Mnuchin Shares Views on Volcker, GSEs, FSOC, and CFPB during Senate Confirmation Hearing

On Thursday, January 19th, Stephen Mnuchin sat before members of the Senate Finance Committee to be considered for confirmation as Treasury Secretary. During the five-hour confirmation hearing, Mnuchin responded to questions from Senators on a wide range of policy issues, including the Volcker rule, GSE reform, the FSOC's role under the Trump Administration and the future of the CFPB.

According to an article in Forbes, the nominee explained that he supports the Volcker rule and that "the concept for proprietary trading doesn't fit banks that are FDIC insured." However Mnuchin went on to add that "there needs to be proper definition around the Volcker Rule so banks can understand what they can do and what they can't do." He also highlighted concerns that institutions covered by the rule have reduced market-making activities, citing research by the Federal Reserve that shows a decline in liquidity linked to Volcker.

During the hearing Mnuchin also expanded on his views around GSE reform. In a previous statement Mnuchin had said that he would like to see Fannie and Freddie returned to the private market. According to an article in Housing Wire, many observers interpreted this to mean a "recap and release" of the GSEs. However during the hearing Mnuchin explained "my comments were never that there should be a recap and release … For long periods of time, Fannie and Freddie were well run and did not create risk to the government." He then went on to emphasize the need for "a bipartisan solution to housing finance reform … where we don't put the taxpayers at risk and we don't eliminate capital for the housing market."

The article in Forbes also detailed how Mnuchin said he would approach his role on the Financial Stability Oversight Committee. He explained that as Treasury Secretary, he would limit the oversight of FSOC, especially where it may negatively impact the competitiveness of small community banks.

The nominee also offered proposals for reforming the CFPB. The primary reform proposed by Mnuchin was a change in the bureau's structure so that it would be funded through government appropriations. Mnuchin explained this argument, saying "the biggest issue I have with the CFPB is I don’t believe they should be funded out of profits from the Federal Reserve," Mnuchin said. "I believe they should be funded from the appropriations process."

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