Analysis: Gutting the Dodd-Frank Financial Reform Law Won't Help the Budget



Since the passage of the landmark Dodd-Frank Act in 2010, several leading members of Congress have been gunning to repeal or substantially alter the financial reform law, but have been unable to do so for lack of sufficient support, particularly in reaching the 60-vote threshold in the Senate. Now, a new opportunity arises via a much different route: the annual budget and reconciliation process, where “germane” policy changes can be achieved with just a simple majority, according to an analysis in The Hill today. If it sounds a bit peculiar to change banking law through the budget process, it is, especially given that the expected budget “savings” from such changes are illusionary. The Congressional Budget Office assumes that, over the next 10-year budget window, bank failures will occur, requiring the FDIC to draw funds from the Treasury. The resulting repayment from the resolved or disposed institution, and the mandatory supplemental payment by the industry, wouldn’t occur until years 11 and beyond. Given these arbitrary budget scoring assumptions, the orderly liquidation authority appears to generate approximately $14 billion in budget outflows. But in fact, the orderly liquidation authority does not entail any net budget cost to the U.S. Treasury or the American taxpayer if viewed over a slightly longer time horizon. The billions in assumed budget savings is an illusion based simply and superficially on the arbitrary timing of Treasury outflows and inflows within the 10-year budget window, according to the analysis. The orderly liquidation authority is designed and mandated by law to function as a budget-neutral tool that protects taxpayers and safeguards our financial system in a time of crisis. Eliminating the authority will generate zero real savings for taxpayers.

Student Loan Forgiveness Has Halted Under Trump



The U.S. Education Department has not approved any applications for student loan forgiveness in cases of possible fraud since President Trump took office, according to records sent to an Illinois senator, the Associated Press reported yesterday. Democratic Sen. Richard Durbin released those records yesterday and blasted the department for its inaction and for a June decision to delay and rewrite Obama-era rules that would have made it easier for students to get loans forgiven if they were deceived by their schools. “This response shows that while the Department of Education has illegally delayed the new borrower defense rule, it has also stopped processing federal student loan relief under current regulations for tens of thousands of defrauded borrowers,” Durbin said. Under President Obama, the department approved more than 28,000 claims for loan forgiveness from former students of Corinthian Colleges, a chain of for-profit colleges that closed in 2015 amid accusations that it falsified job-placement data and altered student grades. But in the letter responding to Durbin’s questions, Acting Under Secretary James Manning wrote that “no borrower defense applications have been approved between Jan. 20, 2017, and today.” The records also revealed that the department has continued to receive new applications from borrowers who say they were victims of fraud, mostly from Corinthian borrowers and from former students of ITT Technical Institute, a chain that closed last year. The number of new applications is likely to swell even further, experts say, amid a campaign by many state attorneys general to notify students who might be eligible for loan relief.

Markets 'Somewhat' Doubtful that the Fed Will Hike Rates Again This Year



Investors have another reason to be skeptical that the Federal Reserve can stick to its rate-hiking forecast in the face of subdued inflation, the Wall Street Journal reported today. The Fed’s rate-setting committee kept interest rates steady when it met yesterday and said it expects to start shrinking its more than $4 trillion bond portfolio “relatively soon.” Markets took cues instead from a subtle tweak to language in the Fed’s policy statement describing recent readings on inflation, saying inflation measures “have declined” and are “running below 2%.” This suggests that the Fed sees inflation as more entrenched and less transitory than it did in June, when it said inflation had “recently declined” and was “somewhat below” 2%. Economists were quick to point out that the Fed made no changes to the wording of its economic outlook, perhaps muddying the significance of the inflation edits. What’s clear is that markets are focused far more on the rate path than on the fact that the Fed is ready to pare back its massive bond portfolio, an action that also has potential to tighten financial conditions.

Participate in Next Consumer Commission Meeting on Sept. 15 at NABT



The Committee on Chapter 7 of the ABI Commission on Consumer Bankruptcy will hold a public meeting during the National Association of Bankruptcy Trustees (NABT) on September 15 from 12:30 to 2:00 PM in the Marriott New Orleans in New Orleans, Louisiana. For more information, including submission guidelines, please click here.



A list of topics under consideration by the Commission is available on the Commission’s website at https://consumercommission.abi.org/. To submit any comments or suggestions for the Commission, please e-mail consumercommission@abiworld.org.



Read available written testimony from the 7/15 open meeting at NACTT’s annual seminar by clicking at the bottom of this page (linked by name).

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