The Commodities Futures Trading Commission has been urged to strengthen derivatives rules in regulating the international derivatives market. A group of six senators called on the CFTC to hold U.S.-based financial firms and their foreign subsidiaries to the same accountability standards by utilizing U.S. reporting and regulatory requirements.

Senators Sherrod Brown (D-Ohio), Carl Levin (D-Mich.), Tom Harkin (D-Iowa), Elizabeth Warren (D-Mass.), Jeff Merkley (D-Ore.), and Dianne Feinstein (D-Calif.) joined in the letter to CFTC Chairman Gary Gensler. "A wide range of offshore and cross-border transactions in swaps, including swaps where one of the counterparties is a foreign branch, foreign subsidiary, or foreign affiliate of a U.S. financial institution, have a direct and significant effect on the U.S. economy and financial stability," the senators wrote.

The Federal Reserve Board is doing many things to address the issue of too-big-to-fail banks, Fed Chairman Ben Bernanke told the Joint Economic Committee on May 22, 2013. According to Bernanke, the reintroduction of Glass-Steagall type restrictions would not help the problem. "Glass-Steagall is not the solution because as we saw in the crisis, investment banks and commercial banks separately got into serious trouble," he asserted. "We're doing a lot of things...to move in the right direction toward addressing too-big-to-fail," Bernanke asserted.

During the hearing, Sen. Pat Toomey (R-Pa.) asked Bernanke whether Section 716 of the Dodd-Frank Act, which requires banks to execute swaps in an affiliate outside of the bank, should be amended. Bernanke responded, "Yes. The Federal Reserve had concerns about this prior to the enactment of the law and we still have concerns about it."

Looking at the broader economic outlook, Bernanke cautioned that a premature tightening of monetary policy could lead to a temporary rise in interest rates, as well as a "substantial risk" of slowing or ending the economic recovery and causing inflation to fall further. "Renewed economic weakness would pose its own risks to financial stability," Bernanke said. He added that the Fed is working to address financial stability concerns through increased monitoring, a more systemic approach to supervising financial firms, and the ongoing implementation of reforms to make the financial system more resilient.

• Opening statement of Rep. Kevin Brady (R-Texas).

• Bernanke statement.

• Sen. Pat Toomey (R-Pa.) release.

Treasury Secretary Jacob Lew told Congress that important work remains to be done to complete the implementation of financial reform, including strengthening of coordination both domestically and internationally. Appearing before the House Financial Services Committee May 22, 2013, Lew said the Financial Stability Oversight Council supports the development of policies that mitigate regulatory arbitrage and address regulatory gaps primarily through members' engagement with the G-20 and the Financial Stability Board.

Committee Chairman Rep. Jeb Hensarling (R-Texas) pointed to a recent Government Accountability Office finding that the FSOC has not developed a structure that supports having a comprehensive process for identifying emerging threats. The GAO study concluded that the FSOC faces challenges in achieving its mission and that continued actions are needed to strengthen the accountability and transparency of decisions and activities. At a March 14, 2013, hearing the GAO reported that collaboration among FSOC members can be challenging as almost all members represent independent agencies that retain existing authorities.

• Opening Statement of Rep. Jeb Hensarling (R-Texas).

• Opening Statement of Rep. Maxine Waters (D-Calif.).

• Testimony of Jacob J. Lew, Secretary of the Treasury.

• Committee memorandum.

In implementation of the Dodd-Frank Act, the Federal Housing Finance Agency is proposing to remove a number of credit rating references and requirements in certain safety and soundness regulations affecting the Federal Home Loan Banks and to adopt new provisions that would require the FHLBanks to apply internal analytic standards and criteria to determine the credit quality of a security or obligation, subject to FHFA review. According to the FHFA, it recognizes, as have the other federal regulatory agencies, that existing references to credit ratings generally serve several regulatory purposes including those related to capital adequacy, investment acceptability, risk assessment, and disclosure. 

The annual report of the Financial Stability Oversight Council will be presented May 22, 2013, to the Financial Services Committee, according to a committee blog post. The Dodd-Frank Act created the FSOC to identify risks to U.S. financial stability, promote market discipline by eliminating the expectation of government bailouts, and respond to emerging threats. The FSOC annual report to Congress details its activities, significant financial market and regulatory developments, potential emerging threats, systemically important financial institution designations, recommendations for resolving jurisdictional disputes, and recommendations.

A provision in the Dodd-Frank Act that requires public companies to disclose their use of minerals that originated in the Democratic Republic of the Congo has not stopped the violence in that country and is having serious consequences for the local population, the House Subcommittee on Monetary Policy and Trade heard May 21, 2013. Dodd-Frank Section 1502 requires companies to certify to the Securities and Exchange Commission that they are not purchasing so-called conflict minerals from the DRC. Witnesses at the hearing pointed to the re-emergence of militia groups and the fact that companies that want to remain responsibly engaged in Central Africa now face increased regulatory burdens and costs as evidence that section 1502 has had unintended consequences.

• Opening statement of Rep. John Campbell (R-Calif.).

• Testimony of David Aronson, Freelance Writer, Editor of congoresources.org.

• Testimony of Mvemba Phezo Dizolele, Visiting Fellow, Hoover Institution on War, Revolution and Peace.

• Testimony of Rick Goss, Senior Vice President of Environment and Sustainability, Information Technology Industry Council.

• Testimony of Sophia Pickles, Policy Advisor, Global Witness.

• Committee memorandum.

Treasury Secretary Jacob Lew told Congress that he has "stepped on the accelerator" with regard to Dodd-Frank Act implementation and that progress needs to be measured in weeks and months rather than months and years. Appearing May 21, 2013, before the Senate Banking Committee, Lew told lawmakers that "I have made it a matter of enormous priority for me personally to be driving this process...I have actually stepped on the accelerator." Lew added that he has gone to all of the regulators and said that this is more than just a question of implementing Dodd-Frank, "this is a question of public trust in the government's ability to implement important policy that it said it's going to implement."

 • Opening statement of Sen. Tim Johnson (D-S.D.).

 • Opening statement of Sen. Mike Crapo (R-Idaho).

 • Testimony of Jacob J. Lew, Secretary of the Treasury.

 • Sen. Sherrod Brown (D-Ohio) release.

The Consumer Financial Protection Bureau defended its ability-to-repay/qualified mortgage amendments to Reg. Z—Truth in Lending (12 CFR 1026) against Congressional claims that it will restrict consumer access to mortgage credit. The bureau emphasized instead that the rule was written to provide appropriate consumer safeguards without becoming a "straightjacket." At a May 21, 2013, hearing of the House Financial Institutions and Consumer Credit Subcommittee, Chairman Shelley Moore Capito (R-W.Va.) expressed concern that "this approach of 'Washington knows best' will harm the very people that the rule seeks to help: borrowers who are on the fringe of lacking access to mainstream financial services."

CFPB Assistant Director for Regulations Kelly Thompson Cochran sought to reassure Capito by noting that when the CFPB issued its final qualified mortgage rule it also issued proposals to make certain additional adjustments, including potential exceptions for the low-to-moderate income population. Cochran explained that the final rule also includes adjustments designed to address concerns raised by smaller institutions, such as treating certain balloon-payment loans as qualified mortgages if they are originated and held in portfolio by small creditors operating predominantly in rural or underserved areas. "We are very sensitive to concerns about how this rule will impact small institutions. That's one of the main reasons we went back out for comment to continue to consider how the different parts of the rule were going to influence smaller institutions," Cochran said.

• Opening statement of Rep. Shelley Moore Capito (R-W.Va.).

• Testimony of Peter Carroll, Assistant Director for Mortgage Markets, and Kelly Thompson Cochran, Assistant Director for Regulations, Consumer Financial Protection Bureau.

• Financial Services Committee release

• Committee memorandum

To be a qualified written test under the Secure and Fair Enforcement for Mortgage Licensing Act, the test developed by the Nationwide Mortgage Licensing System and Registry (NMLSR) must include questions covering all the required areas, including state laws and regulations, according to guidance issued by the CFPB. The guidance responds to questions about whether states may use the Uniform State Test developed by the NMLSR as part of a qualified written test under the SAFE Act.

According to the bureau, this requirement may be met through the use of a compliant Uniform State Test, or a separate test for each state covering the particular laws and regulations of that state, and a National Test Component developed by the NMLSR.  The CFPB notes that presenting test questions through a Uniform State Test rather than a separate state test component would not preclude the test from being a qualified test under the SAFE Act, so long as all the requirements for a qualified test are satisfied.  

A divided panel of the U.S. Court of Appeals for the Third Circuit has ruled in NLRB v. New Vista Nursing and Rehabilitation that a National Labor Relations Board panel lacked the requisite number of members to exercise the NLRB's authority because one panel member was invalidly appointed during an intrasession break. This latest ruling, along with the Jan. 25, 2013, decision by the U.S. Court of Appeals for the District of Columbia in Noel Canning v. National Labor Relations Board, as well as the Obama Administration's petition for certiorari with the Supreme Court seeking reversal of the D.C. court's decision, further clouds the January 2012 recess appointment of Richard Cordray as Director of the Consumer Financial Protection Bureau and the actions taken by the bureau during Cordray's recess appointment.

Sen. Mike Johanns (R-Neb.) responded to the ruling by calling on appointed NLRB and CFPB members "to immediately vacate the offices." Johanns also sent letters to the appointees. Although Johanns projected that as a result of the ruling the actions of the NLRB and CFPB "are likely void and subject to litigation," a report by the Congressional Research Service noted that if a court invalidated Cordray's recess appointment and determined that every rulemaking and enforcement action conducted under the direction of Cordray was done without proper legal authority, that does not necessarily mean those actions are void. The report went on to say that "many of the substantive actions taken while Cordray was at the helm were exercises of transferred authorities that the [Treasury] Secretary could have authorized had he been serving as interim director pursuant to [Dodd-Frank Act] section 1066(a)" and the Treasury Secretary may be permitted to validate some of the bureau's past actions through the doctrine of ratification.