THE BIG PICTURE
For the latest advice for businesses dealing with the coronavirus, be sure to check out Paul Hastings’ targeted alert series: https://www.paulhastings.com/coronavirus
Coronavirus cases topped 1.5 million across the country as the death toll neared 90,000. Despite these statistics, the trend lines in some areas are beginning to show an encouraging drop in infections, and many states and localities have begun easing restrictions and reopening certain businesses as the public grows weary of social distancing measures. Despite the push to reopen, public health officials continued to express concern that various benchmarks have not yet been met, and that reopening too early without a clear plan to manage infections could lead to a second spike. In a hearing, HHS whistleblower Rick Bright warned that “our window of opportunity is closing” for decisive and coordinated federal action, and predicted a difficult winter of resurgence. The CDC released several one-page “decision tree” documents as part of an effort to guide the reopening of schools, restaurants, businesses, and transit; though many criticized the charts as inadequate and argued that more detailed plans are needed. On Friday, President Trump announced the formation of a new public-private partnership to focus efforts on vaccine development, dubbed “Operation Warp Speed.”
On Friday, the House voted 217-189 on largely party lines to pass the sprawling US$3T Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. The relief package includes US$1T for state and local governments, as well as additional direct cash payments to citizens, expanded unemployment insurance, boosts to SNAP and nutrition assistance, rental and homeowner assistance, and provides badly needed funds to shore up the postal service and transit agencies among a slew of other progressive priorities. House Speaker Nancy Pelosi argued that as the unemployment rate hits 14.7%, it’s time to “think big” in order to support a safe reopening of the economy while protecting frontline workers. The measure is likely dead on arrival in the Senate however, as Republicans have voiced their opposition to the measure, calling it aspirational and a “left wing wishlist” with Senate Majority Leader Mitch McConnell urging Congress to “hit pause” and gauge the success of prior bills before considering additional measures.
The Small Business Administration continued to process and distribute Paycheck Protection Program funding. As of Friday, the SBA reported they had processed 2.75 million applications from 5,479 different lenders, approving US$194.8B in loans from the US$320B allocated in the second tranche of funding. At the end of the week, they released additional information on the loan forgiveness component, including the official application. Despite this, many companies are scrambling to return the money they had received by the Monday deadline after facing confusing and shifting guidance and the threat of audits over their requests. The SBA sought to reassure smaller businesses, saying that loans under US$2M would not face review.
Other highlights of last week include:
- Late Friday evening, the President gave notice that he planned to fire the State Department’s Inspector General, his third IG firing in recent months, prompting the launch of a probe by Democratic leadership.
- The FBI served a search warrant on Sen. Richard Burr (R-NC), collecting his cellphone as part of an ongoing investigation into his sale of stocks at the outset of the pandemic. Burr has stepped aside from his role as Chair of the Senate Intelligence Committee until the inquiry is concluded.
- Republican Mike Garcia emerged victorious in the special election to fill former Rep. Katie Hill’s seat in California’s 25th District.
LAST WEEK ON THE HILL
Bipartisan Group of Senators Urge Fed to Take Additional Measures to Ease Borrowing Costs for State and Local Governments: Senators Sherrod Brown (D-OH), Bob Menendez (D NJ) Thom Tillis (R-NC), and Lisa Murkowski (R-AK) wrote to Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell, asking them to consider additional measures to ease the borrowing costs for state and local governments fighting the COVID-19 pandemic. The Senators argued, “State and local governments are on the frontlines in the fight against COVID-19 . . . quickly deploying desperately-needed funds to hospitals, public health departments, nursing homes, water and power utilities, public transit, and other essential services,” and thus “the Treasury and Federal Reserve must also ensure sufficient access to medium- and long-term capital” for them.
Senators Call on Administration to Ensure that Lenders are not Shorting Small Businesses on PPP Loans: On Wednesday, Sen. Sherrod Brown (D-OH), Sen. Bob Menendez (D-NJ), and Sen. Tina Smith (D-MN) sent a letter to Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranza urging them to provide answers and clarity to small businesses regarding Paycheck Protection Program (PPP) loan amounts. The Senators cited recent press reports where small businesses that successfully navigated the PPP process were surprised to find that they received less funding than they applied for or expected. The Senators called for the Administration to investigate the claims and address their questions immediately to ensure that all small businesses have access to full funding of PPP loans.
Senators Jones Calls for Investigation into Potential Improper Political Influence on Repeal of Federal Payday Lending Rule: On Wednesday, Sen. Doug Jones (D-AL) led a group of colleagues in calling on Federal Reserve Board Inspector General Mark Bialek to open an investigation into the CFPB’s rulemaking process that led to the repeal of the Payday Rule. “Recent press reports detail a CFPB rulemaking process that, if true, flagrantly violates the Administrative Procedure Act’s (APA) requirements—in which political appointees exerted improper influence, manipulated or misinterpreted economic research, and overruled career staff to support a predetermined outcome,” the Senators wrote, adding, “In light of these disturbing allegations, we ask that you investigate to determine whether the Bureau’s process for reconsidering and repealing the 2017 Payday Rule violated the APA or other federal laws and regulations.”
HOUSE FINANCIAL SERVICES COMMITTEE
Bipartisan “Virtual Roundtable” with Prudential Regulators: On Wednesday, the Consumer Protection and Financial Institutions Subcommittee held a virtual roundtable with prudential regulators.
- Rodney Hood, Chairman, National Credit Union Administration
- Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation
- Joseph Otting, Comptroller, Office of the Comptroller of the Currency
- Randal Quarles, Vice Chairman, Board of Governors of the Federal Reserve System
SENATE BANKING COMMITTEE
Hearing on “Oversight of Financial Regulators”: On Tuesday, the full Committee held a remote hearing to receive testimony from the Fed, OCC, FDIC, and NCUA on efforts, activities, objectives, and plans with respect to regulatory and supervisory activities of banks, credit unions, and other regulated entities. Panel members from both sides of the aisle questioned why the Fed’s highly anticipated Municipal Liquidity Facility was not yet up and running. Comptroller Otting told the panel that the agency planned to push forward with Community Reinvestment Act rulemaking, despite calls from community groups and lawmakers to delay the process due to the pandemic.
- Randal Quarles, Vice Chairman for Supervision, Board of Governors of the Federal Reserve System
- Joseph Otting, Comptroller, Office of the Comptroller of the Currency
- Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation
- Rodney Hood, Chairman, National Credit Union Administration
“Executive Session”: On Tuesday, the full Committee held an executive session to vote on the nomination of Brian Miller to be Special Inspector General for Pandemic Recovery (SIGPR), and Dana Wade to be Assistant Secretary, U.S. Department of Housing and Urban Development, ultimately advancing both for consideration by the full Senate.
Senate Judiciary Committee “Examining Liability During the COVID-19 Pandemic”: On Tuesday, the full Committee held a hearing to consider the liability issues that businesses and public institutions may face in the reopening process. Senators on both sides of the aisle agreed that federally issued workplace standards would need to precede any liability shield legislation. Law Professor David Vladeck argued that “we urgently need science-based COVID 19 enforceable guidelines from public health agencies. Those guidelines not only safeguard the public but, at the same time, they provide the standards of liability.” Committee Chairman Lindsey Graham (R-SC) acknowledged that “the sooner we can come up with a regulatory, OSHA-driven process to allow big, small, and intermediate businesses [guidance], the better off we'll be.”
- Mr. Kevin Smartt, Chief Executive Officer Kwik Chek Convenience Stores
- Mr. Anthony “Marc” Perrone, International President United Food and Commercial Workers International Union
- Ms. Rebecca Dixon, Executive Director National Employment Law Project
- Mr. Leroy Tyner, Jr., General Counsel Texas Christian University
- Professor David Vladeck, A.B. Chettle Chair in Civil Procedure Georgetown University Law Center
- Ms. Helen Hill, Chief Executive Officer Explore Charleston
Select Subcommittee on the Coronavirus Crisis Hearing on “Briefing to Focus on Need for Comprehensive Testing, Tracing, and Targeted Containment Strategy”: On Wednesday, the Select Subcommittee on the Coronavirus Crisis Hearing held its first briefing with a bipartisan group of key experts on the requirements for safely reopening our nation during the coronavirus pandemic.
- Dr. Scott Gottlieb, Former Commissioner, Food and Drug Administration, Resident Fellow, American Enterprise Institute
- Dr. Mark McClellan, Former Commissioner, Food and Drug Administration, Former Administrator, Centers for Medicare and Medicaid Services, Founding Director, Duke Margolis Center for Health Policy, Duke University
- Dr. Ashish Jha, Director, Harvard Global Health Institute, Harvard University
- Dr. Tom Inglesby, Director, Center for Health Security, Johns Hopkins Bloomberg School of Public Health
- Dr. Georges Benjamin, Executive Director, American Public Health Association
ON THE FLOOR
Senate Reauthorizes Intelligence Programs: On Thursday, the Senate voted 80-16 to reauthorize lapsed provisions of the USA Freedom Act, including the Foreign Intelligence Surveillance (FISA) Court, albeit with changes to strengthen protections for individuals. The changes mean the measure will be sent back to the House for another vote.
House Adopts Temporary Rule Change to Allow Proxy Voting and Remote Committee Work: On Friday, the House voted 217-189 on largely party lines to pass H. Res 965, which would allow members the option to vote by proxy and perform committee work remotely. “I don't suggest these changes lightly, I still believe that we do our best work in person and side by side,” said Rules Committee Chairman Jim McGovern (D-MA), “But we must temporarily embrace technology during this unprecedented time.”
LEGISLATION INTRODUCED AND PROPOSED
H.R. 6806: Rep. Emanuel Cleaver (D-MO) introduced H.R. 6806, which would suspend certain requirements under the public housing and housing choice voucher programs during the COVID 19 emergency.
H.R. 6815: Rep. Abby Finkenauer (D-IA) introduced H.R. 6815, which would amend the CARES Act to provide for notice of the eviction moratorium under such Act to be provided to tenants of dwelling units subject to such moratorium.
H.R. 6817: Rep. Al Green (D-TX) introduced H.R. 6817, which would establish a payroll loan facility for small financial institutions affected by COVID-19.
H.R. 6820: Rep. Denny Heck (D-WA) introduced H.R. 6820, which would provide emergency rental assistance under the Emergency Solutions Grants program of the Secretary of Housing and Urban Development in response to the public health emergency resulting from the coronavirus.
H.R. 6823: Rep. Jared Huffman (D-CA) introduced H.R. 6823, which would expand the housing choice voucher program of the Department of Housing and Urban Development to provide temporary housing during the COVID-19 health crisis.
H.R. 6827: Rep. Alexandria Ocasio-Cortez (D-NY) introduced H.R. 6827, which would amend the Coronavirus Economic Stabilization Act of 2020 to place certain requirements on corporations receiving Federal aid related to COVID-19.
H.R. 6830: Rep. Dean Phillips (D-MN) introduced H.R. 6830, which would amend the Riegle Community Development and Regulatory Improvement Act of 1994 to establish minimum issuance amounts under the CDFI Bond Guarantee Program.
H.R. 6831: Rep. Dean Phillips (D-MN) introduced H.R. 6831, which would amend the CARES Act to authorize the Congressional Oversight Commission to submit discretionary reports to Congress.
H.R. 6832: Rep. Dean Phillips (D-MN) introduced H.R. 6832, which would amend the CARES Act to authorize appropriations to carry out the duties of the Special Inspector General for Pandemic Recovery.
H.R. 6835: Rep. Katie Porter (D-CA) introduced H.R. 6835, which would require residential mortgage servicers receiving certain emergency relief under the CARES Act to provide reports on loan-level data.
H.R. 6850: Rep. Greg Meeks (D-NY) introduced H.R. 6850, which would protect stimulus checks from garnishment and fees and from being used as an offset by a credit union or depository institution.
H.R. 6851: Rep. Alexandria Ocasio-Cortez (D-NY) introduced H.R. 6851, which would require major corporations receiving Federal aid related to COVID-19 to make annual payments of equity to employees of the corporation while such aid is outstanding.
H.R. 6852: Rep. Alexandria Ocasio-Cortez (D-NY) introduced H.R. 6852, which would prohibit the Secretary of the Treasury and the Board of Governors of the Federal Reserve System from waiving provisions related to COVID-19 emergency relief and taxpayer protections related to such relief.
H.R. 6859: Rep. Nydia Velazquez (D-NY) introduced H.R. 6859, which would authorize supplemental appropriations for public housing operations and tenant-based rental assistance.
H.R. 6863: Rep. Doug Collins (R-GA) introduced H.R. 6863, which would authorize the imposition of sanctions with respect to the People's Republic of China for its obstruction or failure to cooperate in investigations relating to the outbreak of COVID-19.
H.R. 6867: Rep. Vicente Gonzalez (D-TX) introduced H.R. 6867, which would provide necessary flexibility under programs for federally assisted housing to respond to the COVID-19 pandemic.
H.R. 6868: Rep. Al Green (D-TX) introduced H.R. 6868, which would amend the CARES Act to establish a Community Capital Investment Program.
H.R. 6873: Rep. Katie Porter (D-CA) introduced H.R. 6873, which would authorize supplemental funding for supportive housing for the elderly.
H.R. 6874: Rep. Katie Porter (D-CA) introduced H.R. 6874, which would require reporting on the Paycheck Protection Program of the Small Business Administration.
S. 3683: Sen. Lindsey Graham (R-SC) introduced S. 3683, which would authorize the imposition of sanctions with respect to the People's Republic of China for its obstruction or failure to cooperate in investigations relating to the outbreak of COVID-19.
THIS WEEK ON THE HILL
Tuesday, May 19
Senate Banking Committee Hearing on “The Quarterly CARES Act Report to Congress”: 10:00 AM via WebEx.
Federal Reserve Publishes Updates to the Term Sheet for the Municipal Liquidity Facility: On Monday, the Federal Reserve Board published updates to the term sheet for the Municipal Liquidity Facility (MLF) to provide pricing and other information. The MLF will offer up to US$500 billion in lending to states and municipalities to help manage cash flow stresses caused by the coronavirus pandemic.
Federal Reserve Publishes Updates to the Term Sheet for the TALF and Announces Information to Be Disclosed Monthly for the TALF and the PPPLF: On Tuesday, the Federal Reserve Board announced additional information regarding borrower and collateral eligibility criteria for the Term Asset-Backed Securities Loan Facility (TALF). To help ensure that U.S. consumers and businesses remain able to access credit at affordable terms, TALF initially will make up to US$100 billion of loans available. The Board also outlined the information it will publicly disclose for the TALF and the Paycheck Protection Program Liquidity Facility (PPPLF) on a monthly basis including the name of each participant in both facilities; the amounts borrowed, interest rate charged, and value of pledged collateral; and the overall costs, revenues, and fees for each facility.
Federal Reserve Board Issues Report on the Economic Well-Being of U.S. Households: On Thursday, the Federal Reserve Board published its latest Report on the Economic Well-Being of U.S. Households, finding that financial conditions changed dramatically for people who experienced job loss or reduced hours during March 2020 as the spread of COVID-19 intensified in the United States. In addition to monitoring how households were faring near the onset of the COVID-19 pandemic, the report also highlights continuing financial concerns for many households that predated the public health crisis. Some of these financial challenges include the 25%of non-retired adults who lack retirement savings, the 18% of adults with outstanding debt from medical treatments, and the 3% of people who do not own their home who experienced an eviction in 2018 or 2019.
Regulators Temporarily Change the Supplementary Leverage Ratio: On Friday, the Federal Reserve Board, FDIC, and OCC announced temporary changes to their supplementary leverage ratio rule. The temporary modifications will provide flexibility to certain depository institutions to expand their balance sheets in order to provide credit to households and businesses in light of the challenges arising from the coronavirus response. If a depository institution does change its supplementary leverage ratio calculation, it will be required to request approval from its primary federal banking regulator before making capital distributions, such as paying dividends to its parent company, as long as the exclusion is in effect. The interim final rule permits depository institutions to choose to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio.
New York Fed Releases Notice of Interest for the Municipal Liquidity Facility: On Friday, the New York Federal Reserve Bank of New York released a Notice of Interest (NOI) for Eligible Issuers to express interest in selling notes to the special purpose vehicle (SPV) Municipal Liquidity Facility LLC. Filling out the notice of interest is the initial step for an Eligible Issuer to provide eligibility information to the SPV for review. The New York Fed also announced that the SPV, Municipal Liquidity Facility LLC, designated BLX Group LLC (BLX) as its administrative agent for the execution phase of the MLF. In serving as the administrative agent, BLX will receive notices of interest and applications from Eligible Issuers interested in selling notes to the SPV, review those notices and applications based on criteria established by the New York Fed, and will be available to respond to questions from Eligible Issuers.
FDIC Issues Proposed Rulemaking to Mitigate the Deposit Insurance Assessment Effects of Participation in the Paycheck Protection Program and Related Programs: On Tuesday, the FDIC’s Board of Directors authorized publication of a notice of proposed rulemaking that would mitigate the deposit insurance assessment effects of participating in the Paycheck Protection Program (PPP) established by the Small Business Administration and the Paycheck Protection Program Lending Facility and Money Market Mutual Fund Liquidity Facility established by the Federal Reserve Board. To provide certainty to insured depository institutions regarding the assessment effects of participating in these programs, the FDIC is proposing an effective date by June 30, 2020 and an application date of April 1, 2020, which would ensure that the changes are applied to assessments starting in the second quarter of 2020.FDIC Issues Proposed Rulemaking to Mitigate the Deposit Insurance Assessment Effects of Participation in the Paycheck Protection Program and Related Programs: On Tuesday, the FDIC’s Board of Directors authorized publication of a notice of proposed rulemaking that would mitigate the deposit insurance assessment effects of participating in the Paycheck Protection Program (PPP) established by the Small Business Administration and the Paycheck Protection Program Lending Facility and Money Market Mutual Fund Liquidity Facility established by the Federal Reserve Board. To provide certainty to insured depository institutions regarding the assessment effects of participating in these programs, the FDIC is proposing an effective date by June 30, 2020 and an application date of April 1, 2020, which would ensure that the changes are applied to assessments starting in the second quarter of 2020.
CFPB Issues Final Remittance Rule: On Monday, the CFPB issued a final rule covering remittances transfers. Among its requirements, the Rule mandates that remittance transfer providers generally must disclose the exact exchange rate, the amount of certain fees, and the amount expected to be delivered to the recipient. The Rule allows for depository institutions to estimate certain fees and exchange rate information under certain circumstances, but, by statute, this provision expires in July 2020. The Rule also increases the threshold that determines whether an entity that makes remittance transfers is subject to the Rule. Entities making 500 or fewer transfers annually in the current and prior calendar years would not be subject to the Rule.
CFPB, FHFA, & HUD Launch Joint Mortgage and Housing Assistance Website for Americans Impacted by COVID-19: On Tuesday, the CFPB, FHFA, and HUD launched a new mortgage and housing assistance website, https://www.cfpb.gov/housing, with the goal of ensuring homeowners and renters have the most up to date and accurate housing assistance information during the COVID-19 national emergency. This joint website consolidates the CARES Act mortgage relief, protections for renters, resources for additional help, and information on how to avoid COVID-19 related scams. It also provides lookup tools for homeowners to determine if their mortgage is federally backed, and for renters to find out if their rental unit is financed by FHA, Fannie Mae, or Freddie Mac.
CFPB Outlines Responsibilities of Financial Firms During Pandemic: On Wednesday, the CFPB released a statement and FAQs outlining the responsibility of certain financial firms during the pandemic. In the statement, the Bureau outlines the billing error responsibilities of credit card issuers and other open-end non-home secured creditors during the COVID-19 pandemic. Additionally, the Bureau encourages financial firms to continue to provide the kind of assistance to their communities that many have been providing, such as waiving fees, lowering minimum-balance requirements, and implementing changes in account terms that benefit consumers.
CFPB, CSBS Issue Consumer Guide on Mortgage Relief Options: On Friday, the CFPB and the Conference of State Bank Supervisors released a Consumer Relief Guide, which outlines borrowers’ rights to mortgage payment forbearance and foreclosure protection under the federal CARES Act.
FHA Extends Foreclosure and Eviction Moratorium for Single Family Homeowners and Remote Work Flexibilities for Lenders and Appraisers: On Thursday, the Federal Housing Administration announced an extension of its foreclosure and eviction moratorium through June 30, 2020, for homeowners with FHA-insured Single Family mortgages, while also supporting new FHA insured mortgage originations through an extension of temporary policy flexibilities for lenders and appraisers. The FHA's moratorium extension applies to homeowners with FHA insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, and directs mortgage servicers to: (1) halt all new foreclosure actions and suspend all foreclosure actions currently in process, excluding legally vacant or abandoned properties; and (2) cease all evictions of persons from FHA-insured Single Family properties, excluding actions to evict occupants of legally vacant or abandoned properties.
Freddie Mac Announces COVID-19 Payment Deferral: On Wednesday, Freddie Mac announced a solution for homeowners once they have resolved their COVID-19-related hardship that can quickly bring their mortgages current and put them back on track. The Freddie Mac COVID-19 Payment Deferral solution will return a homeowner’s monthly mortgage payment to its pre-COVID amount by adding up to 12 months of missed payments, including escrow advances, to the end of the mortgage term without accruing any additional interest or late fees. This will help borrowers keep their mortgage payment current following their hardship when other options—such as reinstatement, or a repayment plan—are not viable. The COVID-19 Payment Deferral solution is effective July 1, 2020, at which time Servicers must begin evaluating homeowners with resolved COVID-19 related hardships for eligibility.
COMINGS AND GOINGS AT THE AGENCIES
SEC Names John Moses Managing Executive in Chairman’s Office: On Monday, the SEC announced that John Moses has been named the Managing Executive in the Office of Chairman Jay Clayton. Mr. Moses was previously the Deputy Director in the SEC’s Office of Minority and Women Inclusion. Mr. Moses succeeds Peter Uhlmann, who will assume a new role in the agency’s Office of Compliance Inspections and Examinations.
Fourth Circuit Allows Emoluments Challenge to Proceed: On Thursday, the Fourth Circuit voted 9-6 to reject the President’s effort to shut down a lawsuit brought by the governments of Maryland and the District of Columbia, which alleges that the President has violated the emoluments clause of the constitution. The President’s attorneys have indicated they will seek relief from the Supreme Court.
OTHER NOTEWORTHY ITEMS
FinCEN Director Addresses Blockchain Conference: On Wednesday, FinCEN Director Kenneth Blanco addressed the Consensus Blockchain Conference, which was held virtually. He discussed FinCEN’s efforts to provide guidance related to the COVID-19 pandemic; the Travel Rule and trends FinCEN is seeing with respect to compliance; and opportunities for collaboration in the fight against the illicit use of virtual currencies and key challenges.