Waters builds new agenda for Financial Services Committee

Rep. Maxine Waters (D-Calif.) is the new chairman of the committee, taking on leadership from Texas Republican Jeb Hensarling following November mid-term elections that saw Democrats retake majority status in the chamber.

Joining Waters will be newly appointed Democratic committee members:

• Congresswoman Alma Adams of North Carolina
• Congresswoman Cindy Axne of Iowa
• Congressman Sean Casten of Illinois
• Congresswoman Madeleine Dean of Pennsylvania
• Congresswoman Tulsi Gabbard of Hawaii
• Congressman Jesús García of Illinois
• Congresswoman Sylvia Garcia of Texas
• Congressman Al Lawson of Florida
• Congressman Ben McAdams of Utah
• Congresswoman Alexandria Ocasio-Cortez of New York
• Congressman Dean Phillips of Minnesota
• Congresswoman Katie Porter of California
• Congresswoman Ayanna Pressley of Massachusetts
• Congressman Michael San Nicolas of Guam
• Congresswoman Rashida Tlaib of Michigan
• Congresswoman Jennifer Wexton of Virginia

Waters discussed her goals and priorities for the Committee during a speech last week as an invited guest of the Center for American Progress Action Fund.

The CFPB, financial regulation

“An ongoing priority for me is ensuring that we have a strong Consumer Financial Protection Bureau and strong financial regulation that protects consumers, investors, and our economy,” Waters said. “We all remember how devastating the financial crisis was: 11 million Americans lost their homes, $13 trillion in wealth was lost, nearly 9 million Americans lost their jobs, and the unemployment rate hit 10 percent. It was catastrophic for communities across the country. The crisis was a result of Wall Street running amok, with abusive institutions peddling toxic products like no-doc loans, interest-only mortgages, and other predatory products, with no agency responsible for prioritizing consumer protection. Ultimately, the economy was sent tumbling into the abyss.”

In response, the Dodd-Frank Act was crafted and passed “to improve accountability in the financial system and protect consumers, investors, and the economy from abusive Wall Street practices.”

“As the centerpiece of that law, we created the Consumer Financial Protection Bureau, which is the only federal agency solely dedicated to protecting consumers from being ripped off by financial firms.” The Consumer Financial Protection Bureau, Waters said, was a cornerstone of those efforts. Once created, it returned $12 billion to more than 30 million harmed consumers; handled over 1.3 million consumer complaints about financial institutions; implemented rules on mortgages, prepaid cards, payday loans, and auto title loans; and required additional disclosures from financial institutions.

Nevertheless, “Congressional Republicans and the Trump Administration have been determined to undermine and destroy the Consumer Bureau,” Waters said. “Trump installed Mick Mulvaney, his budget director, to serve as acting director of the CFPB and, during his tenure, Mulvaney made it a priority to dismantle the Bureau from within … He fired all members of the Consumer Advisory Board and requested zero dollars in operating funds for the Consumer Bureau from the Federal Reserve. He also created an Office of Cost Benefit Analysis as a way to internally block important regulations under the guise of cost benefit analysis.”

“Mulvaney also moved to strip the Bureau’s Office of Fair Lending and Equal Opportunity of its enforcement and supervisory authority [and] closed the Office of Students and Young Consumers at a time when 44 million student borrowers collectively carry over $1.5 trillion in student loan debt. He also helped out payday lenders. For example, he withdrew a lawsuit against a group of deceptive payday lenders who allegedly failed to disclose the true cost of loans, which carried interest rates as high as 950 percent a year,” she added.

Mulvaney has since moved on to become President Trump’s acting chief of staff, but his time at the CFPB will not be forgotten, Waters pledged. She has informed him that, “while his time running the Bureau may be over, the time for accountability for his actions is about to begin.”

“This Congress, I am going to be working diligently to undo the damage that Mulvaney has wrought during his time at the Bureau,” she explained. A bill, the Consumers First Act, will soon be reintroduced to “reverse many of his known harmful actions.”

“It’s not just Mick Mulvaney who I will be paying attention to. I will be keeping a watchful eye on all of the financial regulators to make sure that they are carrying out their statutory duties, including holding bad actors accountable, and promoting financial stability,” Waters added. “As we saw during the 2008 financial crisis, large Wall Street banks that aren’t subject to strong oversight and safeguards to protect our economy can do a lot of damage. [The Dodd-Frank Act] put in place robust reforms for our largest and most complex financial institutions, including increased capital, reduced leverage, improved liquidity, vigorous stress testing, and thorough living wills, all designed to improve financial stability… All of these reforms were designed to help prevent a future financial crisis. The Committee will be paying close attention to whether financial regulators try to weaken these important reforms.”

One emerging area the Financial Services Committee will be paying very close attention to is the growth of financial technology, or so-called “FinTech” firms, Waters said.

“As Americans are banking and accessing credit in new ways, it is important that we encourage responsible innovation with the appropriate safeguards in place to protect consumers and without displacing community banks and credit unions,” she explained.

Credit reporting is another issue the Waters-led committee will scrutinize. “In the wake of the Equifax data breach, it’s absolutely critical for Congress to reform the nation’s credit reporting system,” she said. “We need to shift the burden of removing mistakes from credit reports onto the credit bureaus and furnishers, and away from consumers. We also need to place limits on credit checks for employment purposes, reduce the time period that negative items stay on credit reports, and make other reforms to fix the serious problems with the credit reporting sector. For the sake of consumers across the country, credit reporting needs a comprehensive overhaul.”

Diversity and inclusion

Waters cited a study by the Government Accountability Office that found a continued trend of low representation of minorities and women in the financial services industry.

“Minorities and women have particularly low representation at the senior management levels within the financial services industry,” she said. “This needs to change. Diverse representation in these institutions, and particularly at the management level, is essential to ensure that all consumers have fair access to credit, capital, and banking and financial services.”

Waters was among the authors of Section 1116 of the Housing and Economic Recovery Act and Section 342 of the Dodd-Frank Act. Together, these provisions directed most of the federal financial services agencies to create Offices of Minority and Women Inclusion with responsibility of overseeing diversity matters in the management, employment, and business activities of their agencies. As a next step, she will create a new Congressional Subcommittee on Diversity and Inclusion “dedicated to looking at diversity and inclusion issues under the Committee’s jurisdiction.”

Sanctions scrutiny

Waters called the Trump administration’s approach to Russia sanctions “haphazard and weak” and “inconsistent with its approach to sanctions imposed on other countries, such as Iran. She expressed particular concern about the Treasury Department’s recent actions to lift sanctions on businesses connected to Oleg Deripaska, a Russian oligarch with close ties to both Vladimir Putin and former Trump campaign chairman Paul Manafort.

“I believe the delisting agreement for Deripaska’s companies is too favorable to [him], including by allowing him to benefit from potentially tens of millions of dollars in debt forgiveness by transferring some of his shares to a Russian bank to satisfy debts that Deripaska owes that bank. I also don’t believe he should be allowed to retain any influence or level of control over these companies,” she said.

Bipartisanship?

Waters promised to “build consensus and work across the aisle.” She and Rep. Patrick McHenry (R-N.C.), ranking member of the Financial Services Committee, have already reintroduced the Promoting Transparent Standards for Corporate Insiders Act, bipartisan legislation which requires the Securities and Exchange Commission to consider amendments to Rule 10b5-1 that “would ensure corporate insiders are unable to indirectly engage in illegal insider trading through changes to their trading plans.” The legislation would require the Commission to study how to amend its rules to address reported incidents of manipulation.