James Setterlund

ATR Submits Comments on FHFA’s Capital Rule

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Posted by James Setterlund on Wednesday, September 9th, 2020, 12:38 PM PERMALINK

Last week, Americans for Tax Reform submitted comments to the Federal Housing Finance Agency on its proposed capital requirement rule. This rule sets minimum capitalization levels for Fannie Mae and Freddie Mac as the FHFA begins the process of ending its conservatorship of the Enterprises. Ending conservatorship will help remove the explicit burden of loss from the taxpayer, which can only be done by ensuring the Enterprises build up sufficient capital levels to protect against an economic downturn.

ATR broadly applauds the Agency’s leverage ratio requirement as well as the inclusion of credit risk transfers in the proposed framework. We believe the rule’s direction to raise the leverage ratio ensures the Enterprises will be able to cover potential losses from underlying mortgages in the event of a market downturn and acts in support of more technical risk-based requirements that are subject to error. The leverage ratio, in contrast to risk-based requirements, acts as a broad-based hedge of risk and ensures the Agency fulfills its mission to withstand housing market downturns and give countercyclical support to the mortgage market. That is, strength when the broader economy and housing market is weak.

ATR emphasized the need to incrementally step-up capital requirements like the leverage ratio slowly, rather than rapidly as suggested in the proposed rule. Structuring an onramp would give the Enterprises necessary time to phase in changes and help preserve the CRT market, which is also an essential countercyclical balance for the Enterprises. The CRT market has become a central mode through which the Enterprises manage the risk it assumes in the mortgage market. We advise against requirements to curb CRT in order to support the continued stability of the Enterprises.

CRT effectively serves as a buffer to protect taxpayers from the underlying risks of the mortgage market by selling credit risk to private capital markets and reinsurers. This shrinks the extent to which the Enterprises can suffer losses on mortgage defaults and places private capital in front of taxpayer liabilities in the event of a market downturn. By issuing CRT, the Enterprises limit their risk levels as they continue to take on mortgage risk, serving both their mission to foster a strong mortgage market and limit the exposure to the taxpayer from needing to bailout the Enterprises again.

While the success of the CRT program within conservatorship for both Enterprises and market participants is indisputable, the path toward independence must still include capital buffers and ratio requirements. Maintaining support of the rule and cognizance of CRTs’ benefit, ATR indicated its wish to see the FHFA study the economic impact of the CRT market before definitively deciding to curb its use, as any increase in capital requirements would necessitate. Preserving the CRT market is vital to any finalized capital requirements rule.

Read the full letter here.

Photo Credit: F Delventhal


ATR Leads Coalition to Prevent Further Expansion of the Durbin Amendment

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Posted by James Setterlund on Monday, May 24th, 2021, 9:17 AM PERMALINK

Recently, a group of free-market organizations, led by Americans for Tax Reform Presidents Grover Norquist, sent a letter to Senate Banking Committee and House Financial Service Committee leadership opposing further attempts to expand the Durbin Amendment. Retail trade associations have continued to ask for further carve outs and price controls from payment businesses at the expense of customer's financial choices and security.

The Durbin Amendment was a last-minute addition to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The amendment created payment routing mandates and instructed the Federal Reserve to imposed price controls on debit card interchange fees. These fees are collected at the point of sale, whether in-store or online, by banks and credit unions when payments are made using a debit card. These fees help fund innovation in the payment infrastructure, fraud and security protection, and customer service support.

The retail trade associations and Sen. Dick Durbin (D-Ill.), promised that the amendment would allow retailers to cut prices on their products, allowing consumers to benefit from these savings. A Federal Reserve study demonstrates in the following years after Dodd-Frank’s enactment, “all but 1 percent of retailers either raised prices or kept them level after Durbin.” A separate 2017 study found that “the overall adverse effect of the Durbin Amendment on lower-income consumers was approximately $1-3 billion per year.”

However, because of lost revenue, banks and credit unions have had to increase the costs of their financial services. According to the Richmond Federal Reserve, the Durbin Amendment has cost large banks $14 billion a year. Banks have recovered lost revenue by installing higher overdraft fees, increasing minimum balances, reducing access to free checking, eliminating debit card rewards, and charging higher maintenance fees. Hundreds of thousands of low-income households failed to receive lower retail prices as promised by retailer trade associations in exchange for inclusion of the Durbin Amendment in Dodd-Frank.

A decade after Dodd-Frank’s enactment, retail trade groups continue to ask Congress and federal regulators for further relief or to intervene in the payment card marketplace on the grounds of antitrust. However, robust competition exists in the marketplace for retailers to choose which payment routing network to use. Or retailers could choose to create their own co-branded credit cards that use the payment networks of their choice.

Additionally, if the Durbin Amendment expands to include credit cards, rewards programs enjoyed by millions who prefer to use credit cards will get rolled back without any guarantee of cost savings consistently promised from retailers. Republicans must continue to oppose the costly and ineffective expansion of the Durbin Amendment in the payment space.

Click here to view the letter or read below.

May 20, 2021

The Honorable Sherrod Brown,                The Honorable Patrick Toomey, Ranking

The Honorable Maxine Waters,                The Honorable Patrick McHenry, Ranking    

Dear Chairman Brown, Ranking Member Toomey, Chairwoman Waters and Ranking Member McHenry,

On behalf of the undersigned organizations representing millions of consumers, we write to express our opposition toward legislative and Federal Reserve efforts that expand the Durbin Amendment routing mandate, both of which would limit competition and choice in the debit and credit card marketplace. Retail trade associations have consistently lobbied for greater intervention from the Federal Reserve, including forcing market participants to allow competitors to free ride on their innovative technology, a clear and uncompensated governmental taking, given the misleading title of “interoperability.” Additionally, the harm demonstrated from the Durbin Amendment is shown in the Federal Reserve’s own data, and we oppose further attempts to expand the Durbin Amendment to credit cards.

As organizations working to advance free-market policies to benefit every part of the American economy, we sympathize with businesses that have struggled due to the COVID-19 pandemic, and support policies to bring them regulatory and tax relief. We object, however, to policy actions proposed in the name of “relief” that benefit some businesses by massively raising costs on other businesses and consumers.

The Durbin Amendment was a last minute provision included in the Dodd-Frank Wall Street Reform and Consumer Protection Act which mandated price controls on interchange fees for transactions using debit cards. Since its passage, retail trade associations and some in Congress have searched for opportunities to expand the Durbin Amendment's reach to credit cards. Last year, the National Restaurant Association pushed for an unrelated expansion of the Durbin Amendment in any Covid-19 relief bill to cap credit card interchange fees. At the start of this year, Sen. Durbin (D-Ill.) supported antitrust measures to limit competition amongst payment providers and the services they offer.

The expansion of the Durbin Amendment is highly concerning and would directly harm consumers during the check-out process online and in-person. Any Durbin Amendment expansion to credit cards and the costs associated with such a policy will only serve to further limit consumer’s financial choices and could threaten $50 billion in rewards enjoyed by millions of consumers and retailers who use and accept rewards credit cards.

Retailer trade groups have continued to pressure Sen. Durbin and his Democrat colleagues to call for antitrust intervention by the Federal Reserve and Department of Justice to exercise greater control over the routing of transactions. Their calls are concerningly anti-competitive and misguided.

There are currently many options for retailers to choose for the routing of debit card payments. STAR, Accel, and Interac are some of the regional routing networks that retailers may choose to use to route debit card transactions if they do not wish to use debit card firms’ own networks. Retailers, however, have asked for the Federal Reserve to mandate that debit card firms allow the payment infrastructure of their proprietary networks to be used by these regional competitors. This request would allow some routing networks to free ride on the innovation of others while possibly comprising customer’s security at check-out. 

Retailers clearly have choices and may also opt to create their own co-branded credit cards that use the payment networks of their choice. To do so, retailers may partner with a bank to issue the credit card, allowing the partnering bank to process the transaction, rather than a specific card network.

In both debit and credit card availability, competition already exists, with consumers continuing to benefit from choice in the marketplace.

Unsatisfied, retail trade groups have now initiated a lawsuit against the Federal Reserve itself for supposedly not instituting a “reasonable and proportional” interchange fee to process a debit card transaction.

Purposefully left out of the retailers’ latest complaint is the retailer’s failure to live up to their promises to reduce the cost of items in exchange for the Durbin Amendment’s addition to Dodd-Frank. The retail groups also omit in their complaint the security protections and innovation interchange fees help facilitate. A 2017 study published by the International Center of Law and Economics found that “the overall adverse effect of the Durbin Amendment on lower-income consumers was approximately $1-3 billion per year.” Interchange fees help fund security technology services, anti-fraud programs, customer service help lines and infrastructure needed by banks to process thousands of transactions a day.

Retail trade associations have proven themselves relentless in their justification of shifting billions of dollars away from consumers and limit choice within the marketplace. Consumers stand to lose the most with further government intervention and can expect to see a loss of rewards points, transaction security, and higher costs at check-out. We, the undersigned organizations, oppose any further intervention in the debit and credit card marketplace and encourage all members of Congress to vote against future expansions of the Durbin Amendment, either by legislation or misguided Federal Reserve policymaking.

Sincerely,

Grover Norquist

President, Americans for Tax Reform

Brent Wm. Gardner

Chief Government Affairs Officer, Americans for Prosperity

Robert Romano

Vice President of Public Policy, Americans for Limited Government

Heather R. Higgins

CEO, Independent Women’s Voice

Jerry Theodorou,

Director, Finance, Insurance and Trade, R Street Institute

Adam Brandon

President, FreedomWorks

Pete Sepp

President, National Taxpayers Union

Andrew F. Quinlan

President, Center for Freedom and Prosperity

Phil Kerpen

President, American Commitment

John Berlau

Senior Fellow, Competitive Enterprise Institute

Maureen Blum

Executive Director, USA Workforce

Matthew Kandrach

President, Consumer Action for a Strong Economy

Ryan Ellis

President, Center for a Free Economy

George Landrith

President, Frontiers of Freedom

Tom Schatz

President, Council for Citizens Against Government Waste

Garrett Bess

Vice President, Heritage Action for America

Photo Credit: Blue Coat Photos


ATR Sends Letter Opposing Congressional Repeal OCC’s 2020 True Lender Rule

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Posted by James Setterlund on Wednesday, May 12th, 2021, 11:26 AM PERMALINK

Americans for Tax Reform released a letter to Senators opposing S.J.Res. 15, a joint resolution to invoke the Congressional Review Act and repeal the Office of the Comptroller of the Currency’s 2020 True Lender Rule. The rule established a regulatory framework for partnerships between financial technology businesses and banks to extend credit services and other financial service tools to millions of Americans.

The 2020 OCC True Lender Rule treats banks as the "true lender" when they appropriately identify themselves as the lender in loan agreements offered by financial technology businesses to meet the needs of consumers. Fintech businesses and their mobile phone applications have become popular with many consumers, especially during the Covid-19 healthcare emergency. Many fintechs do not have a national banking charter and often partner with financial institutions that do, allowing them to extend financial services to millions.

Senate Democrats opposed the rule, with Sen. Chris Van Hollen (D-Md.) introducing S. J. Res. 15 using the Congressional Review Act process to overturn the rule with a simple majority vote. Under the CRA, Congress has 60 legislative days after the final rule has been published in the Federal register to issues a resolution that disapproves and overturns a federal agency’s rules, preventing the agency from issuing a substantially similar rule in the future.

Along with the introduction of S. J. Res. 15, Sen. Van Hollen stated, “When this rule was finalized in October, I vowed to use every tool at our disposal to strike it down. Today, we’re one step closer to fulfilling that. We will not let this rule stand.”

However, with nearly 7 million Americans who remain unbanked and underbanked, the True Lender Rule provided legal certainty for many of these bank and fintech partnerships and mobile phone services that have been widely adopted by consumers. Sen. Van Hollen’s resolution will ultimately harm many of these same Americans who need access to affordable financial service products the most.

Americans for Tax Reform supports the innovative solutions and competition provided by national banks and fintech business. By restricting these forms of credit, Democrats will further harm the same people they claim they are protecting. Americans for Tax Reform strongly opposes S.J.Res. 15 and any Congressional action that seeks to restrict access to credit markets.

Click here or see below to view the letter.

May 11, 2021

Dear Majority Leader Schumer, Minority Leader McConnell, Chairman Brown, and Ranking

Member Toomey:     

On behalf of Americans for Tax Reform, I am writing to express our opposition to S. J. Res.  15, which seeks to use the Congressional Review Act to repeal the Office of the Comptroller of the Currency’s 2020 True Lender Rule. Under President Trump’s Administration, this rule was designed to assist the 7 million Americans who remain unbanked and underbanked. Should Congress move to overturn this rule, it would directly harm many of these same Americans who need access to affordable financial services the most.  

The OCC’s 2020 True Lender Rule treats banks as the “true lender" if they fund or identify themselves as a lender in the loan agreement provided to customers in partnership with financial technology businesses. Many customers have built trustworthy relationships with financial technology businesses that provide access to customers through mobile phone applications. This relationship has successfully provided access to credit for millions of Americans and the OCC’s rule provides legal certainty for the growing number of partnerships between banks and financial technology partners.

The Federal Reserve reported that 40% of American households are unable to afford a $400 emergency. Repealing the True Lender Rule would cut off a lifeline to the millions of households across the country that may depend on short-term financing. Economists at the Mercatus Center found that in the absence of legal credit, borrowers will continue to seek financing through illegal alternatives. Loan sharks and other illegal loan providers operate outside of any regulatory supervision and use tactics like blackmail, coercion, and violence when desperate borrowers fail to repay their loans.

Partnerships between banks and financial technology companies promote innovation and efficiency for servicing consumer needs. When financial technology businesses can serve as credit providers, they can offer quick financing solutions. Their services assist the 25% of US households that are unbanked or underbanked and do not have the means to access traditional or affordable products and services.

In addition, by invalidating the rule through the CRA, Congress would create significant legal barriers to existing borrowers and the services they enjoy.

Americans can make appropriate financial decisions that meet their needs when more competition exists for them to choose from in the credit markets. Americans for Tax Reform strongly opposes S. J. Res. 15 and we urge members of Congress to vote against this legislation.

Sincerely,

Grover G. Norquist
President, Americans for Tax Reform


ATR Signs Coalition Letter Urging Congress to Oppose Interest-Rate Caps

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Posted by James Setterlund on Thursday, April 8th, 2021, 10:07 PM PERMALINK

Americans for Tax Reform joined a group of free-market groups and signed a coalition letter encouraging Congress to oppose interest rate caps on consumer borrowing. By restricting interest rates on financial products, Congress will limit consumer choices among affordable lending services.

Installing a cap on interest rates will price consumers out of the market, particularly many of the unbanked and underbanked who need access to affordable financial products the most. An interest rate cap on lending products will not reduce borrower demand and instead will force lenders to increase borrower eligibility requirements. Increased eligibility requirements could adversely discriminate against borrowers who lack even a basic credit score.

Many low-income borrowers who may not have access to traditional banking services and or credit history will not get quick credit from any legal lender. This has been demonstrated by economists at the Mercatus Center that shows government interest rate caps exclude borrowers from obtaining affordable lending products and does little to diminish the customers need for these products. Those borrowers will continue to seek credit through alternative forms of credit, which could come from illegal lenders known as "loan sharks.” Loan sharks operate outside regulatory supervision and have been known to use tactics like blackmail, coercion, and violence when borrowers fail to meet their aggressive repayment plans.

Legislation at the federal and state level should be conscious of whose lead they are following. Many of these proposals may resemble the legislation put forth by Senator Bernie Sanders (I-Vt.) and Representative Alexandria Ocasio Cortez (D-N.Y.) in 2019.

Several states have tried an interest rate cap in the past with low-income households suffering the most. Arkansas, a state with a constitutionally mandated interest rate cap, has extremely low loan volume. Many of its residents drive out of state to acquire installment loans that offer increased lending options with interest rates appropriately tailored to service those borrowers. After Georgia and North Carolina implemented caps on interest rates, insufficient funds notifications and bounced check fees surged, harming lower-income consumers who may find it more challenging to afford these fees.

Illinois Governor J.B. Pritzker (D-IL) signed an interest rate cap into law last month even after lender organizations, including the Illinois Small Loan Association, warned that the interest rate ceiling effectively ends the short-term loan industry. Neighboring Indiana and Wisconsin have no interest rate cap and can expect to see an influx of new borrowers crossing state lines for loans as did the states like Oklahoma, Missouri, and Tennessee surrounding Arkansas.

Consumers are best able to make appropriate financial choices that meet their needs when they have more choices in credit markets. Americans for Tax Reform and the undersigned organizations strongly urge Congress to oppose regulation limiting credit markets and installing a ceiling on interest rates.

Click here to review the letter.

Photo Credit: Blue Coat Photos


ATR Leads Coalition Supporting Legislation to eliminate the Office of Financial Research

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Posted by James Setterlund on Tuesday, March 2nd, 2021, 6:33 PM PERMALINK

Today a group of free market groups released a letter supporting Sen. Ted Cruz (R-Texas) and Rep. Ted Budd's (R-N.C.) legislation to eliminate the Office of Financial Research.

Established under the Dodd-Frank Wall-Street Reform and Consumer Protection Act, the Office of Financial Research is a regulatory agency that collects data provided by financial institutions, such as bank holding companies. The data is used to examine financial market risks and supports the Financial Stability Oversight Council. This data is commonly volunteered by financial institutions. However, Dodd-Frank provides wide latitude for the Office’s Director to use their subpoena power to demand the data.

OFR receives funding outside the congressional appropriations process through fees the agency collects from the financial institutions that it regulates. As a result, the agency avoids direct congressional oversight, allowing OFR to determine what their budget should be almost unilaterally. For the fiscal year 2020, the OFR had a $62.7 million budget and about 100 full-time staffers.

The Office of Financial Research is redundant and duplicative. Its mission to research the stability of financial institutions has been conducted by roughly 20 other federal agencies, well before the enactment of Dodd-Frank, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial stability

The previous Republican Administration took steps to shrink the Office and reduce its regulatory burden on the financial services industry. However, the current Director of the OFR, President Trump appointee Dino Falaschetti, has reversed his stance on agency cuts and called for more funding and increased staffing. Additionally, the newly appointed Secretary of Treasury Janet Yellen acknowledged in her written testimony before the Senate Finance Committee that she would reassess the Office’s cuts and expanding the agency’s footprint to research the economic effects of climate change.

Furthermore, a new Director under a Biden Administration could potentially weaponize the Office’s subpoena power to collect information from financial institutions lending activity to publicly shame institutions from servicing certain industries.

The organizations who joined this coalition letter are proud to support Senator Cruz’s efforts to curb further government overreach by unaccountable agency bureaucrats. 

Click here or see below to view the letter.

Dear Senator Cruz & Congressman Budd:

On behalf of the undersigned organizations, we write to express our support for your legislation eliminating the unaccountable Office of Financial Research. This agency was established in 2010 by the Dodd-Frank Act and operates outside the Congressional appropriations process, receiving its funding from industry fees collected from financial institutions.

In response to the financial crisis of 2008, Congress quickly passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, expanding the federal government’s role in oversight of the financial marketplace and created several new regulators. The Office of Financial Research serves as a data collection agency that supports the Financial Stability Oversight Council, another regulator initiated by Dodd-Frank. While much of the data collected by OFR is voluntarily provided by private financial institutions, Congress granted the Office’s Director subpoena power to collect information from bank holding companies as he sees fit.

OFR receives its funding through fees collected predominantly from the bank holding companies it regulates, insulating itself from Congressional oversight. Congress has no authority to review OFR's operations and how it spends its fees, shielding the Office from Congressional accountability. For bank holding companies, there are limited options other than surrendering capital to fund their regulator.

The Office of Financial Research's mission to support the Financial Stability Oversight Council with financial research is duplicative in nature. Nearly 20 other agencies, departments, bureaus, and committees exist and already conducts similar research, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial Stability. OFR is housed within the Treasury and operated on an annual budget of $62.7 million for the 2020 fiscal year. Furthermore, despite OFR's significant outlays, the bureau has a history of producing incomplete and analytically unsound research.

Concerningly, the current Director of the OFR, President Trump appointee Dino Falaschetti, is now calling for more funding and increased staffing to increase the agency's scope. The Trump administration took steps to shrink the Office and limit its intrusion among financial institutions. But, Secretary of the Treasury Janet Yellen discussed reassessing the Office's cuts and expanding the Office's scope to include climate research during her confirmation hearing before the Senate Financial Committee.

Under the Biden Administration, a Democrat-appointed Director could weaponize the Office and abuse its subpoena power to liberally collect information from financial institutions. Specifically, the Office could be used as a backdoor collection point for banks to surrender information regarding their lending activity in an attempt to publicly shame institutions and discourage them from lending to certain industries. For these reasons, we, the undersigned organizations, strongly support your legislation to eliminate the Office of Financial Research in its entirety.

Sincerely,

Grover Norquist

President, Americans for Tax Reform

Adam Brandon

President, FreedomWorks

Andrew F. Quinlan

President, Center for Freedom and Prosperity

Heather R. Higgins

CEO, Independent Women’s Voice

Pete Sepp

President, National Taxpayers Union

Maureen Blum

Executive Director, USA Workforce

Phil Kerpen

President, American Commitment

Matthew Kandrach

President, Consumer Action for a Strong Economy

Iain Murray

Vice President, Competitive Enterprise Institute

Tom Schatz

President, Council for Citizens Against Government Waste

Photo Credit: RoguePlanet


ATR Signs Coalition Letter Urging Congress to Overhaul Fannie Mae and Freddie Mac

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Posted by James Setterlund on Monday, March 1st, 2021, 9:20 PM PERMALINK

Americans for Tax Reform joined a group of free-market groups and signed a coalition letter encouraging legislators to prioritize reforming Fannie Mae and Freddie Mac this Congress. Reforming these Government Sponsored Enterprises and their conservatorship will help protect American taxpayers from continuing to remain on the hook and bailing them out again in the event of another financial market emergency.

Fannie Mae and Freddie Mac are America’s two largest home mortgage companies. While they do not originate any mortgages, both provide liquidity to the mortgage market by purchasing mortgages from lenders. Fannie and Freddie either hold the mortgages in their portfolio or securitize the loans into pools called mortgage-backed securities that are sold to investors.

The two GSEs wield an effective duopoly over the secondary mortgage market and currently guarantee almost $7 trillion in mortgage-related debt. Fannie Mae and Freddie Mac were congressionally chartered private companies established to encourage homeownership, but the actions taken in the wake of the housing crisis effectively put the companies under government control, known as conservatorship.

During the 2008 financial crisis, some of the mortgages bought by the GSE’s started to fail. Homebuyers were unable to meet their mortgage payments, jeopardizing the solvency of Fannie and Freddie’s mortgage portfolios. As a result, the Housing and Economic Recovery Act of 2008 placed both Fannie Mae and Freddie Mac into government conservatorship on September 6, 2008, under the newly created Federal Housing and Finance Agency. Because the conservatorship arrangement implies that the government now guarantees the loans, the American taxpayers have become the backstop of a multi-trillion-dollar loan portfolio. When Fannie and Freddie were nearing insolvency in 2008, they borrowed over $191.4 billion from the U.S. Treasury. If the housing market declines again, Fannie and Freddie can borrow the remaining amount from the $254 billion Treasury credit line left over from 2008.

Legislators and regulators did not intend for the conservatorship to be perpetual. It was supposed to be a short-term emergency measure to keep GSEs solvent and prevent further escalating the financial crisis. In 2008, FHFA Director James B. Lockhart stated that Fannie and Freddie would only be under conservatorship until they were stabilized. Similarly, the former Office of Management and Budget Director Jim Nussle considered the arrangement to be temporary.

However, Fannie Mae and Freddie Mac are entering their 13th year under federal government control. Fannie Mae and Freddie Mac have increased their loan portfolio to levels 33% higher than pre-crisis. After a decade of recovering home prices and economic expansion, the need for GSE’s to remain in conservatorship has long passed.

It is long overdue for Congress to prioritize ending the GSEs conservatorship and protect taxpayers from further remaining as a federal backstop. Americans for Tax Reform and the undersigned organizations strongly urge Congress to prioritize comprehensive housing finance reform in the 117th Congress.

Click here to review the letter.

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ATR Warns Against Attempts to Expand the Durbin Amendment

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Posted by James Setterlund on Thursday, February 4th, 2021, 11:33 AM PERMALINK

Americans for Tax Reform President Grover Norquist sent a letter to Senator Patrick Toomey (R-Pa.) and Representative Patrick McHenry (R-N.C.) expressing concern regarding attempts by retail merchants to expand the Durbin Amendment during the 117th Congress. The letter urges Congress to anticipate further attempts to expand the Durbin Amendment’s price controls on interchange fees mandate to credit cards, as the Amendment has already done so for debit cards.

The Durbin Amendment, an eleventh-hour addition added to the Dodd-Frank Wallstreet Reform and Consumer Protection Act, installed routing mandates and instructed the Federal Reserve to place a cap on debit card interchange fees. Interchange fees are charged at the point of sale by banks and credit unions on debit and credit card transactions. These fees help banks fund software and hardware systems, continued innovation within the marketplace that ensures secure transactions and protect customers from card fraud.

The merchants and retailers that supported the Durbin Amendment promised that savings would be passed on to consumers. However, studies conducted by academics and the Federal Reserve have shown that the Durbin Amendment failed to deliver tangible cost savings to consumers. Meanwhile, a 2017 report published by the International Center for Law and Economics found that large retailers saved approximately $40 billion in interchange fees.

The loss in interchange fee revenues has resulted in higher consumer banking costs. According to the Boston Federal Reserve, the Durbin Amendment has cost large banks nearly “$14 billion a year or more than 5 percent of core total noninterest income.” To recover lost revenue, the banking sector installed higher overdraft fees, increased minimum balances, reduced access to free checking, canceled debit card rewards programs, and charged higher monthly account maintenance fees. As a result, millions of households have been harmed in aggregate by the Amendment. The adverse effects of these policies have fallen disproportionately on the poor. Hundreds of thousands of low-income households failed to receive lower retail prices and were forced to exit a more costly banking system.

In March of last year, COVID-19 relief legislation was used as justification for the National Restaurant Association to push for an unrelated expansion of the Durbin Amendment to cap credit card interchange fees. ATR is now concerned that the retail lobby will use upcoming anti-trust complaints as another basis to unreasonably expand the Durbin amendment. The retail industry has proven to be relentless at searching for any justification to shift billions of dollars away from the consumer.

In their efforts to expand the Durbin Amendment, retailers will continue to promise savings to the consumer that they have no intention of fulfilling. The retail industry has demonstrated that it will shamelessly ride the coattails of any weekly crisis to push this issue. It will use any must-pass emergency bill to attach legislation to expand the Durbin Amendment.

The retail industry’s goal of expanding the Durbin Amendment will adversely affect the 70% of Americans who own at least one credit card. Since the rollback of debit card benefits post-Durbin Amendment, credit card usage has trended upwards. Credit cards are now the preferred consumer payment method, overtaking debit cards in the last decade and consumer greatly value the rewards offered with their usage. Credit cards continue to increase in popularity because they offer tangible benefits to consumers. The most popular credit cards, such as Chase Sapphire Reserve, the Costco Anywhere Visa Card, and the Southwest Rapid Rewards card line, have become staples in Americans’ wallets. These cards have become household names because of their generous rewards programs that offer substantial benefits to consumers in the form cashback, store-specific discounts, redeemable rewards points, and travel perks. If credit card providers are not able to price interchange fees competitively and fairly, credit card rewards will get rolled back and consumers will be left paying higher annual fees without any guarantee of offsetting cost savings from retailers.

During the 117th Congress, Congress must remain vigilant and skeptical of the retail industry’s promises. Congress should continue to oppose the costly and ineffective expansion of the Durbin Amendment mandate to credit cards.

Click here to see the full letter.

Photo Credit: Charles Edward Miller


ATR Signs Coalition Letter Urging President Trump to Waive Dodd-Frank Provision for National Security

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Posted by James Setterlund on Wednesday, December 23rd, 2020, 12:00 AM PERMALINK

Americans for Tax Reform joined a group of other free-market groups and signed a coalition letter to encourage President Trump to use his authority before his first term expires and temporarily suspend the “conflict minerals” provision under Dodd-Frank for two years in the interest of national security. Waving the mandate will enhance the ability for manufactures and distributors to more rapidly develop and deliver COVID-19 vaccines in the coming year quickly and efficiently.

Currently, the conflict minerals regulation interrupts the supply chain of minerals such as tin, tungsten, tantalum, and gold. It has shrunk the supply of most materials needed to resolve the healthcare emergency, as these materials are essential to both producing the vaccine and keeping it cold in transportation, which is a critical component of the COVID-19 vaccine distribution process.

This regulation has slowed health advances as the world rapidly tries to cure the coronavirus disease. The dampening effect comes from the regulation’s immense cost. Following Dodd-Frank’s passage, the Wall Street Journal found the conflict minerals regulation cost firms $709 million to trace their supply chains for conflict minerals in 2014.

The regulation has proved nearly impossible to implement. The report found 90% of firms were unable to confirm whether their supply chains were conflict-free. This forced many companies to end conducting business operations within the region surrounding the Democratic Republic of the Congo altogether. More than a decade after the regulation, this still holds true at a time when the region’s long-term underinvestment poses an obstacle to implementing a COVID-19 cure.

The coalition letter urges President Trump to waive the regulation for two years, which Dodd-Frank provides the President authority to do in the interest of national security. Since these minerals are central to ventilators, X-ray machines, syringes, and compressors that refrigerate vaccines in transportation, the present circumstance is a clear case of national security interest.

As Competitive Enterprise Institute’s John Berlau wrote in a recent article, “the national security interest—and global interest—of defeating Covid-19 cannot be weighed down by outdated red tape that has failed to serve even its own stated purpose of alleviating suffering.”

Photo Credit: Marco Verch Professional Photographer


ATR Leads Coalition Encouraging SEC to Review Quarterly Reporting

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Posted by James Setterlund on Tuesday, October 27th, 2020, 3:24 PM PERMALINK

Under the leadership of Chairman Jay Clayton, the Securities and Exchange Commission has taken a tactful approach to review regulations and statutes for their efficiency in a marketplace that is constantly evolving, innovating and incorporating new technologies to help investors successfully plan for their long-term interests. At the heart of many of Chairman Clayton’s initiatives has been reducing regulatory barriers and encourage more private companies and retail investors to seek the capital markets. 

On Dec. 28, 2018, the SEC published an advance notice on proposed rulemaking in the Federal Register to request public input on how best to balance investor protection and the need for quarterly disclosure of financial reporting. This comes on the heels of President Trump asking SEC Chairman Jay Clayton to review the process, of which the SEC agreed to continue to “study public company reporting requirements, including the frequency of reporting.”

Specially, the solicitation of comments asks investors and businesses alike to evaluate the need for multiple disclosures of quarterly filings, known as Form 10-Q, in conjunction with yearly financial disclosures on Form 10-K and earnings reports on Form 8-K. Among the multiple businesses and investors who provided comments, there is support for the SEC to review and consider adopting new reporting guidelines that would amend the current quarterly standard and adopt a tri-annual, or even a biannual reporting structure.

As some of the comments submitted to the SEC suggest, switching from quarterly to tri-annual, or even a biannual reporting basis, could help promote long-term investing, instead of a “short-termism” trading mentality. Proponents of the proposal note that shifting to a model that decreases the reporting frequency will save costs for public companies, particularly small cap companies, as the reports are time consuming, expensive, and repetitive as there are already multiple other forms of reporting to the SEC. Those opposed to shifting to a less-frequent reporting system believe that the lack of quarterly reports leaves investors in the dark and lacks transparency for disclosing company performance. However, as has been the case particularly among technology businesses have operated at a loss for multiple quarters or years after going public and using their earned capital to reinvest back into the business before turning a profit. Had some investors purely relied on Form 10-Q reporting, discounted the products or services made and the business’s management team, these investors could have been left out of valuable growth opportunities.

Since the healthcare crisis created uncertainty beginning in March, over 850 companies have pulled quarterly guidance, as noted by CNBC. Because of the uncertainty surrounded by the crisis, investors actually have not punished companies for not providing guidance during Q2 and Q3 of this year, with many companies opting not to providing guidance for a full year. For example, only 67 of the S&P 500 companies have resumed guidance. With this lack of guidance and the market returning to near pre-COVID levels, it has some institutional investors supporting the idea to eliminate the trend of quarterly guidance to encourage more long-term investment in the market as well.

Americans for Tax Reform lead the coalition letter encouraging the SEC to ease compliance burdens on public companies and promote policies to that encourage shareholders to invest for the long-term by moving toward tri-annual reporting and reviewing guidance structures.

Click here to review our letter.

Photo Credit: Eric Allix Rogers


ATR & SAF Supports Second Term for SEC Commissioner Hester Peirce

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Posted by James Setterlund on Monday, July 6th, 2020, 9:47 AM PERMALINK

Shareholder Advocacy Forum Executive Director James Setterlund and Americans for Tax Reform President Grover Norquist sent a letter to the Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) expressing support for the re-appointment of Securities and Exchange Commissioner Hester Peirce to serve a second-term at the Commission.

President Trump nominated Peirce for her second term as a Commissioner of the SEC in early June. Her current term was set to expire on June 5, but the nomination has added 18 months for the Senate to review and vote to confirm. Commissioner Peirce could serve for at least five more years at the SEC depending on her confirmation before the full Senate. 

Commissioner Peirce has a proven track record as one of the most forward thinking and pro-modernization Commissioners the last decade. Her policies represent a commitment to the SECs core tenants of investor protection, facilitating capital formation, and maintaining efficient markets, without burdening the market with expensive and unfair regulations. Commissioner Peirce has encouraged market functionality without transforming the SEC into a government regulator that stifles innovation before new financial products are created.

Commissioner Peirce is known for her willingness to openly engage in dialogue with the investing public. Whether it be about tailoring crypto currency regulations to better serve the market, or supporting capital formation in the private market – Commissioner Peirce cares about feedback from all market participants regardless of the size of their investments in the market. She raises questions that probe investors and issuers, while encouraging forward-thinking comments.

President Trump has recognized the impact of Commissioner Peirce’s contribution to the SEC and the market. Peirce was quoted in February “I certainly do not feel done with that I want to do at the SEC.” Commissioner Peirce is an invaluable asset to the SEC and the investing public.

A full copy of the letter can be found here.

Photo Credit: Fortune Brainstorm TECH


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