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PH Money Matters: This Week in Washington

This Week in Washington for September 10, 2018

THE BIG PICTURE

Brett Kavanaugh’s Supreme Court confirmation hearing was held over four days last week. The proceeding got off to a contentious start, with Democrats attempting to delay the hearing until they had a chance to consider the full set of 40,000 pages of documents that had been released the evening before. The Senators questioned Judge Kavanaugh about his views on Roe v. Wade, the constitutionality of the CFPB’s structure, presidential pardons and subpoenas, racial profiling, and a variety of other hot button issues. Despite Democrats’ attempt to highlight areas they view as concerning in Mr. Kavanaugh’s record, given the current makeup of the Senate he is likely to be confirmed, albeit on partisan lines.

An anonymous op-ed published in the New York Times by a senior official in the Trump administration rocked the White House, and caused a series of high profile denials from officials and even the First Lady, as the President criticized the author as a “gutless” coward. The piece described a “resistance” within the administration, with officials who are “thwarting Mr. Trump’s more misguided impulses until he is out of office,” and revealed that there had been “whispers within the cabinet of invoking the 25th Amendment.” Later in the week, the President called for Attorney General Jeff Sessions to launch an investigation into who wrote the piece, calling it a national security issue.

Another round of primaries was held in the run-up to the midterm elections. In Delaware, incumbent Democratic Senator Tom Carper survived a primary challenge from Air Force veteran Kerri Evelyn Harris. In Massachusetts’ 7th District however, 10-term Democratic Rep. Mike Capuano was defeated by Boston city council member Ayanna Pressley. Ms. Pressley, if successful in November, will become the first African-American elected to Congress from the state.

President Obama delivered a rare campaign-style speech on Friday, his first in a series of appearances intended to rally Democrats leading up to the November midterms. While former Presidents typically maintain a low profile and avoid criticizing their successors, Obama decried the current political climate, saying “this is not normal. These are not ordinary times, these are dangerous times,” and had some harsh words for President Trump, who he described as “capitalizing on resentments politicians have been fanning for years.”

Other highlights of last week include:

  • Chicago Mayor Rahm Emanuel surprised many by announcing on Tuesday that he will not seek reelection to a third term. His decision leaves the city without a clear frontrunner among the field of 12 remaining candidates.
  • Arizona Governor Doug Ducey has selected former Senator Jon Kyl to fill the seat of the late Senator John McCain. Mr. Kyl has agreed to serve “at least” until the end of year. A special election will be held in 2020 to decide who will fill the remaining two years of McCain’s term. Since leaving the Senate in 2013, Mr. Kyl has worked as a lobbyist in DC.
  • Former foreign policy advisor to the Trump campaign, George Papadapoulos, was sentenced to 14 days in jail on Friday. Mr. Papadapoulos had pled guilty to lying to the FBI in October as part of the Russia investigation.
  • The August jobs report showed another strong month, with 201,000 jobs added and the unemployment rate remaining at a low 3.9%.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Hearing entitled “The Future of Money: Coins and Banknotes”: On Wednesday, the Monetary Policy and Trade Subcommittee held a hearing to examine and evaluate the operations of both the U.S. Mint and the Bureau of Engraving and Printing. Subcommittee Chair Rep. Andy Barr (R-KY) noted that “with new and disruptive products entering the market, demand for coins and paper money may grow at a slower pace and possibly even decrease one day,” adding that these new products “could increase the sophistication of counterfeiting abilities of criminals.”

  • Mr. Leonard R. Olijar, Director, Bureau of Engraving and Printing
  • Mr. David J. Ryder, Director, United States Mint

Hearing entitled “The Cost of Regulation on Affordable Multifamily Development”: On Wednesday, the Housing and Insurance Subcommittee held a hearing to examine the various federal, state, and local regulations and policies that affect affordable multifamily housing development. The hearing identified regulatory barriers that inhibit or prevent the development
of affordable housing, assessed how those barriers affect the cost of building and maintaining affordable housing, and offered suggestions on how such policies should change to meet future demand for such units.

  • Ms. Sue Ansel, President and Chief Executive Officer, Gables Residential, on behalf of the National Multifamily Housing Council
  • Ms. Erika Poethig, Vice President and Chief Innovation Officer, The Urban Institute
  • Mr. James H. Schloemer, Chief Executive Officer, Continental Properties Company, Inc.
  • Mr. Steven E. Lawson, Chairman, The Lawson Companies, on behalf of the National Association of Home Builders

Hearing entitled “A Failure to Act: How a Decade without GSE Reform Has Once Again Put Taxpayers at Risk”: On Thursday, the full Committee held a hearing to review and evaluate the efficacy of the government’s conservatorship and financial bailout of the GSEs over the last decade, lessons learned from the role of Fannie Mae and Freddie Mac in the lead up to the financial crisis, and the actions of Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency (FHFA) since the beginning of the conservatorship.

  • Mr. Edward J. DeMarco, President, Housing Policy Council
  • Dr. Phillip L. Swagel, Professor, University of Maryland School of Public Policy
  • Ms. Nikitra Bailey, Executive Vice President, Center for Responsible Lending
  • Mr. Edward J. Pinto, Co-Director, Center on Housing Markets and Finance & Resident Fellow, American Enterprise Institute

Hearing entitled “Survey of Terrorist Groups and Their Means of Financing”: On Friday, the Subcommittee on Terrorism and Illicit Finance held a hearing to examine the evolving nature of terrorism and the current groups around the world which pose the greatest threats to the national security of the United States and specifically its financial system. The hearing also explored the diverse methods these groups use to generate and transfer funds to support their activities and organizations, and provided an overview of the current terrorist financing trends.

  • Ms. Katherine Bauer, Blumenstein-Katz Family Fellow, Washington Institute for Near East Policy
  • Dr. Colin P. Clarke, Senior Political Scientist, RAND Corporation
  • Mr. Yaya J. Fanusie, Director of Analysis, Center on Sanctions and Illicit Finance, Foundation for Defense of Democracies
  • Mr. Oren Segal, Director, Center on Extremism, Anti-Defamation League
  • Mr. Ali H. Soufan, Chairman and Chief Executive Officer, The Soufan Center

SENATE BANKING COMMITTEE

Hearing entitled “Outside Perspectives on Russia Sanctions: Current Effectiveness and Potential for Next Steps”: On Thursday, the full Committee held the second of three planned hearings on sanctions against the Russian Federation for its malign activities directed against the United States, its allies and spheres of influence.

  • The Honorable Daniel Fried, former Coordinator for Sanctions Policy, U.S. Department of State (2013-2017), and former Assistant Secretary of State for European and Asian Affairs (2005-2009)
  • The Honorable Michael A. McFaul, the Peter and Helen Bing Senior Fellow at the Hoover Institution and Professor of Political Science, Director and Senior fellow at the Freeman Spogli Institute for International Studies at Stanford University, and former U.S. Ambassador to the Russian Federation (2012-2014)
  • Ms. Heather A. Conley, Senior Vice President for Europe and Eurasia, Center for Strategic & International Studies (CSIS), and former Deputy Assistant Secretary of State for Eurasian Affairs (2001-2005)
  • Ms. Rachel Ziemba, Adjunct Senior Fellow, Energy, Economics and Security Program, Center for a New American Security (CNAS).

LEGISLATION INTRODUCED AND PROPOSED

Data Security Bill: On Friday, the anniversary of the Equifax data breach revelation, Rep. Blaine Luetkemeyer (R-MO) released the text of the “Consumer Information Notification Requirement Act” which he describes as “enhance[ing] the Gramm-Leach-Bliley Act, ensuring customers of financial firms are protected and informed in the event of a breach. The American people deserve better data security standards, and my bill will give financial institution customers the peace of mind they need.”

THIS WEEK ON THE HILL

Wednesday, September 12

Senate Banking Committee Hearing Entitled “Countering Russia: Assessing New Tools”: 10:00 AM in Dirksen Senate Office Building 538.

The House of Representatives will consider two pieces of financial services legislation:

  • H.R. 5059 – State Insurance Regulation Preservation Act, as amended (Sponsored by Rep. Keith Rothfus)
  • H.R. 6411 – FinCEN Improvement Act of 2018 (Sponsored by Rep. Ed Perlmutter)

Thursday, September 13

Senate Banking Committee Hearing Entitled “Implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act”: 10:00 AM in Dirksen Senate Office Building 538.

THE REGULATORS

Agencies Extend Comment Period for Proposed Rule Simplifying and Tailoring the “Volcker Rule”: The Federal Reserve Board, the CFTC, the FDIC, the OCC, and the SEC on Tuesday jointly extended until October 17, 2018, the comment period for a proposed rule to simplify and tailor compliance requirements for the “Volcker Rule.” The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds.

SEC Awards More Than US$54M to Two Whistleblowers: The SEC awarded US$39M to one whistleblower and US$15M to another whose critical information and continued assistance helped the agency bring an important enforcement action. The US$39M award is the second-largest award in the history of the SEC’s whistleblower program.

OCC Gives Conditional Approval for First Bank Charter for Fintech Company: Varo Money, rebranded as Varo Bank, announced that they had been given preliminary approval from the OCC to form a de novo national bank. Co-founder and CEO Collin Walsh described it as “a historic moment and marks the start of a new era in banking.”

CFPB Releases 17th Edition of Supervisory Highlights Report: The report covers Bureau supervision activities completed between December 2017 and May 2018, and shares observations in the areas of auto loan servicing, credit card account management, debt collection, mortgage servicing, payday lending, and small business lending.

Treasury Official Discusses Data Security Risks: Speaking at a Women in Housing and Finance event, Heath Tarbert, Treasury Assistant Secretary for international markets and investment policy, discussed potential cybersecurity vulnerabilities in the financial services industry related to personally identifiable and health care information. He described these as “areas potentially susceptible to manipulation, [that] we would want to make sure that those things are properly safeguarded.”

Federal Reserve Board Announces Members of Its Community Depository Institutions Advisory Council for 2019: The Federal Reserve Board on Friday announced the members of its Community Depository Institutions Advisory Council (CDIAC) and the president and vice president of the council for 2019. The CDIAC advises the Board on the economy, lending conditions, and other issues of interest to community depository institutions. Members are selected from representatives of commercial banks, thrift institutions, and credit unions serving on local advisory councils at the 12 Federal Reserve Banks. Christopher D. Maher, President and Chief Executive Officer of OceanFirst Financial Corporation and OceanFirst Bank, Toms River, N.J., will serve as CDIAC president in 2019. Joe Quiroga, President and Chief Executive Officer of Texas National Bank, Edinburg, Texas, will serve as vice president.

FDIC’s Gruenberg Cautions Against Easing Backup Capital Rule: In a speech at the Peterson Institute for International Economics, FDIC board member and former chairman Martin Gruenberg cautioned that the proposal to ease backup capital rules for large banks would amount to “a serious weakening of post-crisis reforms” and urged reconsideration.

FTC Looks to Ramp Up Fintech Enforcement: Andrew Smith, the FTC’s Director of consumer protection, remarked that “Commissioners are really interested in [fintech], . . . cause that’s where the new entrants to the marketplace are and that’s where the action is.” He highlighted recent reports about online lending as an example of an area with “troubling practices.”

COMINGS AND GOINGS AT THE AGENCIES

SEC Names Rebecca Olsen as Director of the Office of Municipal Securities: The SEC announced on Tuesday that Rebecca J. Olsen has been named Director of the agency’s Office of Municipal Securities (OMS). Ms. Olsen has served as OMS’s Acting Director since September 2017. Ms. Olsen was named as OMS’s Deputy Director in May 2015 after previously serving in the role of Chief Counsel for the office. She first joined the SEC in May of 2013 as an attorney fellow in OMS.

SEC Names Anita Bandy and Carolyn Welshhans as Associate Directors in Enforcement Division: The SEC announced on Thursday that Anita Bandy and Carolyn Welshhans have been named Associate Directors in the SEC’s Division of Enforcement. Ms. Bandy joined the SEC in 2004 and has been an Assistant Director in the Division of Enforcement since 2013. Ms. Welshhans, who joined the SEC in 2007, has served as an Assistant Director in the Division of Enforcement’s Market Abuse Unit since 2015.

Elad Roisman Confirmed to SEC: Elad Roisman was confirmed by a vote of 85-14 to join the SEC as its fifth commissioner. Mr. Roisman, once sworn in, will occupy the final open spot, restoring the Commission to full strength. He most recently served as the chief counsel to the Senate Banking Committee.

Dan Berkovitz Sworn in to Serve as a CFTC Commissioner: On Friday, Dan Berkovitz was sworn in to serve as a Commissioner for the CFTC. Berkovitz was nominated by President Trump to serve as a Commissioner in April 2018 and he was unanimously confirmed by the Senate on August 28, 2018. Berkovitz previously served as General Counsel of the CFTC from 2009-2013.

FDIC Announces Senior Personnel Changes: FDIC Chairman Jelena McWilliams announced on Tuesday the appointment of two long-term FDIC veterans to serve in key leadership positions. Arleas Upton Kea will serve as the Deputy to the Chairman and Chief Operating Officer (COO), and Arthur J. Murton will serve as the Deputy to the Chairman for Policy.

OTHER NOTEWORTHY ITEMS

14 AGs Call for CFPB to Continue Support for Disparate Impact Liability: 14 Democratic attorneys general wrote a letter to Acting Director Mick Mulvaney urging him against reading disparate impact liability out of the Equal Credit Opportunity Act, calling it a “critically important feature of antidiscrimination law.” The letter expressed their view that the “CFPB has no authority to overrule the Supreme Court’s interpretation of unambiguous text, any action to reinterpret ECOA not to provide for disparate impact liability could be set aside by a court as arbitrary, capricious, and otherwise not in accordance with law.”