In this week’s roundup, MMG examines the latest discussions around the Volcker rule, the Senate’s efforts to roll back regulation in a precedent-setting move, and a Supreme Court hearing over whether state governments can compel retailers based outside their state to collect sales taxes.
Quarles Says Volcker Rule Hurts Capital Markets
The Volcker rule isn’t working very well, according to Randal Quarles, the Federal Reserve’s vice chairman for supervision, as reported by the Business Times. Quarles, who oversees the Federal Reserve’s supervision of banks, spoke before Congress about the rule, a provision of the 2010 Dodd-Frank Act that prevents banks from making investments in certain vehicles, such as hedge funds and private equity funds.
“There is an excessive burden as a result of the Volcker rule, a great deal of uncertainty and a great deal of cost,” he said.
Last Friday, the House of Representatives voted on a bill to make the Volcker rule enforceable only by Federal Reserve. Nearly all Republicans and 78 Democrats voted in favor of the bill. The bill would remove the ability of the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodities Futures Trading Commission to enforce any Volcker rule violations, creating an easier path for repealing the rule in the future.
“There is an excessive burden as a result of the Volcker rule, a great deal of uncertainty and a great deal of cost.”
Vice Chairman for Supervision, Federal Reserve
The bill would also exempt banks with under $10 billion in total assets and 5 percent or less in trading assets and liabilities—a provision which is included in the Senate Banking reform bill that MMG has reported on previously. It is currently stalled in the House of Representatives as Chairman Jeb Hensarling of the Financial Services Committee attempts to negotiate the inclusion of a variety of bipartisan bills his committee has passed in the last year.
Senate Sets Precedent on Regulatory Repeals
The Senate voted on Wednesday to repeal regulatory guidance issued by the Consumer Financial Protection Bureau under the Congressional Review Act—something that could set a precedent to allow the Republican-controlled Congress to repeal a variety of regulations, The Hill reports. The Congressional Review Act prevents a filibuster. It was previously thought that it could not repeal guidance. The ability to do so should significantly increase the ability of Congress to unwind regulations.
The regulation voted on was in regards to guidance by the CFPB intended to eliminate racial disparity in auto-financing, but it was used to justify a variety of other lawsuits against car dealers.
Supreme Court Hears Online Sales Tax Case
The Supreme Court heard one-hour arguments on the hot-button issue of whether states can force online retailers based outside their state (but selling to customers living in the state) to collect sales taxes, Reuters reports.
The original court case stems from a South Dakota lawsuit attempting to overturn a 1992 Supreme Court case that says that states can’t compel retailers to collect state sales taxes unless the businesses have a “physical presence” in the state.
The Supreme Court justices appear to be somewhat hesitant to enforce the taxes, favoring congressional action instead.
Ben Marsico is ACG Global’s manager of legislative and regulatory affairs.