WASHINGTON–A preview of how congressional oversight of financial institution regulators might change in the next Congress was apparent during a Senate Banking Committee hearing on Tuesday at which NCUA was both criticized and praised.
While the Democrats will retain control of the Senate regardless of the vote in the Georgia senate run-off, the House will most likely be under GOP control when the 118th Congress convenes in January. And that means a change in committee leadership.
During a hearing in the Senate titled “Oversight of Financial Regulators: A Strong Banking and Credit Union Systems for Main Street,” Sen. Pat Toomey (R-PA) raised concerns around several issues related to financial regulation, including what he said is regulators weighing in on issues that are not their purview, including climate change and environmental, social and governance (ESG) issues.
That represents the kind of focus change likely to take place in the House.
In his opening remarks, Toomey cited NCUA as among the agencies that have offered direction to the institutions they regulate related to climate change and risk.
Toomey said some regulators have been “misusing their powers to allocate capital away from traditional energy companies. But addressing global warming requires really difficult political decisions that involve trade-offs and in a democratic society these kinds of tradeoffs have to be made by elected and accountable representatives, representatives of the American people who are held accountable through the political process.”
‘Dubious Rules’
Toomey praised FDIC Vice Chairman Michael Barr for stating during his nomination hearing that the Fed “should not be in the business of telling financial institutions to lend to a particular sector or not to lend to a particular sector.”
“I urge him to keep to that commitment and one way we could do that is by pulling the Fed out of the politically contentious issue of global warming,” Toomey stated. “Federal banking regulators have also been preoccupied in some cases with establishing new rules, the need for which have been dubious…”
Toomey told the hearing “some regulators seem to think that benefits of new regulations always outweigh the cost, but we know that regulation is not without cost and as regulation increases financial activities will continue to migrate out of the banking system as they have been doing in recent years, and while some of our banking regulators have been distracted they failed to address real challenges facing the financial system.
As an example, Toomey cited the Fed, the OCC and the FDIC for failing to provide greater clarity around the involvement of banks in crypto activities, including providing custody services or issuing stablecoins. While those agencies dither, Toomey said, there have been several high-profile collapses of crypto companies, including FTX within the last week.
Praise for NCUA
Toomey praised NCUA for not allowing itself to be pressured by outside parties to stay out of crypto regulations, and for issuing guidance for credit unions on partnering with crypto companies and for using distributed ledger technologies.
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