The housing bill will become law today. Maybe, possibly, it depends

Trump's trump card
It is not going too far to say that it is difficult to know what Donald Trump thinks from moment to moment, or why he does many of the things he does.

Two weeks ago, he surprised just about everybody by canceling a ceremony to sign into law a housing bill that had gone through some torturous sausage-making to get bipartisan approval. For a Congress that is setting fresh records for inaction, it was a rare win. But Trump decided to hold it hostage for a voter bill that everybody in Congress understands can't be passed.

The housing bill includes a number of community-bank riders, including a pair of brokered-deposit sections plus others that would let more small banks qualify for less-rigorous oversight. Our Claire Williams has a look at how the brokered-deposit rules would change if the bill becomes law. (link to come)

Trump did not, however, take the step of actually vetoing the housing bill. Instead, he just left it on his desk, unsigned. The way the law works, he has until Friday night at midnight to do something about that. If he doesn't, the bill automatically becomes law with or without his signature. 

Given that it is Friday morning and there are approximately 700 moments left in this day (I actually looked up how long a moment lasts; Google told me it's about a minute and a half; that's 40 moments to an hour, 18 hours until midnight, a bit more than 700 moments left) there is plenty of time for Trump to sign the bill, veto the bill, or ignore the bill. All are equally as likely. 

No bad bankers left
I would imagine there were at least a couple of cynical harrumphs in the last day or two from some of you reading the stories we've done this week related to the drop in regulatory actions from federal agencies. Not having federal bureaucrats breathing down your throats has to feel good, I'd imagine.

It probably doesn't come as much of a surprise that enforcement actions have fallen in the Trump administration. Republicans are generally more laissez-faire so that's to be expected. But a study from the Brookings Institution, reported on by our Kyle Campbell, found that enforcement actions fell under the Biden administration as well. In fact, over the past decade, enforcement actions have dropped by about half.

It didn't seem to matter which party controlled the White House. The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency have all been less handsy with the industry. Why? Well, the charitable explanation is twofold: one, there are fewer banks to monitor, and two, bad actors who get expelled from the industry are expelled for good. Eventually, you run out of bad actors.

Like I said, it's a charitable explanation. There are about 20% fewer banks today than there were a decade ago – from 5,000 to 4,000 - but the number of enforcement actions has fallen by 50%. And while it's nice to think that the industry could run out of malefactors, that hasn't happened in the entire history of banking, so it would indeed be a surprise for it to happen now (I'm not picking on banks; no industry is ever totally free of bad actors, not even my sainted media).

So if the drop isn't political, and it isn't because there's fewer bad banks and bankers out there, then what is it? Well, those two are probably part of the answer, but the rest of it is that the regulators are using other methods of gently getting banks back into compliance, such as issuing directives and entering into memorandums of understanding. These are corrective actions that would come before an enforcement action.

And it's hard to argue with success, right? I mean, the number of bank failures has been extremely low in recent years – there were only two in the first half of this year –  so you can hardly say regulators are asleep at the wheel. And they are still working. The Fed this week put the cuffs, so to speak, on an Iowa-based bank holding company. 

There is such a sameness to the process – the Iowa case involves all the usual remedies, preserve capital, halt dividends, no new debt, no new activities, enhanced oversight – that you wonder if regulators have indeed just gotten better at their jobs and are catching problems before they metastasize.