Maxine Waters to Keep 'Watchful Eye' on Regulators

Rep. Maxine Waters, D-Calif. (Photo: Bloomberg)

Ensuring there's a strong Consumer Financial Protection Bureau, keeping a "watchful eye" on financial regulators as well as ensuring the big banks are adhering to Dodd-Frank rules top House Financial Services Committee Chair Maxine Waters' priorities in the new year.

During a speech Wednesday at the Center for American Progress, the California Democrat said that she would ensure financial regulators "are carrying out their statutory duties, including holding bad actors accountable," as well as work "diligently to undo the damage" that Mick Mulvaney "has wrought during his time" as director of the CFPB. (He was replaced by Kathy Kraninger in December.)

Waters said she plans to reintroduce soon her Consumers First Act, which she said "reverses many of [Mulvaney's] known harmful actions."

The committee, Waters stated, will also "be paying very close attention to the growth of financial technology, or so-called 'fintech' firms," adding that regulators "need to address the evolving financial marketplace appropriately."

Said Waters: "I have great hopes that fintech firms can open up opportunities for those who have been excluded from access to responsible credit, but I strongly believe that there must be strong protections for consumers of these financial products, and that abusive payday lending practices must not be allowed."

As the fintech sector grows, she continued, "there are opportunities for unmet credit needs to be addressed, as well as risks that minority communities may be preyed upon or discriminated against by some of these companies."

She'll also ensure that safeguards put in place by the Dodd-Frank Act — such as "robust reforms for our largest and most complex financial institutions," the Financial Stability Oversight Council and the Volcker Rule — stay intact.

"All of these reforms were designed to help prevent a future financial crisis," Waters said. "The committee will be paying close attention to whether financial regulators try to weaken these important reforms, and keeping an eye on the big banks and their activities, including by holding many hearings."

Indeed, Andy Friedman of The Washington Update told ThinkAdvisor that he expects Waters to focus on three areas: Subject large banks (particularly bad actors) to hearings and scrutiny; slow progress of deregulation; and require Securities and Exchange Commission officials to testify on the "weak" best-interest standard set forth in the agency's upcoming Regulation Best Interest for brokers.

"Waters likely will subpoena bank executives to appear at investigative hearings," Friedman said.

No hearings have been announced yet, Friedman notes, "in part due to the government shutdown."

"Waters can't get legislation to increase bank regulation through the Senate, nor does she have the power to require the [Trump] administration to reverse its deregulation initiative," Friedman continued. "Neither can she force the SEC, an independent entity, to change its 'best interests' proposal."

However, Waters "can effectively stop further action by tying up administrative officials in oversight hearings that require extensive preparation and lengthy testimony."

That said, "if the grilling of bank officials reveals their company has acted badly, the institution could be subject to regulatory scrutiny, fines and forced executive changes, likely prompting a decline in the company's stock price," Friedman opined.

"If the malfeasance is widespread and egregious, hearings could rattle the entire financial services sector, reducing equity values. The more widespread the problems, the greater the presumed adverse effect, accentuating sector volatility."

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