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Money Matters: This Week in Washington

This Week in Washington for February 25, 2019

March 01, 2019

By Dina Ellis


North Carolina’s 9th Congressional District is headed for a special election after the state board of elections voted unanimously to call a new race following a multi-day hearing last week. The seat has remained open since the 2018 midterms, after the board was unable to certify a winner amidst allegations of election fraud involving absentee ballots.

On Tuesday, House Oversight Committee Chairman Elijah Cummings (D-MD) announced the Committee was launching an investigation into the administration’s dealings with Saudi Arabia. The announcement follows a report based on whistleblower accounts that senior officials had advocated for the sale of nuclear technology to the Saudis despite warnings from national security and ethics officials.

Despite rampant speculation that special counsel Robert Mueller’s investigation could be drawing to a close, and his report forthcoming, a Justice Department official confirmed the report would not be delivered this week. Rep. Adam Schiff (D-CA) who chairs the House Intelligence Committee said that the Committee was prepared to subpoena the report if necessary.

Over the weekend, Special Counsel Robert Mueller’s sentencing memorandum for Paul Manafort in his DC proceedings was released in redacted form, in which he described Mr. Manafort’s pattern of “repeatedly and brazenly” violating the law. While making no specific recommendation, it noted the sentence should “take into account the gravity of” his conduct.

Other highlights of last week include:

  • On Sunday, President Trump announced that he would delay the March 1 deadline for trade talks with China, citing “substantial progress” in ongoing negotiations.

  • Speaker Nancy Pelosi announced plans for a vote Tuesday on legislation to block President Trump’s national emergency declaration. While it is expected to easily pass the House, it may face tougher odds in the Senate.

  • President Trump announced the nomination of current Ambassador to Canada, Kelly Knight Craft, to serve as UN Ambassador after Heather Nauert withdrew from consideration.

  • On Tuesday, Senator Bernie Sanders officially launched his 2020 campaign for the presidency.

  • A federal judge granted Michael Cohen’s request to delay his report date for his prison sentence by 60 days. Mr. Cohen had requested the additional time to recover from a recent surgery, as well as to allow for his upcoming congressional testimony.


No hearings held.


Credit Reporting Overhaul: Rep. Maxine Waters (D-CA) released a discussion draft of the “Comprehensive Consumer Credit Reporting Reform Act of 2019” that would provide consumers greater say in disputing credit report information as well as restricting the use of credit reports in employment decisions.


Tuesday, February 26

House Financial Services Committee hearing entitled “

”: 10:00 AM in 2128 Rayburn House Office Building. Including testimony from Paul Hastings partner Tom Brown.

Senate Banking Committee “

”: 9:30 AM in 106 Dirksen Senate Office Building.

Senate Banking Committee hearing entitled “

”: 10:00 AM in 106 Dirksen Senate Office Building.

Wednesday, February 27

House Financial Services Committee hearing entitled “

”: 10:00 AM in 2128 Rayburn House Office Building.

House Financial Services Committee hearing entitled (Subcommittee on Diversity and Inclusion) “

”: 2:00 PM in 2128 Rayburn House Office Building.

Thursday, February 28

Senate Banking Committee hearing entitled “

”: 10:00 AM in 538 Dirksen Senate Office Building.


CFTC Commissioners Submit Comment on Proposed Rule: On Tuesday, CFTC Commissioners Brian Quintenz, Rostin Behnam, and Dan Berkovitz submitted a comment on the notice of proposed rulemaking issued by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation to implement a new approach for calculating the exposure amount of derivatives contracts under the agencies’ regulatory capital rules. They were joined by Chairman Christopher Giancarlo.

SEC Proposes to Expand “Test-the-Waters” Modernization Reform to All Issuers: On Tuesday, the SEC voted to propose an expansion of a popular modernization reform that would permit investor views about potential offerings to be taken into account at an earlier stage in the process than is the case today. The new rule and related amendments would expand the “test-the-waters” accommodation—currently available to emerging growth companies or “EGCs”—to all issuers, including investment company issuers. This proposal would allow all prospective issuers, not just EGCs, to gauge market interest in a possible initial public offering or other proposed registered securities offering by permitting discussions with certain investors prior to the filing of a registration statement.

HUD to Reduce Advance Notice of Inspections at Public Housing Facilities: In a notice published on Wednesday, HUD announced that the agency would reduce the advance notice given to public housing facilities before inspections to 14 days from the current policy, which “can frequently extend up to four months.” Secretary Ben Carson said in a statement that, “It's become painfully clear to us that too many public housing authorities and private landlords whom we contract with were using the weeks before their inspection to make quick fixes, essentially gaming the system.”

FHA Expands Pilot Program to Accelerate Financing of Low-Income Housing Tax Credit Projects: On Thursday HUD Secretary Ben Carson announced a significant expansion of a Federal Housing Administration (FHA) pilot program that streamlines FHA mortgage insurance applications for affordable housing developments that have equity from the sale of Low-Income Housing Tax Credit (LIHTC) Program, the nation's primary source of affordable housing production.

FDIC Encourages Consumers to Set Financial Goals During “America Saves Week”: The FDIC announced America Saves Week, a nationwide campaign the runs between February 25 and March 2, 2019, and encouraged consumers to use America Saves Week as an opportunity to evaluate their short- and long-term financial goals and learn more about how banks can help achieve them. “During America Saves Week, the FDIC encourages consumers to expand their financial knowledge, set clear savings goals and strong savings habits, and learn how to better manage their money,” said FDIC Chairman Jelena McWilliams.

FDIC Chair Discusses Potential Proposal to Ease Backup Capital Requirements: On Thursday, FDIC Chairwoman Jelena McWilliams discussed potentially reissuing a proposal, which would ease the backup capital requirement for large financial institutions, saying “I would want to have my mark on the rule.” However, she acknowledged that ideally the FDIC, Federal Reserve and OCC would act in concert, saying “my general approach to regulation is that the agencies should move together.”

Federal Reserve Releases Semiannual Report Highlighting Resilient System: On Friday, the Federal Reserve released its semiannual report which detailed its view that the financial system is “substantially more resilient” than before the 2008 crisis. Despite that assessment, the report also warned that “Debt owed by businesses is high, and credit standards, especially within segments of the loan market on low-rated or unrated firms, deteriorated in the second half of 2018.”

Quarles Says Fed Doesn’t Have Preference between Reserves and Treasuries for Liquidity Requirement:Speaking at a forum on Friday, Fed Vice Chairman of Supervision Randal Quarles said the bank doesn’t have a preference between reserves and Treasury bonds for banks to meet liquidity requirements, explaining “Occasionally we hear that banks feel they are under supervisory pressure to satisfy their [high-quality liquid assets] with reserves rather than Treasury securities…. that's not the case… I don't think we should have an official preference for reserves.”

Company Settles Unregistered ICO Charges After Self-Reporting to SEC: On Wednesday, the SEC charged Gladius Network LLC with conducting an unregistered initial coin offering (ICO), which the company self-reported to the SEC. Gladius self-reported to the SEC’s Enforcement staff in the summer of 2018, expressed an interest in taking prompt remedial steps, and cooperated with the investigation. The SEC did not impose a penalty because the company self-reported the conduct, agreed to compensate investors, and will register the tokens as a class of securities. The case follows the Commission’s two recent ICO registration cases, in which companies agreed to pay penalties for similar registration violations and agreed to similar undertakings. “The SEC has been clear that companies must comply with the securities laws when issuing digital tokens that are securities,” said Robert A. Cohen, Chief of the SEC’s Cyber Unit, adding this “case shows the benefit of self-reporting and taking proactive steps to remediate unregistered offerings.”


CFTC Announces New Deputy Director of the Market Intelligence Branch: On Tuesday, the CFTC’s Division of Market Oversight announced today that Mel Gunewardena has been named Deputy Director of the Market Intelligence Branch and CFTC’s Chief Market Intelligence Officer.

SEC Names James P. McNamara as Chief Human Capital Officer: On Thursday, the SEC announced that James P. McNamara had been named the agency’s Chief Human Capital Officer (CHCO) and Director of the Office of Human Resources (OHR). Mr. McNamara has served as Acting CHCO since April 2018.


OCC Fights Discovery in Court: On Tuesday, the OCC argued in DC District Court that preliminary discovery was not warranted in a challenge to their special purpose charter proposal brought by the Conference of State Bank Supervisor. The agency told the court that, “knowing that discussion materials — however informal — reflecting an entity’s potential business plans may be made available to the state regulators that make up CSBS and who view the SPNB charter as a threat to their own jurisdiction and initiatives in the fintech area would intimidate anyone seeking to open a discussion with the OCC.”


Wyoming Passes Two Blockchain Bills: On Tuesday, the Wyoming state legislature passed House Bill 185, which authorizes “corporations to issue certificate tokens in lieu of stock certificates” and House Bill 74, which will “create special purpose depository institutions to serve businesses.”

Trade Associations Criticize State Efforts to Implement Fiduciary Rules: Three insurance trade associations published a joint statement criticizing state efforts to implement fiduciary rule regulations, saying that “Adoption of fiduciary standards — and differing standards from state to state—will cause adverse consequences for consumers,” adding that “It will also result in a patchwork quilt of state and federal laws and regulations that will spread uneven protections across the country and across the retirement plan marketplace, jeopardizing savers' ability to obtain long-term financial peace of mind.”

Rep. Waters Pens Open Letter to Employees of the CFPB: Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, sent a letter to the employees of the CFPB, saying that “actions to weaken the Consumer Bureau from within as Director Mulvaney attempted to do will not go unchecked or unnoticed” and praised their work as “a vital public service,” in addition to encouraging employees to contact her and her staff if they witness “waste, fraud, abuse or gross mismanagement.”

California State Assembly Introduces Bill to Close Data Privacy Breach Loophole: On Thursday, the California state assembly introduced a bill that would require businesses to disclose to consumers when various personal identifies such as passport numbers and biometric information such as fingerprints or retina scans have been the subject of a breach. Existing law only covers categories such as social security numbers, driver’s license information, credit card numbers, and medical insurance information. “We hope the message to companies is to use every tool at your disposal to protect this very precious information,” said California Attorney General Xavier Becerra.

New York Department of Financial Services Issues Alert on Universal Life Insurance Policies: On Thursday, the NYDFS issued a consumer alert warning New Yorkers to exercise caution if they own or are thinking about buying universal life insurance policies. It explained that it had received a higher than average number of consumer complaints about these policies, and that many consumer groups and media organizations had also reported consumer issues with universal life insurance. Ahead of next year’s implementation of DFS’s “best interest” standard regulation for life insurance products, Acting Superintendent Lacewell urged all New Yorkers to carefully review their policies.

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