This Week in Washington for March 5, 2018
By Dina Ellis
THE BIG PICTURE
On Monday the Supreme Court declined to hear the Trump administration’s challenge to a California district court judge’s injunction on the winding down of DACA protections, insisting the case proceed through the normal channels. The administration, in an unusual move, had sought to expedite its appeal by skipping over the federal appeals court. The case will likely end up back before the Supreme Court next term, if the administration, as many expect, does not prevail in its appeals in the 2nd and 9th circuits. The move also lessens the immediate pressure on lawmakers to find a permanent legislative solution for the DREAMers, by further pushing back the date on which protections could end.
During a televised meeting with a bipartisan group of lawmakers on Wednesday, the President surprised many Republicans by seeming to embrace comprehensive gun control measures. He raised eyebrows when he stated his opinion that law enforcement officers should be given the power to seize weapons from the mentally ill, saying “Take the guns first, go through due process second.” However this stance was quickly walked back by aides, and following an oval office meeting with NRA lobbyists, the President seemed to again shift his view, tweeting that it had been a “Good (Great) meeting.”
Revisiting a public feud that has simmered since his recusal, President Trump lashed out at Attorney General Jeff Sessions on Twitter Wednesday, calling him “DISGRACEFUL!” following Mr. Sessions’ decision to have the DOJ Inspector General investigate the FBI’s surveillance of former campaign adviser Carter Page. Mr. Sessions responded in a statement saying that he would “continue to discharge my duties with integrity and honor, and this Department will continue to do its work in a fair and impartial manner according to the law and Constitution.”
The President’s son-in-law and adviser Jared Kushner has lost his Top Secret level security clearance following John Kelly’s crackdown on interim clearances. While his attorney Abbe Lowell said in a statement that the change would “not affect Mr. Kushner’s ability to continue to do the very important work he has been assigned by the President,” it remains to be seen how this will work in practice. It was a difficult week for Mr. Kushner, as in addition to his clearance downgrade, it was also reported that he is under scrutiny for his business deals and foreign contacts.
On Thursday, the President shocked Washington by announcing his intention to enact tariffs on steel and aluminum imports to the tune of 25% and 10% respectively. The announcement sparked fears of an impending trade war, sending stocks plunging and causing speculation that Gary Cohn, Trump’s top economic advisor and the head of the National Economic Council, might soon be looking for the exit door.
Other highlights of last week include:
White House Communications Director and one of President Trump’s most trusted aides Hope Hicks, announced her resignation on Wednesday, just a day following her interview with the House Intelligence Committee as part of their Russia investigation.
Brad Parscale, who headed the digital operations in Trump’s 2016 campaign, has been named as President Trump’s campaign manager for his 2020 re-election bid. It was revealed this week that Trump filed paperwork for his re-election on inauguration day.
Sen. Bob Corker (R-TN) has officially decided against running for another term, after having been reported to be wavering in recent days from his retirement decision announced last fall.
On Tuesday, primaries were held in the race to replace Rep. Trent Franks in Arizona’s 8th District. Rep. Franks resigned last December following allegations of sexual misconduct. Former Arizona state Senator Debbie Lasko won the Republican primary, and will face former E.R. doctor Hiral Tipirneni who won the Democratic primary, in the special general election to be held on April 24.
U.S. District Court Judge Amy Berman Jackson has scheduled a September 17 trial date in D.C. for Paul Manafort, setting up a potential PR nightmare as Republicans attempt to maintain their majorities in Congress during the midterm elections. Mr. Manafort also faces a separate, yet to be scheduled, trial in Alexandria, Virginia on a separate indictment.
Senate Sergeant-at-Arms Frank Larkin announced his retirement on Monday. He has served as chief law enforcement and executive officer of the Senate since he was sworn in on January 6, 2015. In his role he enforced rules of the Senate; provided a range of technical and administrative services to Senators in their Washington D.C., and state offices, and also maintained security in the Capitol and Senate office buildings.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
- The Honorable Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System
SENATE BANKING COMMITTEE
- The Honorable Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System
ON THE FLOOR
House Passes Bill to Ease Capital Requirements for Large Banks: On February 27, the House passed H.R. 4296, a bill sponsored by Rep. Blaine Luetkemeyer (R-MO) by a vote of 245-169. The bill would place requirements on operational risk capital requirements for banking organizations established by an appropriate Federal banking agency. The bill could potentially be rolled into separate Senate legislation which seeks to ease banking regulatory requirements.
LEGISLATION INTRODUCED AND PROPOSED
Sen. Elizabeth Warren (D-MA) Promises Bill on Puerto Rico Debt Relief: On Thursday, Sen. Warren told reporters that she planned to introduce a bill designed to provide debt relief for Puerto Rico. Sen. Warren declined to elaborate on the specifics, saying only “We're still negotiating that bill with other senators because I want to get as many co-sponsors as I can on it, but it's coming.”
THIS WEEK ON THE HILL
Senate Poised to Advance Bank Regulation Rollback Bill: Senate Majority Leader Mitch McConnell (R-KY) is likely to advance for debate S. 2155 (Sen. Mike Crapo (R-ID)), a bank regulation relief bill that has 13 Democratic and Independent co-sponsors. The bill would rollback many Dodd-Frank regulatory requirements on small and medium size banks. Senate Minority Leader Chuck Schumer (D-NY) has already announced his opposition to the bill, joining progressives Sen. Elizabeth Warren (D-MA) and Sen. Sherrod Brown (D-OH).
House Committee on Appropriations Subcommittee on Financial Services and General Government, hearing entitled
House Financial Services Committee, hearing entitled
House Financial Services Subcommittee on Housing and Insurance, hearing entitled
House Financial Services Subcommittee on Financial Institutions and Consumer Credit, hearing entitled
House Committee on Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies, hearing entitled
Joint Economic Committee, hearing entitled
SEC Announces Agenda for March 8 Investor Advisory Committee Meeting: On Tuesday, the Securities and Exchange Commission announced the agenda for its Investor Advisory Committee meeting. In addition to welcoming new members Jennifer Marietta-Westberg, Senior Economist at Cornerstone Research, and Heidi Stam, a former Managing Director and General Counsel (Retired) at Vanguard, the Committee will hold two panel discussions with outside speakers: a morning session on regulatory approaches to combat retail investor fraud, and an afternoon session on efforts to prevent the financial exploitation of vulnerable adults. In addition, the committee will discuss two other topics: dual-class share structures, and financial support for law school clinics that support investors.
SEC Cracks Down on Suspected Fraudulent ICOs: The SEC is said to have issued about 80 subpoenas to firms suspected of violating securities laws as part of a widening investigation into initial coin offerings. Concerns exist that some ICOs are raising money for non-existent businesses.
Senators Seek Information on Sexual Harassment from SEC and FINRA: Three Senators, Elizabeth Warren (D-MA), Dianne Feinstein (D-CA) and Catherine Cortez Masto (D-NV), have sent letters requesting information from the SEC and FINRA on efforts to prevent workplace harassment, promote diversity and inclusion within workplaces, the prevalence of sexual harassment in the financial sector, and efforts to collect data about harassment.
Treasury Sanctions International Network Smuggling Oil from Libya to Europe: On Monday, the U.S. Department of the Treasury’s Office of Foreign Assets Control sanctioned six individuals, 24 entities, and seven vessels pursuant to Executive Order 13726 for threatening the peace, security, or stability of Libya through the illicit production, refining, brokering, sale, purchase, or export of Libyan oil, or for being owned or controlled by designated persons. Oil smuggling undermines Libya’s sovereignty, fuels the black market and contributes to further instability in the region while robbing the population of resources that are rightly theirs.
Treasury Participates in Interagency Meeting with Puerto Rico’s Financial Oversight and Management Board: Officials from Treasury, OMB, NEC, FEMA, the Department of Commerce, the Department of Energy, the Department of Housing and Urban Development, and the Department of Justice met with the Puerto Rico Financial Oversight and Management Board and members of its senior staff for an information sharing session. FEMA and Treasury officials discussed the terms and conditions under which the Federal Government will offer Community Disaster Loans (CDLs) to the Commonwealth of Puerto Rico, including important steps that will be taken to protect federal taxpayer investments while ensuring funding is available quickly when needed. Treasury and FEMA are putting in place loan documentation for the Commonwealth to access funding quickly in the event its cash balance declines below $800 million. CDL financing will be structured through direct lending to the Commonwealth, which could then on-lend to its public corporations, including the Puerto Rico Electric Power Authority (PREPA).
Treasury, IRS Issue Guidance on Plans to Kill the Carried Interest Loophole: The U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued clarifying guidance on March 1 to taxpayers on how it will implement the carried interest provisions under the Tax Cuts and Jobs Act. The guidance informed taxpayers that regulations will be issued that will not allow them to avoid the three year holding period by using a pass through entity (“S” corporation). During his testimony at a Senate Finance Committee in February, Treasury Secretary Steven Mnuchin indicated that closing this loophole was “something we believe we have the authority to do under the existing code, which left certain discretion to the secretary and the IRS.”
Federal Reserve Vice Chairman Discusses Tax Cuts: In a speech at the National Association for Business Economics on Monday, Vice Chairman Randal Quarles discussed his expectation that the newly enacted tax cuts would boost productivity, saying “The impetus from fiscal policy has turned distinctly positive with the passage of recent tax and budget legislation. Fiscal policy is likely to impart considerable momentum to growth over the next couple of years not only by increasing demand, but also by boosting, to some degree, the potential capacity of the economy.”
CFPB Issues Request for Information on Consumer Complaint Reporting: On Thursday, the CFPB issued a Request for Information about the Bureau’s public reporting of consumer complaints. The Bureau is seeking comments and information from interested parties on the usefulness of complaint reporting and analysis, as well as specific suggestions or best practices for complaint reporting. This is the sixth in a series of RFIs announced as part of Acting Director Mick Mulvaney’s call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.
CFPB Acting Director Mulvaney Stresses New “Mild but Certain” Approach: Speaking at the Credit Union National Association Governmental Affairs Conference on Tuesday, Acting Director Mulvaney pledged to continue protecting consumers, but noted they would not be “pushing the envelope” on enforcement. He added “We're still going to be regulating. We're still going to try to protect consumers. We're simply going to do it differently.”
Republican Senators and Congressional Representatives File Amicus Brief to Support CFBP Acting Director Mick Mulvaney: On Friday, 38 Senators and 75 Representatives, led by Senate Banking Committee Chairman Mike Crapo (R-ID) and House Financial Services Committee Chairman Jeb Hensarling (R-TX), filed an amicus brief in support of Acting Director Mulvaney and the President’s authority to designate an Acting Director of the Consumer Financial Protection Bureau under the Federal Vacancies Reform Act.
COMINGS AND GOINGS AT THE AGENCIES
Russell Vought Confirmed as Deputy Budget Director: On Wednesday the Senate, in a 50-49 party line vote that required Vice President Mike Pence to cast the tie breaking vote, confirmed Russell Vought to serve as deputy director of the Office of Management and Budget. Mr. Vought has previously worked for Heritage Action for America, as a policy director for the House Republican Conference and as the executive director of the Republican Study Committee. The nomination had been pending for months following Mr. Vought’s controversial comments about Islam.
White House to Nominate Richard Clarida for Fed Vice Chairman Post: President Trump is rumored to be considering Richard Clarida, a Columbia University economist and managing director at Pacific Investment Management Co., to become vice chairman of the Federal Reserve Board.
OTHER NOTEWORTHY ITEMS
Equifax Identifies 2.4 Additional Data Breach Victims: On Thursday, Equifax announced that it had identified 2.4 additional Americans who were affected by the unprecedented data breach disclosed last year. These victims were not included in the prior disclosures as only their names and partial driver’s license information were exposed, not their social security numbers, which had been the focus of earlier analysis. The total number of individuals affected by the breach now stands at nearly 147.9 million consumers.
Supreme Court Limits Chapter 11 Safe Harbor Provision: On Tuesday, the Supreme Court resolved a split between the 2nd, 3rd, 6th, 7th, 8th and 10th circuits, siding with the 7th circuit’s interpretation of Section 546(e) of the Bankruptcy Code, saying in an opinion “The court concludes that the plain meaning of Section 546(e) dictates that the only relevant transfer for purposes of the safe harbor is the transfer that the trustee seeks to avoid.”