April 12, 2015 at 8:00 am ET
The First 100 Days of Congress: Finance
Since Franklin Delano Roosevelt first made reference to it in 1933, political analysts have frequently invoked a benchmark to assess a new president’s effectiveness early in his term: what happened during the first 100 days?
The 114th Congress will hit its own 100-day mark this week as it returns from a two-week recess, making this an ideal occasion to take stock of what has happened since Republicans took control of both chambers in January.
In short, it’s time for a performance review.
Republicans emerged victorious from the 2014 midterm elections, with the GOP congressional leadership quickly promising an end to the partisan gridlock that plagued Capitol Hill for the past few years.
“The skeptics say nothing will be accomplished in the next two years,” House Speaker John Boehner (R-Ohio) and incoming Senate Majority Leader Mitch McConnell (R-Ky.) wrote in an op-ed the day after the elections. “As elected servants of the people, we will make it our job to prove the skeptics wrong.”
While the skeptics may point to persistent sluggishness – protracted fights over approving the Keystone XL Pipeline and funding the Department of Homeland Security, as well as a controversial abortion amendment attached to a human trafficking bill – lawmakers have sent eight bills to the president’s desk, two more than had passed both chambers at this point in the 113th Congress.
And for the first time since 2006, both chambers passed a budget resolution.
Below is a recap of the congressional highlights pertinent to the world of finance from the first 100 days of the 114th Congress.
Heading into 2015, the Dodd-Frank financial regulation law was back on Washington’s radar after a provision was inserted into a $1.1 trillion government funding measure (H.R. 83) – known colloquially as the Cromnibus – that would roll back a statute in the original law limiting certain risky derivatives products. While the bill passed both chambers with bipartisan support and was signed into law by President Barack Obama on Dec. 16, the anti-Wall Street enthusiasm from Sen. Elizabeth Warren (D-Mass.) continued through the first few weeks of the new Congress. At the same time, banks were emboldened by the prospect of chipping away at Dodd-Frank some more.
In early January, Rep. Michael Fitzpatrick (R-Penn.) introduced a package of Dodd-Frank changes (H.R. 37), including a proposal to delay the Volcker Rule from taking effect until 2019. But House Republicans were stymied in their efforts to advance the legislation under suspension of the rules, which requires a two-thirds majority voting in favor of the bill. That meant coming back the following week to consider the measure under normal rules. The measure passed 271-154.
A week later, Obama said in his State of the Union address that he would veto any measure that unravels the new rules on Wall Street. The law firm Davis Polk, which tracks the progress of Dodd-Frank rulemaking implementation, said in a report that at the end of last month, 235 of the law’s 390 required rules, or about 60, had been finalized. The legislation was signed into law in July 2010.
The early days of the 114th Congress also proved politically challenging for the Obama administration. The White House had nominated investment banker Antonio Weiss to a top Treasury position that requires Senate confirmation, but progressive lawmakers once again cried foul. Amid vocal opposition from Sens. Warren, Joe Manchin (D-W.Va.), Bernie Sanders (I-Vt.) and others, Weiss announced on Jan. 12 that he was withdrawing his nomination. Instead, he opted to serve as a senior counselor to Treasury Secretary Jacob Lew, a post that doesn’t require Senate approval.
In the wake of the November elections there was renewed enthusiasm about the possibility of the first tax code overhaul since 1986. Boehner, McConnell and incoming House Ways and Means Committee Chairman Paul Ryan (Wis.), as well as key administration officials like Treasury Secretary Jacob Lew, signaled the endeavor had bipartisan support.
But in early February, the White House Fiscal Year 2016 budget laid out an ambitious tax plan that drew sharp criticism from the GOP. The administration’s blueprint includes proposals to restructure the U.S. international tax system and change the way capital income is taxed. And while there is bipartisan agreement that the corporate tax rate should be cut, the White House and congressional Republicans disagree over how low to set the new threshold.
Fannie Mae and Freddie Mac
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) made housing policy an early focus for his panel in the new year, calling Federal Housing Finance Agency Director Melvin Watt to testify for the first hearing of the session. Four of the committee’s 11 hearings have focused on housing issues.
Both sides of the aisle worry over how to deal with with the mortgage giants Fannie Mae and Freddie Mac. But the prospects of a congressional overhaul look dim, according to Senate Banking, Housing and Urban Affairs Committee Chairman Richard Shelby (R-Ala.).
“I don’t know if we will do anything in the area of government-sponsored enterprise or not,” he said March 25 at a U.S. Chamber of Commerce event. “Right now we’re focused on regulatory reform.”
Federal Reserve Overhaul
Sen. Rand Paul (R-Ky.), who last week launched his campaign for the presidency, introduced a bill (S. 264) early in the session that would subject the Federal Reserve to a U.S. Government Accountability Office audit. It quickly drew the ire of Senate Democrats who said that because the GAO is a congressional outfit, the legislation would subject the central bank’s independent monetary policy to undue political influence. So far, no action has been taken on the measure, which has 32 cosponsors—all of whom are Republicans except for Sen. Mazie Hirono (D-Hawaii).
Shelby has indicated he wants to pass a bipartisan package out of the Senate Banking Committee that could address address governance issues at the Federal Reserve, as well as topics like reducing regulatory requirements for community banks and tweaking the process that designates systemically important financial institutions. Among the possible revisions that could make it into the package are proposals to further disperse power to the 12 regional banks, and to require cost-benefit analyses of future regulatory rule-making.
However, Shelby is currently keeping his distance from endorsing an audit of the central bank, instead highlighting changes to the Fed system that might draw support from committee Democrats such as Jack Reed. The Rhode Island senator introduced a bill (S. 530) this year that would require the head of the New York Federal Reserve be nominated by the White House and confirmed by the Senate. The bill has no cosponsors, though the Banking Committee did hold a hearing on “Federal Reserve Accountability and Reform” on Mar. 3. Reuters recently reported that New York Fed President William Dudley is not opposed to such a proposal.
Imminent deadlines indicate that debate over renewing the charter of the Export-Import Bank will be forthcoming in the next several weeks. The bank’s charter is scheduled to expire on June 30.
And once again, another debt-ceiling conflict looms on the horizon. The borrowing authority of the U.S. will run out in October or November, according to an estimate by the Congressional Budget Office.