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Money Matters: This Week in Washington

This Week in Washington for April 2, 2018

April 02, 2018

Dina Ellis


In a move coordinated with NATO allies, President Trump ordered on Monday the expulsion of 60 Russian diplomats accused of working as spies, giving them only seven days to leave the country. It was also announced that the Russian consulate in Seattle would be shuttered. This expulsion is part of the continuing fallout from the poisoning of former Russian spy Sergei Skripal and his daughter with a nerve agent in Salisbury, England last month. On Thursday, Russia announced a reciprocal response, ordering the expulsion of 60 U.S. diplomats and the closure of the U.S. consulate in St. Petersburg.

President Trump announced that he plans to replace the Secretary of Veterans Affairs, David Shulkin, with White House physician Admiral Ronny Jackson. Secretary Shulkin has faced criticism in recent months over misuse of taxpayer dollars following the release of a VA inspector general report detailing his trip to Europe over the summer where, accompanied by his wife, more time was spent sightseeing than conducting business. Some Democrats and veterans groups advocated for the Secretary to remain in place, fearing his departure would mark a shift towards a privatization push at the VA. Meanwhile, many are raising questions about whether Admiral Jackson is qualified to lead the nation’s second largest government agency, having never before held a role in management.

Shrugging off pressure from Republicans, Attorney General Jeff Sessions announced on Thursday that he would not appoint a second special counsel to investigate allegations of misconduct by the FBI and Department of Justice. In a letter to GOP leaders, AG Sessions noted that only “extraordinary circumstances” warrant the appointment of a special counsel, and affirmed his confidence in U.S. Attorney John Huber, who Mr. Sessions appointed to investigate the matter in coordination with Justice Department Inspector General Michael Horowitz.

Rumors are swirling around the Capitol that Rep. Steve Scalise (R-LA), the House Majority Whip, may be positioning himself to succeed Speaker of the House Paul Ryan (R-WI) should Rep. Ryan retire. If Congressman Scalise decided to run, he would be skipping over Majority Leader Kevin McCarthy (R-CA), who is next in line to be Speaker from a seniority standpoint. Majority Whip Scalise said that he would not run for Speaker if Congressman McCarthy decided to run. Scalise survived a shooting at a congressional softball practice by mere millimeters in June, and has seen his star rise as he has recovered. While there have been persistent whispers about Paul Ryan’s retirement, his office continues to deny any imminent changes. For his part, Rep. Scalise says, “I wouldn’t rule it out.”


All is quiet on Capitol Hill as they remain on recess through April 6.


Commodity Futures Trading Commission Chairman Giancarlo Dubbed “Cryptodad” on Twitter: Following his testimony before Congress in February on digital currencies, CFTC Chairman Christopher Giancarlo has experienced a surge of popularity on Twitter, embracing the moniker of “#cryptodad.” A spokeswoman said that Chairman Giancarlo “views Twitter as a valuable platform to reach diverse audiences on customer education.” However, his recently verified account is not without controversy. Following Giancarlo’s posting of a photo of a meeting held with members of the Securities and Exchange Commission, Commissioner Rostin Behnam expressed disappointment that he had not been informed of the high-level meeting Giancarlo convened, saying, “It is unfortunate that I only learned [of the event’s details] after the fact through a tweet from the chairman’s account.” Democrats in Congress also took issue with the meeting, voicing concerns that it may have violated the Sunshine Act.

Comptroller of the Currency Otting Previews Reform of Community Reinvestment Act: Speaking at the Hope Global Forums annual meeting in Atlanta on Wednesday, Comptroller of the Currency Joseph Otting offered a preview of a proposal that is rumored to be released in April to reform the Community Reinvestment Act, saying, “This is a monumental change for America.” The proposed changes would simplify the CRA and offer clarity around how success is measured.

Advocates Urge SEC to Investigate Pay Ratios: In a letter to the Director of the SEC’s Division of Corporate Finance on Thursday, progressive activist group Public Citizen urged the Commission to “exercise appropriate diligence in oversight” and investigate the “integrity in reporting in the newly implemented disclosure of the CEO pay ratio [as required by Section 953(b) of Dodd-Frank].”

Atlanta Federal Reserve Leader on Cryptocurrencies – “Don’t Do It”: Speaking at the Hope Global Forums annual meeting on Tuesday, President Raphael Bostic of the Federal Reserve Bank of Atlanta advised the audience to avoid cryptocurrencies, saying, “They are speculative markets. They are not currency. If you have money you really need, do not put it in these markets.”

FDIC Vice Chairman Warns of Unintended Consequences of Living Wills: In remarks at the Peterson Institute for International Economics, Federal Deposit Insurance Corporation Vice Chairman Tom Hoenig warned that the “living will” process established by the Dodd-Frank Act, whereby banks develop plans on how to break themselves up, may actually be signaling the opposite of its intended effect to creditors.

New York Fed. President Calls on Banks to Foster Responsible Behavior: On Monday, William Dudley called for a culture change in financial institutions, saying, “While regulation and supervision are necessary to ensure a resilient and robust financial system, I very much doubt that they are sufficient. They need to be supplemented by bank management that pays close attention to incentives, conduct, and culture.”

FHFA Announces Date for Common Mortgage-Backed Security: On Wednesday, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will begin issuing a common mortgage-backed security on June 3, 2019. The new Uniform Mortgage-Backed Security (UMBS) will be issued through the Enterprises’ joint venture, Common Securitization Solutions (CSS), using the Common Securitization Platform (CSP). “The transition to the new, common security requires planning, investment, and preparation by a wide variety of market participants,” said FHFA Director Melvin L. Watt. “We have now set the specific date that the Enterprises will start issuing the UMBS and I urge the industry to get ready now to ensure smooth, successful implementation.”

Consumer Financial Protection Bureau Issues Request for Information on Its Guidance and Implementation Support: On Wednesday, the CFPB issued the latest in its going series of requests for information begun by Acting Director Mick Mulvaney. This request seeks comments and information from interested parties to assist in assessing the overall effectiveness and accessibility of its guidance materials and activities, including implementation support. The Bureau is also considering whether it would be appropriate to make changes to the formats, processes, and delivery methods for providing this guidance. And it is considering whether it would be appropriate to make changes to the disclaimers used on certain forms of guidance.

Massachusetts Regulators Crack Down on Cryptocurrency Initial Coin Offerings: On Tuesday, the Secretary of the Commonwealth’s office entered into five consent agreements, which ordered the companies in question to cease offering coins and to offer rescission on coins already purchased. In a statement, Secretary Galvin issued a warning, saying, “I encourage anyone in Massachusetts who is thinking of investing in these new initial coin offerings to make sure the people they are giving their hard-earned money to are legitimately doing business. Do not be fooled by get-rich schemes trying to capitalize on the current bitcoin craze. An offering done to avoid registration with regulators should be seen as a red flag, and you should contact my office before investing.”

FTC Files Comment to CFPB on Civil Investigative Demand Processes: On Monday, the FTC’s Bureau of Consumer Protection (BCP) publicly filed a comment to the CFPB in response to the agency’s request for information on how to improve processes related to the issuing of Civil Investigative Demands (CID). Thomas Pahl, Acting Director of BCP, said, “We applaud the Bureau of Consumer Financial Protection for undertaking a critical assessment of its investigative processes. We hope our comment describing BCP’s experience with CIDs, including recent reforms, is valuable to the Bureau in making its investigative processes efficient and effective.” Recommendations included: (1) adding more detail about the scope and purpose of investigations to give companies a better understanding of the information sought; (2) limiting the relevant time periods to minimize undue burden on companies and focus the Commission’s finite resources on investigating harms that have an immediate impact on consumers; (3) shortening and simplifying the instructions for providing electronically stored data; and (4) increasing response times for CIDs, where appropriate.

FTC Official Calls for Greater Authority to Battle Robocalls: Speaking at a panel, Lois Greisman from the FTC’s Bureau of Consumer protection called the common carrier exemption preventing the FTC from pursuing bad actors “obsolete,” saying, “It hasn’t made sense in years.” The topic has been in the headlines recently as just earlier this month the Ninth Circuit reversed a finding related to the FTC’s ability to pursue providers that also offered services that were regulated as utilities.


FDIC Chief Operating Officer Announces Retirement: Barbara Ryan, who has served as chief of staff since 2011 when Martin Gruenberg became chairman, announced that she will retire from the agency at the end of April. Chairman Gruenberg, whose tenure will come to an end when Jelena McWilliams is confirmed in the near future, lauded Ms. Ryan, saying she was “instrumental in initiating several of the FDIC’s key employee engagement programs.”

John Williams Presumed to be Next President of New York Fed.: It is widely expected that San Francisco Fed President John Williams will be named the President of the New York Fed, to replace current President William Dudley, who is retiring this year. Sen. Elizabeth Warren (D-MA) meanwhile has called for testimony, particularly in relation to his supervision over larger banks, saying, “If Mr. Williams is selected, the Fed’s Board of Governors should not approve his selection until Mr. Williams and the co-chairs of the New York Fed’s search committee testify before the Senate Banking Committee about his qualifications and the process that led to his selection.”


31 Attorney Generals Oppose Data Breach Bill: In an open letter to lawmakers, the attorneys general of 31 states have written to oppose the “Data Acquisition and Technology Accountability and Security Act” sponsored by Rep. Blaine Luetkemeyer (R-MO) and Caroline Maloney (D-NY) that was introduced in February. The AGs argue that the bill would have the opposite of its supposed intended effect, and would result in the watering down of state laws: “The bill allows [companies] to notify the consumer after the harm already has occurred. Consumers must know right away if their data has been compromised so that they can take proactive steps to protect themselves from identity theft before it happens, not after the fact.”

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