Money Matters: This Week in Washington
This Week in Washington for August 3, 2020
August 03, 2020
Dina Ellis
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 continued to surge across the country, with 4.6 million confirmed infections and over 155,000 lives lost. Among those was former Republican presidential candidate and businessman Herman Cain, who passed away due to complications from the virus on Thursday. Representatives Louie Gohmert (R-TX) and Raul Grijalva (D-AZ) tested positive for the virus, prompting Speaker Nancy Pelosi to mandate the wearing of masks in House office buildings and on the floor. Dr. Anthony Fauci cautioned that November is likely the earliest we’ll find out if the current frontrunner vaccine candidate is effective, and advised that wearing goggles or a face shield may be beneficial as an added layer of protection in addition to masks, underscoring the ever-evolving nature of our understanding of transmission risks. Over the weekend Dr. Deborah Birx warned Americans to take precautions as we have entered a “new phase” where the virus is “extraordinarily widespread.”
Senate Republicans unveiled their US$1T stimulus proposal, the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act, but negotiations quickly stalled as Congressional leadership struggled to find common ground. The extension of unemployment benefits continued to be a major sticking point, as both sides sought to deflect blame for their expiration. A last ditch effort to extend the UI program by one week failed, as Democrats rejected a piecemeal approach to the crisis and criticized Republicans for waiting until the eleventh hour to engage. The President signaled a willingness to accept a deal that did not include liability protections, which had been a priority of Senate Majority Leader Mitch McConnell, but considered a nonstarter by Democratic leadership.
The first presidential debate will take place September 29th in Cleveland after Notre Dame withdrew from hosting due to coronavirus concerns. The President traveled to Texas on Wednesday for a campaign stop, as the traditionally Republican stronghold has become increasingly competitive for Democrats. The President floated via Twitter the idea of postponing the election due to uncertainty related to the pandemic, a proposal that was swiftly rejected by Congressional leaders.
Other highlights of last week include:
The continuing economic damage wrought by the pandemic was brought into sharp relief on Thursday when it was announced that U.S. GDP fell at a 32.9% annual rate in the second quarter.
Rep. David Schweikert (R-AZ) was formally reprimanded by the House for misuse of taxpayer dollars and violating campaign finance requirements. Schweikert has accepted responsibility for his misconduct, and agreed to pay a US$50K fine to the Treasury.
The administration announced it would suspend new DACA applications as it explores the future of the program in the wake of the Supreme Court’s ruling.
During his eulogy for the late Rep. John Lewis, President Barack Obama came out in favor of eliminating the filibuster, calling it a “Jim Crow relic.”
Supreme Court Justice Ruth Bader Ginsburg was released from the hospital on Friday after undergoing a nonsurgical procedure.
LAST WEEK ON THE HILL
Brown, Warren, and Harris Call on CFPB to Protect Borrowers from Discrimination: On Friday, Senators Sherrod Brown (D-OH), Elizabeth Warren (D-MA), and Kamala Harris (D-CA) sent a letter to Consumer Financial Protection Bureau Director Kathy Kraninger, urging the agency to take immediate actions to address potential violations of the Equal Credit Opportunity Act (ECOA) by lenders who use educational data to make credit decisions. The Senators called on Kraninger “to reverse your and Mr. Mulvaney’s decision to strip the CFPB’s Office of Fair Lending of its supervisory and enforcement duties. When Congress created the CFPB, we specifically charged the Director with creating an Office Of Fair Lending to ‘provid[e] oversight and enforcement’ of Federal fair lending laws and required this Office to submit an annual report to Congress detailing the CFPB’s efforts to ‘fulfill its fair lending mandate.’”
Warren, Brown Criticize Fed Vice Chair Quarles' Lobbying in COVID-19 Relief Package: On Friday, Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) sent a letter to Federal Reserve's Vice Chairman for Supervision Randal Quarles questioning why he is lobbying Congress to insert regulatory favors for big banks into the upcoming COVID-19 relief package. The Senators also wrote to Chairman Powell raising concerns that Quarles is compromising Powell's claims of an independent Fed by working with Senate Republicans to craft legislation that would undermine financial protections Congress passed after the last financial crisis.
HOUSE FINANCIAL SERVICES COMMITTEE
Waters, Clay, and Heck Request Housing Finance Regulator Pause Rulemaking Increasing Capital for Fannie Mae and Freddie Mac: On Tuesday, Chairwoman Maxine Waters (D-CA), Rep. Wm. Lacy Clay (D-MO), and Rep. Denny Heck (D-WA) sent a letter to Mark Calabria, Director of the Federal Housing Finance Agency, urging the agency to prioritize economic recovery amid the COVID-19 pandemic crisis by pausing a rulemaking that would set new capital requirements for Fannie Mae and Freddie Mac until after the pandemic. The letter also urges FHFA to provide better analysis on how the rule would impact borrowers of color.
Hearing on “Protecting Consumers during the Pandemic? An Examination of the Consumer Financial Protection Bureau”: On Thursday, the full Committee held a hearing to receive testimony from CFPB Director Kathy Kraninger on the CFPB’s semiannual report. Chairwoman Maxine Waters (D-CA) accused Kraninger of betraying consumers and slammed the Bureau’s move to toll back key safeguards for payday, car title, and installment loans, exposing consumers to high-cost, predatory loans.
Kathy Kraninger, Director, Consumer Financial Protection Bureau
SENATE BANKING COMMITTEE
Hearing on “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress”: On Wednesday, the full Committee held a hearing to receive testimony from CFPB Director Kathy Kraninger on the CFPB’s semiannual report. Kraninger faced tough questioning from the Democrats on the panel, who criticized the Bureau’s response to the pandemic and enforcement activity. Sen. Sherrod Brown (D-OH) claimed the rulemaking process around revisions to the payday lending rule was “clearly corrupted.” In a particularly tense exchange, Sen. Elizabeth Warren (D-MA) said that “based on your actions in this pandemic, you should resign.”
Kathy Kraninger, Director, Consumer Financial Protection Bureau
OTHER COMMITTEES
House Judiciary Committee Hearing on “Oversight of the Department of Justice”: On Monday, during an a DOJ oversight hearing, Attorney General William Barr faced tough questioning on a number of recent controversies, from police protests, the Russia investigation, and the treatment of Roger Stone and Paul Manafort.
William Barr, Attorney General, U.S. Department of Justice
Joint Economic Committee Hearing on “Reducing Uncertainty and Restoring Confidence during the Coronavirus Recession”: On Thursday, the Committee held a hearing to hear from a panel of experts on various methods to address the nation’s economic crisis and reduce uncertainty.
Dr. Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities
Dr. Heather Boushey, President & CEO and Co-Founder, Washington Center for Equitable Growth
Dr. Douglas Holtz-Eakin, President, American Action Forum
Rachel Greszler, Research Fellow in Economics, Budget and Entitlements, The Heritage Foundation
House Select Subcommittee on the Coronavirus Hearing on “The Urgent Need for a National Plan to Contain the Coronavirus”: On Friday, the Subcommittee held a hearing to examine the urgent need for a national comprehensive plan to address the coronavirus pandemic with three key officials leading the response.
Anthony S. Fauci, M.D., Director, National Institute of Allergy and Infectious Diseases
National Institutes of Health, Admiral Brett P. Giroir, M.D., Assistant Secretary for Health, Department of Health and Human Services
Robert R. Redfield, M.D., Director, Centers for Disease Control and Prevention
ON THE FLOOR
House Passes US$1.3T Spending Package: On Friday, the House voted 217-197 along largely party lines to pass a package of FY21 spending bills including funding for Labor, Health and Human Services, Education, Commerce, Justice, Energy, Financial Services and General Government, Transportation, Housing and Urban Development.
LEGISLATION INTRODUCED AND PROPOSED
H.R. 7793: Rep. Al Green (D-TX) introduced H.R. 7793, which would amend the Consumer Financial Protection Act of 2010 to provide for whistleblower incentives and protection.
H.R. 7796: Rep. Joyce Beatty (D-OH) introduced H.R. 7796, which would amend the Fair Debt Collection Practices Act to restrict collections of consumer debt during a national disaster or emergency.
H.R. 7809: Rep. Van Taylor (R-TX) introduced H.R. 7809, which would require the Secretary of the Treasury to establish a HOPE Preferred Equity Facility to guarantee certain financial investments of commercial borrowers affected by COVID-19.
H.R. 7834: Rep. Trey Hollingsworth (R-IN) introduced H.R. 7834, which would amend the Securities Act of 1933 with respect to small company capital formation.
H.R. 7844: Rep. Jimmy Panetta (D-CA) introduced H.R. 7844, which would authorize the Director of the Minority Business Development Agency of the Department of Commerce to provide assistance for nonprofit economic development organizations to provide services for low- and moderate-income individuals who are aspiring entrepreneurs or seeking employment, and for owners of smaller businesses.
H.R. 7847: Rep. Ayanna Pressley (D-MA) introduced H.R. 7847, which would create a database of eviction information, establish grant programs for eviction prevention and legal aid, and limit use of housing court-related records in consumer reports.
Small Business Lending Disclosure and Broker Regulation Act: Rep. Nydia Velazquez (D-NY) introduced the Small Business Lending Disclosure and Broker Regulation Act, which would ensure many safeguards already required in consumer lending, through the Truth in Lending Act, would also apply to small business credit markets. The bill would bolster the role of the Consumer Financial Protection Bureau in policing small business lending and bring enhanced transparency to small commercial loans.
S. 4318: Sen. Chuck Grassley (R-IA) introduced S. 4318, the American Workers, Families, and Employers Assistance Act, which would provide assistance to American workers, families, and employers during the COVID–19 pandemic.
S. 4321: Sen. Marco Rubio (R-FL) introduced S. 4321, the Continuing Small Business Recovery and Paycheck Protection Program Act, which would establish the Paycheck Protection Program Second Draw Loan and amend the 7(a) loan guaranty program for recovery sector business concerns.
S. 4324: Sen. Lindsey Graham (R-SC) introduced S. 4324, the Restoring Critical Supply Chains and Intellectual Property Act, which would facilitate the availability, development, and production of domestic resources to meet national personal protective equipment and material needs, and ensure American leadership in advanced research and development and semiconductor manufacturing.
S. 4340: Sen. Ted Cruz (R-TX) introduced S. 4340, which would ensure that a State or local jurisdiction is ineligible to receive or use funds allocated, appropriated, or authorized to address COVID-19 if that State or jurisdiction discriminates against religious individuals or religious institutions.
S. 4344: Sen. Jon Tester (D-MT) introduced S. 4344, which would provide a tax credit to live event venues that provided refunds on tickets for events that were cancelled due to the coronavirus pandemic.
S. 4348: Sen. Bill Cassidy (R-LA) introduced S. 4348, which would provide for the conduct of a GAO study and report on rural health access during the COVID-19 pandemic.
S. 4361: Sen. Jack Reed (D-RI) introduced S. 4361, which would automatically extend and adjust enhanced unemployment assistance for the duration of the COVID-19 emergency and economic crisis.
S. 4364: Sen. Martha McSally (R-AZ) introduced S. 4364, which would amend the Tariff Act of 1930 to require online retailers to disclose whether articles sold by such retailers originate in the People's Republic of China.
S. 4367: Sen. Rand Paul (R-KY) introduced S. 4367, which would amend the Internal Revenue Code of 1986 to eliminate limitations on contributions to health savings accounts.
S. 4378: Sen. Mitt Romney (R-UT) introduced S. 4378, which would provide for a short-term extension of the Federal Pandemic Unemployment Compensation program.
Coronavirus Assistance for American Families Act: Senators Marco Rubio (R-FL), Bill Cassidy, M.D. (R-LA), Steve Daines (R-MT), and Mitt Romney (R-UT) introduced legislation that would provide increased Economic Impact Payments (EIP) to American families by equalizing EIPs per person, regardless of age or dependent status. The measure would provide payments of $1,000 for both adults and children with social security numbers. A family of four would receive an additional $600 more than under the CARES Act.
THIS WEEK ON THE HILL
No financial services hearings scheduled.
THE REGULATORS
Federal Reserve Board Announces an Extension of Lending Facilities: On Tuesday, the Federal Reserve Board announced an extension through December 31 of its lending facilities that were scheduled to expire on or around September 30. The three-month extension will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the COVID-19 pandemic.
Federal Reserve Board Announces the Extensions of its Temporary U.S. Dollar Liquidity Swap Lines and FIMA Repo Facility: On Wednesday, the Federal Reserve announced the extensions of its temporary U.S. dollar liquidity swap lines and the temporary repurchase agreement facility for foreign and international monetary authorities (FIMA repo facility) through March 31, 2021. The extensions of these facilities will help sustain recent improvements in global U.S. dollar funding markets by maintaining important liquidity backstops. In addition, the FIMA repo facility will help support the smooth functioning of the U.S. Treasury market by providing an alternative temporary source of U.S. dollars other than sales of securities in the open market.
FinCEN Issues Advisory on Cybercrime and Cyber-Enabled Crime Exploiting the COVID-19 Pandemic: On Thursday, the Financial Crimes Enforcement Network issued an advisory to alert financial institutions to potential indicators of cybercrime and cyber-enabled crime observed during the COVID-19 pandemic. The advisory contains descriptions of COVID-19-related malicious cyber activity and scams, associated financial red flag indicators, and information on reporting suspicious activity.
Treasury and United States Postal Service Reach Agreement on Terms of CARES Act Loan: On Wednesday, the U.S. Department of the Treasury announced that it had reached an agreement with the USPS on the material terms and conditions of a loan of up to $10 billion to the USPS under Section 6001 of the CARES Act. “While the USPS is able to fund its operating expenses without additional borrowing at this time, we are pleased to have reached an agreement on the material terms and conditions of a loan, should the need arise,” said Secretary Steven Mnuchin.
Treasury Designates Key ISIS Financial Facilitators in the Middle East: On Tuesday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated two Islamic State of Iraq and Syria (ISIS) financial facilitators located respectively in Syria and Turkey for providing financial support to ISIS. This action coincides with the thirteenth meeting of the Counter ISIS Finance Group (CIFG), which includes over 60 countries and international organizations, and plays a fundamental role in coordinating efforts to deny ISIS access to the international financial system and eliminate its sources of revenue.
CFPB Requests Information on Ways to Prevent Credit Discrimination and Build a More Inclusive Financial System: On Tuesday, the CFPB issued a request for information to seek public input 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 RFI is in lieu of a symposium the Bureau had planned to host on ECOA issues this Fall.
SEC Announces Creation of the Event and Emerging Risk Examination Team in the Office of Compliance Inspections and Examinations: On Tuesday, the SEC announced the creation of the Event and Emerging Risks Examination Team (EERT) in the Office of Compliance Inspections and Examinations (OCIE). The EERT will proactively engage with financial firms about emerging threats and current market events and quickly mobilize to provide expertise and resources to the SEC's regional offices when critical matters arise.
Small Business Capital Formation Advisory Committee Meeting to Focus on How Capital Markets Are Serving Underrepresented Founders: On Wednesday, the SEC released the agenda for the Tuesday, Aug. 4 meeting of its Small Business Capital Formation Advisory Committee, which will be hosted via video conference. In light of the challenges that minority communities face accessing capital, as well as recent events highlighting racial injustice, the Committee will focus the agenda on how capital markets are serving underrepresented founders, including minorities and women.
COMINGS AND GOINGS AT THE AGENCIES
SEC Names Adam Storch to Lead New Event and Emerging Risks Examination Team: The SEC announced that Adam Storch has been named Associate Director of the newly created Event and Emerging Risks Examination Team. In this role, Mr. Storch will oversee a dedicated, multidisciplinary team of specialized examiners, industry experts, accountants and quantitative analysts.
THE COURTS
States Sue over OCC’s Valid-When-Made Doctrine: On Wednesday, the Attorney Generals from New York, California, and Illinois filed suit against the OCC over the agency’s valid-when-made rule. In the complaint, the AGs argued the rule “would facilitate predatory lending through sham ‘rent-a-bank’ partnerships designed to evade state law” drastically altering “the statutory scheme and regulatory regime that Congress established.”
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