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CHAMBER OF COMMERCE
OF THE
UNITED STATES OF AMERICA
R . BR U C E J O S T E N
1615 H STREET, N.W.
WASHINGTON, D.C. 20062-2000
202/463-5310
EXECUTIVE VICE PRESIDENT
GOVERNMENT AFFAIRS
September 26, 2016
The Honorable Jeb Hensarling
Chairman
Committee on Financial Services
U.S. House of Representatives
Washington, DC 20515
The Honorable Maxine Waters
Ranking Member
Committee on Financial Services
U.S. House of Representatives
Washington, DC 20515
Dear Chairman Hensarling and Ranking Member Waters:
The U.S. Chamber of Commerce, the world’s largest business federation representing the
interests of more than three million businesses of all sizes, sectors, and regions, as well as state
and local chambers and industry associations, and dedicated to promoting, protecting, and
defending America’s free enterprise system, enthusiastically supports the Committee’s continued
oversight of the Federal Reserve and the agency’s supervision and regulation of the financial
system.
The Chamber strongly believes that the Federal Reserve must have independence in
developing and administering monetary policy. However, the Chamber has serious and growing
concerns with the Federal Reserve, and other banking regulatory agencies, in their failure to
transparently write rules that provide for a stable financial sector to fuel a growing economy.
This includes a reluctance by the Federal Reserve to consider the impact of their rules on capital
formation. Conducting these types of analyses would provide the public with a full and robust
opportunity to comment on their policy recommendations as envisioned by the Administrative
Procedures Act and the Riegle Community Development and Regulatory Improvement Act of
1994.
For example, last week, the Chamber raised these concerns in a letter to the Federal
Reserve on its conclusions that Congress should repeal the merchant banking authority of
financial holding companies (FHCs) in a report required under Section 620 of the Dodd-Frank
Act. In issuing those recommendations, the Federal Reserve failed to consider the important role
of merchant banking as a provider of capital to businesses of all sizes, as well as the importance
of that authority in helping support capital raising, underwriting, and financing for start-ups and
expansions. We raised these concerns as subsequent comments from Federal Reserve officials
confirmed that the agency had no evidence of material loss resulting from such activities. By
doing so, the Federal Reserve admitted that a hypothetical, unrealized risk somehow outweighs
the real and demonstrable benefits of merchant banking.1
1
See Interview with Steve Liesman and Federal Reserve Governor Daniel K. Tarullo, CNBC, Sept. 9, 2016.
These unsupported conclusions were only exacerbated by the complete lack of
opportunity for stakeholders to provide their input on these recommendations. In addition to
businesses that rely on capital provided by merchant banking, pension plans, endowments,
charitable organizations, and similar institutions benefit from the ability of FHCs to manage their
investments through their merchant banking authority. Similarly, limiting or eliminating the
ability of FHCs to engage in commodity-related activities through their merchant banking
authority would impact the ability of non-financial companies to access efficient, transparent,
liquid markets for managing their day-to-day physical commodity and related hedging needs.
However, there was simply no opportunity for the public to raise any of these objections to the
Federal Reserve prior to the publication of their recommendations to Congress.
It is for these reasons that the Chamber strongly supports immediate adoption of the
reforms listed in our Federal Reserve Reform: Securing Regulatory Transparency and
Accountability report. For example, appointing a Vice Chairman for Supervision at the Federal
Reserve would establish a key point of contact for regulatory accountability in the senior
leadership of the Federal Reserve. Similarly, adoption of a strategic plan would finally provide
the public with an opportunity to comment on the Federal Reserve’s regulatory initiatives.
Finally, requiring publication of economic and impact analyses would only benefit the Federal
Reserve’s rulemaking, as policies could be crafted that help support capital formation while
fulfilling the Federal Reserve’s bank supervisory mission.
The Chamber appreciates the work of the Committee regarding Federal Reserve
oversight on this issue and related issues of transparency, particularly at the international level.
These include deliberations at the Financial Stability Board and Basel Committee on Banking
Supervision—issues the Chamber has commented on extensively in the past. We look forward
to working with you on policies to restore the American economy to its long-term growth
potential.
Sincerely,
R. Bruce Josten
cc: Members of the Committee on Financial Services
Attachments: September 19, 2016 Letter to Scott Alvarez, General Counsel, Board of Governors
of the Federal Reserve System, re: Section 620 Report on Investment Bank Activities; Summer
2016 U.S. Chamber of Commerce Federal Reserve Reform Report: Securing Regulatory
Transparency and Accountability