THE BIG PICTURE
Excerpts from a letter sent by Special Counsel Robert Mueller to Attorney General William Barr were published in the media on Tuesday, revealing that the Special Counsel felt the AG’s four-page summary of the probe did not capture “the context, nature and substance” of the investigation and had caused “public confusion about critical aspects of the results.” The next day, AG Barr appeared before the Senate Judiciary Committee where he faced tough questioning from Democrats who accused him of being “purposefully misleading” and criticized his handling of the report’s release. The AG’s planned appearance before the House Judiciary Committee on Thursday was called off following disagreements over the questioning format. The panel moved forward with the hearing, leaving an empty chair for the AG.
Following a meeting between the President, House Speaker Nancy Pelosi, and Senate Minority Leader Chuck Schumer on Tuesday, it was announced they had agreed to work towards a deal on a US$2T infrastructure bill. The conversation was described as “excellent and productive,” as both sides pledged to work towards a “big and bold” package. Specific pay-fors were not discussed, however, with House Transportation Chairman Peter DeFazio (D-OR) saying the plan was to “sit down and talk about how we pay for” it another day.
The President filed suit on Monday to block companies from complying with House Committee subpoenas seeking his financial records, arguing that they serve “no legitimate or lawful purpose.” House Financial Services Chairwoman Maxine Waters (D-CA) and Intelligence Chairman Adam Schiff (D-CA) called the suit “meritless” and merely a tactic “designed to put off meaningful accountability as long as possible.” Counsel for the House, however, agreed to suspend the subpoena deadlines until seven days after the Court rules on whether to grant a preliminary injunction.
Other highlights of last week include:
- Deputy Attorney General Rod Rosenstein, who was responsible for appointing Special Counsel Robert Mueller, submitted his resignation on Monday, effective May 11.
- The April jobs report was released, showing another strong month during which the economy added 263,000 jobs and the unemployment rate fell to 3.6%, the lowest level since 1969.
- Colorado Senator Michael Bennet announced his bid for the 2020 Democratic presidential nomination, joining an increasingly crowded field of candidates.
- On Saturday, Wyoming Senator Mike Enzi, who chairs the Senate Budget Committee, announced that he will not run for reelection in 2020.
- On Sunday, the President announced that he had selected Mark Morgan, who headed the U.S. Border Patrol at the end of the Obama administration, as the next director of Immigration and Customs Enforcement.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “Housing in America: Assessing the Infrastructure Needs of America’s Housing Stock”: On Tuesday, the full Committee held a hearing to assess the infrastructure needs of the nation’s housing stock. The Committee also considered a discussion draft of the “Housing is Infrastructure Act of 2019” championed by Chairwoman Maxine Waters (D-CA), who argued the bill would “make the investments we need in our housing infrastructure and create jobs across the country.”
- Ms. Diane Yentel, President and CEO of the National Low Income Housing Coalition
- Ms. Adrianne Todman, CEO of the National Association of Housing and Redevelopment Officials
- Mr. Steven Lawson, Chairman of The Lawson Companies and representative from the National Association of Home Builders
- Mr. Daryl Carter, Founder, Chairman and CEO of Avantha Capital, on behalf of the National Multifamily Housing Council and the National Apartment Association
Hearing on “Ending Debt Traps in the Payday and Small Dollar Credit Industry”: On Tuesday, the Subcommittee on Consumer Protection and Financial Institutions held a hearing on ending debt traps in the payday loan and small dollar credit industry. The Committee also considered the following draft legislative proposals: (1) H.R.____, The “Protecting Consumers from Debt Traps and Unreasonable Rates Act”; H.R. 1285, The “Improving Access to Traditional Banking Act of 2019.”
- Rev. Dr. Frederick Douglass Haynes, III, Senior Pastor, Friendship-West Baptist Church
- Kenneth Whittaker, Activist and Former payday loan consumer
- Diane Standaert, Executive Vice President and Director of State Policy, Center for Responsible Lending
- Todd Ortique McDonald, Vice President and Board Director, Liberty Bank & Trust Company, representing the National Bankers Association
- Christopher Lewis Peterson, John J. Flynn Endowed Professor of Law, University of Utah, S.J. Quinney College of Law, and Director of Financial Services and Senior Fellow, Consumer Federation of America
- Garry Lacy Reeder II, Vice President, Policy and Innovation, Center for Financial Services Innovation
- Robert Sherrill, CEO, Imperial Cleaning Systems
- Diego Zuluaga, Policy Analyst, Center for Monetary and Financial Alternatives, Cato Institute
Hearing on “Examining Discrimination in the Automobile Loan and Insurance Industries”: On Wednesday, the Subcommittee on Oversight & Investigations held a hearing to examine discrimination in the automobile loan and insurance industries. Chairwoman Maxine Waters (D-CA) argued that “buying a car is a significant purchase for many Americans and should be a fair and transparent transaction, free of discrimination,” and decried the fact that this is often not the case for persons of color.
- John W. Van Alst, Attorney, National Consumer Law Center; Director, Working Cars for Working Families, an NCLC project
- Rachel J. Cross, Policy Analyst, Frontier Group
- Kristen Clarke, President and Executive Director, Lawyers Committee for Civil Rights Under Law
- Joshua Rivera, Policy Advisor, University of Michigan, Poverty Solutions
- James Lynch, Chief Actuary, Vice President of Research and Education, Insurance Information Institute
Hearing on “Good for the Bottom Line: A Review of the Business Case for Diversity and Inclusion”: On Wednesday, the Subcommittee on Diversity and Inclusion held a hearing to examine data and research about the social and economic benefits that can be achieved when organizations implement robust diversity and inclusion strategies. The hearing also explored the financial services industry and other organizational examples of successful diversity and inclusion initiatives.
- Rick Guzzo, Senior Leader, Workforce Strategy, Mercer
- Victoria Budson, Co-Director, Women and Public Policy Program, Kennedy School, Harvard University
- Adrienne Trimble, President, National Minority Supplier Development Council
- William Von Hoene, Jr., Chief Strategy Officer, Exelon
- Rory Verrett, Founder and Managing Partner, Protégé Search
SENATE BANKING COMMITTEE
Hearing on “Guidance, Supervisory Expectations, and the Rule of Law: How do the Banking Agencies Regulate and Supervise Institutions?”: On Tuesday, the Committee held a hearing to consider guidance, supervisory expectations, the rule of law, and how banking agencies regulate and supervise institutions. While Chairman Mike Crapo (R-ID) remarked that he was open to hearing witness views on “what can be done to ensure that there is greater transparency and accountability in the regulatory and supervisory process,” Ranking Member Sherrod Brown (D-OH) criticized the hearing as intended “to make life a little easier for Wall Street.”
- Mr. Greg Baer, President And Chief Executive Officer, Bank Policy Institute
- Ms. Margaret Tahyar, Partner, Davis Polk & Wardwell LLP
- Ms. Patricia McCoy, Professor Of Law, Boston College Law School
House Agriculture Committee Hearing on “The State of the CFTC”: On Wednesday, the House Agriculture Committee held a hearing to receive the testimony of CFTC Chairman J. Christopher Giancarlo on the state of the agency. During his testimony, Chairman Giancarlo discussed the CFTC’s response to rapidly changing technological developments such as blockchain, saying the agency had adopted an “exponential growth mindset,” had become a “quantitative regulator,” was embracing “market-based solutions” and had established an internal FinTech Stakeholder to address opportunities and challenges. He discussed his view that “the Commission anticipates new applications for clearinghouse registration resulting from the explosion of interest in cryptocurrencies; an area in which protection of the cryptocurrencies will be one of the highest risks.” He also criticized the European Market Infrastructure Regulation (EMIR 2.2) which passed the EU parliament, saying, “Suddenly now … we face the prospect of having to share oversight of our domestic, American clearinghouses with a foreign regulator,” and pledged that “Under my watch, and I know my pending successor Heath Tarbert has said the same thing, this will not happen. U.S. markets will stay under U.S. regulation.”
- The Honorable Christopher Giancarlo, Commodity Futures Trading Commission
ON THE FLOOR
House Passes 3 Bipartisan Financial Services Bills: On Tuesday, the House passed three bipartisan pieces of legislation in recognition of Financial Literacy Month.
- H. Res. 327, a resolution to encourage financial planning efforts among students and young adults. This legislation was introduced by Congressmen Bill Foster (D-IL) and French Hill (R-AR). It passed by a voice vote.
- H. Res 328, a resolution in support of efforts to combat financial fraud and scams against seniors. This legislation was introduced by Congressmen Sean Casten (D-IL) and John Rose (R-TN). It passed by a vote of 411 6.
- H.R. 1876, the Senior Security Act of 2019, a bill that would create a taskforce within the U.S. Securities and Exchange Commission to address issues that affect senior investors. This legislation was introduced by Congressmen Josh Gottheimer (D-NJ) and Trey Hollingsworth (R-IN). It passed by a vote of 392 20.
McConnell Files Cloture on Ex-Im Bank Nominees: On Thursday, Senate Majority Leader Mitch McConnell (R-KY) filed cloture on the nomination of three Export-Import Bank nominees—Kimberly Reed to serve as president of the bank and Spencer Bachus and Judith Pryor to serve as board members, setting them up for a final vote.
Veto Override Fails: On Thursday, the Senate voted 53 45 in favor of overriding the President’s veto of legislation that would have ended U.S. support for the Saudi-led war in Yemen, falling short of the 67 votes needed to secure passage.
LEGISLATION INTRODUCED AND PROPOSED
H.R. 2380: Rep. Nydia Velazquez (D-NY) was joined by Congressmen Barry Loudermilk (R-GA), Trey Hollingsworth (R-IN) and Bill Foster (D-IL) in introducing the “Fannie Mae and Freddie Mac Lobbying Regulation Act of 2019” which would regulate lobbying by Fannie Mae and Freddie Mac. In a statement, Rep. Velazquez noted that “I am deeply distressed to learn of acts by senior Fannie and Freddie officials trying to influence and control management of the agencies. Congress is the only authority equipped to make decisions on the future of Fannie and Freddie.”
H.R. 2390: Rep. Tim Ryan (D-OH) introduced the “Clean Up Our Neighborhoods Act of 2019” which would authorize the Secretary of Housing and Urban Development to make grants to States for use to eliminate blight and assist in neighborhood revitalization.
H.R. 2391: Rep. David Scott (D-GA) introduced the “Improving Rural Access to Power Act of 2019” which would amend the Federal Home Loan Bank Act to provide investment authority to support rural infrastructure development.
H.R. 2436: Del. Michael San Nicolas (D-GU) introduced H.R. 2436 which would require the Securities and Exchange Commission to revise the definitions of a “small business” and “small organization” for purposes of assessing the impact of the Commission’s rulemakings under the Investment Advisers Act of 1940.
H.R. 2479: Rep. Denny Heck (D-WA) and Rep. Barry Loudermilk (R-GA) reintroduced the “Primary Regulators of Insurance Vote Act” which would amend the Financial Stability Act of 2010 to include the State Insurance Commissioner as a voting member of the Financial Stability Oversight Council.
S.Res. 182: Sen. David Perdue (R-GA) introduced a resolution recognizing the duty of the Senate to condemn Modern Monetary Theory and recognizing Modern Monetary Theory would lead to higher deficits and higher inflation.
S. 1230: Sen. Dick Durbin (D-IL) introduced the “Protecting Consumers from Unreasonable Credit Rates Act of 2019” which would amend the Truth in Lending Act to “eliminate the excessive rates and steep fees charged to consumers for payday loans by capping interest rates on consumer loans at an Annual Percentage Rate (APR) of 36 percent—the same limit currently in place for loans marketed to military service-members and their families.”
THIS WEEK ON THE HILL
Tuesday, May 8
Senate Banking Committee Hearing on “Data Rights and Collection in a Digital Economy”: 10:00 AM in 538 Dirksen Senate Office Building.
Wednesday, May 9
House Financial Services (Subcommittee on Housing, Community Development and Insurance) Hearing on “A Review of the State of and Barriers to Minority Homeownership”: 10:00 AM in 2128 Rayburn House Office Building.
Federal Reserve Holds Interest Rates Steady: Following the meeting of the Federal Open Market Committee on Tuesday and Wednesday, the Federal Reserve announced that it had decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee noted that it continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee said that it will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes. The President had urged the Fed to lower rates via Twitter, saying the economy had “the potential to go up like a rocket” if the Fed would lower rates “one point.”
Federal Reserve to Host Conference Focused on Challenges Faced by the Middle Class: The Federal Reserve announced that its Community Development Research Conference, “Renewing the Promise of the Middle Class,” will be held May 9 10, 2019, in Washington, D.C. The conference will feature the latest research on challenges faced by low- and moderate-income families when moving into the middle class, as well as threats to the economic security of middle-class households.
SEC to Host Roundtable to Kick Off National Small Business Week: On Tuesday, the SEC announced that its Office of the Advocate for Small Business Capital Formation will host a roundtable on May 6 to hear from small businesses and their investors. The roundtable will celebrate the kickoff of National Small Business Week, which is May 5 11. The event will feature discussions between small businesses and venture capital investors on the successes and challenges they have experienced in raising capital and investing outside of the more traditional financing “hot spots” along the U.S. coasts. Venture-backed companies in the U.S. raised over US$99B across over 5,000 deals in 2018, yet companies in just three states accounted for over three-quarters of that funding. Participants will explore ways to encourage the efficient flow of capital and expand investment opportunities.
SEC Proposes to Improve Disclosures Relating to Acquisitions and Dispositions of Businesses: On Friday, the SEC voted to propose rule amendments to improve the information that investors receive regarding the acquisition and disposition of businesses. The proposed amendments are also intended to facilitate more timely access to capital and to reduce complexity and compliance costs of these financial disclosures. “The proposed rules are, first and foremost, intended to ensure that investors receive the financial information necessary to understand the potential effects of significant acquisitions or dispositions,” said Chairman Jay Clayton.
FinCEN Advisory Warns Against Venezuelan Attempts to Steal, Hide, or Launder Money: On Friday, the Financial Crimes Enforcement Network (FinCEN) issued an updated advisory to alert financial institutions of continued widespread public corruption in Venezuela and the methods Venezuelan senior political figures and their associates may use to move and hide the proceeds of their corruption. The advisory provides and updates a number of financial red flags to assist in identifying and reporting suspicious activity that may be indicative of corruption. Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence, said in a statement that “the international financial community must be vigilant to prevent exploitation by corrupt regime insiders and their enablers, including front companies and foreign financial institutions that continue to prop up this illegitimate regime.”
Treasury’s OFAC Issues a Framework for Compliance Commitments: On Thursday, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) published “A Framework for OFAC Compliance Commitments” in order to provide organizations subject to U.S. jurisdiction, as well as foreign entities that conduct business in or with the United States or U.S. persons, or that use U.S.-origin goods or services, with OFAC’s perspective on the essential components of a sanctions compliance program. “As the United States continues to enhance our sanctions programs, ensuring that the private sector implements strong and effective compliance programs that protect the U.S. financial system from abuse is a key part of our strategy,” said Sigal P. Mandelker, Under Secretary for Terrorism and Financial Intelligence.
CFTC Commissioner Calls for Diversity Hiring at Agency: In a letter to the CFTC’s Office of Minority and Women Inclusion, Commissioner Rostin Behnam argued that given the FY19 budget increase, the agency should prioritize diversity hiring, saying “The importance of a diverse and inclusive work environment to recruitment, retention and career development cannot be overemphasized,” adding that “Current data suggest that the commission may be falling short,” particularly “with respect to management-level positions.”
CFTC Proposes to Amend Derivatives Clearing Organization Regulations: On Monday, the CFTC approved a proposed rule to amend certain regulations that apply to derivatives clearing organizations (DCOs) under Part 39 of the CFTC’s regulations. The proposed amendments would, among other things, streamline the registration and reporting process, address certain risk management and reporting obligations, and add new requirements regarding default procedures and event-specific reporting in response to recent events.
LabCFTC to Host Office Hours: The CFTC announced that as part of the agency’s external engagement activities, LabCFTC will be hosting Office Hours at our New York City office during #BlockchainWeekNYC on May 15, 2019. The Office Hours will provide entrepreneurs and FinTech innovators an opportunity to engage with LabCFTC.
CFTC Staff Issues Clearinghouse Supervisory Stress Test Report: On Wednesday, the CFTC’s Division of Clearing and Risk (DCR) and the Office of the Chief Economist (OCE) issued “CCP Supervisory Stress Tests: Reverse Stress Test and Liquidation Stress Test,” a two-part report that includes the results of a reverse stress test of central counterparties (CCPs) or clearinghouses resources and an analysis of stressed liquidation costs.
CFPB Proposes Changes to HMDA Rules: On Thursday, the CFPB issued a Notice of Proposed Rulemaking, which proposes to raise the coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the Home Mortgage Disclosure Act (HMDA) rules. The agency argued that the proposed rule would provide relief to smaller lenders from HMDA’s data reporting requirements, and would clarify partial exemptions from certain HMDA requirements that Congress added in the Economic Growth, Regulatory Relief, and Consumer Protection Act. Sen. Sherrod Brown (D-OH) criticized the proposal saying, “Reducing HMDA reporting will make it easier for lenders to discriminate against people of color, and it will reduce access to credit in small towns and rural areas. Director Kraninger should stop repealing rules and start enforcing them.”
OCC Releases Plan for FinTech Innovation Pilot Program: On Tuesday, the OCC released a request for comment on a new Innovation Pilot Program which would provide eligible entities with regulatory input early in the testing of innovative activities that could present significant opportunities or benefits to consumers, businesses, financial institutions, and communities. “Supporting a financial system that innovates responsibly is central to the mission of the OCC,” said Comptroller of the Currency Joseph Otting. “As the prudential regulator of the U.S. federal banking system, the OCC has been a leading voice among regulators on the importance of encouraging innovation that promotes safe and sound bank operations, treats customers fairly, and provides fair access to financial services. This proposed program is an important step as we look to the future of supervision and the evolution of the U.S. banking system.”
Comptroller Discusses Executive Pay Rule: Speaking at a panel last week, Comptroller of the Currency Joseph Otting revealed that the OCC planned to move forward with a long-delayed rule that would impose restrictions on executive compensation. Otting noted that the OCC was taking the lead in drafting alongside the SEC, but that “The Fed and the FDIC are aware of it … and they'll join us as we get it to a point where we can share what a document would look like.”
COMINGS AND GOINGS AT THE AGENCIES
SEC Names Adam Aderton As Co-Chief of the Asset Management Unit: On Thursday, the SEC announced that Adam Aderton had been named Co-Chief of the Division of Enforcement's Asset Management Unit, a national specialized unit that focuses on misconduct by investment advisers, investment companies, and private funds. He succeeds Anthony Kelly, who left the agency in November 2018. Mr. Aderton first joined the SEC in 2008 as a staff attorney in the Division of Enforcement.
Stephen Moore Withdraws from Consideration for Fed Seat: On Thursday, the President announced that Stephen Moore, who he described as “a great pro-growth economist and a truly fine person” had “decided to withdraw from the Fed process.” There were signals earlier in the week that his path to confirmation nomination was in peril after some controversial past comments came to light. Republican Senator Joni Ernst (R-IA) had announced that she was “not enthused about supporting him” while others expressed concern. After the withdrawal, Sen. Sherrod Brown (D-OH) called on the President to select a candidate who is “qualified, independent and put the needs of working people first.”
Court Rules NYDFS FinTech Charter Suit Can Proceed: A federal judge in Manhattan ruled on Thursday that the New York Department of Financial Service’s lawsuit against the OCC challenging the agency’s special purpose FinTech charters can proceed, denying the OCC’s motion to dismiss.
OTHER NOTEWORTHY ITEMS
Maxine Waters Demands Answers from Treasury Secretary Mnuchin on Reported Ransom Payment: In a letter to Treasury Secretary Steven Mnuchin, Rep. Maxine Waters (D-CA) expressed concern following reports that the administration had paid a US$2M “medical bill” or ransom demand from the North Korean government related to American student and hostage Otto Warmbier, who passed away shortly after his return to the U.S. due to injuries sustained while in North Korean custody. Rep. Waters set a May 10 deadline for response to a series of questions related to the reported payment.
NYDFS Launches Consumer Protection Division: The New York State Department of Financial Services announced on Monday that it was launching a new Financial Frauds and Consumer Protection division, which will be headed by Katherine Lemire. DFS Superintendent Linda Lacewell said the new division will be a “powerhouse” that is “responsible for developing investigative leads and intelligence.”