THE BIG PICTURE
President Trump and North Korean leader Kim Jong Un’s second summit, held in Hanoi, Vietnam, ended abruptly without a deal on Thursday. The two leaders were unable to find common ground on the issues of denuclearization and sanctions relief. The President told reporters that “sometimes you have to walk, and this was just one of those times.” The President also told the press that he did not consider Kim responsible for the death of American Otto Warmbier, who was imprisoned in North Korea and died shortly after his return to the US. In response, Otto’s parents released a statement blaming Kim and saying “no excuses or lavish praise can change that.”
On Wednesday, the President’s former personal attorney Michael Cohen appeared before the House Oversight Committee for his long anticipated public hearing. In his opening remarks, he described the President as a “racist” and a “con man.” Mr. Cohen faced tough questioning from Republicans on the Committee like Rep. Jim Jordan (R-OH), who questioned how trustworthy his testimony could be, given his impending prison sentence.
Other highlights of last week include:
- On Tuesday, the House voted 245-182 to pass a resolution to overturn the President’s national emergency declaration, with 13 Republicans joining the Democrats. The measure now advances to the Senate, where four Republican Senators have already voiced their support. The bill is certain to face a veto, should it reach the President’s desk.
- Washington Governor Jay Inslee announced his bid for the Presidency on Friday, emphasizing the battle against climate change as his signature campaign issue.
- The annual Conservative Political Action Conference was held last week, featuring a lengthy address from the President on Saturday.
- On Thursday, the Senate voted 52-47, largely on party lines, to confirm former lobbyist Andrew Wheeler as the next administrator of the EPA. Sen. Susan Collins (R-ME) was the only Republican to join the Democrats in voting against Mr. Wheeler.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “Who’s Keeping Score? Holding Credit Bureaus Accountable and Repairing a Broken System": On Tuesday, the full Committee held a hearing on the nation’s credit reporting system and to consider two draft legislative proposals, the “Comprehensive Consumer Credit Reform Act of 2019” and “Protecting Innocent Consumers Affected by a Shutdown Act.”
- Mr. Mark Begor, CEO, Equifax
- Mr. James M. Peck, President and CEO, TransUnion
- Mr. Craig Boundy, CEO, Experian North America
- Ms. Lisa Rice, President and CEO, National Fair Housing Alliance (NFHA)
- Ms. Chi Chi Wu, Staff Attorney, National Consumer Law Center (NCLC)
- Ms. Jennifer Brown, Associate Director, Economic Policy, UnidosUS
- Mr. Edmund Mierzwinski, Consumer Program Director, U.S. Public Interest Research Group (PIRG)
- Mr. Thomas Brown, Partner, Paul Hastings
Hearing on “Monetary Policy and the State of the Economy”: On Wednesday, the full Committee held a hearing to hear the testimony of Federal Reserve Chairman Jerome Powell on the conduct of monetary policy and the state of the economy. Chairwoman Waters expressed concern over weakening regulatory safeguards, saying “now is not the time to take the guardrails off of this industry.” In response to questioning on the efficacy of the President’s regulatory relief efforts, the Chairman said “it’s really hard to isolate that.” He also relayed that he does not think new accounting standards will hurt bank lending, saying they had provided ample time to adjust and would do “everything we can to avoid a big change” that would disrupt lending.
- The Honorable Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System
Hearing on “An Overview of Diversity Trends in the Financial Services Industry”: On Wednesday, the Subcommittee on Diversity and Inclusion held a hearing to examine trends in diversity in the financial services industry, including management-level diversity and diversity among potential talent pools. They also explored challenges that financial services firms have identified in trying to increase workforce diversity and practices that firms have used to address such challenges. In her opening remarks, Chairwoman Waters celebrated the first meeting of the newly formed Subcommittee, and pledged to “shin[e] light” on troubling trends and “work to improve the industry so that our financial system works for everybody.”
- Daniel Garcia-Diaz, Director, Financial Markets and Community Investment, U.S. Government Accountability Office
SENATE BANKING COMMITTEE
Executive Sessions on “Nominations”: On Tuesday, the full Committee met to vote on the following nominations, ultimately advancing all 11:
- Dr. Mark Calabria to be Director of the Federal Housing Finance Agency. Nomination was advanced by a vote of 13-12.
- Mr. Bimal Patel to be an Assistant Secretary of the Treasury. Nomination was advanced by voice vote.
- Mr. Todd Harper to be a Member of the National Credit Union Administration Board. Nomination was advanced by voice vote.
- Mr. Rodney Hood to be a Member of the National Credit Union Administration Board. Nomination was advanced by voice vote.
- Dr. Dino Falaschetti to be Director of Treasury’s Office of Financial Research. Nomination was advanced by voice vote.
- Mr. Spencer Bachus III to be a Member of the Board of Directors of the Export-Import Bank. Nomination was advanced by voice vote.
- Ms. Judith Delzoppo Pryor to be a Member of the Board of Directors of the Export-Import Bank. Nomination was advanced by voice vote.
- Ms. Kimberly Reed to be President of the Export-Import Bank. Nomination was advanced by voice vote.
- Mr. Seth Appleton to be an Assistant Secretary at HUD. Nomination was advanced by voice vote.
- Mr. Robert Hunter Kurtz to be an Assistant Secretary at HUD. Nomination was advanced by voice vote.
Hearing on “The Semiannual Monetary Policy Report to the Congress”: On Tuesday, the full Committee held a hearing to receive the testimony of Federal Reserve Chair Jerome Powell and to examine the current state of the U.S. economy, the Fed’s implementation of monetary policy, and its supervisory and regulatory activities. Chairman Powell rejected the idea that the growing budget deficit wasn’t a problem, saying “the idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong.” He also indicated that overhauling Fannie Mae and Freddie Mac was “one of the big unfinished pieces of business in the post-crisis reform period.” He declined to comment on former Chairwoman Yellen’s recent comment that the President doesn’t have a grasp on macroeconomic policy.
- The Honorable Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System
Hearing on “Legislative Proposals on Capital Formation and Corporate Governance”: On Thursday, the full Committee held a hearing to consider a number of legislative proposals that would encourage capital formation and improve corporate governance.
- Ms. Catherine Mott, CEO, BlueTree Capital and BlueTree Allied Angels
- Mr. Thomas Quaadman, Executive Vice President, U.S. Chamber Center for Capital Markets Competitiveness
- Ms. Heather Slavkin Corzo, Director of Capital Markets Policy for AFL-CIO, and Senior Fellow for Americans for Financial Reform
LEGISLATION INTRODUCED AND PROPOSED
Arbitration Fairness for Consumers Act: Senator Sherrod Brown (D-OH) introduced the Arbitration Fairness for Consumers Act, which would prohibit financial companies from forcing consumers to give up their right to a day in court or their right to join a class action suit to seek relief. Sen. Brown decried forced arbitration as being “about big companies silencing victims and giving more power to corporations that already have too much power over the lives of working Americans.”
Help Americans Never Get Unwanted Phone Calls: On Thursday, a bipartisan group of legislators reintroduced the Help Americans Never Get Unwanted Phone calls (HANGUP) Act, which aims to shield consumers from receiving robocalls and robotexts from federal debt collectors by removing exemptions in the Telephone Consumer Protection Act (TCPA).
Cybersecurity Disclosure Act of 2019: A bipartisan group of Senators—Jack Reed (D-RI), Susan Collins (R-ME), Mark Warner (D-VA), John Kennedy (R-LA), and Doug Jones (D-AL) —introduced S. 592, the Cybersecurity Disclosure Act of 2019, which aims to better protect customers, increase transparency for investors, and ensure public companies are prioritizing cybersecurity and data privacy. The legislation would require publicly traded companies to include in their SEC disclosures to investors information on whether any member of the company’s Board of Directors is a cybersecurity expert, and if not, why having this expertise on the Board of Directors is not necessary because of other cybersecurity steps taken by the company.
Fair Aluminum Pricing: Rep. Ken Buck (R-CO) along with Al Lawson (D-FL) reintroduced H.R. 1406, the Aluminum Pricing Examination (APEX) Act, which would “grant the CFTC the statutory authority to conduct oversight of the aluminum market and to investigate price setting, benchmarking, and reporting entities. At the same time, the bill [would] enable the DOJ to consult with the CFTC to ensure all regulatory and oversight actions align with anti-trust statutes.”
Transparency in Corporate Trading: Senators Chris Van Hollen (D-MD) and Deb Fischer (R-NE) introduced the Promoting Transparent Standards for Corporate Insiders Act which would require the SEC to study, report to Congress, and write rules addressing the ability of corporate insiders to take advantage of the SEC’s insider trading safe harbor rule. The bill was also introduced in the House by Financial Services Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC).
ON THE FLOOR
Universal Background Checks: On Tuesday, the House passed H.R. 8, the Bipartisan Background Checks Act of 2019, by a vote of 240-190. The bill is intended to close a loophole in the current background check system for firearm sales which doesn’t require private sellers to run checks.
THIS WEEK ON THE HILL
Wednesday, March 6
House Financial Services Committee “Markup of FY19 Budget Views and Estimates”: 10:00 AM in 2128 Rayburn House Office Building.
Thursday, March 7
House Financial Services Committee hearing on “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau”: 10:00 AM in 2128 Rayburn House Office Building.
FHFA Issues Final Rule on Uniform Mortgage-Backed Security: On Thursday, the Federal Housing Finance Agency issued a final rule that requires Fannie Mae and Freddie Mac to align programs, policies, and practices that affect the cash flows of “To-Be-Announced” (TBA)-eligible Mortgage-Backed Securities (MBS). The agency described the rule as significantly improving the predictability of cash flows to MBS investors. “This rule demonstrates FHFA’s commitment to the success of the UMBS, which will promote liquidity and efficiency in the secondary mortgage market,” said FHFA Acting Director Joseph Otting.
CFTC Announces Data Protection Initiative: CFTC Commissioner Dawn Stump announced a Data Protection Initiative, saying “I am proposing a pathway to enhancing the Commodity Futures Trading Commission’s data protection measures,” adding that “it is time for the CFTC to comprehensively evaluate our approach to data collection and implement consistent policies and procedures across the many functions required to carry out our mission.”
SEC Celebrates African American History Month with Presentation by Award-Winning Filmmaker: The SEC celebrated African American History Month with events in its Regional Offices and a presentation by scholar and award-winning filmmaker Dr. Henry Louis Gates, Jr. to discuss his latest documentary series, “Reconstruction: America After the Civil War,” at the agency’s headquarters in Washington, D.C. In introducing Dr. Gates, Chairman Jay Clayton remarked, “I believe in our quest for a pluralistic and inclusive society where opportunity and support are broadly and fairly distributed and our past failures—particularly in the area of race—are faced head on and provide us with the tools to do better. It is people like Dr. Gates who give us that context and enable us to communicate better, who help us on this journey.”
CFPB Releases Report on First-Time Homebuying Servicemembers: On Friday, the CFPB released a report focusing on mortgages made to first-time homebuyers who are serving in the armed forces or are veterans. The Bureau’s report is the first time researchers have been able to provide a description and analysis of servicemembers’ mortgage choices and mortgage performance, both during and after the housing crisis of the last decade. It showed that the share of first-time homebuying servicemembers using VA mortgages increased from 30 percent before 2007 to 63 percent in 2009, while in 2016, 78 percent of servicemember loans were VA loans.
U.S. and UK Authorities Issue Joint Statement on Continuity of Derivatives Trading and Clearing Post-Brexit: On Monday, the U.S. CFTC and the Bank of England, including the Prudential Regulation Authority (BoE) and the Financial Conduct Authority (FCA) issued a statement regarding derivatives trading and clearing activities between the UK and U.S. after the UK’s withdrawal from the EU. They revealed that the authorities were “taking measures to ensure the UK’s withdrawal from the EU, in whatever form it takes, will not create regulatory uncertainty regarding derivatives market activity between the UK and U.S.” CFTC Chairman Giancarlo said “London is and will remain a global center for derivatives trading and clearing,” adding that he was “pleased to announce these important measures [that] provide a bridge over Brexit through a durable regulatory framework.”
HUD Approves Puerto Rico Disaster Recovery Action Plan: On Friday, HUD announced its approval of Puerto Rico’s latest disaster recovery action plan to help the island continue to rebuild from Hurricanes Maria and Irma. HUD’s approval of the action plan makes Puerto Rico eligible for an additional US$8.2B in congressionally appropriated disaster relief funds which will be awarded through HUD grant programs. “This is an unprecedented investment and since Puerto Rico has a history of fiscal malfeasance, we are putting additional financial controls in place to ensure this disaster recovery money is spent properly,” said Secretary Ben Carson.
Treasury Announces FSOC Meeting: On Wednesday, Treasury announced that the Financial Stability Oversight Council will hold its first meeting of the year on March 6th. The preliminary agenda for the open session includes proposed amendments to the Council’s interpretive guidance on nonbank financial company designations. The preliminary agenda for the executive session includes a discussion regarding U.S. nonfinancial corporate credit and proposed amendments to the Council’s interpretive guidance on nonbank financial company designations.
COMINGS AND GOINGS AT THE AGENCIES
SEC Names Gabriel Benincasa as Its First Chief Risk Officer: On Thursday, the SEC announced that Gabriel Benincasa has been named the Commission’s first Chief Risk Officer. This position was created by SEC Chairman Jay Clayton to strengthen the agency’s risk management and cybersecurity efforts.
SEC Names S.P. Kothari as Chief Economist and Director of the Division of Economic and Risk Analysis:On Tuesday, the SEC announced that S.P. Kothari has been named Chief Economist and Director of the agency’s Division of Economic and Risk Analysis. Mr. Kothari joins the SEC from the Sloan School of Management at MIT, where he is a professor of accounting and finance and recently ended a six-year term as Deputy Dean of MIT Sloan School of Management.
SEC Names Vanessa Countryman Acting Secretary: On Tuesday, the SEC announced that Vanessa Countryman had been named Acting Secretary. Ms. Countryman will replace Brent Fields, who is stepping down as Secretary effective March 11, 2019, to accept a position in the Commission's Division of Investment Management. For the past five years, Ms. Countryman has served as Chief Counsel in the Division of Economic and Risk Analysis. Between 2010 and 2012, Ms. Countryman served as Counsel to two SEC Commissioners.
Former CFPB Attorney Appointed Florida’s Banking Commissioner: Ronald Rubin, who previously served as an enforcement attorney at the CFPB has been appointed as Florida’s Banking Commissioner.
OTHER NOTEWORTHY ITEMS
GAO Calls for OCC to Do More to Defend Against Regulatory Capture: A report released by the GAO on Monday found that the OCC is not doing enough to prevent conflicts of interest among their employees and the banks they supervise, saying “OCC has some policies that encourage transparency and accountability in its large bank supervision processes; however, weaknesses in documentation requirements may make large bank supervision more vulnerable to regulatory capture.” The OCC responded by saying they did not agree with the report, and said they would not implement the recommendations.
Republican Senators Call on GAO to Examine Guidance on Large Financial Institutions: In a letter, five Republican Senators including Thom Tillis (NC), Mike Crapo (ID), David Perdue (GA), Mike Rounds (SD), and Kevin Cramer (ND), asked the GAO to examine whether Federal Reserve guidance on large bank supervision could be overturned via the Congressional Review Act, saying “Determining whether the LISCC Guidance is a ‘rule’ under the CRA is particularly important because the Federal Reserve has never revealed the criteria by which certain supervised institutions become subject to (or may avoid becoming subject to) the LISCC designation and associated requirements.”