This Week in Washington for August 5, 2019
By Dina Ellis
THE BIG PICTURE
In an escalation of the trade dispute with China, on Thursday President Trump threatened to impose a new 10% tariff on US$300B in Chinese imports beginning September 1st. He later clarified that the rate could increase to as much as 25% depending on the outcome of ongoing negotiations with the Chinese. When combined with the existing 25% tariff on US$250B worth of goods, the move would result in nearly all Chinese imports being subject to tariffs. Despite reported opposition from his advisors and backlash from the business community, the President remains firm in his position.
Senate Minority Leader Chuck Schumer voiced his support for House Speaker Nancy Pelosi’s reluctance to launch a formal impeachment inquiry on Tuesday. Despite increasing pressure from members of his own leadership team to commence proceedings, Schumer was cautious to avoid being seen as undercutting her position, saying “I believe that Speaker Pelosi is handling this appropriately.”
Other highlights of last week include:
The Senate voted 67-28 to pass a two-year US$2.7T budget deal that will increase spending caps and suspend the debt ceiling through July 31, 2021. The bill was one of the final items on the Senate’s pre-recess to-do list. On Friday, the President signed the measure into law.
Three-term congressman Will Hurd (R-TX) announced his retirement on Thursday evening. In a statement, he said he made the decision “in order to pursue opportunities outside the halls of Congress to solve problems at the nexus between technology and national security.”
On Friday, a federal judge in DC ruled against a Trump administration policy that would only allow migrants who enter the U.S. through legal ports of entry to claim asylum after finding it was “inconsistent with” the Immigration and Nationality Act.
The President reversed course and dropped his plan to nominate Rep. John Ratcliffe (R-TX) to serve as the next Director of National Intelligence, after reports in the media surfaced regarding his exaggerated claims of experience.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “
Hector Hernandez, Director, Housing Opportunity Center, Southwest Economic Solutions
Ted Phillips, Executive Director, United Community Housing Coalition
Bernadette Atuahene, Senior Research Scholar, University of Michigan
Lauren Mason, Member, Housing Committee Chair – Detroit Action
Taz George, Senior Research Analyst, Community Development and Policy Studies Division, Federal Reserve Bank of Chicago
Vanessa Fluker, Fellow Practitioner, Vanessa G. Fluker, Esq., PLLC
SENATE BANKING COMMITTEE
Hearing on “
Mr. Jeremy Allaire, Co-Founder, Chairman and Chief Executive Officer, Circle, on behalf of The Blockchain Association
Dr. Rebecca M. Nelson, Specialist in International Trade and Finance, Congressional Research Service
Professor Mehrsa Baradaran, Professor of Law, University of California, Irvine School of Law
Senate Finance Committee Hearing on “
The Honorable Brent James McIntosh to be an Under Secretary of the Treasury
Brian Callanan to be General Counsel for the Department of the Treasury
Brian McGuire to be a Deputy Under Secretary of the Treasury
LEGISLATION INTRODUCED AND PROPOSED
Stock Buyback Reform: Sen. Sherrod Brown (D-OH) unveiled his “Stock Buyback Reform and Worker Dividend Act” on Wednesday, which aims to curb stock buybacks and create a ‘worker dividend’ to ensure workers get their fair share of the profits they help create. Sen. Brown said in a statement that, “my proposal is simple: if corporations want to transfer wealth to Wall Street, workers have to get a proportionate share of the pie.”
H.R. 3884: Rep. Jerry Nadler (D-NY) introduced H.R. 3884, which would decriminalize and deschedule cannabis, provide for reinvestment in certain persons adversely impacted by the War on Drugs, and provide for expungement of certain cannabis offenses.
H.R. 3958: Rep. Maxine Waters (D-CA) introduced H.R. 3958, which would make necessary reforms to improve compliance with loss mitigation requirements by servicers of mortgages for single family housing insured by the FHA and to prevent foreclosures on FHA borrowers.
H.R. 4023: Rep. Drew Ferguson (R-GA) introduced H.R. 4023, which would reform the inspection process of housing assisted by the Department of Housing and Urban Development.
H.R. 4037: Rep. David Kustoff (R-TN) introduced H.R. 4037, which would promote uniformity and reciprocity among States that license insurance claims adjusters and facilitate prompt and efficient adjusting of insurance claims.
H.R. 4047: Rep. Gregory Meeks (D-NY) introduced H.R. 4047, which would require certain Federal financial regulators to carry out an independent study of their regulated entities’ processes for allowing third parties to access consumer-authorized financial data.
H.R. 4064: Rep. Jan Schakowsky (D-IL) introduced H.R. 4064, which would require all newly constructed, federally assisted, single-family houses and town houses to meet minimum standards of visitability for persons with disabilities.
H.R. 4067: Rep. David Scott (D-GA) introduced H.R. 4067, which would amend the Consumer Financial Protection Act of 2010 to direct the Office of Community Affairs to identify causes leading to, and solutions for, under-banked, un-banked, and underserved consumers.
H.R. 4074: Rep. Nydia Velázquez (D-NY) introduced H.R. 4074, which would create a safe harbor for insurers engaging in the business of insurance in connection with a cannabis-related business.
H.R. 4076: Rep. Ann Wagner (R-MO) introduced H.R. 4076, which would require the Securities and Exchange Commission to implement rules simplifying the quarterly financial reporting regime.
H.R. 4084: Rep. Andy Barr (R-KY) introduced H.R. 4084, which would impose sanctions with respect to the Democratic People’s Republic of Korea.
S. 2243: Sen. Chris Van Hollen (D-MD) introduced S. 2243, which would amend the Expedited Funds Availability Act to require that funds deposited be available for withdrawal in real-time.
S. 2342: Senators Gary Peters (D-MI) and Martha McSally (R-AZ) introduced S. 2342, which would require data brokers to register with the FTC annually and disclose the type of personal information brokers collect and sell. The bill also would require that data brokers maintain certain minimum data security standards.
S. 2347: Sen. Cory Gardner (R-CO) introduced S. 2347, which would amend the Internal Revenue Code of 1986 to exclude employer contribution to student loan repayment from income.
S. 2349: Senators Dianne Feinstein (D-CA), Amy Klobuchar (D-MN) and Richard Blumenthal (D-CT) introduced the Protection from Robocalling Act, which would amend the Federal Trade Commission Act to eliminate the common carrier exemption for telecommunications companies.
THIS WEEK ON THE HILL
No hearings scheduled during the recess period.
New CFTC Chairman Lays Out Priorities: In an op-ed, new CFTC Chairman Heath Tarbert outlined his priorities as he takes the helm at the Commission. He noted that they are “closely monitoring Brexit” and emphasized the importance of issuing “long-awaited rules to limit derivatives positions that help unscrupulous traders corner commodity markets.” He discussed the great promise of technological innovations like blockchain, saying the “CFTC must develop a holistic framework for these 21st-century commodities.” He acknowledged that along with the positive side of innovation, protecting against emerging cyber threats is “a top priority of the CFTC as well as the firms and exchanges we regulate.”
SEC’s Peirce Skeptical of Global Crypto Regulation Efforts: Speaking at a conference on Tuesday, SEC Commissioner Peirce expressed her view that a worldwide regulatory framework for policing cryptocurrency is not the answer. Instead, she highlighted the importance of continued global communication between financial regulators, saying, “regulators can create a healthy environment for this new market to grow by sharing information that will smooth cross-border transactions while stamping out fraud and other harmful activity.”
Federal Reserve Announces Rate Cut: On Wednesday, the Federal Reserve announced that it would cut rates for the first time in over a decade. The Federal Open Market Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.” The Committee cautioned that in the face of uncertainties it will “continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.”
Federal Reserve Moves Closer Towards Real-Time Payments: During a press conference on Thursday, Federal Reserve Chairman Jay Powell signaled that the central bank might launch its own real-time payments network which would rival an existing system supported by big banks. Chairman Powell said that “The United States is far behind other countries in terms of having real-time payments available to the general public,” adding that while the bank had not made a decision yet, “it’s something we’re looking at carefully and it’s something I do expect we’ll make a decision on soon.”
Treasury Announces Sanctions on Russia: On Thursday, the President signed an executive order authorizing a new round of sanctions targeting Russian sovereign debt, which aim to punish the country for the 2018 nerve-agent attack in the U.K. In response, on Friday, the Treasury Department announced that it is implementing two sanctions on Russia as part of measures imposed by the U.S. government pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act. To implement the sanction related to U.S. bank loans, Treasury’s OFAC is issuing a Russia-related Directive that will prohibit U.S. banks from participating in the primary market for non-ruble denominated bonds issued by the Russian sovereign and prohibit U.S. banks from lending non-ruble denominated funds to the Russian sovereign. The Directive will become effective on August 26, 2019, following a Congressional notification period.
Treasury Designates a Vietnam-Based Representative of a WMD Entity: On Thursday, Treasury’s OFAC designated a North Korean individual operating from Vietnam, Kim Su Il, for his ties to the Workers’ Party of Korea. “Treasury continues to enforce existing sanctions against those who violate United Nations Security Council resolutions (UNSCRs) and evade U.S. sanctions on North Korea’s unlawful nuclear and ballistic missile programs,” said Sigal Mandelker, Treasury Under Secretary for Terrorism and Financial Intelligence. “Kim Su Il has violated UNSCRs and supports North Korea’s weapons program.”
HUD Announces Efforts to Reduce Risk from Cash-Out Refinance Lending: On Thursday, HUD announced joint policy actions designed to reduce risk associated with cash-out refinance lending. The changes preserve homeowners’ ability to convert home equity to cash via a government-sponsored mortgage but also improves the risk profile of HUD’s housing finance programs. To address these concerns, the Federal Housing Administration will lower its maximum loan-to-value requirements for cash-out refinance transactions from 85 percent to 80 percent. “We are taking another important step to support sustainable homeownership that builds wealth for families,” FHA Commissioner Brian Montgomery said in the statement.
CFPB Extends Comment Period for Debt Collection Proposal: On Friday, the Consumer Financial Bureau announced that it is extending the comment period on its Notice of Proposed Rulemaking implementing the Fair Debt Collection Practices Act. To enable commenters to consider the issues raised in the NPRM, the comment period will be extended by 30 days to September 18, 2019. Among other things, the NPRM would set clear limits on the number of calls debt collectors may place to reach consumers on a weekly basis, apply prohibitions on harassment or abuse, and clarify requirements for certain consumer-facing debt collection disclosures.
OCC Consolidates Supervision Support Functions with Two New Units: On Wednesday, the OCC announced the realignment of approximately 150 staff members to create two new units, consolidating bank supervision support, risk analysis, and oversight of national trust banks and significant service providers. The first unit, Supervision System and Analytical Support, will pull together supervisory information system teams, data management, business intelligence, risk analysis, and supervision risk management staff from other OCC supervisory and policy units. The second unit, Systemic Risk Identification Support and Specialty Supervision, will bring together lead experts from Large Bank Supervision and Midsize Bank Supervision as well as teams responsible for the supervision of trust companies from the Northeastern District National Trust Banks team and significant service providers from Bank Supervision Policy. “This realignment will improve the agency’s ability to supervise the federal banking system by aligning like work, eliminating redundancies, and ensuring the OCC presents a single voice to supervised institutions,” said Comptroller of the Currency Joseph Otting.
Republican Senators Urge the Fed, FDIC, and OCC to Speed Up Deregulation: On Tuesday, all of the Republican members of the Senate Banking Committee wrote to the chairs of the Federal Reserve, FDIC, and OCC urging the agencies to pick up the pace of work on bank deregulation policies over the course of the next year, saying “more can be done to support the economic expansion.”
Waters and Brown Call on Regulators to Protect Taxpayers and Stability of the Financial System: House Financial Services Committee Chairwoman Maxine Waters and Senator Sherrod Brown, Ranking Member of the Senate Banking Committee, wrote to the chairs of the Federal Reserve, FDIC, and OCC, urging them to maintain the current requirements to post initial margin for any swaps transaction between insured depository institutions (IDIs) and their affiliates. They also highlighted the importance of collateral because it “protects taxpayer-insured banks from gambling by their affiliates operating in the capital markets, as well as by their foreign affiliates that can avoid U.S. regulation.”
COMINGS AND GOINGS AT THE AGENCIES
CFTC Chairman Tarbert Announces Key Executive Leadership Appointment: On Tuesday, Chairman Tarbert announced the appointment of Malcolm Clark “Clark” Hutchison III to serve as Director of the Division of Clearing and Risk. Prior to joining the CFTC, Mr. Hutchison spent more than three decades in top positions in the U.S. financial sector, where he specialized in clearing and risk management.
CTFC’s Gorfine to Depart Agency: On Friday, the CFTC announced that their first Chief Innovation Officer and Director of LabCFTC, Daniel Gorfine, will depart in mid-August to return to the private sector. Gorfine also served as the Designated Federal Officer of the CFTC’s Technology Advisory Committee.
SEC’s Cyber Unit Chief to Leave Agency: On Thursday, the SEC announced that Robert Cohen, Chief of the Division of Enforcement’s Cyber Unit, will be leaving the agency in August after 15 years of service with the Commission. Mr. Cohen was the first Chief of the Cyber Unit, created in 2017.
OTHER NOTEWORTHY ITEMS
FCA Provides Clarity on Cryptoasset Regulation: On Wednesday, the UK’s Financial Conduct Authority published a Final Guidance that sets out the cryptoasset activities it regulates. The goal of the Guidance is to help firms understand whether their cryptoasset activities fall under FCA regulation and allow firms to have a better understanding of whether they need to be authorized and what they need to do to ensure they are compliant. When “marketing unregulated cryptoasset products, the firm must not be unclear, unfair or misleading in its marketing and make sure customers are aware the cryptoasset activity is unregulated,” the FCA said. The FCA also specified which tokens fall under its jurisdiction by stating that true cryptocurrencies like bitcoin and ether are not regulated, but anti-money-laundering rules would still apply to them.