Money Matters: This Week in Washington

This Week in Washington for December 16, 2019

December 16, 2019

Dina Ellis

THE BIG PICTURE

On Tuesday, House Democrats unveiled two articles of impeachment, accusing the President of obstruction of Congress and abuse of power. Following three long and contentious days of meetings, the House Judiciary Committee voted along party lines to approve the articles, paving the way for a full House vote this week. Committee Chairman Jerry Nadler called it a “solemn and sad day,” while the White House Press Secretary Stephanie Grisham described the proceedings as a “desperate charade.”

House Speaker Nancy Pelosi announced on Tuesday that the House had reached an agreement with the White House on the U.S.-Mexico-Canada Trade Agreement. On Friday, the administration submitted implementing legislation to Congress, clearing the way for a vote. The House Ways and Means Committee is set to hold a markup of the bill this Tuesday, before sending the bill to the floor.

The Justice Department Inspector General released the long-awaited report on the launch of the Russia probe, finding the investigation was properly opened and decisions were not impacted by political bias. The report did however detail “serious performance failures” that plagued the investigation, and laid out recommendations for major changes. The President continued to decry the probe as an “attempted overthrow” while Attorney General Bill Barr disagreed with some of the report’s core findings.

Other highlights of last week include:

• Congressional leaders announced a “deal in principle” had been reached to fund the government on Thursday. Negotiations over technical details continued over the weekend, but a vote is expected early in the week as the December 20 deadline looms.

• The Supreme Court agreed to hear the President’s appeals in three cases involving efforts to obtain his financial records, with oral argument set to take place in March.

• Former Federal Reserve Chairman Paul Volcker who tackled inflation during his tenure passed away on Monday at the age of 92.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

“Markup”: On Tuesday and Wednesday, the Committee met for the final markup of the year to consider several draft pieces of legislation intended to protect student borrowers, enhance consumer credit reporting, ensure that regulators are working to preserve and promote Minority Depository Institutions (MDIs), and improve cybersecurity. The Committee ultimately advanced 8 measures to the full House for consideration, in addition to passing three resolutions by unanimous consent.

• H.R. 5322, the Protecting Your Credit Score Act of 2019, introduced by Rep. Josh Gottheimer (D-NJ), passed the Committee by a vote of 31-24.

• H.R. 5315, the Expanding Opportunities for Minority Depository Institutions (MDIs) Act, introduced by Rep. Joyce Beatty (D-OH), passed the Committee by a vote of 57-0.

• H.R. 4545, the Private Loan Disability Discharge Act of 2019, introduced by Rep. Madeleine Dean (D-PA), passed the Committee by a vote of 32-25.

• H.R. 5294, the Student Borrower Protections Act, introduced by Rep. Alma Adams (D-NC), passed the Committee by a vote of 32-26.

• H.R. 5287, the Fair Student Loan Debt Collection Practices Act, introduced by Rep. Al Lawson (D-FL), passed the Committee by a vote of 32-24.

• H.R. 5330, the Consumer Protections for Medical Debt Collections Act, introduced by Rep. Rashida Tlaib
  (D-MI), passed the Committee by a vote of 31-24.

• H.R. 5332, the Ensuring Diversity in Community Banking Act of 2019, introduced by Rep. Gregory Meeks
  (D-NY), passed the Committee by a vote of 52-0.

• H.R. 1731, the Cybersecurity Disclosure Act of 2019, introduced by Rep. Jim Himes (D-CT), passed the Committee by a vote of 32-24.

SENATE BANKING COMMITTEE

Executive Session on “Nominations”: On Tuesday, the full Committee held a hearing to vote on various nominees, ultimately advancing all of them.

• Mr. Mitchell Silk, of New York, to be an Assistant Secretary of the Treasury;

• The Honorable Brian Montgomery, of Texas, to be Deputy Secretary of Housing and Urban Development;

• Mr. David Woll, Jr., of Connecticut, to be an Assistant Secretary of Housing and Urban Development;

• Mr. John Bobbitt, of Texas, to be an Assistant Secretary of Housing and Urban Development;

• Mr. Peter Coniglio, of Virginia, to be Inspector General, Export-Import Bank.

Hearing on “Oversight of the Securities and Exchange Commission”: On Tuesday, the full Committee held a hearing to receive the testimony of SEC Chairman Jay Clayton. In his testimony, Clayton said the agency had no plans to introduce caps on whistleblower awards, saying a proposal will introduce “transparency in how the decisions are made.” He also noted the SEC was looking into suspicious comment letters received in favor of shareholder-voting rules proposed earlier this year.

• The Honorable Jay Clayton, Chairman, U.S. Securities and Exchange Commission.

Committee Democrats Seek Testimony from OCC Comptroller Otting: Ranking Member Sherrod Brown
(D-OH) led the Democratic members of the Committee in writing to OCC Comptroller Joseph Otting, requesting he appear before the Committee to testify regarding the recent proposal to overhaul the Community Reinvestment Act. The members wrote they were concerned that the proposal would have “significant impact on low-income communities, communities of color, rural areas, affordable housing development, community development, and other underserved communities and activities across the banking system.”

ON THE FLOOR

Future Act Clears House: On Tuesday, the House voted 319-65 to pass H.R. 5363, the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act, which reauthorizes funding programs for historically Black colleges and universities and other minority-serving institutions. The measure was able to move forward after House and Senate leaders reached agreement on a student-aid data sharing provision.

House Passes Bill to Lower Drug Prices: On Thursday, the House voted 230-192 on largely party lines to pass legislation to pass H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, which would establish a fair price negotiation program, protect the Medicare program from excessive price increases, and establish an out-of-pocket maximum for Medicare part D enrollees. The measure has drawn sharp opposition from the Republican Caucus and was described as “dead on arrival” in the Senate.

LEGISLATION INTRODUCED AND PROPOSED

H.R. 5290: Rep. Eleanor Holmes Norton (D-DC) introduced H.R. 5290, the District of Columbia Returning Citizens Coordination Act of 2019, which would provide that, for purposes of certain Federal privacy laws, agencies of the District of Columbia are treated as Federal agencies.

H.R. 5360: Rep. Joyce Beatty (D-OH) introduced H.R. 5360, which would require the Board of Governors of the Federal Reserve System to collect more data on race and wealth.

S. 3026: Sen. Ben Cardin (D-MD) introduced S. 3026, which would promote international efforts in combating corruption, kleptocracy, and illicit finance by foreign officials and other foreign persons, including through a new anti-corruption action fund.

S. 3032: Sen. Michael Bennet (D-CO) introduced S. 3032, which would amend the Internal Revenue Code of 1986 to allow for transfers of the renewable electricity production credit, the energy credit, and the credit for carbon oxide sequestration.

Eviction Crisis Act: Senators Michael Bennet (D-CO) and Rob Portman (R-OH) introduced the bipartisan Eviction Crisis Act which would shed light on the root causes of the eviction crisis, reduce preventable evictions, and limit the devastation to families when eviction is unavoidable. Senators Todd Young (R-IN) and Sherrod Brown (D-OH) signed on as co-sponsors.

THIS WEEK ON THE HILL

No financial services hearings scheduled.

THE REGULATORS

FDIC and OCC Propose Modernization of Community Reinvestment Act Regulations: On Thursday, the FDIC and OCC announced proposals to modernize the agencies' regulations under the Community Reinvestment Act (CRA). The proposed rules are intended to increase bank activity in low- and moderate-income communities where there is significant need for credit, more responsible lending, greater access to banking services, and improvements to critical infrastructure. The proposals clarify what qualifies for credit under the CRA, enabling banks and their partners to better implement reinvestment and other activities that can benefit communities. The agencies plan to create an additional definition of “assessment areas” tied to where deposits are located—ensuring that banks provide loans and other services to low- and moderate-income persons in those areas. The Federal Reserve was unable to sign onto the proposal, with Chairman Powell saying they had “worked very hard to get aligned with the OCC on a proposal,” but in the end he was not sure that would be possible.

Office of Financial Research Releases Annual Report to Congress: On Wednesday, the Office of Financial Research released its 2019 Annual Report to Congress. The Annual Report, which includes a financial stability risk assessment and key findings, described risks to financial stability as moderate. The report stated that risks to U.S. financial stability remain in the medium range, reflecting a mix of high, moderate, and low risks in the financial system. The report detailed that solvency and leverage risk continues to be low while most other types of risk to financial stability are moderate. Of those moderate risks, macroeconomic risk was highlighted as higher than a year ago while credit risk remains moderate. On the higher end of the spectrum, market risk was listed as remaining elevated. The report also noted that asset prices have appreciated with the strong U.S. economy.

CFTC to Hold an Open Commission Meeting on December 18: On Wednesday, Chairman Heath Tarbert announced that the CFTC would hold an open meeting on Wednesday, December 18 to consider the following: (1) Final Rule: Amendments to Derivatives Clearing Organization General Provisions and Core Principles; (2) Proposed Rule: Prohibition on Post-Trade Name Give-Up on Swap Execution Facilities; (3) Proposed Rule: Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants; (4) Request for Comment on Designated Foreign Sovereign Debt as Collateral and Acceptable Currencies for Collateral and Settlement.

FDIC Issues Proposed Rule on Brokered Deposit Restrictions: On Thursday, the FDIC issued a notice of proposed rulemaking to modernize its brokered deposit regulations. The proposal would, among other things, modernize a regulatory framework built for a different era to remove regulatory disincentives to offering deposit accounts to customers through different channels. The proposal would establish a new framework for analyzing whether deposits placed through deposit placement arrangements qualify as brokered deposits. These include arrangements between insured depository institutions (IDIs) and third parties, such as financial technology companies, for a variety of business purposes, including access to deposits, as well as IDIs' increasing reliance on new technologies to engage and interact with their customers.

Former Congressman Settles Insider Trading Charges with SEC: On Monday, the SEC announced that it had reached a settlement agreement with former Congressman Chris Collins, who was charged with insider trading and plead guilty to related criminal charges. The settlement, which is subject to court approval, bars Collins from serving as an officer or director of a public company. “Insider trading undermines investor confidence in the fairness and integrity of the securities markets,” said Stephanie Avakian, Co-Director of the Enforcement Division, adding that the settlement “should deter others who may be tempted to engage in this pernicious conduct.”

Federal Reserve Board Announces Annual Adjustment to the Asset-Size Threshold in Regulation I: On Thursday, the Federal Reserve Board announced the annual adjustment to the asset-size threshold in Regulation I that determines the dividend rate paid to banks that are members of the Federal Reserve System. The updated total consolidated asset threshold is US$10.715B through December 31, 2020.

CFPB Director Celebrates Anniversary at the Bureau: On Tuesday, CFPB Director Kathy Kraninger released a statement reflecting upon her one year anniversary leading the Bureau, and highlighted several accomplishments, including: providing clear rules of the road through rulemaking, creating a culture of compliance, enforcing the law against bad actors, educating and empowering consumers to make better informed financial decisions, enhanced inter-agency coordination, and promoting a more inclusive, effective and efficient organization.

Federal Reserve Board Announces It Will Extend Comment Period for Risk-Based Capital Requirement Proposal: On Friday, the Federal Reserve announced that it will extend until January 22, 2020, the comment period for its proposal to establish risk-based capital requirements for certain insurance companies supervised by the Board. Originally, comments were due by December 23, 2019.

FinCEN Sees Uptick in Suspicious Activity Reports Following Release of Guidance: Speaking at a conference on Tuesday, FinCEN Director Kenneth Blanco revealed that since the agency released its guidance in May, they had seen a significant uptick in suspicious activity reporting, saying that “it is encouraging that [virtual currency] entities, dozens of whom had never filed a SAR report prior to the May advisory, are using the red flags and reporting suspicious activity back to us.”

OCC Highlights Key Risks for Federal Banking System in Semiannual Report: On Monday, the OCC released its Semiannual Risk Perspective for Fall 2019. The report detailed operational, credit, and interest rate risks facing the federal banking system, as well as highlighting cybersecurity and technology management as emerging risks.

OTHER NOTEWORTHY ITEMS

Congressional Democrats Write to Regulators on CRA Proposal: Rep. Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, Sen. Sherrod Brown (D-OH), Ranking Member of the Senate Banking Committee, and Rep. Gregory Meeks (D-NY), Chairman of the House Subcommittee on Consumer Protection and Financial Institutions, led a letter to Fed Chairman Jerome Powell, Comptroller of the Currency Joseph Otting, and FDIC Chairwoman Jelena McWilliams, demanding the regulators provide all interested parties with adequate time to thoroughly review and offer input on proposed changes to the framework of the Community Reinvestment Act. “The CRA is a critical tool to combat redlining, a practice that still exists by which banks discriminate against prospective customers based primarily on where they lived, or their racial or ethnic background, rather than creditworthiness,” the lawmakers wrote. “Many of us have shared our views and concerns with you regarding your proposed changes to implementation of the CRA… we remain extremely concerned about the direction any proposed rule is likely to take and efforts to arbitrarily rush to finalize a rule in the near future.”

NYSE Submits Revised Direct Listing Proposal: Following the rejection of its earlier proposed rule change related to direct listings, the New York Stock Exchange filed an amended version on Wednesday. The NYSE seeks to allow companies that go public through direct listings to raise capital if they sell new shares totaling US$100M. In a statement, NYSE official John Tuttle said “We are committed to the evolution of the direct listing. Our rule changes, if approved, will make these transactions available to a broader universe of companies and create the option for a capital raise as part of a direct listing.”

NYDFS Seeks Comment on Virtual Currency Proposals: New York’s Department of Financial Services is seeking comments from all interested parties and the general public regarding the two proposed coin adoption or listing options that DFS wishes to make available to VC licensees – (1) a proposed DFS web-page that will contain a list of all coins that are permitted for the Virtual Currency Business Activities of the VC licensees, without the prior approval of DFS, which list may be updated from time to time, as long as such listed coins have not been subject to any modification, division, or change after their listing on the DFS web-page; and (2) a proposed model framework for a coin-listing or adoption policy that can be tailored to a VC licensee’s specific business model and risk profile to create a firm specific coin listing or adoption policy that, if approved by DFS, will enable the licensee to self-certify the listing or adoption of new coins in addition to those listed under the first proposal, without DFS’s prior approval.

Basel Committee on Banking Supervision Releases Crypto Asset Discussion Paper: On Thursday, the Basel Committee on Banking Supervision published a discussion paper to seek the views of stakeholders on a range of issues related to the prudential regulatory treatment of crypto-assets, including: (1) the features and risk characteristics of crypto-assets that should inform the design of a prudential treatment for banks' crypto-asset exposures; (2) general principles and considerations to guide the design of a prudential treatment of banks' exposures to crypto-assets, including an illustrative example of potential capital and liquidity requirements for exposures to high-risk crypto-assets.