Money Matters: This Week in Washington

This Week in Washington for August 24, 2020

August 24, 2020

Dina Ellis


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 deaths reached 800,000 around the globe, with the United States accounting for 176,000 of those lives lost. Cases in the country topped 5.6 million, including Sen. Bill Cassidy (R-LA), who is recovering at home. The President took to twitter on Saturday to accuse the FDA of slow rolling research in an effort to hurt his re-election campaign, an apparent reference to reported doubts by some scientists about the efficacy of using convalescent blood plasma as a treatment. On Sunday, however, the agency announced it would issue an emergency use authorization for plasma, which the President dubbed a “breakthrough.”

The Democratic National Convention was held virtually over four nights with a theme of “America’s promise.” A series of speakers and panels emphasized the empathy and kindness of Joe Biden, who promised to be an “ally of the light, not the darkness” in returning the country to normalcy and painted President Trump in stark terms as unfit for office and incapable of handling the coronavirus crisis. In contrast, the President continued to sow doubt about the upcoming election, repeating claims about the potential for voter fraud using mail-in ballots. The Republican convention will kick-off this week, presenting the President’s case for his re-election.

As coronavirus relief talks remained at an impasse, Senate Republicans released the text of a so-called “skinny” version of their July proposal, in a bid to address the most critical issues. Democrats, however, continued to reject a piecemeal approach, preferring a comprehensive response to the crisis.

Other highlights of last week include:

  • Former White House strategist Steve Bannon was arrested and charged with defrauding donors to a campaign to privately fund the building of a wall on the Southern border.

  • On Monday, Interior Secretary David Bernhardt announced plans for an oil and gas leasing program in the Arctic National Wildlife Refuge in Alaska.

  • In honor of the 100th anniversary of the ratification of the 19th amendment, which gave women the right to vote, the President announced he would issue a posthumous pardon to suffragette Susan B. Anthony, who was arrested and found guilty of voting in 1872.


Senate Intel Releases Volume Five of Bipartisan Russia Report: On Tuesday, the Senate Select Committee on Intelligence released the fifth and final volume of the Committee’s bipartisan Russia investigation titled, “Volume 5: Counterintelligence Threats and Vulnerabilities,” which examines Russia’s attempts to gain influence in the American political system during the 2016 elections. The Committee’s investigation totaled more than three years of investigative activity, more than 200 witness interviews, and more than a million pages of reviewed documents. The report detailed interactions between former Trump campaign chairman Paul Manafort and Konstantin Kilimnik, who the panel described as a Russian intelligence officer.

Brown, Colleagues Sound Alarm, Demand Answers Regarding Fannie Mae & Freddie Mac’s Sudden Decision to Increase Mortgage Refinancing Costs for Homeowners: On Wednesday, Sen. Sherrod Brown
(D-OH), Ranking Member of the Senate Banking Committee, led 15 Senate Democrats in a letter to Mark Calabria, Director of the FHFA, expressing concern and demanding answers regarding the sudden announcement that Fannie Mae and Freddie Mac (the Enterprises) will begin charging an additional 50 basis points in up-front fees for all refinance loans delivered to the Enterprises on or after September 1, 2020. This additional fee will increase the cost to homeowners of refinancing their mortgages in the midst of an economic downturn.

Congressional Oversight Commission Publishes Fourth Report: On Friday, the Congressional Oversight Commission, a five-person panel established by the CARES Act to oversee the economic stabilization efforts of the Treasury Department and the Federal Reserve, released its fourth report. The report focused on the implementation of the Main Street Lending Program by the Federal Reserve and the Treasury. They found that the Main Street Lending Program has seen modest initial activity thus far. As of August 19, 2020, eligible lenders had issued loans totaling US$496.8M under the program. The Federal Reserve’s participation amount in these loans is US$472M—about 0.07% of the program’s US$600B lending capacity. As of August 10, 2020, 522 lenders have registered with the program, although only 160 had publicized that they are accepting loan applications from new customers.

Brown Blasts SEC for Moving Anti-Investor Proposal Forward: On Friday, Sen. Sherrod Brown (D-OH), Ranking Member of the Senate Banking Committee, sent a letter to SEC Chair Jay Clayton regarding the Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8. The SEC is expected to finalize the rule next month, but Brown, in his letter, urged the agency to withdraw the rule, which, based on the SEC’s own data, could prevent a substantial portion of individual investors from submitting shareholder proposals. Brown made clear the SEC should prioritize shareholder engagement instead of pursuing the rule that gives investors fewer tools to address gender and racial pay equity, board and management diversity, and treatment of the workforce.


Senate Governmental Affairs Committee Hearing on “Examining the Finances and Operations of the United States Postal Service During COVID-19 and Upcoming Elections”: On Friday, the Committee held a virtual hearing to receive the testimony of Postmaster General Louis DeJoy over how recent changes at the agency have affected mail service and the potential for impacts to the upcoming election. Despite announcing earlier in the week that he would suspend “operational initiatives” until after the election, DeJoy was grilled by Democratic members of the panel over mail delays and the decommissioning of equipment. In dueling narratives, Ranking Member Gary Peters (D-MI) accused DeJoy of undermining “one of our nation’s most trusted institutions and wreak[ing] havoc on families, veterans, seniors, rural communities and people across our country” while Chairman Ron Johnson (R-WI) criticized the Democrats for carrying out a “character assassination” of DeJoy over a “false narrative” of issues at the USPS. DeJoy told the committee the Postal Service is “fully capable” of “delivering the nation’s election mail securely and on time.”

  • Louis DeJoy, Postmaster General, United States Postal Service


House Passes Postal Service Rescue Package: In a rare Saturday vote, the House approved H.R. 8015, which provides US$25B in emergency funding for the United States Postal Service and prohibits the USPS from making changes to operations or levels of service. Nearly two dozen Republicans joined the Democratic caucus in supporting the measure. The White House threatened a veto of the measure, describing it as “an overreaction to sensationalized media reports.”


Monday, August 24

House Oversight Committee Hearing on “Protecting the Timely Delivery of Mail, Medicine, and Mail-in Ballots”: 10:00 AM.


Agencies Issue Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons: On Friday, the Federal Reserve, FDIC, FinCEN, NCUA, and OCC issued a joint statement clarifying that Bank Secrecy Act (BSA) due diligence requirements for customers who may be considered politically exposed persons (PEPs) should be commensurate with the risks posed by the PEP relationship. The statement recognized that PEP relationships present varying levels of money-laundering risk, which depends on facts and circumstances specific to the customer relationship. The statement clarified that, while banks must adopt appropriate risk-based procedures for conducting customer due diligence (CDD), the CDD rule does not create a regulatory requirement, and there is no supervisory expectation for banks to have unique, additional due diligence steps for customers who are considered PEPs.

SEC Adopts Requirements to Ensure Public Notice, Comment, and Approval Prior to Effectiveness of NMS Plan Fees: On Wednesday, the SEC voted to rescind a rule exception that allowed a proposed national market system (NMS) plan fee amendment to become effective upon filing, prior to review and comment by investors and other market participants. The new procedures require public notice of any proposed NMS plan fee amendment, an opportunity for public comment, and Commission approval by order before a new or changed fee can be charged. The Commission also modified the procedures for review of all proposed NMS plans and plan amendments, including fee amendments, to specify timelines for Commission action for each step of the process, adding certainty to the process for NMS plan participants.

SEC Proposes Data Security Enhancements to the CAT NMS Plan: On Friday, the SEC proposed amendments to the national market system plan governing the Consolidated Audit Trail (the “CAT NMS Plan”) to bolster the Consolidated Audit Trail’s (“CAT”) data security. While the CAT NMS Plan currently sets forth a number of requirements regarding the security and confidentiality of CAT data, the proposed amendments to the CAT NMS Plan are the latest SEC action to limit the scope of sensitive information required to be collected by CAT and enhance the security of the CAT and the protections afforded to CAT data.

FinCEN Issues Statement on Enforcement of the Bank Secrecy Act: On Tuesday, the FinCEN issued a statement that sets forth its approach to enforce the rules and regulations within the BSA. FinCEN aims to provide clarity and transparency to its approach when contemplating compliance or enforcement actions against covered financial institutions that violate the BSA. The statement outlines the administrative actions available to FinCEN and provides an overview of the information FinCEN analyzes in order to determine the appropriate outcome to violations of the BSA. FinCEN encouraged financial institutions to voluntarily and promptly report violations and to candidly and completely cooperate with any investigation. “FinCEN is committed to being transparent about its approach to BSA enforcement. It is not a ‘gotcha’ game,” said Director Kenneth Blanco. “The information required by the BSA saves lives, and protects our communities and people from harm. It is a national security issue.”

FDIC Proposes Changes to Its Supervisory Appeals Process: On Friday, the FDIC approved a proposal to amend its Guidelines for Appeals of Material Supervisory Determinations. The most significant change in the proposal would be to replace the current Supervision Appeals Review Committee (SARC) with an independent, standalone Office of Supervisory Appeals (Office) within the FDIC. "The proposal seeks to establish a fair, independent process for a bank to appeal material supervisory decisions. Such an appeals process is key to promoting consistency among examiners across the country, ensuring accountability at the agency, and ultimately, maintaining stability and public confidence in the nation's financial system," said FDIC Chairman Jelena McWilliams.

CFPB Proposes New Category of Qualified Mortgages to Encourage Innovation and Access to Affordable Mortgage Credit: On Tuesday, the CFPB issued a notice of proposed rulemaking (NPRM) to create a new category of seasoned qualified mortgages (Seasoned QMs) in order to encourage innovation and help ensure access to responsible, affordable mortgage credit market. To be considered a Seasoned QM under the proposal, loans would have to be first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period. Covered transactions would also have to be held on the creditor’s portfolio during the seasoning period, comply with general restrictions on product features and points and fees and meet certain underwriting requirements. For a loan to be eligible to become a Seasoned QM, the proposal would also require that the creditor consider and verify the consumer’s debt-to-income ratio (DTI) or residual income at origination.

CFPB Extends Comment Period on Request for Information on Ways to Prevent Credit Discrimination and Build a More Inclusive Financial System: On Wednesday, the CFPB announced that it will provide an additional 60 days for public comment on its Request for Information (RFI) on how best to create a regulatory environment that expands access to credit and ensures that all consumers and communities are protected from discrimination in all aspects of a credit transaction. The original deadline for submissions was October 2, 2020. The comment period will now close on December 1, 2020.

FHA Launches Technology Module for Single Family Appraisals: On Tuesday, the FHA announced the upcoming release of its FHA Catalyst: Electronic Appraisal Delivery module on the FHA Catalyst platform. FHA Catalyst: Electronic Appraisal Delivery will allow lenders to electronically submit, track, and manage single family property appraisals. The FHA Catalyst: Electronic Appraisal Delivery module enhances electronic appraisal report submission features while maintaining industry standard appraisal data sets in use today throughout the housing finance industry. In its initial release, the module can be used by lenders to electronically submit appraisal reports and updates for FHA Single Family Title II forward mortgages.

HUD Issues Guidance for Coronavirus Relief Funds: On Wednesday, HUD Secretary Ben Carson provided guidance and additional flexibility to states and units of local government who are utilizing their existing federal disaster recovery funds to support low- and moderate-income persons and vulnerable populations for disasters occurring in 2015-2019 during the coronavirus outbreak. Key new flexibilities available to CDBG-DR Grantees are: (1) provided a one-year extension of its previously established expenditure deadline for CDBG-DR funds under certain public laws in response to a 2015, 2016, or 2017 disaster; (2) provided with the option to request an additional expenditure extension beyond the one-year extension, for a maximum of two years; (3) provided submission extensions to CDBG-DR grantees for their certifications, implementation plan and capacity assessment, and action plan in response to a 2018 or 2019 disaster.

HUD Secretary Ben Carson Hosts Roundtable with Pennsylvania Elected Officials on the Removal of the 2015 AFFH Rule: On Thursday, HUD Secretary Ben Carson held a roundtable with local and federal officials in Pennsylvania to discuss the importance of local zoning decisions being made by local communities. “American suburbs are a shining example of the American Dream, where people can live in their own homes, in safe, pleasant neighborhoods,” said Secretary Carson. “We have already seen jurisdictions make strong progress promoting fair housing at the local level, and they will continue to do so without complicated certification processes from Washington that would inevitably lead to blanket national policies on intimate local issues.”

EXIM Chair Highlights Export Financing Tools for Small Businesses: Export-Import Bank of the United States President and Chair Kimberly addressed a NCUA webinar and in her remarks underscored how small businesses can leverage the new partnership between EXIM and credit unions to better compete in the global marketplace. During the virtual event, Reed highlighted how credit union members can use EXIM’s financing tools and resources to increase their international sales, showcase their “Made in the USA” products, and support American jobs.

Commerce Department Further Restricts Huawei Access to U.S. Technology and Adds Another 38 Affiliates to the Entity List: On Monday, the Bureau of Industry and Security in the Department of Commerce further restricted access by Huawei Technologies and its non-U.S. affiliates on the Entity List to items produced domestically and abroad from U.S. technology and software. In addition, BIS added another 38 Huawei affiliates to the Entity List, which imposes a license requirement for all items subject to the Export Administration Regulations and modified four existing Huawei Entity List entries. BIS also imposed license requirements on any transaction involving items subject to Commerce export control jurisdiction where a party on the Entity List is involved. These actions, effective immediately, prevent Huawei’s attempts to circumvent U.S.-export controls to obtain electronic components developed or produced using U.S. technology.


Caroline Crenshaw and Hester Peirce Sworn-In as SEC Commissioners: On Monday, the SEC announced that Caroline Crenshaw and Hester Peirce have been sworn into office as SEC commissioners. Ms. Crenshaw and Ms. Peirce were both unanimously confirmed by the Senate on August 6, 2020.

SEC Names Diana Stoltzfus as Deputy Chief Accountant: On Tuesday, the SEC announced the appointment of Diana Stoltzfus as a Deputy Chief Accountant in the agency's Office of the Chief Accountant. Ms. Stoltzfus joins the SEC from PricewaterhouseCoopers LLP.

SEC Names Marc Berger as Deputy Director of Enforcement: On Wednesday, the SEC announced that Marc Berger, currently Director of the SEC’s New York Regional Office, has been named Deputy Director of the Division of Enforcement. Richard Best, who currently serves as Regional Director of the Atlanta Office, will succeed Berger in New York.


State AGs File Suit over FDIC’s Valid-When-Made Rule: On Thursday, Attorneys General from California, New York, Illinois, Massachusetts, Minnesota, New Jersey, North Carolina, and the District of Columbia filed suit in California federal court seeking to block the FDIC’s valid-when-made rule. The AGs argued that the rule is “beyond the FDIC's power to issue, is contrary to statute, and would facilitate predatory lending through sham 'rent-a-bank' partnerships designed to evade state law.”

Administration Petitions Supreme Court to Review Ruling on Twitter-Blocking: On Thursday, the administration asked the Supreme Court to review an appellate court ruling, which found the President’s practice of blocking individuals from following his twitter account constituted a violation of the First Amendment. The DOJ argued, “The result of the court of appeals’ novel ruling will be to jeopardize the ability of public officials—from the President of the United States to a village councilperson—to insulate their social-media accounts from harassment, trolling, or hate speech without invasive judicial oversight.”

Colorado Attorney General’s Office Settles Lawsuit against Lenders for Exceeding State Interest Rate Limits on Consumer Loans: On Wednesday, Colorado Attorney General Phil Weiser announced that his office has reached a settlement in two precedent-setting lawsuits involving Colorado’s right to enforce its interest rate limits on consumer loans to protect residents from predatory lending practices. Under federal law, certain out-of-state banks can lend in Colorado at interest rates that exceed Colorado’s limits. The Attorney General alleged that the non-banks at issue illegally partnered with two out-of-state banks—in a scheme to “rent” those banks’ ability to lend above Colorado’s rate limits. In a statement, Weiser noted that “protecting consumers from predatory loans is among my top priorities as Attorney General, and we take the 36% lending cap very seriously,” adding, “this agreement protects Colorado consumers and creates a model for how other lenders can comply with Colorado law and treat consumers fairly.”

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.

Get In Touch With Us

Contact Us