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President Obama Nominates Former Community Bank Chief to Fed Board
On January 6, President Obama announced his intent to nominate Allan R. Landon to serve on the Board of Governors of the Federal Reserve System. If confirmed by the U.S. Senate, Landon would serve out the remaining term of former Fed Governor Sarah Bloom Raskin, who departed to become Deputy Secretary of Treasury. Previously, Landon was a partner at Ernst & Young LLP and served as Chairman and CEO of Bank of Hawaii Corporation.
Senate Banking Committee Elects New Chairman
On January 7, the Republican members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs elected Sen. Richard Shelby (R-Ala) as its new chairman for the 114th Congress. Sen. Shelby previously served as Committee chairman from 2003 to 2006. Sen. Sherrod Brown (D-OH) will serve as the Committee’s ranking member.
President Obama Signs Extension of SCRA's One-Year Foreclosure Protection
On December 18, after passing unanimously in both houses of Congress, President Obama signed into law S.3008, the Foreclosure Relief and Extension for Servicemembers Act of 2014. Previously, the SCRA’s protection for servicemembers against foreclosure for one year after the end of active duty was set to expire at the end of 2014. The Act extends this protection until the end of 2015, at which point the foreclosure protection is scheduled to revert to the period of active duty plus 90 days that was in effect in 2008.
President Obama Signs Law Allowing Authority To Implement Ukraine-Russian Sanctions
On December 18, President Obama signed into law H.R. 5859, the “Ukraine Freedom Support Act of 2014.” First introduced in the House on December 11, the bill gives the President the authority to impose sanctions against countries, entities, and individual persons that pose potential threats to financial stability through excessive risk-taking with the Russian market. The bill provides authority for sanctions against foreign persons, including executive officers of an entity, relating to (i) banking transactions; (ii) investing in or purchasing equity or debt instruments; (iii) U.S. property transactions; and (iv) Export-Import Bank of the United States assistance. Finally, the bill directs the President to “use U.S. influence to encourage the World Bank Group, the European Bank for Reconstruction and Development, and other international financial institutions to invest in and stimulate private investment in such projects.”
Senate Confirms New HUD Deputy Secretary
On December 2, the U.S. Senate confirmed Nani Coloretti to be appointed as the new Deputy Secretary of HUD. Nominated in March, Coloretti currently serves as the Assistant Secretary for Management at the Department of Treasury where she advises on the development and execution of Treasury’s budget, strategic plans, and the internal management of the Department and its bureaus. Following the passage of the Dodd-Frank Act, she also helped stand-up the CFPB by serving as its Acting COO.
Senator Warren And Congressman Cummings Urge GAO To Study Economic Vulnerability Of Non-Bank Mortgage Servicers, Risks To Consumers
On October 20, Senator Warren and Congressman Cummings co-authored a letter to the GAO requesting that the agency investigate possible effects on the non-bank servicing industry in the event of an economic downturn. In addition, the duo urged the GAO to study the potential risks to consumers should a major non-bank servicer fail. The letter stems from a report recently issued by the FHFA-OIG. The report cites that the rise in non-bank mortgage servicers “has been accompanied by consumer complaints, lawsuits, and other regulatory actions as the servicers’ workload outstrips their processing capacity.”
Members Of Congress Caution Education Department On Aid Disbursement Rulemaking
Over the past week, members of Congress from both parties have sent several letters to the Department of Education (DOE or ED) regarding its ongoing rulemaking related to the ways higher education institutions request, maintain, disburse, and otherwise manage federal student aid disbursements. As part of that rulemaking, the DOE is considering changes that would, among other things, clarify permissible disbursement practices and agreements between education institutions and entities that assist in disbursing student aid, and increase consumer protections governing the use of prepaid cards and other financial instruments. In general, the letters from Congress express concern that the draft rule is too broad and will limit student access to financial services. For example, in a July 17 letter from Congressman Luetkemeyer (R-MO), Senator Hoeven (R-ND), and 40 other lawmakers, including six Democrats, the members expressed concern that the DOE proposal could cover any account held by a student or a parent of a student if the financial institution had any arrangement, however informal, with a school and regardless of when or why the account was opened. The members support efforts to protect students from abuses made in disbursing student aid, but ask the DOE to tailor the rule such that it could not be construed so broadly as to restrict students’ access to financial services. Earlier this year, another group of lawmakers called on the DOE to “mandate contract transparency, prohibit aggressive marketing, and ban high fees when colleges partner with banks to sponsor debit cards, prepaid cards, or other financial products used to disburse student aid.”
Senate Confirms HUD Secretary
On July 9, the Senate voted 71-26 to confirm Julian Castro to serve as HUD Secretary. The former San Antonio, Texas mayor will replace Shaun Donovan, who the Senate subsequently confirmed to lead the Office of Management and Budget.
Supreme Court Holds President May Make Recess Appointments During Intra-Session Recesses Of Sufficient Length
On June 26, the Supreme Court rejected the federal government’s challenge to a January 2013 decision by the D.C. Circuit that appointments to the National Labor Relations Board (NLRB) made by President Obama in January 2012 during a purported Senate recess were unconstitutional. NLRB V. Noel Canning, No. 12-1281, 2014 WL 2882090 (U.S. Jun. 26, 2014). A five-member majority of the Court held that Presidents are permitted to exercise authority under the Recess Appointments Clause to fill a vacancy during both intra-session and inter-session recesses of sufficient length, and that such appointments may fill vacancies that arose prior to or during the recess.
The Court determined that the phrase “recess of the Senate” is ambiguous, and that based on the functional definition derived from the historical practice of past presidents and the Senate, it is meant to cover both types of recesses. Further, the court held that although the Clause does not indicate how long a recess must be before a president may act, historical practice suggests that a recess less than 10 days is presumptively too short. The Court did not foreclose the possibility, however, that appointments during recesses of less than 10 days may be permissible in unusual circumstances. The Court also validated the Senate’s practice of using pro forma sessions to avoid recess appointments, holding the Senate is in session when it says it is, provided it retains capacity to conduct business. Because the Senate was in session during its periodic pro forma sessions, and because the recess appointments at issue were made during a three-day recess between such sessions, the appointments were invalid.
A minority of the Court concurred in the judgment, but endorsed a narrower reading of the President’s authority to make recess appointments and the Senate’s ability to avoid triggering the President’s recess-appointment power. Writing for that minority, Justice Scalia explained that the plain constitutional text limits the President’s recess appointment power to filling vacancies that first arise during the recess. The minority reading of the Clause also limits the President’s recess appointment power to recesses between legislative sessions, and not intra-session ones. CFPB Director Richard Cordray was appointed in the same manner and on the same day as the NLRB members whose appointments were at issue in this case, but was subsequently re-nominated and confirmed for the position. He later ratified CFPB actions taken during the period he served as a recess appointee.
Senate Banking Committee Leaders Seek Regulators' Views On Virtual Currencies
On May 19, the Senate Banking Committee’s chairman and ranking member, Senators Tim Johnson (D-SD) and Mike Crapo (R-ID), sent a letter to the leaders of the Treasury Department, the SEC, the CFTC, the OCC, the FDIC, and the Federal Reserve Board regarding recent developments in the use of virtual currencies and their interaction with the global payment system. The Senators ask the regulators a series of questions related to the role of virtual currencies in the U.S. banking system, payment system, and trading markets, and the current role of federal regulators in developing local, national, and international enforcement policies related to virtual currencies. The Senators also seek the agencies’ expectations on virtual currency firms’ BSA compliance, and ask whether an enhanced regulatory framework for virtual currencies is needed.