This Week in Washington for August 10, 2020
By Dina Ellis
THE BIG PICTURE
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The United States surpassed five million coronavirus cases over the weekend, while the death toll reached 162,000. As understanding of transmission continues to evolve, Dr. Anthony Fauci has recommended the White House Coronavirus Task Force investigate potential aerosolized spread. School districts around the country continue to grapple with plans for the upcoming school year. While many areas will begin the year virtually, New York Governor Andrew Cuomo announced that schools in the state would be “authorized to open” due to low rate of community spread. In an op-ed, Minneapolis Fed President Neel Kashkari advocated for a strict six-week lockdown in order to “crush the spread” and prevent thousands of deaths, lamenting that the country gave up on efforts to control transmission, which in turn has worsened the economic impact.
Negotiations over an additional coronavirus relief package collapsed as congressional leaders and the administration remained at an impasse over key provisions. On Saturday, the President announced he would bypass Congress and sign four executive orders targeted at extending enhanced unemployment benefits at a reduced rate, renewing eviction protections, deferring student loan repayment and a payroll tax holiday. The orders were met with criticism from Democratic leadership, with House Speaker Nancy Pelosi calling them “unconstitutional” and Senate Minority Leader Chuck Schumer describing them as “unworkable, weak and far too narrow.”
A series of primaries were held last week in the run-up to the 2020 election. In Tennessee, Trump-backed candidate Bill Hagerty clinched the Republican Senate nomination in a bid to succeed the retiring Sen. Lamar Alexander. Rep. Roger Marshall defeated controversial candidate Kris Kobach in the Republican primary for the open Kansas Senate seat, increasing the odds of Republicans holding onto the seat in the general election. In Michigan, freshman Rep. Rashida Tlaib fended of a challenge from former Rep. Brenda Jones, while in a surprise turn of events, longtime Missouri Rep. Wm. Lacy Clay was defeated by progressive Black Lives Matter activist Cori Bush.
Other highlights of last week include:
The President signed executive orders on Thursday prohibiting “transactions” with the Chinese companies behind the popular video app TikTok and the social platform WeChat due to national security concerns.
An additional 1.19 million Americans filed for unemployment benefits last week, even as the unemployment rate fell to 10.2% in July.
House Foreign Affairs Committee Chairman Eliot Engel subpoenaed four aides of Secretary of State Mike Pompeo after they reportedly resisted appearing for interviews related to the investigation of the President’s firing of State Department IG Steven Linick.
A massive explosion at the port in Beirut, Lebanon on Tuesday killed at least 158 and injured over 4,000.
LAST WEEK ON THE HILL
Brown Presses CFTC for a Comprehensive Review of Possible Oil Market Manipulation: On Thursday, Sen. Sherrod Brown (D-OH) sent a letter to CFTC Chair Heath Tarbert pushing for the agency to complete a thorough review of the unusual trading in oil futures that occurred earlier this year. The Senator cited recent press reports that alleged one trading firm was central to the market conditions that caused the price of oil to fall below zero for the first time.
Rosen, Cornyn Lead Bipartisan Letter Urging Robust Funding for Economic Injury Disaster Loans in Next COVID Relief Package and Removal of SBA Caps: On Wednesday, Senators Jacky Rosen (D-NV) and John Cornyn (R-TX) led nine of their colleagues in a bipartisan letter to Senate Small Business Committee Chairman Marco Rubio (R-FL) and Ranking Member Ben Cardin (D-MD) urging robust funding for the Economic Injury Disaster Loan (EIDL) and EIDL Advance programs, and the removal of caps imposed by the SBA in the next COVID-19 relief package. “Since the CARES Act became law, nationwide the EIDL program has provided nearly 3 million small businesses with over $160 billion in loans, and the EIDL Advance program has provided 5.7 million small businesses with $20 billion in direct cash relief, but such relief can only continue with a new infusion of funds and with long-needed reforms . . . we ask the committee to provide robust funding for EIDL in the next coronavirus relief package and also take steps in such legislation to ensure that SBA cannot place caps on EIDL loans and grants below the levels authorized by Congress in the CARES Act,” wrote the Senators.
SENATE BANKING COMMITTEE
Brown, Menendez and Colleagues Urge Congressional Leaders Negotiating the Next Coronavirus Relief Package to Ban Arbitration Clauses Attached to Needed Benefits: On Tuesday, Senators Sherrod Brown
(D-OH) and Bob Menendez (D-NJ) led the Democratic members of the Committee in urging lead negotiators of the next COVID-19 stimulus package to prohibit the Federal Government from attaching forced arbitration agreements to any form of benefit payments to Americans. Last March, the pre-paid debit cards IRS sent to four million Americans, loaded with CARES Act stimulus payments, also contained a little-known, anti-consumer arbitration clause tucked in its fine print.
Executive Session on “
Senate Judiciary Committee Hearing on “Oversight of the Crossfire Hurricane Investigation: Day 2”: On Wednesday, the Committee held another hearing as part of their oversight investigation into the origins of the Russia probe. The Republicans on the panel questioned former deputy attorney general Sally Yates in a series of at-times testy exchanges over Michael Flynn and politicization at the Justice Department.
Sally Yates, Former Deputy Attorney General Of The United States
Select Subcommittee on the Coronavirus Crisis Hearing on “
Arne Duncan, Managing Partner, Emerson Collective, Former Secretary of Education
Dr. Caitlin Rivers, Senior Scholar, Johns Hopkins Center for Health Security, Assistant Professor, Department of Environmental Health and Engineering, Johns Hopkins Bloomberg School of Public Health
Robert Runcie, Superintendent, Broward County Public Schools
Angela Skillings, Teacher, Hayden Winkelman Unified School District
Congressional Oversight Commission Hearing on “
Eric Rosengren, President and CEO, Federal Reserve Bank of Boston
Lauren Anderson, Senior VP and Associate General Counsel, Bank Policy Institute
Tom Bohn, CEO, Association for Corporate Growth
Vince Foster, Executive Chairman, Main Street Capital Corporation
Gwen Mills, Secretary-Treasurer, UNITE HERE
ON THE FLOOR
Senate Passes Measure Banning TikTok on Government Devices: On Thursday, the Senate passed by unanimous consent Senator Josh Hawley’s (R-MO) bill to ban TikTok on government devices. In August, the House of Representatives voted in favor of companion legislation introduced by Rep. Ken Buck (R-CO) as an amendment to the National Defense Authorization Act.
LEGISLATION INTRODUCED AND PROPOSED
H.R. 7924: Rep. Andy Barr (R-KY) introduced H.R. 7924, which would amend the Securities Exchange Act of 1934 to require issuers to disclose certain financial support from the Government of China.
H.R. 7946: Rep. Maxine Waters (D-CA) introduced H.R. 7946, the Federal Reserve Racial and Economic Equity Act, which would amend the Federal Reserve Act to add additional demographic reporting requirements, to modify the goals of the Federal Reserve System in a manner that “minimizes and eliminates racial disparities in employment, wages, wealth, and access to affordable credit.” A companion bill was introduced by Senators Elizabeth Warren (D-MA) and Kirsten Gillibrand (D-NY).
H.R. 7950: Rep. John Yarmouth (D-KY) introduced H.R. 7950, which would provide emergency relief to youth, children, and families experiencing homelessness, in light of the health and economic consequences of COVID-19.
H.R. 7953: Rep. Andre Carson (D-IN) introduced H.R. 7953, which would establish a grant program in the Bureau of Consumer Financial Protection to fund the establishment of centers of excellence to support research, development and planning, implementation, and evaluation of effective programs in financial literacy education for young people and families ages 8 through 24 years old.
H.R. 7955: Rep. David Cicilline (D-RI) introduced H.R. 7955, which would amend chapter 83 of title 41, United States Code (popularly referred to as the Buy American Act) and certain other laws with respect to certain waivers under those laws, to provide greater transparency regarding exceptions to domestic sourcing requirements.
H.R. 7963: Rep. Tom Emmer (R-MN) introduced H.R. 7963, which would amend the Federal Credit Union Act to modernize certain processes regarding expulsion of credit union members for cause.
H.R. 7993: Rep. Maxine Waters (D-CA) and Rep. Gregory Meeks (D-NY) introduced H.R. 7993, the Promoting and Advancing Communities of Color Through Inclusive Lending Act, which would support the efforts of Community Development Financial Institutions (CDFIs), minority CDFIs, and minority depository institutions to serve consumers, small businesses, and minority-owned businesses, especially in low-income and underserved communities.
S. 4505: Sen. Ted Cruz (R-TX) introduced S. 4505, which would provide one-time grants to parents and guardians for student education expenses, to establish emergency education freedom grants, and to provide tax credits for donations to eligible scholarship-granting organizations.
THIS WEEK ON THE HILL
No financial services hearings scheduled.
Federal Reserve Announces Details of New 24x7x365 Interbank Settlement Service with Clearing Functionality to Support Instant Payments: On Thursday, the Federal Reserve Board announced details of the FedNow Service, a new 24x7x365 interbank settlement service with clearing functionality to support instant payments in the United States. The Fed will take a phased approach to service implementation. The first release of the FedNow Service will provide core clearing and settlement features that will support market needs and help banks manage the transition to a 24x7x365 service. Based on ongoing stakeholder engagement, additional features and service enhancements will be introduced over time. The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed. “The rapid expenditure of COVID emergency relief payments highlighted the critical importance of having a resilient instant payments infrastructure with nationwide reach, especially for households and small businesses with cash flow constraints,” said Federal Reserve Board Governor Lael Brainard, adding, “I am pleased to announce the Federal Reserve Board has approved the core features and functionality based on extensive input from stakeholders.”
New York Fed Releases Brief on COVID-19’s Effects on Black-Owned Businesses: On Tuesday, the Federal Reserve Bank of New York released a brief discussing the effects of COVID-19 on Black communities and Black-owned businesses in particular. The study draws on epidemiological data on COVID-19 cases, Census data on business locations, data on the geographic reach of the Paycheck Protection Program (PPP), and data on small firms’ financial health from the Federal Reserve’s Small Business Credit Survey. “This brief shows the disturbing relationship between high geographic incidence of COVID-19 and the economic health of Black-owned businesses,” said Claire Kramer Mills, assistant vice president at the New York Fed. “These firms had weaker financial cushions, weaker bank relationships, and preexisting funding gaps prior to the pandemic. COVID-19 has exacerbated these issues and businesses in the hardest hit communities have witnessed huge disparities in access to federal relief funds and a higher rate of business closures.”
CFTC Advisory Warns Customers to Carefully Assess Precious Metals Pitches Touting CARES Act Rules: On Tuesday, the CFTC issued a Customer Advisory educating the public about unregistered gold and silver dealers advising investors to use relaxed rules under the CARES Act to purchase precious metals. Specifically, the CFTC has observed a growing trend of precious metals promoters and dealers encouraging investors to use relaxed rules under the CARES Act to convert their retirement savings into investments of gold or silver coins, self-directed gold individual retirement accounts (IRAs), or make leveraged purchases of physical metals. These schemes often gouge unsuspecting customers with expensive premiums and hidden fees.
SEC Announces New Small Business Capital Formation Advisory Committee Members: On Tuesday, at a meeting of the Small Business Capital Formation Advisory Committee, the SEC announced the appointment of two new members to the Committee: Kesha Cash, Founder and General Partner, Impact America Fund and Sue Washer, President and CEO, Applied Genetic Technologies Corporation.
SEC Proposes to Improve the Retail Investor Experience through Modernized Fund Shareholder Reports and Disclosures: On Wednesday, the SEC proposed comprehensive modifications to the mutual fund and exchange-traded fund disclosure framework to better serve the needs of retail investors. The proposed disclosure framework would feature concise and visually engaging shareholder reports that would highlight information that is particularly important for retail investors to assess and monitor their fund investments. The proposal is a central component of the Commission’s investor experience initiative and responds to comments the Commission received in response to a 2018 request for comment on retail investors’ experience with fund disclosure.
OCC Issues Rule Creating Exception to Withdrawal Period Requirement for Collective Investment Funds, Eases Impact of COVID-19: On Tuesday, the OCC issued an interim final rule clarifying rules regarding account withdrawals from collective investment funds (CIF). The rule amends the OCC's requirements applicable to national banks and federal savings associations administering CIFs invested primarily in real estate or other assets that are not readily marketable and codifies the time a bank generally has for withdrawing accounts from those CIFs. The rule establishes an exception that allows a bank to extend the period for withdrawals, with OCC approval and provided that certain conditions are met. The rule also creates an opportunity for additional extensions with OCC approval.
Federal Financial Institutions Examination Council Issues Statement on Additional Loan Accommodations Related to COVID-19: The Federal Financial Institutions Examination Council on behalf of its members issued a statement setting forth prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as initial coronavirus-related loan accommodation periods come to an end, and they consider additional accommodations.
FHFA Announces Multifamily Property Owners in Forbearance Now Required to Inform Tenants of Eviction Suspension and Tenant Protections: On Thursday, the FHFA announced that multifamily property owners with mortgages backed by Fannie Mae or Freddie Mac (the Enterprises) who enter into a new or modified forbearance agreement must inform tenants in writing about tenant protections during the multifamily property owner's forbearance and repayment periods. Landlords with Enterprise-backed mortgages can enter new, or if qualified, modified forbearance if they experienced or continue to experience a financial hardship due to the
COVID-19 emergency. While in forbearance, the property owners must agree not to evict tenants solely for the nonpayment of rent.
COMINGS AND GOINGS AT THE AGENCIES
SEC’s Enforcement Co-Director Steven Peikin to Depart: On Wednesday, the SEC announced that Division of Enforcement Co-Director Steven Peikin will leave the agency on Aug. 14, 2020. Upon Mr. Peikin’s departure, Ms. Avakian will remain Director.
Lindsay McCord Named Chief Accountant in SEC’s Division of Corporation Finance: On Wednesday, the SEC announced that Lindsay McCord has been named Chief Accountant in the Division of Corporation Finance. Ms. McCord has served as Acting Chief Accountant in the Division since March 2020.
D.C. Circuit Rules Former White House Counsel Must Testify: On Friday, in a 7-2 ruling, the D.C. Circuit Court upheld a House Judiciary Committee subpoena for testimony from former White House Counsel Don McGahn.
Paul Hastings’ Government Relations team is monitoring these issues. We help our clients craft strategies to address federal legislative and regulatory matters. Please reach out to us if your organization needs assistance with congressional or regulatory relations.