Money Matters: This Week in Washington
This Week in Washington for July 6, 2020
By Dina Ellis
THE BIG PICTURE
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Coronavirus cases in the United States approached three million as the death toll reached 130,000 last week. A surge in infections across the South and West, particularly in Florida, Texas, Arizona, and California, led local public health officials to sound the alarm as they struggle to contain the spread. The wearing of masks, viewed by infectious disease experts as an important mitigation tool, has become a partisan flashpoint in many communities. Political leaders sought to combat that perception, with Senate Majority Leader Mitch McConnell saying there should be “no stigma” in wearing masks, and Surgeon General Jerome Adams describing them as “an instrument for freedom” and necessary for our return to normalcy. The continued spread led the European Union to restrict non-essential travel by Americans until authorities have better controlled the virus.
The virus continues to impact the trajectory of the presidential campaign, as both Republicans and Democrats attempt to adapt. After facing blowback for holding an indoor rally in Tulsa, Oklahoma, the President announced he would hold an outdoor rally in New Hampshire this week where face masks would be encouraged. The RNC’s plan to hold portions of its nominating convention in Florida next month could be waylaid by the recent spike in infections in the state.
Consensus is building around the need for an additional aid package, and Senate Majority Leader Mitch McConnell has signaled he plans to focus on the issue after the two-week long July 4th recess. The expiration of enhanced unemployment benefits at the end of July is among several looming deadlines facing Congress. On Thursday, Treasury Secretary Steven Mnuchin indicated the administration was seriously considering additional direct payments to citizens in order to help support the economy alongside aid for state and local governments.
Other highlights of last week include:
The House passed a massive US$1.5T infrastructure package by a vote of 233-188. The bill has little chance of passage in the Senate, but details Democratic priorities on climate change, broadband access, drinking water, the energy grid, and vehicle safety.
As states begin to reopen and furloughed workers are recalled, the unemployment rate has fallen to 11.1%. Despite this progress, an additional 1.4 million Americans filed for unemployment benefits last week.
Mississippi Governor Tate Reeves signed a bill on Tuesday that would retire the state flag, which features the Confederate battle flag, calling the moment “solemn” and an “occasion to lead our Mississippi family to come together, to be reconciled, and to move on.”
The Supreme Court has agreed to hear the dispute over House Democrats’ efforts to obtain grand jury materials from Special Counsel Robert Mueller’s Russia investigation, which DOJ has sought to block.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “
Steven Mnuchin, Secretary, U.S. Department of the Treasury
Jerome Powell, Chair, Board of Governors of the Federal Reserve System
SENATE BANKING COMMITTEE
Hearing on “
Christopher Giancarlo, Senior Counsel, Willkie Farr & Gallagher LLP and former Chairman, U.S. Commodity Futures Trading Commission
Charles Cascarilla, Chief Executive Officer and Co-Founder, Paxos
Professor Nakita Cuttino, Visiting Assistant Professor of Law, Duke University School of Law
ON THE FLOOR
House Passes Measure Intended to Protect Credit Scores: On Monday, the House voted 234-179 to pass H.R. 5332, the Protecting Your Credit Score Act, which would direct the three credit reporting agencies to create a new one-stop-shop online portal for American consumers to protect and strengthen their credit as well was raise cybersecurity standards. The measure was sponsored by Rep. Josh Gottheimer (D-NJ) and Rep. Tom Reed (R-NY) who co-chair the Problem Solvers Caucus.
House Passes Emergency Housing Protections Bill: On Tuesday, the House voted 232-180 to pass H.R. 7301, the Emergency Housing Protections and Relief Act of 2020. The measure, first introduced by Rep. Maxine Waters (D-CA) would prevent evictions, foreclosures, and unsafe housing conditions resulting from the COVID-19 pandemic.
House and Senate Pass Extension of Small-Business Loan Program: The Senate passed S. 4116, first introduced Sen. Ben Cardin (D-MD), by unanimous consent on Tuesday with the House following suit on Wednesday. The measure would extend the deadline for businesses to apply for Paycheck Protection Program funds from June 30 to August 8. Roughly US$130B in funds remain available through the program.
House and Senate Pass Hong Kong Sanctions Bill: On Wednesday, the House approved the Hong Kong Autonomy Act by unanimous consent, with the Senate following suit on Thursday. The measure was sponsored by Senators Pat Toomey (R-PA) and Chris Van Hollen (D-MD) who celebrated its passage, saying, “America must stand with the people of Hong Kong. Tens of thousands of Hongkongers are in the streets protesting and refusing to surrender their basic rights to the Chinese Communist Party. . . . Our bipartisan Hong Kong Autonomy Act will punish those responsible for these crackdowns and other CCP aggression with strong sanctions.”
LEGISLATION INTRODUCED AND PROPOSED
**H.R. 7402: Rep. Chuy Garcia (D-IL) introduced H.R. 7402, which would provide a temporary moratorium on eviction filings.
H.R. 7408: Rep. Michael McCaul (R-TX) introduced H.R. 7408, which would abolish the United States and Foreign Commercial Service.
H.R. 7412: Rep. Mike Thompson (D-CA) introduced H.R. 7412, which would establish a temporary voluntary program for support of insurers providing business interruption insurance coverage during the COVID-19 pandemic.
H.R. 7422: Rep. Tulsi Gabbard (D-HI) introduced H.R. 7422, which would require the Federal financial regulators to issue guidance to encourage depository institutions to establish programs to educate customers at risk of unwittingly becoming money mules.
S. 4098: Sen. Robert Menendez (D-NJ) and Sherrod Brown (D-OH) introduced S. 4098, the Coronavirus Housing Counseling Improvement Act, which would expand access to critical information, assistance programs, and services for millions of families struggling to remain in their homes because of the COVID-19 pandemic and economic fallout.
S. 4104: Sen. Rand Paul (R-KY) introduced S. 4104, the Stopping Improper Payments to Deceased People Act, which would amend the Improper Payments Elimination and Recovery Improvement Act of 2012, including making changes to the Do Not Pay Initiative, for improved detection, prevention, and recovery of improper payments to deceased individuals.
S. 4143: Senators Chuck Schumer (D-NY) and Ron Wyden (D-OR) introduced S. 4143, which would extend the unemployment insurance provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act for the duration of the economic recovery.
Protecting Renters from Evictions and Fees Act of 2020: Sen. Elizabeth Warren (D-MA) and Representatives Chuy García (D-IL) and Barbara Lee (D-CA) introduced the Protecting Renters from Evictions and Fees Act of 2020. The measure would extend the federal eviction moratorium to March 27, 2021, one year after the date of enactment of the CARES Act, and expand the moratorium to cover substantially all renters. The bill would also prohibit fees, fines, and extra charges due to nonpayment of rent.
Assisted Living Facility Coronavirus Reporting Act: Senators Elizabeth Warren (D-MA) and Edward Markey (D-MA) introduced the Assisted Living Facility Coronavirus Reporting Act, which would put in place national data collection and reporting requirements to ensure that assisted living facilities adequately protect residents from COVID-19.
THIS WEEK ON THE HILL
Both chambers of Congress have departed for a two-week July Fourth recess.
Tuesday, July 7
House Financial Services Committee (Hearing on Subcommittee on National Security, International Development, and Monetary Policy) “
Wednesday, July 8
House Financial Services Committing (Task Force on Artificial Intelligence) Hearing on “
Thursday, July 9
House Financial Services Committee Hearing on “
Federal Reserve Board Releases New Term Sheet for the Primary Market Corporate Credit Facility: On Monday, the Federal Reserve Board released a new term sheet for the Primary Market Corporate Credit Facility, adding pricing and other information. As detailed in an FAQ, pricing will be issuer-specific and informed by market conditions. Prices will also be subject to minimum and maximum spreads over comparable maturity Treasury securities.
Federal Reserve Board Seeks Individuals to Serve on Insurance Policy Advisory Committee: On Monday, the Federal Reserve Board announced that it is seeking individuals to serve on its Insurance Policy Advisory Committee, or IPAC, which was established by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Board seeks a diverse group with expertise in life, property and casualty, and reinsurance issues. In 2019, the Board selected 21 individuals, who are serving staggered terms of up to three years. This year, the Board will select seven individuals to serve a three-year term for newly vacant seats.
OCC Highlights Key Risks for Federal Banking System: On Monday, the OCC conveyed the key issues facing the federal banking system and the effects of the COVID-19 pandemic on the federal banking industry in its Semiannual Risk Perspective for Spring 2020. The OCC reported weak financial performance and increasing credit, operational, and compliance risks among the key risk themes in the report.
Consumer Financial Protection Bureau Issues Proposed Rule on Escrow Exemptions for Certain High-Priced Mortgage Loans: On Thursday, the CFPB issued a notice of proposed rulemaking (NPRM) that would amend Regulation Z to provide a new exemption available to certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs). The proposed amendment generally would exempt from the Regulation Z HPML escrow requirement on any loan made by an insured depository institution or insured credit union and secured by a first lien on the principal dwelling of a consumer if (1) the institution has assets of US$10 billion or less; (2) the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and (3) certain other criteria are met.
CFPB, OCC Host Virtual Innovation Office Hours: On Thursday, the CFPB and OCC announced they will host joint, virtual Innovation Office Hours, July 29-30, as part of the American Consumer Financial Innovation Network (ACFIN). Participants will have the opportunity to discuss issues that touch upon both consumer protection and prudential regulation. These one-on-one meetings with representatives from the OCC and CFPB Offices of Innovation will allow participants to discuss fintech, new products or services, partnering with a bank or fintech company, or other matters related to responsible innovation in financial services.
FHFA Provides Tenant Protections: On Monday, the FHFA announced that Fannie Mae and Freddie Mac (the Enterprises) are allowing servicers to extend forbearance agreements for multifamily property owners with existing forbearance agreements for up to three months, for a total forbearance of up to six months. While the properties are in forbearance, the landlord must suspend all evictions for renters unable to pay rent. The forbearance extension is available for qualified properties with an Enterprise-backed multifamily mortgage experiencing a financial hardship due to the coronavirus national emergency. “During the pandemic, FHFA has been focused on protecting renters and borrowers while ensuring the mortgage market functions as efficiently as possible," said Director Mark Calabria. “The multifamily mortgage forbearance extension announced today will help renters stay in their homes and help property owners retain their properties."
DOL Proposes Exemption to Improve Investment Advice for Workers and Retirees: On Monday, the Department of Labor announced that it is proposing a new exemption for investment advice fiduciaries. The proposed exemption offers a new prohibited transaction class exemption for investment advice fiduciaries and is based on an existing temporary policy adopted after the 5th Circuit Court of Appeals vacated the Department’s 2016 fiduciary rule package. The proposal would allow investment advice fiduciaries to give more choices for retirement using Impartial Conduct Standards. Impartial Conduct Standards are a best interest standard; a reasonable compensation standard; and a requirement to make no materially misleading statements.
FDIC Launches Competition to Modernize Bank Financial Reporting: On Tuesday, the FDIC announced the start of a rapid prototyping competition to help develop a new and innovative approach to financial reporting, particularly for community banks. Twenty technology firms from across the country have been invited to participate in the competition. The competitors will develop proposed solutions over the next several months that will be presented to the FDIC for consideration, similar to an extended version of a "tech sprint" or "hackathon." Competing firms represent leaders in the financial services, data management, data analytics, and AI/ML fields. These modern tools—and lessons learned in future competitions—will help make financial reporting seamless and less burdensome for banks, provide more timely and granular data to the FDIC on industry health, and promote more efficient supervision of individual banks.
FDIC Issues List of Banks Examined for CRA Compliance: On Thursday, the FDIC issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in April 2020.
CFTC’s Technology Advisory Committee to Meet on July 16: On Monday, the CFTC announced that its Technology Advisory Committee will hold a public meeting on Thursday, July 16, 2020 via teleconference. The TAC will hear presentations from the TAC subcommittees on Automated and Modern Trading Markets; Distributed Ledger Technology and Market Infrastructure; Virtual Currencies; and Cybersecurity.
COMINGS AND GOINGS
Eileen Murray Elected Chairperson of FINRA Board of Governors: On Tuesday, the FINRA Board of Governors unanimously elected Eileen Murray, former Co-CEO of Bridgewater Associates, LP, as Chairperson, effective at FINRA’s Annual Meeting in August.
Supreme Court Find’s CFPB’s Structure Violates Separation of Powers: On Monday, the Supreme Court released its decision in Seila Law LLC v Consumer Financial Protection Bureau, finding that “the structure of the CFPB violates the separation of powers,” adding that the “agency may . . . continue to operate, but its Director, in light of our decision, must be removable by the President at will.”
Second Circuit Rejects Challenge Seeking to Invalidate SEC’s Regulation Best Interest: On Monday, a three-judge panel found that the SEC had power under Dodd-Frank to promulgate its Regulation Best Interest. The rule had been challenged in two separate suits—in one for not doing enough to protect investors, and another as an example of the SEC overstepping its authority. The panel ruled that “although Regulation Best Interest may not be the policy that petitioners would have preferred, it is what the SEC chose after a reasoned and lawful rulemaking process.”
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.