Our Take: financial services regulatory update – January 17, 2025

• What happened? On January 15 th , Senate Banking Committee Chairman Tim Scott (R-SC) announced the committee’s legislative and oversight priorities for the 119th Congress.
• What are Scott’s priorities? Chairman Scott’s priorities for the Banking Committee include:
  • Advancing affordable housing: Efforts will focus on reducing regulation that reduces housing supply, addressing rising costs, and implementing reforms like the ROAD to Housing Act to make housing more accessible.
  • Increasing access to capital: Expanding access to capital and investment opportunities for retail investors, entrepreneurs and small businesses nationwide remains a priority for Chairman Scott, alongside reforming the SEC to enhance accountability and transparency, as outlined in his Empowering Main Street in America Act.
  • Developing a digital assets framework: Chairman Scott criticized the SEC’s actions with respect to digital assets over the last four years and vowed to “build a regulatory framework that establishes a tailored pathway for the trading and custody of digital assets that will promote consumer choice, education and protection.” The Committee will also seek to facilitate innovation in financial services, including through stablecoins.
  • Protecting economic national security: In terms of sanctions and export control policies, Chairman Scott will focus on countering Iran and China. The Committee will also promote resilience in critical supply chains, combat illicit finance and prepare for growing cyber threats.
  • Strengthening insurance markets: The Committee will continue to uphold state-based insurance regulation by preventing overreach from the CFPB and Federal Insurance Office. It will also seek to prevent impact from “progressive pet projects” on policies and promote resiliency in repeatedly flooded communities.
  • Conducting rigorous oversight: Chairman Scott vowed to hold federal financial and housing regulatory agencies accountable, particularly in terms of operating with transparency and following legal requirements. He also said he will use “every tool at the committee’s disposal, including the Congressional Review Act”¹ to overturn “burdensome red tape regulations” and promote legislation that enshrines cost-benefit analyses into law.
• What’s next? The Committee will hold confirmation hearings for President Trump’s nominees to federal banking and securities agencies over the coming months.

Our Take

Regulators will not get off Scott free. The areas of focus announced by Chairman Scott are consistent with his priorities throughout his time in the Senate and his past work in insurance, as well as the expectation that the Committee will work to overturn late Biden Administration regulations. However, Scott will have to work with Chairman French Hill (R-AK) and the House Financial Services Committee to prioritize eligible rules as the committees must issue a separate joint resolution for every rule they want to overturn. Likely candidates for early action include the CFPB’s rules to advance open banking, limit overdraft fees and increase regulation of digital payments. The committees could also influence rules that are not eligible for the Congressional Review Act by using confirmation and oversight hearings to push new regulatory agency leaders to take action. In terms of new action by Congress, legislation to define supervisory jurisdiction and establish a regulatory framework for digital assets is among the most likely to advance, particularly as efforts with strong consumer protection elements could win bipartisan support. Notably, both chambers in the last Congress passed a resolution to overturn the SEC’s Staff Accounting Bulletin (SAB) 121 classifying digital assets as liabilities before it was vetoed by President Biden. However, any legislation would have to obtain enough support from moderate Democrats to overcome an almost certain filibuster from the new Senate Banking Ranking Member Senator Elizabeth Warren (D-MA). There remains a possibility of the Senate majority removing the 60 vote filibuster for most legislation, although Senate Majority Leader John Thune (R-SD) has pledged to preserve it.

^{1. A simple Republican majority in both chambers can vote to overturn (and prevent future similar) Biden Administration regulatory actions finalized after August 1st via the Congressional Review Act without the threat of a filibuster.}