Federal Reserve Chair Janet Yellen is not the only one who disapproves of a bill that calls for more transparency from the Fed. Now the White House is threatening to veto that bill as well as another piece of legislation that would allow loans in portfolio to qualify for an exemption under the Consumer Financial Protection Bureau (CFPB)'s qualified mortgage (QM) rule. Both bills passed in the House on Wednesday.
Yellen wrote a letter to Speaker of the House Paul Ryan and House Democratic leader Nancy Pelosi on Tuesday exhorting them to reject H.R. 3189, known as the Fed Oversight Reform and Modernization (FORM) Act, which passed in the House on Wednesday with bipartisan support with a vote of 241 to 185. The bill passed in the House Financial Services Committee by a 33-25 vote on July 29.
The FORM Act requires the Fed to transparently communicate its monetary policy decisions to the American people by requiring the Fed to generate a monetary policy strategy of its own choosing, in order to provide the American people with more transparency about the factors that lead to the Fed’s monetary decisions. The Act would also eliminate the restrictions on the Government Accountability Office’s ability to audit the Fed, allowing the GAO to conduct an audit of the Fed anytime there is a policy change. The bill is sponsored by Rep. Bill Huizenga (R-Michigan), who is the House Monetary Policy and Trade Subcommittee Chairman.
“Subjecting the Federal Reserve's exercise of Monetary policy authority to audits based on political whims of members of the Congress—of either party—threatens one of the central pillars of the Nation's financial system and economy, and would almost certainly have negative impacts on the Federal Reserve's work to promote price stability and full employment,” the White House said in its Statement of Administration Policy released this week. “H.R. 3189 also would impose numerous, burdensome requirements for the Federal Reserve Board rulemaking authorities, including the imposition of a duplicative requirement that the Federal Reserve Board undertake a proscriptive cost-benefit analysis and a post-adoption impact assessment when promulgating rules.”
The White House concluded the statement by saying, “If the President were presented with H.R. 3189, his senior advisors would recommend that he veto the bill.”
H.R. 1210, known as the Portfolio Lending and Mortgage Access Act, passed in the House on Wednesday with bipartisan support by a 255 to 174 vote. The bill is sponsored by Rep. Andy Barr (R-Kentucky) and will provide a common sense, flexible approach that allows residential mortgage loans held in portfolio to qualify for a safe harbor equivalent to that of the CFPB’s Qualified Mortgage rule. H.R. 1210 will allow community banks to meet the credit demands of consumers, while incentivizing that banks and credit unions ensure the borrower can meet the monthly obligations of a mortgage.
“It should not be the job of Congress or unelected and unaccountable Washington regulators to decide who gets a mortgage and who does not, or to force community banks and credit unions to function like regulated utilities, issuing only plain-vanilla mortgages rubber-stamped in Washington,” House Financial Services Committee Jeb Hensarling (R-Texas) said. “This common sense legislation recognizes that the most effective way to ensure that a borrower has the ability to repay is not a one-size-fits-all, top-down regulation from Washington that mandates the terms of loans and underwriting practices.”
The White House was critical of H.R. 1210, saying that it would “undermine critical consumer protections by exempting all depository financial institutions, large and small, from QM standards—including very basic standards like verifying a consumer's income—as long as the mortgage loans in question are held in portfolio by the institution.”