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39 » VISIT US ONLINE @ DSNEWS.COM DEMOCRATS WARN OF RISKS POSED BY REPEAL OF DODD- FRANK PROVISION U.S. Sen. Elizabeth Warren (D-Massa- chusetts) and Rep. Elijah Cummings (D- Maryland) wrote two letters to government agencies based on the findings of their investiga- tion as to the risk taxpayers and economy face after last year's partial repeal of Section 716 of the Dodd-Frank Wall Street Conform and Con- sumer Protection Act. e investigation conducted by the two lawmakers found that repealing Section 716 of Dodd-Frank allows banks to keep nearly $10 trillion in swaps trades on the books that would be "pushed out" to entities that are not insured with taxpayer funds, if not for the Dodd-Frank rollback. Section 716 was intended to prevent taxpayer bailouts of federally-insured banks with risky swap holdings. e first letter was written by the two law- makers to the Securities and Trading Commis- sion (SEC) and Commodity Futures Trading Commission (CFTC), warning them that swaps margins rules recently issued by prudential regulators do not adequately address the risks that repealing Section 716 poses. In their letter, Warrant and Cummings, who is the Ranking Member on the House Committee on Oversight and Government Reform, urge the agencies to adopt strong rules that will protect both the financial system and taxpayers. "While the Dodd-Frank rollback and the weak margin requirements imposed by pruden- tial regulators have created new risks for taxpay- ers and the financial system, your agencies are in position to mitigate these risks," Warren and Cummings wrote. "Congress required the SEC and CFTC to each issue rules governing un- cleared swaps ... As your agencies finalize these rules, we urge you to act to protect the financial system and protect taxpayer interests." e Warren-Cummings investigation also revealed that despite the fact that repealing Section 716 of Dodd-Frank allows banks to trade trillions worth of risky derivatives, regulators have not conducted an analysis of the risks to taxpayers and to the financial system that the repeal poses. In response to this finding, the second letter written by Warren and Cummings urges the Government Accountability Office to investigate the impact of repealing Section 716 of Dodd-Frank. "e failure to assess the impact on banks and the economy of the repeal of Section 716 raises critical questions about whether federal policymakers are sufficiently attentive to the risk posed by nearly $10 trillion of risky swaps now primarily held-and allowed to be traded and held on an ongoing basis-by a handful of the country's largest, FDIC-insured banks," Warren and Cummings wrote. "Understanding this risk is critical as policymakers continue to make deci- sions about how banks are regulated." Warren and Cummings wrote letters to four of the nation's biggest financial institutions (Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs) in January 2015 requesting information about risks posed by the repeal of Section 716, but received only limited informa- tion in response, according to an announcement on Warren's website. In Bank of America's response, Director of Federal Government Rela- tions John E. Collingwood pointed out some of the downside to Section 716, saying, "Section 716 as adopted in the Dodd-Frank Act would have raised the cost to end-users of managing their risk through the use of derivatives without any improvements in bank safety and sound- ness. From a safety and soundness perspective, Section 716 would have hindered banks' ability to centrally manage their derivatives risk while at the same time 'pushing out' certain activities that are not subject to the strict prudential regulation of a bank." In July, Warren and Cummings wrote to four government agencies (the FDIC, the SEC, the OCC, and the CFTC) asking for more informa- tion on the risks posed to taxpayers by the repeal of Section 716 and how it would affect banks' swaps activity. OCC TO TEST BANKS FOR TRID COMPLIANCE e Consumer Financial Protection Bureau (CFPB) will no longer be the only entity monitoring TILA-RESPA Integrated Disclosure (TRID) rule compliance among lenders. e Office of the Comptroller of the Currency (OCC) announced that TRID compliance exams are coming. e OCC provided guidance on what to expect in their forthcoming TRID compliance exams directed to "chief executive officers and compliance officers of national banks and federal savings associations, federal branches and agencies, department and division heads, all examining personnel, and other interested parties." is guidance applies to national banks and federal savings associations with $10 billion or less in total assets, according to the OCC. TRID went into effect October 3, 2015, and in the days following, the House of Rep- resentatives voted to pass a bipartisan bill (303- 121) that will provide a "hold harmless" grace period for those making a "good faith" effort to comply with the regulation. e White House threatened to veto the bill just one day before it passed in the House, accord- ing to a Statement of Administrative Policy. "e CFPB has already clearly stated that initial examinations will evaluate good faith ef- forts by lenders," the White House wrote. "e Administration strongly opposes H.R. 3192, as it would unnecessarily delay implementation of im- portant consumer protections designed to eradicate opaque lending practices that contribute to risky mortgages, hurt homeowners by removing the private right of action for violations, and undercut the Nation's financial stability. If the President were presented with H.R. 3192, his senior advisors would recommend that he veto the bill." e initial examinations that the OCC intends to conduct will evaluate a "bank's com- pliance management system and overall efforts to come into compliance, recognizing the scope and scale of changes necessary for each bank to achieve effective compliance." e OCC noted that banks will be expected to "make good faith efforts to comply with the rule's requirements in a timely manner." e bulletin also explained that the examin- ers will be looking at the bank's implementa- tion plan, including actions taken to update policies, procedures, and processes, as well as training of appropriate staff and handling of early technical problems, or other implementa- tion challenges. is approach will be similar to the one that the OCC took in initial examinations for compliance with the mortgage rules imple- menting provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect in January 2014. No official exam date was mentioned by the OCC.

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