Spanish).
Think Tanks
December 12, 9:30 a.m. – The Atlantic Council The Atlantic Council holds a virtual discussion, beginning at 9:30 a.m., on "Debating the Dollar: Who Wants It, Who Doesn't, and What Comes Next?"
December 12, 12:00 p.m. – The Federalist Society for Law and Public Policy Studies holds a virtual discussion, beginning at 12 p.m., on "FSOC's (Financial Stability Oversight Committee) Updated Approach for Responding to Financial Stability Risks: New Guidance on Nonbank "SIFI (Systemically Important Financial Institutions)" Designations."
December 12, 2:30 p.m. – The Urban Institute holds a virtual discussion, beginning at 2:30 p.m., on the "Goldman Sachs One Million Black Women Research Partnership," focusing on the "findings and recommendations to close the racial wealth gap."
December 13, 9:00 a.m. – The Peterson Institute for International Economics hosts an event entitled “The US Debate about the Final Basel III Accord.”
December 14, 9:00 a.m. – The Center for Global Development holds a virtual discussion on "Transformation of the MDBs (Multilateral Development Banks): Taking Stock and Looking Forward."
December 14, 9:00 a.m. – The Brookings Institution holds a discussion on "The importance of financial data collection and standardization." Sen. Jack Reed, (D-Rhode Island), a senior member of the Senate Banking Committee. delivers morning keynote remarks. In the afternoon, Treasury Undersecretary for Domestic Finance Nellie Liang delivers afternoon keynote remarks. Other participants/speakers include Sandra Lee, deputy assistant Treasury secretary in the Financial Stability Oversight Council; Makada Henry-Nickie, executive director of JPMorgan Chase & Co.; Allan Mendelowitz, president of the Algorithmic Contract Types Unified Standards Financial Research Foundation and the ACTUS Users Association; Stephan Wolf, CEO of the Global Legal Equity Identifier Foundation; Gillian Tett, U.S. editor-at-large and chair of the editorial board at the Financial Times; Aaron Klein, associate at Semantic Arts, Inc.; Kathryn Judge, professor of law at Columbia University; Ylan Mui, managing director of the Penta Group; and Ben Harris, vice president and director of economic studies at the Brookings Institution and director of the Brookings Institution's Retirement Security Project.
December 14, 3:00 p.m. – The Brookings Institution holds a discussion on "Have real estate and labor markets reached a new normal?"
Please let us know if you have any questions or want to be added to our email distribution list.