THE BIG PICTURE
On Friday, the administration reached a deal with Canada and Mexico, immediately lifting tariffs on steel and aluminum imports, and easing the path for the U.S.-Mexico-Canada Agreement’s ratification. In related news, the President decided to delay a decision on auto tariffs, though reserved the right to levy them in six months’ time. On the China front, Treasury Secretary Steven Mnuchin indicated he expects to return to Beijing soon to continue negotiations, and that the President will likely meet with Chinese President Xi Jinping at the G20 summit in June.
Other highlights of last week include:
- On Thursday, NYC Mayor Bill DeBlasio became the latest Democrat to launch a bid for the Presidency.
- The President unveiled his “pro-American” immigration plan on Thursday, pledging to overhaul the legal immigration system and crack down on “meritless” asylum claims.
- Donald Trump Jr. reached an agreement with the Senate Intelligence Committee over the terms and scope of his testimony, allowing him to comply with the panel’s subpoena.
- Treasury Secretary Steven Mnuchin refused to comply with House Ways and Means Committee Chairman Neal’s subpoena for the President’s tax returns, setting the stage for a court battle.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “Promoting Economic Growth: A Review of Proposals to Strengthen the Rights and Protections for Workers”: On Wednesday, the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing to examine four legislative proposals that are designed to provide more information to help investors make decisions based on long-term economic growth. The drafts included: (1) H.R. ____, the “Outsourcing Accountability Act”; (2)
H.R. ____, a bill to amend the Securities Exchange Act of 1934 to require issuers to disclose information about human capital management in annual reports; (3) H.R. ____, a bill to require the SEC to study stock buybacks under rule 10b-18; and (4) H.R. ____, the “Greater Accountability in Pay (GAP) Act of 2019.”
- Steve Clifford, Author and former CEO of King Broadcasting Company
- Heather Slavkin Corzo, J.D., Director of Capital Markets Policy, AFL-CIO
- Abigail E. Disney, Ph.D., President of Fork Films, and Chair & Co-founder of Level Forward
- Nili Gilbert, Co-founder & Portfolio Manager, Matarin Capital Management
- James R. Copland, Senior Fellow and Director, Legal Policy, Manhattan Institute for Policy Research
Hearing on “Assessing the Use of Sanctions in Addressing National Security and Foreign Policy Challenges”: On Wednesday, the Subcommittee on National Security, International Development and Monetary Policy held a hearing on the efficacy of major U.S. economic sanctions programs, with a particular focus on Russia and Treasury’s actions to remove from the U.S. sanctions list the Russian companies that had been owned and controlled by a designated Russian oligarch. The Committee also considered specific areas and opportunities to increase economic pressure on Russia with respect to Russia’s interference in the U.S. 2016 presidential elections as well as deter future attacks on U.S. elections. Draft legislation, H.R.____, to respond to and deter Russian attacks on the integrity of United States elections, was also discussed.
- David Mortlock, Nonresident Senior Fellow, Global Energy Center, Atlantic Council
- Dr. Michael Carpenter, Senior Director, Penn Biden Center for Diplomacy and Global Engagement, University of Pennsylvania
- Elizabeth Rosenberg, Senior Fellow and Director of the Energy, Economics, and Security Program, Center for a New American Security
- Daleep Singh, Senior Fellow, Center for New American Security
- Matthew Zweig, Senior Fellow, Foundation for Defense of Democracies
Hearing on “Oversight of Prudential Regulators: Ensuring the Safety, Soundness and Accountability of Megabanks and Other Depository Institutions”: On Thursday, the full Committee met to hold an oversight hearing of the financial regulatory agencies. The Committee also considered three draft bills: (1) H.R. __, the “Megabank Oversight Act”; (2) H.R. __, the “Prudential Regulator Oversight Act”; and (3) H.R.__, the “Shutdown Guidance for Financial Institutions Act.” Fed Vice Chair of Supervision, Randal Quarles told the Committee that the agencies are making progress on implementing the banking relief bill, saying “we are on track … to have the bulk of the implementing actions [for S. 2155] completed by the third quarter of this year and all of them completed by the end of this year.” Tensions erupted between Chairwoman Maxine Waters and Ranking Member Patrick McHenry when Waters attempted to close the hearing, with McHenry saying “this is a travesty the way you’ve handled this.” The comments revealed a long simmering rift between the two sides, with Republican members criticizing the Chairwoman for not keeping them informed, and not adhering to rules.
- The Honorable Rodney Hood, Chairman, National Credit Union Administration
- The Honorable Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation
- The Honorable Joseph Otting, Comptroller, Office of the Comptroller of the Currency
- The Honorable Randal Quarles, Vice Chairman of Supervision, Board of Governors of the Federal Reserve System
SENATE BANKING COMMITTEE
Hearing on “Oversight of Financial Regulators”: On Wednesday, the full Committee met to receive testimony from the financial regulators, and examine the current state of and recent activities related to prudential regulation and supervision. In his opening remarks, Ranking Member Sherrod Brown (D-OH) criticized what he perceived as a rollback on regulations and loosening of rules, questioning “if they want to see another financial crisis.”
- The Honorable Joseph Otting, Comptroller of the Currency, Office of the Comptroller of the Currency
- The Honorable Randal Quarles, Vice Chair for Supervision, Board of Governors of the Federal Reserve System
- The Honorable Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation
- The Honorable Rodney Hood, Chairman, National Credit Union Administration
ON THE FLOOR
House Passes Four Financial Services Bills: On Tuesday, the House passed four bills that had been sponsored by members of the Financial Services Committee, including:
- H.R. 2578, the National Flood Insurance Program Extension Act of 2019, bipartisan legislation introduced by Rep. Maxine Waters (D-CA) and Rep. Patrick McHenry (R-NC), that would extend the NFIP through September 30th, passed by voice vote.
- H.R. 389, the Kleptocracy Asset Recovery Rewards Act, bipartisan legislation introduced by Rep. Stephen Lynch (D-MA) and Rep. Ted Budd (R-NC), would establish a rewards program to incentivize individuals to notify the U.S. government of assets in U.S. financial institutions that are linked to foreign corruption, passed by voice vote.
- H.R. 1060, the Building Up Independent Lives and Dreams Act (BUILD Act), sponsored by Rep. Barry Loudermilk (R-GA) and Rep. Brad Sherman (D-CA), would allow nonprofit organizations, such as Habitat for Humanity, offering mortgage loans for charitable purposes to use certain alternative forms to satisfy disclosure requirements, passed by voice vote.
- H.R. 1037, the Banking Transparency for Sanctioned Persons Act, sponsored by Rep. Denver Riggleman (R-VA) would require the Secretary of the Treasury to report to Congress semiannually on a list of the licenses issued to financial institutions to provide services to countries and persons subject to certain U.S. sanctions, passed by voice vote.
Anti-LGBT Discrimination Bill Passes: On Friday, the House voted 236-173 to pass H.R. 5, the “Equality Act” which would prohibit discrimination based on sex, sexual orientation, and gender identity in areas including public accommodations and facilities, education, federal funding, employment, housing, credit, and the jury system. Specifically, the bill defines and includes sex, sexual orientation, and gender identity among the prohibited categories of discrimination or segregation. The bill would also expand the definition of public accommodations to include places or establishments that provide (1) exhibitions, recreation, exercise, amusement, gatherings, or displays; (2) goods, services, or programs; and (3) transportation services. The bill would allow the Department of Justice to intervene in equal protection actions in federal court on account of sexual orientation or gender identity. Additionally, the bill would prohibit an individual from being denied access to a shared facility, including a restroom, a locker room, and a dressing room, that is in accordance with the individual’s gender identity.
LEGISLATION INTRODUCED AND PROPOSED
S. 1431: Senators Ben Cardin (D-MD) and Rob Portman (R-OH) introduced S. 1431, the “Retirement Security & Savings Act,” which aims to strengthen Americans’ retirement security by: (1) allowing people who have saved too little to set more aside for their retirement; (2) helping small businesses offer 401(k)s and other retirement plans; (3) expanding access to retirement savings plans for low-income Americans without coverage; and (4) providing more certainty and flexibility during Americans’ retirement years.
H.R. 2763: Rep. Sylvia Garcia (D-TX) introduced H.R. 2763, which would prohibit HUD Secretary Ben Carson from implementing a rule that would result in the federal housing eviction of undocumented immigrants, including 55,000 children. In a statement, Rep. Garcia said “Secretary Carson has chosen politics over people with the end result of forcing U.S. children to be separated from their families or risk homelessness.”
H.R. 2824: Rep. Steve Cohen (D-TN) introduced H.R. 2824, which would amend the Fair Credit Reporting Act to require the inclusion of credit scores with free annual credit reports provided to consumers.
H.R. 2833: Rep. Katie Porter (D-CA) introduced H.R. 2833, which would require the student loan ombudsman of the Department of Education to provide student loan data to the Bureau of Consumer Financial Protection.
THIS WEEK ON THE HILL
Tuesday, May 21
Senate Banking Committee Hearing on “Combating Illicit Financing By Anonymous Shell Companies Through the Collection of Beneficial Ownership Information”: 10:00 AM in 538 Dirksen Senate Office Building.
House Financial Services Committee Hearing on “Housing in America: Oversight of the U.S. Department of Housing and Urban Development”: 10:00 AM in 2128 Rayburn House Office Building.
Wednesday, May 22
House Financial Services Committee Hearing on “The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System - Part II”: 10:00 AM in 2128 Rayburn House Office Building.
Treasury Works with Government of Mexico Against Perpetrators of Corruption and their Networks: On Friday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated a Mexican magistrate judge and a former Mexican governor due to their involvement in corruption activities. “The U.S. government’s coordinated action with our Mexican counterparts advances our joint commitment to combating corruption,” said Sigal Mandelker, Under Secretary for Terrorism and Financial Intelligence, “whether they are receiving bribes from narcotics trafficking organizations or engaging in a variety of other illicit activities, … corrupt officials will face serious consequences including being cut off from the U.S. financial system.”
Treasury’s Proposed Changes to Nonbank SIFI Designations Face Criticism: On Monday, Sen. Sherrod Brown (D-OH) released a statement opposing the Financial Stability Oversight Council’s (FSOC) proposed interpretive guidance for nonbank SIFI designations, saying it “ignores the past damage done to our financial system by encouraging Wall Street gambling and neglecting working families.” His comments followed a warning from Ben Bernanke, Janet Yellen, Tim Geithner, and Jack Lew, who warned that “though framed as procedural changes, these amendments amount to a substantial weakening of the post-crisis reforms.”
Treasury’s Mandelker Discusses Virtual Currencies: In remarks made on Monday, Treasury’s Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker described his view that AML/CFT and sanctions expectations for digital currencies should be “viewed as a duty serving our national security” and noted that businesses should establish a “strong foundation of anti-money laundering and sanctions compliance from the very beginning,” adding that “If you wait until you are contacted by regulators or law enforcement, it is too late.”
Treasury Targets Additional Individuals Involved in the Sergei Magnitsky Case and Gross Violations of Human Rights in Russia: On Thursday, the Treasury’s Office of Foreign Assets Control (OFAC) designated five individuals and one entity pursuant to the Magnitsky Act. In addition, the U.S. Department of State issued its annual submission to Congress on the U.S. Government’s actions to implement the Magnitsky Act. “Treasury continues to impose costs on those involved in the detention, abuse, and death of Sergei Magnitsky, and is committed to addressing broader human rights violations across Russia,” said Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “We are focused on holding accountable those responsible for atrocious acts within Russia, including the extrajudicial killing of Boris Nemtsov and the pervasive abuse of LGBTI persons in Chechnya.”
CFPB Outlines Plan to Review Rules Under the Regulatory Flexibility Act: On Monday, the CFPB published a notice on how it plans to periodically review regulations under the Regulatory Flexibility Act (RFA) and to request public input. Additionally, the Bureau published a notice requesting public input as part of its first RFA review examining the 2009 Overdraft Rule.
CFPB Blames Department of Education for Hindering Oversight of Student Loans: In a response letter to Sen. Elizabeth Warren (D-MA), CFPB Director Kathy Kraninger reported that “student loan servicers have declined to produce information requested by the Bureau for supervisory examinations” due to a December 2017 directive from the Department of Education, which has hindered the Bureau’s ability to perform oversight duties.
GAO Identifies Weakness in Fed and FDIC Oversight: In a report released on Tuesday, the GAO identified some weaknesses in the Fed and FDIC’s supervision of management at large financial institutions, saying the agencies were “missing an opportunity” to explain compliance deficiencies to big banks, saying “Communicating more complete information . . . could help ensure more timely corrective actions.” The GAO also detailed concerns over the Fed’s lack of established guidelines for escalating concerns, and reliance on the experience and judgment of officials, saying it was “risky” as “institutional knowledge can disappear in times of turnover.”
COMINGS AND GOINGS AT THE AGENCIES
Brian Johnson Named Deputy Director at the CFPB: On Monday, CFPB Director Kathy Kraninger announced that Brian Johnson will serve as the Deputy Director. Mr. Johnson first joined the Bureau in December 2017 as Senior Advisor to the Director and was named Principal Policy Director in April 2018. Mr. Johnson has served as Acting Deputy Director since July 2018.
CFPB Announces Additions to Senior Leadership and Executive Teams: On Monday, the CFPB announced that Kate Fulton will serve as the Chief Operating Officer, Yasaman Sutton will serve as Senior Advisor and Counselor to the Director, Melissa Brand will serve as the Director of the Office of Civil Rights, and Jim Rice will serve as the Assistant Director of the Office of Servicemember Affairs.
Derek Kan Reportedly Under Consideration for Fed Seat: Derek Kan, who currently serves as an undersecretary at the Department of Transportation, is reportedly under consideration by the White House as a potential nominee for one of the two vacant seats on the Federal Reserve Board.
Craig Phillips to Depart Treasury Department: In a surprise move, Craig Phillips who works as a counselor to the Treasury Secretary announced he would be leaving next month.
Controversy-Plagued CFPB Associate Director Resigns: Eric Blankenstein, who served as the policy associate director for the Supervision, Enforcement and Fair Lending division at the CFPB, announced he would resign his position and leave the Bureau at the end of the month. Mr. Blankenstein had faced calls for removal ever since racially charged blog posts he authored surfaced last year. In response to the news, Sen. Sherrod Brown (D-OH) released a statement saying he “should have been fired for his hateful” posts, adding that “allowing him to resign is a serious moral and managerial failure.”
OTHER NOTEWORTHY ITEMS
California Senate Blocks Update to Consumer Privacy Legislation: On Thursday, a bill that would strengthen California’s consumer privacy regulations was blocked by the appropriations committee, in a move that sponsor Sen. Hannah-Beth Jackson called “a major setback for California’s privacy rights.”