If Senate Reg Bill Passes House, Capital Formation Is Next Focus: Hensarling

Senate-passed regulatory overhaul legislation does an effective job of loosening rules for community-based financial institutions and any follow-up legislation will focus on capital formation, House Financial Services Chairman Jeb Hensarling (R-Texas) said Thursday.

“Congress has now worked its will on regulation,” Hensarling said at an event sponsored by Politico.

Hensarling’s comments came in anticipation of the House passing S. 2155, Senate-passed regulatory legislation. The House is scheduled to consider that legislation next week.

S. 2155 contains a credit union-specific provision that provides that a one-to-four family dwelling that is not the primary residence of a member will not be considered a business loan under the Credit Union Act and additional changes that impact all financial institutions.

Hensarling has sponsored and the House has passed much more aggressive regulatory overhaul legislation, but the Senate has passed the more modest package. For instance, Hensarling’s bill would make large changes to the CFPB’s powers, while the Senate bill does not touch the agency.

“I like making speeches, but I like making laws better,” he said, acknowledging that many of his proposals would not pass the Senate.

Hensarling originally said he would not consider the Senate bill without the addition of provisions that had passed the House. He abandoned that position after he said Senate Republican leaders assured him that the upper body would consider follow-up legislation.

“I’ve gone from ‘over my dead body’ to ‘let’s get it done yesterday,” he conceded. “The goal is to get something passed and on the president’s desk.”

He said he plans to continue a “healthy dialogue” with Senate leaders over follow-up legislation, which he said must focus on capital formation.

Hensarling said he would have preferred those negotiations to have taken place in a formal House-Senate conference, but he is satisfied with recent developments.

The chairman said he still favors overhauling the CFPB, which he referred to as “a uniquely unaccountable agency.” He said he is willing to consider legislation that would change the agency’s structure from a single-director to a commission.

However, such a plan would be unlikely to pass the Senate.

On another topic, Hensarling, who is retiring from the House at the end of the year, downplayed any possibility that he could be appointed to a regulatory job by President Trump.

He said he has no interest in heading the Federal Housing Finance Agency; his name also has been mentioned as a possible permanent director of the CFPB

“My future has me going back to Dallas, Texas,” he said. “I have no intention of sticking around.”

Hensarling’s focus on capital formation is not surprising, said Ryan Donovan, CUNA’s chief advocacy officer. He said many of the bills Hensarling would like the Senate to consider focus on capital formation.

He added, however, that S. 2155 should not be the end of the discussion on overhauling Dodd-Frank.

“Clearly there’s more to be one for credit unions and community banks,” he said. “I see S. 2155 as a first step, not a last step.”

John McKechnie, senior partner at Total Spectrum welcomed Hensarling’s comments.

“Chairman Hensarling just opened the door wide for capital reform,” he said. “This should be music to the ears of anyone in the credit union movement who cares about growth and helping members succeed.”

McKechnie added that while the NCUA appears to be moving in the right direction on supplemental capital for credit unions, “now is the time for us to make this a priority on the Hill as well.”