House Financial Services Committee Sends PATH Act to the Floor
The House Financial Services Committee approved the Protecting American Taxpayers and Homeowners Act of 2013, also known as the PATH Act (H.R. 2767). The PATH Act now awaits consideration by the House. The housing finance reform bill includes provisions to wind-down the government sponsored enterprises (GSEs) and nearly eliminate the government guarantee on mortgages. The PATH Act differs substantially from a bipartisan bill titled the Housing Finance Reform and Taxpayer Protection Act, sponsored by Sens. Bob Corker (R-TN) and Mark Warner (D-VA) (S. 1217). Progress on the Corker-Warner bill has been slower in the Senate Banking Committee, as the Committee’s Chairman Tim Johnson (D-SD) has emphasized the need to reform the Federal Housing Administration (FHA) before housing finance and GSE reform can be addressed.
Senate Banking Committee Takes up FHA Reform
The Senate Banking Committee has taken up discussion of the draft FHA Solvency Act of 2013. During a hearing on the proposed legislation, FHA Assistant Secretary Carol Galante made several requests for changes to the bill such as increased FHA authority to transfer servicing to another servicer, and additional flexibility regarding the mandatory premium increases during times the capital reserve ratio falls below required levels. The committee is expected to markup the bill before the August recess.
Lawmakers Turn Attention to Banks’ Involvement in Commodities and Warehousing
Following a June 20 New York Times article, there has been increased interest among lawmakers regarding the involvement of banks and financial institutions in the commodities markets. Last Tuesday, July 23, the Senate Banking Subcommittee on Financial Institutions and Consumer Protection held a hearing on whether banks should be allowed to control warehouses, pipelines and other infrastructure used to store and transport essential goods. Several senators have demanded further investigation or an end to the practice all together. The Commodity Futures Trading Commission (CFTC) is now gathering information on these warehouse operations.
This Week’s Hearings:
- Tuesday, July 30: The Senate Banking Committee will hold a hearing titled “Mitigating Systemic Risk in Financial Markets through Wall Street Reforms.” Securities and Exchange Commission (SEC) Chairman Mary Jo White and CFTC Chairman Gary Gensler will testify.
Executive Branch Activity
Deputy Treasury Secretary Steps Down
Department of Treasury (DOT) Deputy Secretary Neal Wolin announced he will end his tenure in August. Deputy Secretary Wolin has played a key role on President Obama’s financial team and was an important figure in formulating the Administration’s response to the 2008 financial crisis, including being a strong advocate of the Dodd-Frank Act.
Detroit Declares Bankruptcy
On July 18, under the direction of emergency manager Kevyn Orr, the city of Detroit filed for Chapter 9 bankruptcy, making it the largest municipality to ever file for bankruptcy in the U.S. Mr. Orr estimates Detroit’s long-term debts at $18 billion. Although Mr. Orr has proposed a plan for restructuring, it is unclear how the bankruptcy will play out.