Subject: Update -- Highway Bill/Week Ahead
From: Dana <[email-masked]>
To: Mike Pyle <[email-masked]>, Mike Schmidt <[email-masked]>
Date: Mon, 16 Nov 2015 15:35:17 -0500

Mike & Co. --

The House is back after a week off and is due to vote this afternoon on a two-week extension of the Highway Trust Fund, thereby averting a highway-funding shutdown on Friday.  The new deadline would be December 4.  

Meanwhile, conferees were named during the recess on the six-year extension bills adopted by the two Houses earlier this year.  They are due to meet Wednesday morning but no votes are expected.  The two-week patch buys the conferees time to iron out a long-term deal while avoiding the complications of proximity to the December 11 deadline for Congress to fund the government.  

Obama and Lew will be in Turkey for the G-20 summit where "resilience through financial regulation, international tax, anti-corruption and IMF reform" are on the agenda.  Other items of note this week:

Hearings on the Hill

•. Wednesday 9:45 am, Biennial Budgeting, House Budget

•. Wednesday 10 am, SEC Oversight, Mary Jo White, House Financial Services

•  Wednesday 2 pm, Millennials' economic future, Joint Economic Cmte. 

Key Data Released

• Consumer Prices at 8:30am Tuesday 

• Industrial Production, 8:30 am Tuesday 

• Index of Leading Indicators, 10:00 am Thursday 

That's it for now.  Below, an excerpt from a recent speech by Richard Shelby on his proposed FRB and FOMC reforms.

Dana

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November 3, 2015 – U.S. Senator Richard Shelby (R-Ala.), Chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs, today spoke at an event hosted by the Federal Reserve for its year-end meeting of the Conference of Chairs of the Reserve Banks.  Below is an excerpt of his speech:

..........

“As part of legislation reported out of the Banking Committee in May of this year, I have called for commonsense first steps that would bring about needed accountability and transparency, including: requiring more frequent reporting to Congress on monetary policy, more detailed explanations of FOMC decisions, and a shortened delay for the release of transcripts from 5 years to 3 years; shifting from the Federal Reserve Board to the more diverse FOMC the authority for setting the rate of interest on banks’ reserves held at the Fed, which has become an important tool of monetary policy; and requiring the FOMC to disclose any monetary rules and explain in more detail its process for making decisions over time. 

“While the bill does not require the FOMC to follow any specific monetary rule, it does aim to provide greater clarity of the Fed’s monetary policy strategy without restricting such activities in a manner inconsistent with the Federal Reserve Act.  These are all modest and reasonable reforms that have been met with stiff resistance.  History shows, however, that change is inevitable.  Sometimes it just takes a bit more time and I am a patient man.

“Many FOMC monetary policy decisions are less transparent compared to other central banks, including the European Central Bank and the Bank of England.  The Bank of England, for example, has more annual meetings and a shorter delay in publishing its minutes compared to the Fed, and both banks issue more monetary reports per year. In addition, the European Central Bank has twice the number of press conferences.

“Through its quantitative easing and other special programs, the Fed’s balance sheet has expanded to an unprecedented size of four-and-a-half trillion dollars.  Nearly 20 percent of all Treasury securities are held on the Fed’s balance sheet.

“Rather than using the proceeds from matured mortgage-backed securities to reduce its balance sheet, the Fed continues to re-invest these proceeds into even more MBS.  I remain concerned over the Fed’s ability to unwind its holdings in a manner that does not cause turmoil in financial markets, including asset price deterioration that could adversely impact financial holdings of private sector investors, or impede its monetary policy goals."

> On Nov 13, 2015, at 10:56 AM, Dana <[email-masked]> wrote:
> 
> Mike & Co. --
> Positions are already being staked out in anticipation of a compromise on financial regulatory policy next month as part of a long-term extension of the FY 2016 Continuing Resolution.  How deployments look right now is sketched out below.  
> 
> Great weekends, everyone...
> 
> Dana
> 
> --------------
> 
> The terms of engagement for year-end  changes to Dodd-Frank are being gamed out in various quarters around the Hill, with the CR's December 11 expiration now less than a month away.  Last year, the spending bill came at a price -- and that was before the GOP took over the Senate. 
> 
> For the first time since its passage in 2010, a significant amendment to Dodd-Frank (DFA) was enacted last year when the Section 716 swaps "push-out" provision was repealed.  It was accomplished in an 11th-hour deal to get the must-pass "Cromnibus" over the finish line at year end.  The deal upset Sen. Warren and 21 of 54 Democrats voted against the bill even though its approval came less than three hours before a midnight deadline that threatened a federal shutdown. 
> 
> Gone was the requirement that some derivatives trades made by bank holding companies be conducted outside the units that hold deposits and enjoy the benefits of deposit insurance.
> 
> Within weeks, Warren torpedoed an administration nomination to a key Treasury post overseeing Dodd-Frank.  Though the nominee's views were not dissimilar from Warren's, he had spent the bulk of his years at Lazard, a blue chip Wall Street firm (and, possibly worse, French).  No one has been nominated to the post since. 
> 
> House Financial Services has reported bills weakening, limiting, underfunding, or repealing various parts of DFA frequently this session, passing ten more similar measures in a marathon mark-up last week.  But none of these has a chance of being picked up in the Senate, let alone of enactment on a standalone basis while Obama is President.  
> 
> In the Senate, the most comprehensive set of legislative limits to DFA yet to clear a major Committee, written by Senate Banking Chair Richard Shelby, cleared the panel on a 12-10 party-line vote in May. The bill has eight major titles and provisions ranging from increasing the SIFI designation threshold to changing the method of selecting the NY Fed President to requiring exams for community banks every 18 months instead of annually.  Have a look:  http://www.banking.senate.gov/public/_cache/files/73d86467-03c5-4e11-9aa2-e205ec1cf811/3895FC44565256E3151D809B2A429B8A.section-by-section-summary.pdf. 
> 
> A party line 12-10 vote in committee isn't enough to get such a sweeping bill to the floor and Shelby knows it.  Reformers and industry have both taken a close interest in the congressional struggle to refund the government with eyes on December 11.  The appropriations rider strategy has worked before.  Shelby has now publicly stated that the appropriations process, with the implied threat of a government shutdown, offers the “best shot” of getting it enacted.  Riders under discussion cover a range of issues including the Fiduciary Rule, the legal basis for nonprofit groups to challenge discriminatory housing and mortgage-lending practices, and CFPB governance.  
> 
> Seeking to put a tag on the price Democrats paid in last year's CR sweepstakes, Sen. Warren and Rep. Elijah Cummings of Maryland, ranking Democrat on the House Overnight and Government Reform Committee published a letter this week from FDIC estimating that the 15 banks currently registered as swap dealers along with their subsidiaries hold up to $9.7 trillion of the types of derivatives that would have been pushed out under Section 716 (totaling 4.4 percent of all outstanding derivatives contract holdings at federally insured banks, comprised of $6.1 trillion in credit derivatives, $1 trillion in commodity derivatives and $2.6 trillion in equities derivatives, per the FDIC letter).
> 
> But in the quieter corners of the Capitol, with GOP majorities in both ends, a group of moderate Democrats is negotiating with Republicans, risking the wrath of Warren and maybe the Democratic base.  The group includes Sens. Donnelly, and Heitkamp, coordinated by Tester, occasionally Warner.  Donnelly said work is happening "every day."  Sherrod Brown:  "everybody's talking to everybody."
> 
> Shelby is trying to find the price that the CR can bear, in terms of heft and scope of viable changes to Dodd-Frank.  
> 
> Sen. Moran:  "That's been the discussion really from the beginning: How expansive can this be, and beyond community banks what more can be accomplished?  The parameters have been narrowed, but, still, finding that sweet spot is in discussion."
> 
> Treasury Secretary Lew on Tuesday:  "We are open to discussions about things that are truly technical but we are very much opposed to anything that would undermine any of the core architecture of Dodd-Frank.  The line between the two is sometimes hard to define."
> 
> If it is only regulatory relief for community banks, it's like a win-win, most Democrats would agree.  If it's a tenfold increase in the SIFI trigger, harder to say  If it's closer to the scope and scale of Shelby's bill, a stormy December is in the forecast.  
> 
> -------------
> 
> Recent Updates:  
> 
> Dodd-Frank and the CR  (Nov. 13)
> FRB Interest Rate Policy  (Nov. 9)
> Ryan and Tax Reform (Nov. 4)
> HTF/Pay-fors  (Nov. 3)
> FRB System Risk Rule  (Nov. 2)
> Ex-Im Reauthorization  (Oct. 30)
> Tax Extenders  (Oct. 30)
> Boehner Budget Deal (Oct. 27)
> Debt and Debt Limit  (Oct. 22)
> SEC Nominations  (Oct. 20)
> TPP/Currency Manipulation  (Oct. 15)
> FRB Dividend  (Oct. 7)
> Jobs Report (Oct. 2)
> Fiduciary Rule  (Oct. 1)
> FY2016 Budget/CR  (Sept. 29)
> Trade/TPP  (Sept. 25)
> GSE Reform  (Sept. 25)
> Carried Interest  (Sept. 23)
> Bush Tax Cuts  (Sept. 15)
> Puerto Rico  (Jul. 23)
> Shelby 2.0  (June 24) 
>