February 8, 2023 - With the election in November 2022 of a slim Republican majority in the House of Representatives, leadership of its various committees changed hands, including the House Financial Services Committee (HFSC). No committee is more important to the loan market (indeed, all capital markets) than HFSC because it has supervisory jurisdiction over all federal banking agencies as well as the Securities and Exchange Commission (SEC) and initiates all financial services regulatory legislation. Congressman Patrick McHenry (R. NC) is the newly installed Chairman of HFSC and he recently appointed the Subcommittee Chairs and announced their respective jurisdictions. Notably, McHenry disbanded the ESG Subcommittee and established instead an ESG Working Group to coordinate the Committee’s approach to environmental, social and governance proposals. This is a significant change from the structure of the previous HFSC as we discuss below. We also briefly identify the heads of the key subcommittee heads, describe their jurisdictions, and explain what these appointments may mean for the loan market, the LSTA and its members.
Subcommittee on Capital Markets—Rep. Ann Wagner (MO-02). The subcommittee’s jurisdiction covers: Developing and pursuing policies that strengthen access to capital formation; Overseeing the operations and policy development of the SEC, MSRB, FASB, and PCAOB; and Overseeing and responding to the SEC’s regulatory agenda.
Subcommittee on Financial Institutions and Monetary Policy—Rep. Andy Barr (KY-06). The subcommittee’s jurisdiction covers: Overseeing the operations and policy development of the prudential financial regulators, the CFPB, and the Federal Reserve and its 12 reserve banks; and Identifying policies that grow and stabilize the financial system and broader economy.
Subcommittee on Digital Assets, Financial Technology and Inclusion—Rep. French Hill (AR-02). The subcommittee’s jurisdiction will cover: Providing clear rules of the road among federal regulators for the digital asset ecosystem; and Developing policies that promote financial technology to reach underserved communities.
Subcommittee on National Security, Illicit Finance, and International Financial Institutions—Rep. Blaine Luetkemeyer (MO-03). The subcommittee’s jurisdiction will cover: Strengthening policies to combat the generational threat posed by the Chinese Communist Party; Overseeing the operations and policy development with respect to the Office of Terrorism Financial Intelligence; and Overseeing the policy development at the International Financial Institutions.
Subcommittee on Oversight and Investigations—Rep. Bill Huizenga (MI-04). The subcommittee’s jurisdiction will cover: Overseeing all agencies, departments, programs and matters within the Financial Services Committee’s jurisdiction.
Each committee also includes within its jurisdiction, commitments to related diversity and inclusion policies and best practices.
What do these subcommittees and their leaders mean for the LSTA, its members and the loan market? Given that the Senate and presidency are held by Democrats, it is very unlikely that any significant adverse financial services related legislation is on the horizon. Instead, we expect the HFSC and the Subcommittees on Financial Institutions and Oversight and Investigations to focus on hearings of all types. Most relevant to the loan market, we anticipate that the Gary Gensler, Chair of the SEC, will be called on frequently to testify about the plethora of rules he is pushing, both on their substance and on the issue of the short comment periods that have been offered to those proposed rules, and, particularly, his focus on ESG disclosure.
This last focus was clearly signaled by the creation of the ESG Working Group (which includes two of the Subcommittee heads) and its mandate as described by McHenry: “To develop a comprehensive approach to ESG that protects the financial interests of everyday investors and ensures our capital markets remain the envy of the world. Financial Services Committee Republicans as a whole will continue our work to expand capital formation, hold Biden’s rogue regulators accountable, and support American job creators.”. Consequently, the SEC and leaders of banks and large fund managers who are seen by many HFSC members as being hostile to traditional energy interests are also likely to be frequent “guests” at HFSC hearings.
Finally, it is important to note that the LSTA advocacy and policy team has developed excellent relationships with Chairman McHenry, all of the Subcommittee Chairs, and many of the incumbent members of the HFSC. We have also met with some of the new, incoming members of the committee and we look forward to meeting the rest of the freshman class. Of course, it has also developed close working relationships with the Democratic ranking members of many of the subcommittees and the other Democratic members of HFSC. We look forward to continuing these important efforts and advocating for the interest of our members.