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STATE GOVERNMENT RELATIONS
Indiana Snares $22B in New Investment this Year
Indiana saw a record-setting $22 billion in capital expenditure by companies this year, eclipsing last year's record total of $8.7 billion and marking an increase of more than 250% from 2021. Notable 2022 investments include: a solar company investing $1.5 billion in northwest Indiana; a $200 million auto-racing headquarters in Fishers; and Samsung SDI building a $2.5 billion electric-vehicle battery plant in Kokomo.
FEDERAL GOVERNMENT RELATIONS
Chopra: 1071 Rulemaking to Be Completed by End of March
With the Consumer Financial Protection Bureau under a court order to complete the Dodd-Frank Act Section 1071 rulemaking by March 31, CFPB Director Rohit Chopra acknowledged concerns that the rule could have an outsized effect on smaller institutions and could affect the supply of credit to the nation's small businesses. The rulemaking addresses the collection of credit application data for small businesses, including women-owned and minority-owned small businesses.
"We want to make sure we have an implementation period that gives the smaller firms more time and the ability to make sure it's not duplicative with existing requirements under the Community Reinvestment Act," Chopra told the House Financial Services Committee during a CFPB oversight hearing. He added that "we're going to get it done by March," and "we're going to do the best we can, but the statute is what we have to look to."
During the hearing, lawmakers also took Chopra to task over his agency's creation and persistent use of the term "junk fees" to describe legal fees that banks charge for financial products and services. "There is no such word in financial services lexicon," said Rep. Blaine Luetkemeyer, R-Mo. "You're making up a word and then using it to go out and enforce something that doesn't exist."
Lawmakers also raised concerns over the bureau's recent updates to its unfair, deceptive, or abusive acts and practices (UDAAP) exam manual that expanded the definition of "unfairness" to encompass discrimination. "This is not interpretive guidance," Rep. Andy Barr, R-Ky., told Chopra. "You're trying to change the law."
Fed Raises Rates by 50 Basis Points
The Federal Open Market Committee announced Wednesday it would raise the target range for the federal funds rate by 50 basis points to 4.25%-4.5%. The increase marks the seventh rate hike this year, but also represented a slowdown from the previous four hikes when the FOMC raised the rate by 75 basis points each time. The committee reiterated that it expects further increases will be necessary to bring long-term inflation down to the target range of 2%.
"Inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases, but it will take substantially more evidence to give confidence that inflation is on a sustained downward path," Federal Reserve Chairman Jerome Powell said.
Powell said that the FOMC's median projection for the appropriate rate level by the end of 2023 is now 5.1%, which is half of a percentage point higher than the September projection. Looking further out, the median projection is 4.1% for the end of 2024 and 3.1% at the end of 2025.
"We've raised (the rate) 425 basis points this year, and we're into restrictive territory," Powell said. "It's now not so important how fast we go. It's far more important to think, 'What is the ultimate level?' And then at a certain point, the question will become, 'How long do we remain restrictive?'" FOMC will meet again Jan. 31-Feb. 1, 2023.
Chopra Defends Decision to Expand UDAAP Definition
Appearing Thursday before the Senate Banking Committee, Consumer Financial Protection Bureau Director Rohit Chopra pushed back against suggestions his agency exceeded its legal authority when it expanded the definition of “unfairness” to encompass discrimination in the unfair, deceptive or abusive acts and practices (UDAAP) exam manual, which is the subject of a lawsuit by business groups.
Committee members Pat Toomey, R-Pa., and Steve Daines, R-Mont., criticized the CFPB for allegedly redefining UDAAP to cover potential discriminatory conduct – including actions that have a disparate impact on protected groups – which they said wasn’t the intent of Congress when it authorized the creation of the agency in the Dodd-Frank Act. “In the 12 years since Dodd-Frank was enacted, neither Congress nor the CFPB has claimed that the legislation authorizes disparate impact under UDAAP,” Daines said. “Unfortunately, instead of implementing these changes in an open and very transparent rulemaking process, your bureau simply issued a press release announcing a very controversial change.”
Chopra told committee members he disagreed that the changes were about disparate impact. “It is about injury, reasonable avoidability and countervailing benefits,” he said. As far as transparency, Chopra said the CFPB has sought to find ways to issue guidance that doesn’t have the force of law “but gives entities a sense of what current law requires.” In the case of the UDAAP manual, it “is guidance for examiners that when they are investigating potential discriminatory or other unlawful conduct, how might it implicate some of the existing laws that Congress has authorized and prohibited. In many situations, illegal conduct can violate multiple laws.”
In their lawsuit filed in September, business groups argued that not only did CFPB exceed its statutory authority, but it failed to go through legally required notice and comment procedures before implementing the update. More recently, the groups have asked a federal court in Texas to grant summary judgment in the case.
Agencies Release CRA Data on Small Business, Community Development Lending
On Thursday the federal banking agencies released 2021 Community Reinvestment Act data on small-business, small-farm and community development lending. The CRA requires banks with more than $1.322 billion in assets to report data in these areas.
The 685 reporting banks originated or purchased 9.4 million small-business loans totaling $371 billion. The total number of loans originated by reporting banks increased by about 12.6% from 2020, the agencies indicated. Small-farm loan originations increased 26.4% year over year, while the total dollar amount decreased by 1.2%. About 47.1% of the reported small-business loans and 59.3% of reported farm loans were made to firms with less than $1 million in revenue.
A total of 618 banks reported community development lending activity totaling nearly $151 billion in 2021, a 10.1% decrease from the amount reported in 2020.
Warren, Marshall Introduce Cryptocurrency AML Bill
Sens. Elizabeth Warren, D-Mass., and Roger Marshall, R-Kan., introduced legislation Wednesday to extend anti-money laundering and countering of the financing of terrorism requirements to cryptocurrency and digital assets.
According to a summary of the bill, the Digital Asset Anti-Money Laundering Act would extend Bank Secrecy Act responsibilities to parties that facilitate digital asset transactions by directing FinCEN to designate them as money service businesses (MSBs), direct FinCEN to finalize a 2020 rule requiring banks and MSBs to keep records of certain digital transactions in non-BSA jurisdictions; prohibit financial institutions from using digital asset mixers and other anonymity-enhancing technologies, and direct regulators such as the SEC and Commodity Futures Trading Commission to establish an AML/CFT compliance examination and review process.
"Following the September 11, 2001, terrorist attacks, our government enacted meaningful reforms that helped the banks cut off bad actors from America's financial system," Marshall said. "Applying these similar policies to cryptocurrency exchanges will prevent digital assets from being abused to finance illegal activities without limiting law-abiding American citizens' access."
Toomey, Warren Team Up on Bill to Extend FOIA to Federal Reserve Banks
Sens. Pat Toomey, R-Pa., and Elizabeth Warren, D-Mass., last week unveiled a bipartisan bill that would subject regional Federal Reserve banks to the Freedom of Information Act. Doing so would require them to respond to congressional information requests, align the Fed with other large agencies by making its inspector general a presidential appointee and prohibit all financial regulatory agencies from denying congressional requests for ethics-related information.
The bill stipulated that regional banks may continue to withhold sensitive information related to monetary policy, confidential supervisory information (CSI) and personnel medical files. However, the bill would grant a specified group of Senate Banking and House Financial Services committee members the ability to access CSI and personnel files on a confidential basis.
Senate Panel Advances FDIC Nominees
The Senate Banking Committee voted Tuesday to advance the nominations of Martin Gruenberg to serve as Federal Deposit Insurance Corp. chairman, Travis Hill as vice chairman and Jonathan McKernan as FDIC board member.