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PH Money Matters: This Week in Washington

This Week in Washington for July 24, 2017

As is usually true of the weeks leading up to August recess, the week was full of twists and turns.

Senator John McCain (R-AZ) Diagnosed with Brain Cancer: Senator John McCain was diagnosed with gliobastoma, an aggressive brain cancer, when he underwent a procedure to remove a blood clot over his eye on July 14. Senator McCain has friends and is receiving prayers from both sides of the aisle. Former President and 2008 campaign rival Barack Obama said that McCain is one of the “bravest fighters [he’s] ever known” and that “cancer doesn’t know what it’s up against.” With such a thin margin in the Senate, Senator McCain’s diagnosis calls into question the future of healthcare reform and possibly tax reform.

Obamacare Repeal Seeming Unlikely: Despite a White House meeting on July 19 and a late-night gathering of Senators, it seems less and less likely to repeal Obamacare in the coming days. Four Senators have announced opposition to starting debate, and more unannounced but likely members who oppose the legislation. Republicans had hoped to complete a repeal before August recess, but that is looking more and more unlikely—even if they stay in session a bit longer than planned.

White House Press Secretary Sean Spicer Resigned: According to a White House official, Press Secretary Sean Spicer resigned on July 21. According to the insider, Spicer resigned due to President Trump’s expected move to appoint Anthony Scaramucci as Communications Director. Scaramucci is a Wall Street financier and longtime Trump supporter. Sarah Huckabee Sanders will replace Spicer as White House Press Secretary.

On the Russia front: Sessions to Stay on as Attorney General: In response to President Donald Trump’s assertion that he would not have appointed Jeff Sessions as Attorney General had he known that Sessions would recuse himself from the Russia investigation, Sessions stated that he plans to continue to serve as Attorney General “as long as [it] is appropriate.”

Donald Trump, Jr. and Paul Manafort to Testify: Donald Trump, Jr. and former campaign Chairman Paul Manafort are scheduled to testify on Wednesday before the Senate Judiciary Committee. The hearing will cover Russia’s interference in the 2016 Presidential Election. Jared Kushner is to testify on Monday before the Senate Intel Committee.

Christopher Wray Approved by Senate Judiciary Committee: President Trump’s nominee to replace James Comey as FBI Director cleared the Senate Judiciary Committee on July 20, with a vote of 20-0. Wray is a former Justice Department official who has been in private practice for the last 12 years. Senate Majority Leader Mitch McConnell said that he intends to bring Wray’s nomination to the Senate floor before August recess.

Special Counsel Robert Mueller Asks White House to Save Russia Meeting Documents: Robert Mueller has asked the White House to preserve all documents that relate to the June 2016 meeting that Donald Trump, Jr., Jared Kushner, and Paul Manafort had with a Russian lawyer in Trump Tower.

Republicans Can Rewrite Tax Code Only with Deep Cuts: In the FY 2018 Budget unveiled by House Republicans last week, Republicans launch the biggest tax code rewrite in a generation. However, in order to overhaul the tax code, lawmakers would need to make significant cuts to important federal programs like food stamps, student aid, and pension funds.

ALSO LAST WEEK ON THE HILL

FY 2018 House Budget Released; Recommends Deregulation: The FY 2018 House budget proposal unveiled on July 18 includes deregulation of the financial services industry, recommending provisions of the Financial CHOICE Act, deregulatory legislation that the House passed along party lines in June. The legislation largely repeals the 2010 Dodd-Frank financial overhaul.

HOUSE FINANCIAL SERVICES COMMITTEE

Subcommittee Holds Hearing on North Korea Sanctions: The Monetary Policy and Trade subcommittee held a hearing on July 19 entitled “Restricting North Korea’s Access to Finance.” In his opening statement, Subcommittee Chairman Andy Barr (R-KY) said that “if we are to change North Korea’s calculations, we must confront why economic sanctions have failed and adapt our policies accordingly.” Witnesses included:

  • Mr. William Newcomb, Visiting Scholar, U.S.-Korea Institute, School of Advanced International Studies, Johns Hopkins University
  • Mr. Anthony Ruggiero, Senior Fellow, Foundation for Defense of Democracies
  • Ms. Elizabeth Rosenberg, Senior Fellow, Center for a New American Security
  • Dr. John Park, Director, Korea Working Group, Belfer Center for Science and International Affairs, Kennedy School of Government, Harvard University

Subcommittee Holds Hearing on Monetary and Fiscal Policy: The Subcommittee on Monetary Policy and Trade held a hearing on July 20 to discuss the impact of monetary and fiscal policy on price stability and the economy. In his opening statement, subcommittee Chairman Andy Barr (R-KY) said that “A Federal Reserve that has taken on the authority to decide where to spend taxpayers’ money weakens the independence of monetary policy, accommodates our unsustainable fiscal policies, and distorts markets.” Witnesses included:

  • Dr. George Selgin, Senior Fellow and Director, Center for Monetary and Financial Alternatives, The Cato Institute
  • Dr. Mickey Levy, Chief Economist for Americas and Asia, Berenberg Capital Markets, LLC
  • Dr. Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities
  • Dr. Eric M. Leeper, Economics Professor, Indiana University Bloomington

Committee Members Send Letter to Trump on China: Twenty-four Members of the House Financial Services Committee, led by Reps. Andy Barr (R-KY) and Bill Huizenga (R-MI) sent a letter to the Trump Administration to pressure Chinese officials to permit non-China-based financial institutions to operate in the country. The letter came before the U.S. and China engaged in their Comprehensive Economic Dialogue on July 19.

SENATE BANKING COMMITTEE

Committee Holds Hearing on Housing Finance Reform and Small Lenders: The Senate Banking Committee held a hearing on July 20 entitled “Housing Finance Reform: Maintaining Access for Small Lenders.” Committee Chairman Mike Crapo (R-ID) said in his opening statement that “small lenders play a critical role in the mortgage market.” Housing reform is a high priority for both the Senate Banking and the House Financial Services Committee, and this is one of many hearings that the Banking Committee has held on the issue since the financial crisis in 2008. Witnesses included:

  • Ms. Brenda Hughes, Senior Vice President and Director of Mortgage and Retail Lending, First Federal Savings Bank of Twin Falls, on behalf of the American Bankers Association (ABA);
  • Mr. Tim Mislansky, Senior Vice President and Chief Lending Officer, Wright-Patt Credit Union and President, myCUmortgage,LLC, on behalf of the Credit Union National Association (CUNA);
  • Mr. Jack E. Hopkins, President and CEO, CorTrust Bank, N.A., on behalf of the Independent Community Bankers of America (ICBA);
  • Mr. Charles M. Purvis, President and CEO, Coastal Federal Credit Union, on behalf of the National Association of Federally-Insured Credit Unions (NAFCU);
  • Mr. Wes Hunt, President, Homestar Financial Corporation, on behalf of the Community Mortgage Lenders of America (CMLA); and
  • Mr. Bill Giambrone, President and CEO, Platinum Home Mortgage and President, Community Home Lenders Association (CHLA).

LEGISLATION INTRODUCED AND PROPOSED

Republicans Introduce Resolution to Roll Back Mandatory Arbitration Prohibition: Republicans on July 20 announced a resolution that would use the Congressional Review Act to block the Consumer Financial Protection Bureau’s rule that would ban mandatory arbitration clauses in certain financial contracts and would make it easier for consumers to file class-action lawsuits against financial institutions. According to House Financial Services Chairman Jeb Hensarling (R-TX), “consumers will lose” if the rule takes effect. Senate Banking Committee Chairman Mike Crapo(R-ID) filed a counterpart resolution in the Senate.

House Financial Services Ranking Member Maxine Waters blasted the resolution, saying that the CFPB’s rule “ensures that consumers are not required to sign away their legal rights in order to open a bank account, obtain a credit card, finance a car, or obtain a private student loan.”

Senators Mike Crapo (R-ID) and Sherrod Brown (D-OH) Introduce Flood Insurance Legislation: Senate Banking Committee Chairman Crapo and Ranking Member Brown introduced legislation on July 17 to reauthorize and reform the National Flood Insurance Program. The legislation would extend the program for six years. Senator Bob Menendez (D-NJ), who represents a coastal state, blasted the flood insurance reauthorization bill released by Banking Committee leadership, saying that it does not do enough to address affordability, claims processing problems and mitigation efforts. Senator Menendez has his own bill, S. 1368, which is cosponsored by Senators John Kennedy (R-LA), Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Jack Reed (D-RI).

Despite the opposition of some Republicans, the House legislation has received the support of some groups that have previously opposed the bill, including the National Association of Realtors. This shows that the House bill is gaining support and progress is being made. The National Flood Insurance Program expires at the end of September and must be reauthorized or extended before then.

Ranking Member Maxine Waters Introduce Bill Requiring Disclosure of Trump Real Estate Buyers’ Identities: Ranking Member Maxine Waters introduced the “End Secret Holdings and Ethical and Legal Loopholes (SHELLs) Act, which would require the President, the Vice President, and other Executive Branch officials and staff to publicly disclose the “beneficial owners” behind any purchases of their real estate holdings.

Rep. Luetkemeyer (R-MO) Introduces Systemic Risk Designation Improvement Act: Rep. Luetkemeyer introduced on July 19 legislation aimed to ease regulations on regional banks. The bill would eliminate the $50B asset threshold in the 2010 Dodd-Frank overhaul that subjects lenders to “enhanced prudential standards.”

THIS WEEK ON THE HILL

Tuesday, July 25

Senate Banking Committee, Executive Session to Vote on Nominations, 10:00am, 538 Dirksen Senate Office Building

  • Mr. J. Paul Compton, Jr., to be General Counsel, U.S. Department of Housing and Urban Development;
  • Ms. Anna M. Farias, to be Assistant Secretary for Fair Housing and Equal Opportunity, U.S. Department of Housing and Urban Development;
  • Mr. Neal J. Rackleff, to be Assistant Secretary for Community Planning and Development, U.S. Department of Housing and Urban Development;
  • Mr. Richard Ashooh, to be Assistant Secretary for Export Administration, U.S. Department of Commerce;
  • Ms. Elizabeth Erin Walsh, to be Assistant Secretary for Global Markets and Director General of the United States and Foreign Commercial Service, U.S. Department of Commerce; and
  • Mr. Christopher Campbell, to be Assistant Secretary for Financial Institutions, U.S. Department of the Treasury.

House Financial Services Committee, Markup, 10:00am, 2128 Rayburn House Office Building

  • H.R. 1624, the “Municipal Finance Support Act of 2017”
  • H.R. 2864, the “Improving Access to Capital Act”
  • H.R. 3110, the “Financial Stability Oversight Council Insurance Member Continuity Act”
  • H.R. 3321, the “National Strategy for Combating Terrorist, Underground, and Other Illicit Financing Act”
  • H.R. 3326, the “World Bank Accountability Act of 2017”
  • H. Res. 442, Of inquiry directing the Secretary of the Treasury to provide certain documents in the Secretary’s possession to the House of Representatives relating to President Trump’s financial connections to Russia, certain illegal financial schemes, and related information.

Thursday, July 27

Senate Banking Committee, Nomination Hearing, 10:00am, 538 Dirksen Senate Office Building

  • Mr. Joseph Otting, to be Comptroller of the Currency; and
  • The Honorable Randal Quarles, to be a Member of the Board of Governors of the Federal Reserve System; Reappointment as a Member of the Board of Governors of the Federal Reserve System; and Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System.

House Financial Services Committee, Hearing, “The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System,” 10:00am, 2128 Rayburn House Office Building

  • The Honorable Steven Mnuchin, Secretary of the U.S. Department of the Treasury

Senate Agriculture Committee, Nomination Hearing, 9:30am, 328A Russell Senate Office Building

  • Rostin Behnam, to be a Commissioner of the Commodity Futures Trading Commission;
  • Dawn Stump, to be a Commissioner of the Commodity Futures Trading Commission; and
  • Brian Quintenz, to be a Commissioner of the Commodity Futures Trading Commission.

THE REGULATORS

Treasury Department Seeking Industry Input on Financial Stability Oversight Council (FSOC): At a closed-door meeting on July 13, banks and securities firms spoke with officials at the Treasury Department about FSOC. According to those at the meeting, the Department was receptive to the input from industry. Among the ideas suggested was that FSOC stop designating companies as “systemically important,” a designation that subjects them to greater scrutiny.

Comptroller of the Currency Keith Noreika Shows Support of National Fintech Charter: Speaking to the Exchequer Club in Washington, Comptroller Noreika expressed support for former Obama-appointed Comptroller Tom Curry’s idea of granting special purpose charters for financial technology companies. According to Noreika, the Office of the Comptroller of the Currency has authority to grant national bank charters to nondepository financial technology companies in appropriate circumstances.

Noreika also said that FSOC on July 28 will discuss the controversial propriety trading ban known as the Volcker Rule.

 

Regulatory Agencies Announce Coordination of Reviews for Certain Funds Under Volcker Rule: Five federal financial regulatory agencies today announced that they are coordinating their respective reviews of the treatment of certain foreign funds under section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, and the agencies' implementing regulations. To aid full consideration, the federal banking regulators announced that they would not take action under section 619 for qualifying foreign excluded funds, subject to certain conditions, for a period of one year.

Securities and Exchange Commission (SEC) Rules Market Makers Can’t Trade Pre-Close: The SEC on July 14 disapproved a proposal by the New York Stock Exchange (NYSE) that would allow designated market makers to make trades that would establish a new high or low price in the last 10 minutes of trading. The SEC said that the NYSE hadn’t addressed the risk that market makers would engage in manipulative activity.

SEC Commissioner Michael Piwowar Says SEC May Unveil Small Business Advocate Office: Speaking in Washington on July 17, SEC Commissioner Michael Piwowar said that the agency may debut a small-business advocate office by the end of the year. The agency recently received approval to fund the office, which will be the Office of the Advocate for Small Business Capital Formation. The office will be responsible for identifying challenges that companies face in accessing capital, and recommending regulatory fixes.

Piwowar also commented on fintech innovations and the market for initial coin offerings (ICOs), saying that there is a challenging regulatory environment and many different federal agencies a startup must address. According to Piwowar, fintech is “transformational” and that the U.S. needs to make sure it is not “behind the curve” on the global phenomena.

National Credit Union Administration (NCUA) Announces Restructuring Plan: the NCUA announced on July 21 plans to restructure that will take place over a number of years. The plan will create an Office of Credit Union Resources and Expansion and close two of NCUA’s regional offices. The new office would be in charge of “redefining and realigning chartering and filed-of-membership, credit union development, grants and loans and minority depository institutions programs.”

NOMINATIONS, COMINGS AND GOINGS AT THE AGENCIES

President Trump Nominates Hester Peirce as SEC Commissioner: President Trump announced on July 18 his intention to nominate Mercatus fellow Hester Peirce as an SEC Commissioner. Peirce is a former Senate Banking Committee and SEC staffer.

OTHER NOTEWORTHY ITEMS

Coalition Pushes for New Market Access in China: The Engage China Coalition—a group of bankers, insurers, and other financial services providers—is putting pressure on the Trump Administration to try to open China’s market to foreign capital. China has places restrictions on the influx of foreign money into its markets. The group says that an upcoming bilateral summit is a good opportunity for the Administration to address the issue.

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Paul Hastings’ Government Relations team is monitoring these issues. We help our clients craft strategies to address federal legislative and regulatory matters. Please reach out to us if your organization needs assistance with congressional or regulatory relations.