Last Month in D.C.: August FinTech Update
Historically, August is a quiet month in Washington, DC. Dating back to the 1800s, Congress recessed in the summer months to escape the heat. Before the arrival of central air conditioning, the hot and sticky summer months were more than the elected officials could bear and even the marble walls and floors of the US Capitol did not provide an oasis from the stifling humidity. The arrival of air conditioning to the Capital allowed Congress to work through the hot summers, but with long sessions away from their home states and constituents, Congress decided a summer break was still necessary. Hence August recess is a tradition in DC. Although political pressure to stay in session to work on health care legislation did keep the Senate in town a week beyond their original plans, this August was really no different than those previous years. As the August recess winds down, the political rhetoric increases with significant anxiety surrounding government funding for fiscal year 2018 and the need to increase the nation debt ceiling.
Debt ceiling debates always involve high drama due to the high stakes involved. Stock markets are extremely sensitive to the debate and any threat of a US default can cause turmoil. For those in the financial services sector, the possibility of not raising the debt ceiling and allowing the US to default on its creditors is potentially catastrophic with the impact reaching far beyond those on Wall Street. Likewise, any lag in funding to keep the federal government open has a negative impact. The idea that both a default by the government and a shutdown could occur simultaneously is enough to make even the most optimistic individuals nervous.
While the anticipated drama plays out in the halls of Congress, the Administration will continue working on a number of rulemakings, initiatives and priorities. Based on recent remarks, the current acting Comptroller of the Currency, Keith Noreika, is committed to moving forward with the OCC’s limited “fintech” charter proposed during the previous Administration. Although the OCC is faced with legal opposition to the proposal by the Conference of State Bank Supervisors, the regulators continue to push forward even as the court recently rejected the OCC’s motion to dismiss because of excessive footnotes.
Other agencies continue jumping into the fintech space. The Commodity Futures Trading Commission (CFTC) just launched a new fintech initiative, LabCFTC, with the mission of promoting fair and responsible competition for innovators. As more regulators look to this space, attention from Congress is a natural outcome. Expect to see Congressional hearings, legislation and general discuss of financial innovation from members of the US House and Senate.