Money Matters: This Week in Washington

This Week in Washington for December 4, 2017

December 05, 2017

Dina Ellis and Casey Miller

THE BIG PICTURE

The Senate spent most of last week working on the US$1.5T Republican plan for a tax overhaul, which passed the chamber early in the morning on December 2. The week was spent editing the plan and counting votes until the GOP had a majority. The plan includes massive spending cuts to various programs. The bill would slash the corporate tax rate from 35 percent to 20 percent, though President Trump said on Saturday morning that he would be willing to set a 22 percent corporate tax rate. When the plan failed to receive Democratic support, the President tweeted that the Democrats were blocking the legislation because "they think it is too good and will not be given the credit."

Battles were waged last week over who would lead the Consumer Financial Protection Bureau after the resignation of former Director Richard Cordray. Cordray named Leandra English, Deputy Director, to serve as his replacement through the end of the term. President Trump named Mick Mulvaney, currently head of the Office of Management and Budget, to serve as Director. After English sued in order to take the place at the helm, the court sided with the Administration and Mulvaney stepped in as Director. At the end of the week, former lawmakers Chris Dodd and Barney Frank teamed up again to protest the President's appointment. President Trump is working to pick a permanent Director, with reports stating the House Financial Services Chairman Jeb Hensarling (R-TX) is high in the running.

Former National Security Adviser Michael Flynn was indicted on Thursday on one count of making a false statement to the Federal Bureau of Investigation. This is the latest step in the investigation into Russian meddling in the election, which is being led by Special Counsel Robert Mueller. On Friday, Flynn pled guilty and said that he is cooperating with Mueller.

According to sources, Republicans are preparing a stopgap spending bill that would fund the government through December 22, though the party is still reaching an agreement on the date and content of the measure. Government funding will expire on Friday if an extension is not passed. Also set to expire on Friday is the National Flood Insurance Program.

There continues to be fallout with various members facing allegations of sexual harassment. Representative Joe Barton (R-TX) announced that he will not be seeking reelection. Both chambers of Congress are now requiring sexual harassment training for employees.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Subcommittee Holds Hearing on Ginnie Mae: On November 29, the Housing and Insurance Subcommittee held a hearing entitled "Sustainable Housing Finance: The Role of Ginnie Mae in the Housing Finance System." The purpose of the hearing was to examine and assess: (1) Ginnie Mae's mission and role in the U.S. housing finance system; (2) Ginnie Mae's current financial condition; (3) Ginnie Mae's programs and products, including its multi-class and single-class securities; (4) Ginnie Mae's platform and its effectiveness and ability to serve its customers; and (5) Ginnie Mae's operational challenges.

Subcommittees Hold Hearing on Countering Terrorism Financing: On November 29, the Financial Institutions and Consumer Credit and the Terrorism and Illicit Finance Subcommittees held a hearing entitled "Legislative Proposals to Counter Terrorism and Illicit Finance." The purpose of the hearing was to examine the following legislative proposals:

• H.R 2219, the "End Banking for Human Traffickers Act of 2017"

• H.R.____, the "Counter Terrorism and Illicit Finance Act"

Witnesses included:

• Mr. Daniel H. Bley, Executive Vice President and Chief Risk Officer, Webster Bank, on behalf of the Mid-Size Bank Coalition of America

• Mr. John J. Byrne, President, Condor Consulting, LLC

• Mr. William J. Fox, Managing Director, Global Head of Financial Crimes Compliance, Bank of America, on behalf of The Clearing House

• Ms. Stefanie Ostfeld, Deputy Head of US Office, Global Witness

• Mr. Chip Poncy, President and Co-Founder, Financial Integrity Network

Subcommittee Holds Hearing on Consolidated Audit Trail: On November 30, the Capital Markets, Securities, and Investment Subcommittee held a hearing entitled "Implementation and Cybersecurity Protocols of the Consolidated Audit Trail (CAT).” The purpose of the hearing was to examine the status of the CAT’s implementation and the current adequacy of existing data security protections regarding the storage and use of CAT data by entities that are part of the CAT operating committee, the CAT plan processor, and the Securities and Exchange Commission. The hearing also examined the following discussion draft legislative proposal:

• H.R. ____,"American Customer and Market Information Protection Act"

Following the hearing, Rep. Bill Huizenga told reporters that he is not discouraged from moving forward with the legislation, which would indefinitely delay the CAT.

Witnesses at the hearing included:

• Mr. Mike Beller, Chief Executive Officer, Thesys Technologies, LLC

• Mr. Chris Concannon, President and Chief Operation Officer, Chicago Board of Options Exchange

• Mr. Tyler Gellasch, Executive Director, Healthy Markets Association

• Ms. Lisa Dolly, Chief Executive Officer, Pershing, on behalf of the Securities Industry and Financial Markets Association

Subcommittee Holds Hearing on Sanctions Programs: On November 30, the Monetary Policy and Trade Subcommittee held a hearing entitled "Evaluating the Effectiveness of U.S. Sanctions Programs." The purpose of the hearing was to examine the Administration's use of economic sanctions to achieve foreign policy objectives with respect to Iran, North Korea, and other countries of strategic importance.

Witnesses included:

• The Honorable Marshall Billingslea, Assistant Secretary for Terrorist Financing, U.S. Department of the Treasury

• Mr. John E. Smith, Office of Foreign Assets Control, U.S. Department of the Treasury

SENATE BANKING COMMITTEE

Committee Holds Executive Session and Nomination Hearing: On November 28, the Committee met to vote on the following nominations at the Department of Housing and Urban Development:

• The Honorable Brian D. Montgomery, to be Assistant Secretary for Housing – Federal Housing Commissioner

• Mr. Robert Hunter Kurtz, of Virginia, to be Assistant Secretary for Public and Indian Housing

• Ms. Suzanne Israel Tufts, of New York, to be Assistant Secretary for Administration

Following the Executive Session, the Committee met in open session to conduct a hearing on the nomination of The Honorable Jerome H. Powell to be Chairman of the Board of Governors of the Federal Reserve System. The Committee will vote on the nomination on December 5.

ON THE FLOOR

House Approves the Preserving Access to Manufactured Housing Act: The House passed H.R. 1699 on December 1, a bipartisan legislation that aims to protect consumers’ ability to become homeowners and access affordable housing. Manufactured housing serves as an affordable housing option for roughly 22 million Americans and represents the largest form of unsubsidized affordable housing in the nation. House Financial Services Ranking Member Maxine Waters (D-CA) said that the bill would "undermine the Dodd-Frank Wall Street Reform and Consumer Protection Act, and eliminate consumer protections for some of the country's most vulnerable borrowers."

LEGISLATION INTRODUCED AND PROPOSED

House Members Introduce Legislation to Repeal Payday Lending Rule: A bipartisan group of House Members are introducing legislation that would repeal a rule the CFPB drafted to crack down on payday lenders. Rep. Dennis Ross (R-FL) is introducing the legislation that would use the Congressional Review Act to block the legislation. The resolution lists five co-sponsors: Rep. Alcee Hastings (D-FL), Tom Graves (R-GA), Henry Cuellar (D-TX), Steve Stivers (R-OH), and Collin Peterson (D-MN).

NEXT WEEK ON THE HILL

Tuesday, December 5

Senate Banking Committee, Executive Session to consider the nomination of The Honorable Jerome H. Powell and S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, 10:00AM, 538 Dirksen Senate Office Building

Wednesday, December 6

House Financial Services Subcommittee on Housing and Insurance, Hearing entitled “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform, Part IV,” 10:00 AM in 2128 Rayburn HOB

Thursday, December 7

House Financial Services Subcommittee on Oversight and Investigations, Hearing entitled “Examining the Office of Financial Research,” 10:00 AM in 2128 Rayburn HOB

House Financial Services Subcommittee on Financial Institutions and Consumer Credit, Hearing entitled “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part II,” 2:00 PM in 2128 Rayburn HOB

THE REGULATORS

Commodity Futures Trading Commission Approves Bitcoin Futures: On December 1, the Chicago Mercantile Exchange Inc. (CME) and the CBOE Futures Exchange (CFE) self-certified new contracts for bitcoin futures products, and the Cantor Exchange (Cantor) self-certified a new contract for bitcoin binary options. “Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” said CFTC Chairman J. Christopher Giancarlo. “As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets. In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin."

Securities and Exchange Commission (SEC) Official Says Additional ICO Enforcement Actions Likely: Speaking at a small business capital formation forum, Division of Corporation Finance Director William Hinman said that the agency is expecting to take additional enforcement actions regarding initial coin offerings. Hinman said "I think you will see more of our guidance through the enforcement actions we expect to bring."

Department of Labor Delays Part of Fiduciary Duty Rule: The Department of Labor announced last week that it is delaying until July 1, 2019 a part of the fiduciary duty rule known as the "best interest contract exemption." The provision was set to go into effect on January 1, 2018.

Federal Reserve Governor Randal Quarles Expresses Concern over Cryptocurrency: Speaking at a Fintech conference sponsored by the Federal Reserve Bank of Cleveland, Federal Reserve Governor Randal Quarles said that digital currencies such as bitcoin may not be secure enough for widespread public use. According to Quarles, "while these digital currencies may not pose major concerns at their current levels of use, more serious financial-stability issues may result if they achieve wide-scale usage."

Speaking at a different event at the Treasury Department, Quarles downplayed the prospect that central banks should issue their own digital currencies. He said that he is "particularly concerned that a central-bank-issued digital currency that's held widely around the globe could be the subject of serious cyberattacks and could be widely used in money laundering and terrorist financing."

Federal Reserve Chair Janet Yellen Testifies Before Joint Economic Committee: Janet Yellen testified before Congress' Joint Economic Committee on November 29. Among her comments was the statement that the U.S.'s rising debt "should keep people awake at night." She also said that the Fed remains committed to easing regulatory burdens on community banks. Speaking on Senate Banking Committee bill S. 2155, Yellen said that the proposal, which would roll back financial regulations, grants the central bank enough flexibility to tailor its industry oversight.

SEC Ratifies Appointment of Administrative Law Judges: The Securities and Exchange Commission today announced that it has ratified its prior appointment of Chief Administrative Law Judge Brenda Murray and Administrative Law Judges Carol Fox Foelak, Cameron Elliot, James E. Grimes, and Jason S. Patil. By ratifying the appointment of its ALJs, the Commission has resolved any concerns that administrative proceedings presided over by its ALJs violate the Appointments Clause.

Treasury Targets Colombian Cocaine Trafficking Network: On November 29, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Colombian national Tito Aldemar Ruano Yandun (Ruano Yandun) and the Ruano Yandun Drug Trafficking Organization as Specially Designated Narcotics Traffickers (SDNTs) pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act) for playing a significant role in international narcotics trafficking. OFAC also designated Colombian national Onofre Junior Aguiño Arboleda for acting for or on behalf of Ruano Yandun. As a result of the action, all assets of those designated that are under U.S. jurisdiction are frozen, and U.S. persons are generally prohibited from engaging in transactions with them.

COMINGS AND GOINGS AT THE AGENCIES

Joseph Otting Sworn in as Comptroller of Currency: Joseph Otting was sworn in last week as Comptroller of the Currency, replacing acting Comptroller Keith Noreika.

President Trump Names Marvin Goodfriend to Serve as Fed Governor: President Trump has named Marvin Goodfriend to serve as a Federal Reserve Governor. Goodfriend is currently a professor at Carnegie Mellon University.

President Trump Nominates Federal Deposit Insurance Corporation Chair: President Trump has nominated Jelena McWilliams to serve as the next Chair of the FDIC. McWilliams is currently Chief Legal Officer at Fifth Third Bank.

President Trump to Nominate Thomas Workman to Financial Stability Oversight Council: President Trump will nominate former insurance trade group executive Thomas Workman to serve on FSOC as the independent insurance expert. The position is currently held by Roy Woodall, whose term expired in September.

President Donald Trump Names Brian Johnson to CFPB: President Trump appointed Brian Johnson, a Senior Counsel for the House Financial Services Committee, to a high-level position at the CFPB. Johnson will report to Acting CFPB Director Mick Mulvaney.

Chief Accountant to Leave SEC: The Securities and Exchange Commission announced on November 30 that Mark Kronforst, Chief Accountant of the SEC’s Division of Corporation Finance, plans to leave the SEC in early January after 13 years of public service with the investor protection agency.