Money Matters: This Week in Washington
This Week in Washington for July 31, 2017
By Dina Ellis and Casey Miller
THE BIG PICTURE
This was another roller coaster week by anyone’s judgment, ranging from passage of sanctions on Russia, Iran and North Korea to the dramatic middle of the night failure of the healthcare bill to intrigue at the White House. The House is now in recess for the next five weeks, but the Senate is staying in session for two more weeks to get nominees confirmed and to move on to tax reform.
President Trump Names New White House Chief of Staff: In a tweet on July 28, President Trump announced that he has appointed Homeland Security Secretary John Kelly as White House Chief of Staff, replacing Reince Priebus. “I am pleased to inform you that I have just named General/Secretary John F Kelly as White House Chief of Staff. He is a Great American....,” the tweet read.
Senate Fails to Repeal Obamacare: After a busy and tumultuous week, the Senate defeated three separate proposals to repeal Obamacare. Most dramatically, the Senate on July 28 voted down 49–51 a trimmed-back healthcare measure that Republicans hoped would pass. Senator John McCain (R-AZ) surprised many when he joined fellow Republicans Susan Collins (R-ME) and Lisa Murkowski (R-AK) to vote against the proposed legislation. The slimmed-down Obamacare repeal bill would have: repealed the Affordable Care Act’s (ACA) individual mandate; partially repealed the ACA’s employer mandate; defunded Planned Parenthood for one year, diverting the funding to community health centers; and cut down the ACA’s Prevention and Public Health Fund. The Senate on July 26 rejected a bill to repeal Obamacare without a replacement, and then rejected a smaller package rollback of Obamacare.
No Modifications to Transgender Policy, According to Joint Chiefs: In response to President Trump’s tweet that transgendered people would no longer be allowed to serve in the military, Marine General and Chairman of the Joint Chiefs Joe Dunford issued a statement that there will be “no modifications” to the military’s transgender policy, at least “until the President’s direction has been received by the Secretary of Defense and the Secretary has issued implementation guidance.”
Moreover, on July 26, the Department of Justice filed an amicus brief saying that Title VII of the Civil Rights Act does not cover employment discrimination based on sexual orientation.
Congress Passes Sanctions on Russia, Iran, and North Korea: Congress last week passed a sanctions package that combined Senate-passed Russia and Iran sanctions with a House-passed North Korea sanctions measure. The legislation received pushback from the Trump Administration because it allows Congress to block any attempt by the President to ease or end penalties against Russia. The legislation overwhelmingly passed the House by a vote of 419–3.
On a related note, the Treasury Department
ALSO LAST WEEK ON THE HILL
Senator Tim Scott (R-SC) Said He May Oppose Export-Import Bank Nominee Scott Garrett: Senator Tim Scott said on July 25 that unless former Rep. Scott Garrett gave a “clear, public statement that ensures he will not dismantle the bank,” Scott will oppose the nomination. Garrett’s nomination is controversial because while he was in Congress he was a leading opponent of the bank and protested the bank’s very existence.
HOUSE FINANCIAL SERVICES COMMITTEE
In response to a question from Chairman Hensarling, Secretary Mnuchin said that the $50B threshold in Dodd-Frank that subjects banks to stricter regulation should be raised to at least $250B. According to Mnuchin, “simple, uncomplex banks, the regulators should be able to exempt above [$250B or $300B]. That doesn’t mean that those banks shouldn’t be regulated. They will be regulated by the primary regulator, and they will be regulated properly.”
- H.R. 2864, the “Improving Access to Capital Act.” Sponsors: Reps. Kyrsten Sinema (D-AZ) and Trey Hollingsworth (R-IN). This bill would help small companies access capital and give investors greater investment opportunities. The legislation provides a useful tool for smaller reporting companies to raise capital from the public through a streamlined Securities and Exchange Commission review process.
- H.R. 1624, the “Municipal Finance Support Act of 2017.” Sponsor: Rep. Luke Messer (R-IN). The bill would require federal banking regulators to treat certain municipal securities held by financial institutions as high-quality liquid assets. This change will protect financial institution investment in local communities by including investment grade municipal bonds in bank liquidity buffers.
- H.R. 3110, the “Financial Stability Oversight Council Insurance Member Continuity Act.” Sponsors: Reps. Randy Hultgren (R-IL) and Maxine Waters (D-CA). The bill would permit the Financial Stability Oversight Council’s (FSOC) Independent Member with Insurance Expertise, after the expiration of his or her term, to serve on the FSOC until the earlier of 18 months after the date on which the term of service ends; or the date on which a successor to such member is appointed and confirmed.
- H.R. 3326, the “World Bank Accountability Act of 2017.” Sponsor: Rep. Andy Barr (R-KY). This legislation would withhold a portion of future appropriations for the World Bank until the Treasury Department reports that the World Bank has undertaken reforms to fight corruption, strengthen management accountability and undermine violent extremism.
The Latest on Flood Insurance: In a
The flood insurance reauthorization is must-pass legislation, as the program expires at the end of September. Congress is receiving increasing pressure to reauthorize the legislation from groups like the National Association of Insurance Commissioners.
SENATE BANKING COMMITTEE
OCC and Federal Reserve Governor Confirmation Hearings Held: The Committee conducted a hearing on the following nominations:
Mr.Joseph Otting, to be Comptroller, Office of the Comptroller of the Currency; and
- The Honorable Randal Quarles, to be a Member of the Board of Governors of the Federal Reserve System; Reappointment as a Member of the Board of Governors of the Federal Reserve System; and Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System.
Fed nominee Randal Quarles said that he does not advocate the adoption of the so-called Taylor Rule, which is a proposed guideline for how central banks should alter interest rates in response to changes in economic conditions. Quarles also advocated for increased transparency in annual stress testing.
Mr. J. Paul Compton, Jr., of Alabama, to be General Counsel, U.S. Department of Housing and Urban Development;
Ms. Anna M. Farias, of Texas, to be Assistant Secretary for Fair Housing and Equal Opportunity, U.S. Department of Housing and Urban Development;
Mr. Neal J. Rackleff, of Texas, to be Assistant Secretary for Community Planning and Development, U.S. Department of Housing and Urban Development;
Mr. Richard Ashooh, of New Hampshire, to be Assistant Secretary for Export Administration, U.S. Department of Commerce;
Ms. Elizabeth Erin Walsh, to be Assistant Secretary for Global Markets and Director General of the United States and Foreign Commercial Service, U.S. Department of Commerce; and
Mr. Christopher Campbell, of California, to be Assistant Secretary for Financial Institutions, U.S. Department of the Treasury.
LEGISLATION INTRODUCED OR PROPOSED
Requiring the waiver process to be conducted and voted on at the Commission level, rather than at the staff level;
Requiring the Commission to consider whether granting a waiver would be in the public interest, protect investors, and promote market integrity;
Requiring the Commission to publish notice and afford the public an opportunity to comment and present their views at a public hearing on whether a particular waiver should be granted or denied; and
Requiring SEC staff to keep complete, public records of all waiver requests (formal and informal) and create a public database of all disqualified bad actors.
SEC Chair Jay Clayton Speaks to Chamber of Commerce: SEC Chairman Jay Clayton addressed the U.S. Chamber of Commerce on July 26. He spoke about shareholder advocacy and said that he is not ready to take away shareholder rights to put issues on corporate ballots. According to Clayton, “we live in a democracy. We have a democratized public company system. That’s good.”
The Chamber of Commerce on July 25 released seven recommendations to the SEC on shareholder proposal reform:
Amend the Resubmission Rule to raise the thresholds for support that proposals must receive in order to be eligible for resubmission.
Withdraw Staff Legal Bulletin 14H (CF) to restore certainty under an exemption allowing exclusion of a proposal if it conflicts with one of the company’s own proposals.
Offer more transparency to investors by requiring proponents to provide sufficient disclosure regarding their economic interests and objectives.
Reassert the “relevance rule” by allowing excludability of a proposal if the subject matter impacts less than five percent of a company’s total assets and five percent of net earnings.
Prohibit the use of images, photos, or graphs as part of proposals, while maintaining the ability of proponents to include a hyperlink for a website they wish to include.
Provide market participants with more certainty regarding its policing of a provision dealing with proposals that relate to a redress of a personal claim or grievance.
Allow for the exclusion of proposals that include materially false or misleading statements.
Office of Comptroller of Currency Makes Move to Block New York Challenge to Fintech: the OCC on July 25 made an early move to block a court challenge to the OCC’s fintech charter efforts. On behalf of the agency, U.S. Attorney Joon H. Kim said the lawsuit filed by the New York Department of Financial Services challenging fintech charters is subject to dismissal on three grounds: lack of standing; that the OCC is shielded by the Supremacy Clause; and that OCC regulations allow chartering approvals even if chartered companies don’t take deposits.
NOMINATIONS, COMINGS AND GOINGS AT THE AGENCIES
OTHER NOTEWORTHY ITEMS
Varo Money Inc. Files Paperwork to Set up New Bank: San Francisco-based company Varo Money Inc. has applied to the Office of the Comptroller of the Currency for a U.S. national bank charter to form Varo Bank N.A., making it the first fintech startup to formally apply for a federal bank charter. Additionally, Varo has applied for deposit insurance from the Federal Deposit Insurance Corporation (FDIC). Co-Founder and CEO Colin Walsh said “we wanted to offer more than just checking, savings and lending products – we wanted to help our customers solve financial problems, fix the fundamentals, and guide them toward a better financial future.”
Paul Hastings’ Government Relations team is monitoring these issues. We help our clients craft strategies to address federal legislative and regulatory matters. Please reach out to us if your organization needs assistance with congressional or regulatory relations.