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TH E M R EP O RT | 59 S E R V I C I N G DATA S E C O N DA R Y M A R K E T O R I G I NAT I O N G O V E R N M E N T GOVERNMENT GOVERNMENT Under Pressure FDIC Stress Test scenarios assume rising mortgage rates. U nemployment, exchange rates, prices, income, and interest rates are some of the economic factors that will reveal whether banks in the United States are armed with ro - bust capital planning processes and sufficient capital to continue opera- tions during times of economic or financial stress. These are also factors that reveal the expectations of economic forecasters. These economic scenarios released by Federal Deposit Insurance Corporation (FDIC) will be used by banks and financial institutions with total consolidated assets of more than $10 billion for stress tests required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The baseline scenario represents expectations of private sector economic forecasters. However, the adverse and severely adverse scenarios are not forecasts but are hypothetical scenarios designed to assess the strength and resilience of financial institutions and their ability to continue to meet the credit needs of households and businesses under stressed economic conditions. Under the base scenario, real GDP Growth is expected to remain in the range of 2.5 percent in 2018, with slight changes in each quarter. Unemployment is likely to fall to 3.8 percent by the end of 2018, while mortgage rates are expected to rise to 4.5 percent by the end of the year from 4.1 percent in the current quarter. The House Price Index (HPI), which is the price index for owner-occupied real estate is also expected to rise to 199.3 points during the year. Though inflation is expected to remain stable at 2.1 percent across the year, disposable income could fall from 4 percent at the beginning of 2018 to 2.8 per - cent towards the end of the year. The results of these stress tests provide the FDIC with forward- looking information used in bank supervision and assist the agency in assessing the company's risk profile and capital adequacy. The Board of Governors of the Federal Reserve System and the Office of the Comptroller of Currency coordinated to develop the baseline, adverse, and severely adverse scenarios for 2018. CFPB Gets a Win A Washington appeals court has reversed a previous ruling and declared the CFPB constitutional. I n a split decision, a Washing- ton appeals court has reversed a previous ruling, declaring the structure of the Consumer Financial Protection Bureau (CFPB) to be constitutional after all. The Court of Appeals for the District of Columbia Circuit ruled that the CFPB's structure is con - stitutional and that the president can only fire the agency director for "inefficiency, neglect of duty, or malfeasance in office." The court's ruling reads, in part, "None of the theories advanced by PHH supports its claim that the CFPB is different in kind from the other independent agencies and, in particular, traditional independent financial regulators." On the subject of whether the president can remove the CFPB director without cause, the ruling reads, "The CFPB's authority is not of such character that removal protection of its Director necessarily interferes with the President's Article II duty or prerogative. The CFPB is neither distinctive nor novel in any respect that calls its constitutionality into question. Because none of PHH's challenges is grounded in consti - tutional precedent or principle, we uphold the agency's structure." Brianne Gorod, Chief Counsel for the Constitutional Accountability Center, said in a statement, "Members of Congress believed, and still believe, that it is critical to the mission of the CFPB that it remains independent of the President, so it can act promptly and decisively in response to new threats to consumers. The D.C. Circuit today made it clear: that leadership structure is consti - tutional, and arguments to the contrary are without merit." Richard Hunt, CEO, and President of the Consumer Bankers Association said of the ruling, "Congress should create a bipartisan commission at the CFPB, in place of a sole director, to uphold the Bureau's mission of consumer protection. " In his state - ment, Hunt said that this change would " ... establish transparency, diversity of thought, additional industry insight, and rule-makings beneficial to consumers, the indus - try, and the economy." The court's previous ruling in October 2016 stated that the CFPB's leadership structure was uncon- stitutional and that it granted the agency's director too much power. That October 2016 ruling said, "Because the Director alone heads the agency without Presidential supervision, and in light of the CFPB's broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency." The case traces its origins back to $109 million in CFPB fines levied against New Jersey-based mortgage company PHH Corp. in 2015, which the mortgage com - pany fought. The October 2016 ruling had also canceled these fines. The verdict is expected to be appealed by both the Trump administration and PHH. "Congress should create a bipartisan commission at the CFPB, in place of a sole director, to uphold the Bureau's mission of consumer protection." — Richard Hunt, CEO, and President of the Consumer Bankers Association