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Waters Remarks on Regulatory Relief and Capital Markets Legislation

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Washington, DC, November 14, 2013 | comments

Financial Services Committee Holds  Markup of Five Bills

Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, delivered the following remarks as part of a Committee markup on five pieces of legislation aimed to assist small businesses and provide relief to small financial institutions. 

In her statement, Waters applauded the bipartisan manner in which the Committee worked to ensure regulatory relief for small financial institutions, though expressed regret over the fact that a more comprehensive regulatory relief package has not yet been considered. As several of the bills considered today require implementation by the Securities and Exchange Commission, she called for the Commission’s full funding, which has been significantly undermined by sequester cuts.

Finally, Waters urged the Committee to continue working in a bipartisan fashion as it prepares to address several other important matters in the near future. 

Her full remarks are below.

As prepared for delivery:

Thank you, Mr. Chairman.

I am pleased that today this Committee considers five pieces of legislation related to capital markets and financial institutions.

After weeks of uncertainty caused by the government shutdown, Congress has a responsibility to provide small businesses and financial institutions with some clarity – and clear direction for the future.

The first two items are part of a larger, more comprehensive regulatory relief package for small financial institutions. Mr. Chairman, you and I have worked closely in negotiating these measures.

I am proud we were able to iron out our differences in a bipartisan manner that provides relief to our credit unions and community banks. However, I remain concerned that we are not taking up these bills as part of a larger package.

The two we consider today include H.R. 3329, which would raise the qualification threshold in the Federal Reserve’s Small Bank Holding Company Policy Statement from $500 million to $1 billion. It would provide capital relief for 550 small banks and affords certain small banks with reduced capital relief if they do not participate in activities deemed risky by the Federal Reserve.

Second is the Credit Union Share Insurance Fund Parity Act. This legislation would provide parity between credit unions and banks regarding deposit insurance coverage of Interest on Lawyer Trust Accounts – known as IOLTAs – as well as similar escrow accounts, including, but not limited, to real estate escrow accounts, funeral trusts and other escrows.  

Mr. Chairman, I believe these bills are a strong step in the right direction and I look forward working with you to ensure the swift passage of the remaining small bank and credit union regulatory relief bills.

In addition, we are considering three capital markets measures that attempt to help small businesses. I hoped we would be able to address a few outstanding issues in today’s markup, but I’m concerned that at least one of these bills may suffer from a failure to work across the aisle.

In particular, I’m concerned about H.R. 1800.  I’d like to point out that this bill is nearly identical to legislation that has been twice introduced by Congresswoman Nydia Velazquez, Ranking Member on the Small Business Committee, who has been a leader on this issue. Her bill – like this one – would make regulatory changes to Business Development Companies (BDCs) – a special type of mutual fund that primarily invests in and provides management advice to private companies and small public companies. 

H.R. 1800 permits BDCs to increase their allowable leverage and their ability to issue new classes of preferred stock without providing any protections to retail investors. 60 percent of BDC stock is owned by these individual investors. The bill also permits BDCs to own investment advisers and streamlines their registration process.

There have been several concerns raised by Securities and Exchange Commission Chair Mary Jo White, state securities regulators, the Consumer Federation of America and the BDCs themselves – regarding issues as diverse as the need for limits on a BDC increasing its leverage, investor protections and caps on issuing preferred stock, and mitigation of potential conflicts of interest.

Representative Maloney will offer an amendment to address these concerns, but it looks like it is likely to be defeated. If these concerns are not addressed, I fail to see how this bill can become law.

Thankfully some bills can be bipartisan. HR 2274 would require small mergers and acquisitions – or M&A brokers, such as certain real estate agents, to file with the SEC in a streamlined notice registration process.  However, it is our understanding that the SEC would prefer to exempt these M&A brokers from registration. We are supportive of a substitute amendment that would accomplish this.

Finally is H.R. 3448, which would create a pilot program for smaller, Emerging Growth Companies that would have their stocks be quoted and traded in increments of five and ten cents, instead of the penny increments that exist today. I understand that both Mr. Carney and Ms. Sinema will offer constructive amendments to improve the pilot program, and I support both amendments.

Mr. Chairman, this markup, in part, demonstrates how addressing complicated regulatory issues on a bipartisan basis can benefit businesses and grow the economy.  I hope it will set the precedent necessary to address several other important issues soon coming before this Committee. These include the renewal of the Terrorism Risk Insurance Act, the reauthorization of the Export-Import Bank and important changes needed to address problems with the implementation of the National Flood Insurance Program.

And finally, I’d like to mention that as several the bills before us today require implementation by the SEC – which has been significantly undermined by sequester cuts. Current SEC funding is insufficient to meet its mandate to protect investors, grow capital and ensure that U.S. capital markets remain the world leader.  It is nothing more than critical that the SEC be provided full funding to carry out this role – particularly since it does not cost the taxpayers a dime.

Thank you, Mr. Chairman, I yield back.


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