This Week in Washington for April 9, 2018
By Dina Ellis
THE BIG PICTURE
On Tuesday during a press conference with Baltic leaders, President Trump announced his intention to send troops to the southern border, saying “until we can have a wall and proper security, we are going to be guarding our border with the military.” Some speculate the President may have been motivated by recent news segments featuring a caravan of would-be immigrants and asylum seekers from Central America traveling through Mexico.
On the heels of passing a deficit busting set of tax-cuts and the US$1.3T spending bill, top GOP leaders have scheduled a vote on a balanced budget amendment. The bill’s sponsor Rep. Bob Goodlatte (R-VA) said the measure “would finally bring discipline to federal spending.” The vote will be largely symbolic, as even if it passes the House it would almost certainly fail in the Senate, and even if it passed that hurdle, it would next require the ratification of three-quarters of states.
Tensions continued to rise with China vis-à-vis tariffs this week, with Treasury Secretary Steven Mnuchin warning that, “There is the potential of a trade war.” President Trump has reportedly asked the U.S. trade representative to investigate the potential of enacting another US$100B in tariffs on top of the US$50B already proposed, while China has announced reciprocal tariffs targeting the U.S. agriculture sector, seemingly designed to specifically hurt President Trump’s base. On Thursday, the Chinese formally launched a challenge with the World Trade Organization, setting off what could be a lengthy legal battle. The prospect of a trade war sent markets plunging late in the week, with Wall Street seeming increasingly skittish.
Other highlights of last week include:
For the second year in a row, it was announced that President Trump will not attend the annual White House Correspondents Dinner scheduled to take place on April 28.
Alex van der Zwaan was sentenced to 30 days in prison for lying to the FBI, becoming the first individual to face jail time as a result of Special Counsel Robert Mueller’s investigation.
Rep. Elizabeth Esty (D-CT) announced on Monday that she will not run for another term. Rep Esty had faced mounting criticism in recent days for the way she handled allegations of sexual harassment by her former chief of staff. In a Facebook post, Rep. Esty acknowledged, “Too many women have been harmed by harassment in the workplace. In the terrible situation in my office, I could have and should have done better.”
Rep. Blake Farenthold (R-TX) resigned on Friday, after having been plagued with scandal for months following the revelation that he had settled a sexual harassment allegation for US$84K using taxpayer money. While he promised to repay that sum, it appears he has not done so.
THIS WEEK ON THE HILL
Wednesday, April 11
House Financial Services Committee hearing entitled
Thursday, April 12
House Financial Services Committee hearing entitled
House Financial Services Committee hearing entitled
Senate Banking Committee hearing entitled “The Consumer Financial Protection Bureau’s Semiannual Report to Congress” 10:00 AM in 538 Dirksen Senate Office Building
Acting Director Mulvaney Seeks to Reduce CFPB’s Power: In the agency’s semi-annual report released on Monday, Acting Director Mick Mulvaney outlined changes he believes Congress should make to “establish meaningful accountability,” for the Bureau. He further explained his belief that, “The Bureau is far too powerful, with precious little oversight of its activities.” Proposed changes include a shift in the Bureau’s appropriations from the Federal Reserve to Congress, the creation of an independent inspector general, and to make it easier for the President to fire the Director.
Consumer Financial Protection Bureau Issues Request for Information on Consumer Financial Education: On Wednesday, the CFPB issued the latest in its series of Requests for Information. This Request relates to consumer financial education. The Bureau is seeking comments and information from interested parties to assist the Bureau in assessing the overall efficiency and effectiveness of its consumer financial education programs. This includes the Bureau’s delivery of financial education through online tools, print publications, and community collaborations.
Treasury Designates Russian Oligarchs, Officials, and Entities in Response to Worldwide Malign Activity: On Friday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), in consultation with the Department of State, designated seven Russian oligarchs and 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, a Russian bank. In a statement announcing the move, Secretary Steven Mnuchin said, “The Russian government engages in a range of malign activity around the globe, including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities. Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”
Fed Chief Plans to Maintain Rules for Large Financial Institutions: Fed Chair Jerome Powell indicated this week that he has no plans to loosen the rules and regulations that the Federal Reserve enacted after the financial crisis, noting the requirements are “very high and they’re going to remain very high.” He continued by observing that, “U.S. banks are competing very, very successfully” and he has not seen “some kind of evidence that regulation is holding them back.”
Fed Governor Discusses Countercyclical Capital Buffer: Speaking at New York University’s Stern School of Business on Tuesday, Fed Governor Lael Brainard said, “If cyclical pressures continue to build and financial vulnerabilities broaden, it may become appropriate to ask the largest banking organizations to build a countercyclical buffer of capital to fortify their resilience and protect against stress.” The countercyclical capital buffer is a tool the Federal Reserve has held in its toolbox since 2016, but has yet to use.
SEC Official Calls Prescriptive Fintech Guidance a “Waste” of Time: Speaking at a conference on Monday, Valerie Szczepanik, who serves as an SEC assistant Enforcement Division director, expressed her doubt in the utility of prescriptive guidance. She further explained, “I think if you were to start down the road of being very prescriptive and putting out specific releases about hypothetical situations, not only would you probably waste a lot of time, you would probably create a road map to get around it.”
SEC Issues Investor Alert on Government Impersonators: On Wednesday, the Securities and Exchange Commission issued an Investor Alert warning investors of fraudsters claiming to be SEC employees in an attempt to trick investors into sending money or revealing sensitive account information. The alert clarified that the SEC does not contact investors to confirm trades, set up trading accounts, or record the details of trades. The alert also noted that federal government agencies, including the SEC, do not endorse or sponsor any particular securities, issuers, products, services, professional credentials, firms, or individuals.
Federal Banking Agencies Issue Final Rule to Exempt Commercial Real Estate Transactions of US$500K or Less from Appraisal Requirements: The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a final rule that increases the threshold for commercial real estate transactions requiring an appraisal from US$250K to US$500K. While they had at first contemplated raising the threshold to US$400K, it was ultimately determined that a US$500K threshold would materially reduce regulatory burden and the number of transactions that require an appraisal. The final rule allows a financial institution to use an evaluation rather than an appraisal for commercial real estate transactions exempted by the US$500K threshold. The final rule responds, in part, to concerns financial industry representatives raised that the current threshold level had not kept pace with price appreciation in the commercial real estate market in the 24 years since the threshold was established.
National Flood Insurance Program Looks to Private Capital: FEMA is looking into various options to inject private capital into the flood insurance market, which has traditionally been the government’s domain. Flood Insurance Director Roy Wright said in a statement, “The NFIP requires a stronger financial framework built on expanding our portfolio of actuarially-priced policies. Transferring more of the risk burden to the private capital markets continues to be part of that strategy.”
COMINGS AND GOINGS AT THE AGENCIES
John Williams to Be Next New York Fed President: Current San Francisco Fed President John Williams was approved on Tuesday by the Fed board to become the next president and CEO of the New York Fed. Fed Chairman Jerome Powell praised him in a statement saying, “John is a dedicated public servant, a distinguished thought-leader in monetary policymaking, and a proven executive and public communicator.” The selection of Mr. Williams goes against the push for gender and racial diversity at the Fed for which many progressive Democrats had been advocating. Among those calling for increased diversity was Sen. Sherrod Brown (D-OH), ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, who released a statement noting that, “Federal Reserve System officials cannot continue to say that diversity is important without showing that they mean it in their selection of individuals to lead the Federal Reserve Banks and other positions.”
Justin Muzinich to Be Nominated for Deputy Treasury Position: It is expected that President Trump will nominate Justin Muzinich, a former banker who helped craft the recently passed tax cuts, to be deputy Treasury Secretary. Mr. Muzinich currently serves as a counselor to Secretary Steven Mnuchin. Two former candidates for the position had withdrawn from consideration, after which Secretary Mnuchin initially seemed content to leave the post unfilled. Mr. Muzinich will next face a confirmation hearing.
FTC Acting Chairman Ohlhausen Appoints Alden Abbott as Acting General Counsel: It was announced on Monday that Alden Abbott would rejoin the Federal Trade Commission as Acting General Counsel, from his position at the Heritage Foundation. He is rejoining the Commission, having served previously as deputy director of the Office of International Affairs, associate director and assistant director of the Bureau of Competition, and attorney advisor in the Office of Policy Planning.
SEC Names Joel Levin as Director of the Chicago Regional Office: The Securities and Exchange Commission announced that Joel R. Levin has been named Director of the Chicago Regional Office. He will join the agency next month. Mr. Levin is a veteran federal prosecutor who has served in various senior leadership positions in the Department of Justice over the last 25 years.
SEC Names Peter Henry as Director of the Office of Equal Employment Opportunity: The Securities and Exchange Commission announced that Peter Henry has been named Director of the agency’s Office of Equal Employment Opportunity. Mr. Henry joined the SEC as OEEO Deputy Director in 2014, and has been serving as the office’s Acting Director since 2016. Prior to joining the SEC in 2014, he served as an associate legal advisor at Immigration and Customs Enforcement, a component of the Department of Homeland Security, where he advised on EEO, performance, and labor matters under the civil rights laws and EEOC regulations. He also spent 14 years at the U.S. Postal Service, including as senior counsel.
Director of FEMA’s National Flood Insurance Program Steps Down: Roy Wright, who has served as Director of the National Flood Insurance Program will depart the agency and assume the reins at an insurance industry related nonprofit. FEMA Administrator Brock Long said of Mr. Wright, “Roy made tremendous strides in updating the National Flood Insurance Program to ultimately benefit the policy holder, and create a more solid financial framework for the program.”
OTHER NOTEWORTHY ITEMS
Daniel Akaka Passes Away at Age 93: Former Democratic Senator from the state of Hawaii Daniel Akaka passed away on Thursday at age 93. Mr. Akaka represented Hawaii for over 36 years, and fought for recognition for Asian-American veterans. He was remembered by Sen. Brian Schatz (D-HI) as “A pure heart, a determined warrior for native Hawaiians, and a true public servant.”
Mutual Funds Set to Release More Information Following Deal with AG Schneiderman: Thirteen mutual funds have agreed to voluntarily release more information about their costs and fees following an investigation into disclosures by the New York Attorney General’s Office. In an announcement, AG Schneiderman said, “These new disclosures will give Main Street investors access to critical information before making investment decisions for themselves and their families. . . By working with us to help level the playing field for all investors, these firms are taking an important step forward. I encourage all mutual fund firms to follow suit.”