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Hensarling Targets GSE Reform, Dodd-Frank Rollback in Ambitious Agenda

WASHINGTON — House Financial Services Committee Chairman Jeb Hensarling recited a litany of priorities for his panel next year, touching on everything from the very broad, like housing finance reform, to the specific, including targeting a proposal to rein in payday lending.

The Texas Republican appeared clearly energized by the election of Donald Trump, saying he was already working with the transition team to revamp his bill to dismantle the Dodd-Frank Act and plans to reintroduce the legislation early in the next Congress.

"There has been a fairly constant dialogue with the Trump transition team about the Choice Act," Hensarling said during a speech Wednesday at the Exchequer Club. "There has also been dialogue with our Speaker and our leader in the House."

But Hensarling's plans went far beyond pushing the Choice Act, including a revived focus on eliminating Fannie Mae and Freddie Mac, a rollback of a Labor Department rule governing investment advisers and stopping the Consumer Financial Protection Bureau from finalizing a plan to curb small-dollar loans.

Following is a guide to what Hensarling is focused on:

The Financial Choice Act

Hensarling's sweeping regulatory reform bill already cleared the House Financial Services Committee in September, and is widely viewed as a marker for next year. The Texas Republican said he is open to making changes to the bill, which would restructure some federal regulators and ease regulations for banks that agree to hold higher capital.

"We are always open to perfecting our legislation for those who may have some concerns or suggestions," said Hensarling during his speech. "We are reexamining our legislation post our committee markup. We are interested in working on the 2.0 version."

Hensarling believes that the Choice Act embodies the populist message that the electorate sent when it elected Trump and criticized federal regulators, who he called an unaccountable fourth branch of government.

Voters "are upset at seeing their values ridiculed and scorned by ruling establishment and every day they see their liberties and opportunities slipping away as Washington grows larger, more intrusive, more distant, more powerful and more arrogant," said Hensarling who has included a provision to repeal court deference to regulators in the Choice Act.

Hensarling's plan would restructure all agencies led by a single director — the Consumer Financial Protection Bureau, Federal Housing Finance Agency and Office of the Comptroller of the Currency — into bipartisan commissions and require them to do a cost-benefit analysis on any new proposals.

Fiduciary and Payday

Hensarling also criticized a rule by the Department of Labor that would require investment advisers to act in the fiduciary interests of their clients and a plan by the CFPB to rein in small-dollar lending. The Labor Department rule is already final, but likely to get rolled back by the new administration regardless of Congress. The future of the payday proposal is less clear, depending partially on the outcome of a court case that could remove Director Richard Cordray from power.

Hensarling made it clear he would roll back both if necessary.

"The Trump administration, working with our majority, should make sure this harmful bureaucratic rule does not go into effect as planned and this is just one example of how unelected unaccountable government hurts working people," said Hensarling of the DOL rule. "Another example is clearly the CPFB rule that would shut down small-dollar lenders, again without ever a single vote being cast in Congress."

Housing Finance Reform

Hensarling highlighted a financial reform proposal that he introduced in 2013 that would wind down Fannie Mae and Freddie Mac and take a more free market approach to housing finance.

Housing finance reform was never a key issue on the campaign trail, and Hensarling had trouble getting even other Republicans to support his bill, which would have removed most of the government's role in the housing market.

By mentioning it on Wednesday, Hensarling made it clear that he was more hopeful at taking another run at the legislation despite the challenging topic.

Monetary Policy and FSOC

Hensarling also raised concerns that interest rates remain low, and noted that his Choice Act includes a provision that would require monetary policy to be dependent on a quantitative rule.

"Our economy would be healthier and more Americans would have the opportunity to achieve success if our Federal Reserve did not wander into fiscal policy and if our Federal Reserve conducted monetary policy in a more transparent rules-like fashion," said Hensarling.

The Trump transition team has reportedly considered Hensarling as a potential pick for Treasury Secretary, a position that would put him in charge of the Financial Stability Oversight Council.

The interagency council has authority to deem certain nonbank companies systemically important and subject them to prudential regulation, but Hensarling is disinterested in it.

"In my world [FSOC] would probably play no role," said Hensarling. "I think there are advantages to having various agencies get out of their silos to converse….look at the their radar screens for incoming threats to our financial system, but ultimately those concerns need to be taken to the elected and the accountable branch of government which is the United States Congress."

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