Week of Nov. 27

November 28, 2017

In This Issue…
• Greetings from Guy
• GRC reviews bills introduced in Second Session
• OBA supports FASB proposal to address reporting implications of tax reform
• Congress approves government funding bill through Feb. 8
• OBA Bankers’ Night Out programs ready for spring
• Register for OBA 2018 Contact Banker Program
• OBA education corner …

Just when it couldn’t get crazier …

There’s good news and bad news for community bankers in Washington:

The good news: Richard Cordray is no longer the director of the Consumer Financial Protection Bureau.

The bad news: We’re not certain who is his successor with legal authority to actually run the place.

That’s the crazy part.

Richard Cordray is very bright. We’re guessing he thought he saw a way clear to block an appointment by President Trump who would likely reverse many of Cordray’s goals and actions he’d taken while serving as director at the Bureau. So, over Thanksgiving, he resigned and named Leandra English, the Bureau’s chief of staff, as deputy director. Here’s why:

The Dodd-Frank Act which created the Bureau, provides that the Bureau’s deputy director will serve as acting its director in the “absence or unavailability of the director.” When Cordray resigned, the argument goes, the Office of the Director is now “vacant.” “Vacant” under this theory equates to the director being “absent” and/or “unavailable.” That should mean the deputy director will serve in an “acting” capacity until the Senate confirms Cordray’s successor.

On the other side of the argument, the Federal Vacancies Reform Act of 1998 gives the president authority to “temporarily authorize” an acting official to fill the vacancy of an officer in an executive agency whose appointment is “required to be made by the president” and confirmed by the Senate. It is the “exclusive means” by which an “acting” role can be filled, unless there’s something more specific in the law that provides an alternative means for filling a vacancy.

The president requested an opinion from the Justice Department about his authority to designate an acting director of the Bureau upon the resignation of the director. That opinion (dated Nov. 25, 2017) can be accessed by clicking here. (courtesy of Wall Street Journal).

The opinion supports the president. Moreover, the general counsel at the CFPB also wrote an opinion that reaches the same conclusion: The president’s appointment of Mick Mulvaney as “acting director” wins the day.

Nevertheless, English filed suit (personally, not on behalf of the CFPB) to block Mulvaney’s appointment. Her argument is the Dodd-Frank Act makes her the bureau’s acting director during a vacancy. A decision is expected as soon as today.

As a practical matter, there are two people claiming to be the “acting director” of the Bureau. Both sent out emails telling Bureau employees to ignore emails or directives from the other person. We can only imagine how confused CFPB employees must feel today.

On Monday, Mulvaney acted to impose a 30-day freeze on all new regulations, guidance, hiring and imposition of civil money penalties at the Bureau. He told the media his goal was to “fix” the Bureau so it would protect consumers without cutting off their access to credit and other financial services.

Bloomberg reports Mulvaney also said he “was just learning about the powers that I have as acting (CFPB director) – they would frighten most of you.” That’s rather alarming it seems to most fair-minded people, but it’s one of the arguments the OBA and many, many other organizations and individuals have made in an effort to establish the Bureau as a “normal” federal agency subject to Congressional oversight and appropriations. Democrats universally oppose this effort, which boggles the mind.

Reg relief for community banks might actually happen

S. 2155 has now been introduced by Senate Banking Committee Chairman Mike Crapo (R-Idaho). The bill has 19 co-sponsors, including nine Democrats and one independent who caucuses with the Democrats:

Sen. Joe Donnelly (D-Ind.) Sen. Heidi Heitkamp (D-N.D.) Sen. Jon Tester (D-Mont.)

Sen. Mark Warner (D-Va.) Sen. Claire McCaskill (D-Mo.) Sen. Joe Manchin (D-W.V.)

Sen. Angus King (I-Maine) Sen. Tim Kaine (D-Va.) Sen. Gary Peters (D-Mich)

Sen. Michael Bennet (D-Colo.)

“The OBA’s Government Relations Council unanimously recommended the OBA support (S. 2155) and the Board in turn approved that recommendation unanimously,” OBA President and CEO Roger Beverage said. “A mark-up is scheduled for Thursday of this week (Nov. 30) and it should come out of Committee with virtually no substantive amendments having been added.

“This is the package, and it’s likely not going to change very much, if at all. It is far from perfect, but it’s a start. In addition, Jerome Powell’s testimony this morning was both supportive of this bill, and he also indicated some movement to a more “tailored” regulatory system for community banks:

Even as we have worked to implement improvements, we also have sought to tailor regulation and supervision to the size and risk profile of banks, particularly community institutions. We will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms–strong levels of capital and liquidity, stress testing, and resolution planning–so that banks can provide the credit to families and businesses necessary to sustain a prosperous economy. (emphasis added)

Testimony of Jerome Powell Senate Confirmation Hearing, November 28, 2017: https://www.federalreserve.gov/newsevents/testimony/powell20171128a.htm

“This is what we’ve been working on for almost three years,” Beverage said. “S. 2155 does not use the business model/risk profile formula for relief, but rather establishes various ceilings below which the stated regulatory relief provision will apply. My guess is it was the only way to get Democrats to buy in to the compromise proposal.”

Beverage also noted he has been in an email exchange with Sen. Elizabeth Warren’s banking assistant asking for her support for the bill, but to no avail.

“I tried, but at the end of the day we just see the world differently when it comes to regulatory relief for community banks,” he said. “Sen. Warren seems to be focused on provisions that deal with increasing the SIFI thresholds and – as I understand it – it is these provisions that will not allow her to support the bill. I don’t see that as a problem for Oklahoma banks, or community banks in general but she does apparently. But I did try.”

Once the bill comes out of Committee, it could be scheduled for floor action fairly quickly, assuming there are no substantive changes and none of the Democrats drop off of the bill. If that’s the case, and Republicans hold together, that gets 62 votes on ending a potential filibuster and only 60 votes are necessary. The bill could be on the president’s desk yet this year.

ICBA files lawsuite against Equifax

The Independent Community Bankers of America has filed suit against the credit reporting firm, Equifax Inc. The lawsuit was filed in the Northern District of Georgia, and sues for damages to community banks across the country that relate to the security breach of 145.5 million customer records and 209,000 payment cards.

“Today’s lawsuit demands remedial action because Equifax needs to be held accountable for this massive and preventable catastrophic event,” ICBA President Cam Fine noted in a press release about the filing of the lawsuit.

OBA education corner …

Thanksgiving was last week and Christmas is just around the corner. But, even with the holidays upon us, don’t forget to plan ahead for continuing education, courtesy of the OBA through our seminars, schools and webinars. Take note of the following:

Robbery Awareness, Nov. 30, webinar — Protect your people, prevent vulnerability, and reassure your customers that their money is safe. This program meets the requirement of Regulation H as it pertains to periodic robbery training
HMDA-Last Minute Update, Dec. 5, webinar — This is your last opportunity to insure your financial institution is prepared and ready for massive changes.
2018 Cybersecurity Forecast, Dec. 6, webinar — As the year slowly winds down, join us for a review on major information security events in 2017 and a brief look forward at what is to come in 2018
Opening Accounts for High Risk Customers, Dec. 6, webinar — This webinar will delve into scripts, documentation and monitoring for high risk customers.
Agricultural Loan Documentation & Administration, Dec. 8, webinar — Learn about agricultural collateral, risk management, loan documentation, loan administration and loan monitoring.
Commercial Real Estate Lending, Dec. 11, webinar — Learn to assess the important qualitative or non-financial factors that influence CRE performance over time.
Notary Public, Dec. 12, webinar — Notaries and others will learn best practices for dealing with issues unique to the financial industry.
Excel Explained: Introduction to Spreadsheets, Dec. 12, webinar — Learn the basics of Excel spreadsheets, getting the knowledge needed to create functional spreadsheets and manipulate large lists of data.
RESPA Section 8 Violations, Dec. 13, webinar — This program reviews the RESPA/Regulation X rules that prohibit unearned fees and kickbacks and many of the recent consent decrees brokered by the CFPB.
E-Sign Compliance, Dec. 13, webinar — What steps must be followed to be in compliance with E-Sign?
EFT, Dec. 14, webinar — Dissecting the Regulation E, VISA and MasterCard error resolution requirements

Also, make note the HR Seminar, originally scheduled for Dec. 5, has been canceled. Full refunds will be made to those who have already registered. We apologize for any inconvenience and if you have any questions about this, please feel free to contact the OBA education department.

Additionally, for long-range planning, note the upcoming 2018 OBA Schools: 2018 Intermediate School, Feb. 5-9 and June 4-8; 2018 Commercial Lending School, March 4-9; 2018 Compliance School, Aug. 27-31; 2018 Consumer Lending School, Oct. 1-5; and 2018 Operations School, Nov. 12-16.

Speaking of schools, GSB-Madison will be holding its 2018 Human Resource Management School on April 15-18. Expand your knowledge of banking, human resource management and employee performance at this respected school—and establish a network of colleagues to exchange ideas for years to come. Topics are timely and relevant. Click here for more information!