Money Matters: This Week in Washington

This Week in Washington for May 4, 2020

May 04, 2020

Dina Ellis


For the latest advice for businesses dealing with the coronavirus, be sure to check out Paul Hastings’ targeted alert series: https://www.paulhastings.com/coronavirus

Coronavirus cases in the United States passed the one million mark, with the death toll reaching 67,000. While the curve has flattened in some areas of the country, the infection rate continues to grow in others, presenting a challenge for leaders as many citizens grow weary of social distancing measures and protests continue to pop-up in several states. Officials have begun implementing targeted approaches to easing certain restrictions, including reopening some public spaces such as parks and beaches. Some states, such as Georgia, have lifted their shelter-in-place orders, despite health officials warning that it could lead to a second spike in infections. The capacity for states to rapidly expand testing and conduct contact tracing continues to be an impediment to lifting restrictions. In a rare piece of good news, the NIH reported that clinical trials of the experimental treatment remdesivir have shown promising preliminary results, shortening the duration of the illness in patients. Efforts at developing a vaccine continue at “warp speed” as the President works to fast-track development and trials.

The Small Business Administration began accepting additional Paycheck Protection Program applications on Monday. Its systems were quickly overloaded despite efforts at pacing after twice as many users attempted to access the system as during the first round. Guidance on the program continued to evolve over the course of the week, as the SBA announced a dedicated time slot for small lenders to submit applications, banned the use of robotic systems, established criteria for non-bank lenders, and capped at US$20M the amount corporate groups could receive. Treasury Secretary Steven Mnuchin said all loans over US$2M will be audited prior to being forgiven and warned there would be “criminal liability” for borrowers who falsely certified they needed the loan. Sen. Marco Rubio (R-FL) indicated that the names of all loan recipients would be publicized, as lawmakers ratchet up scrutiny of the program. The Justice Department has already begun an inquiry after red flags were raised regarding potential fraud among some of the businesses who received loans.

Congressional leaders and the administration are engaged in negotiations over the parameters of an additional relief package. Republicans insist on the inclusion of a broad liability shield for employers, calling it their “red line,” and warning that a failure to enact the provision would cause a “second pandemic” of opportunistic litigation. After initial reluctance, Senate Majority Leader Mitch McConnell conceded state and local funding, a key Democratic priority, would likely be included in the bill, as House Speaker Nancy Pelosi floated figure of US$1T for such aid. The President, who at times has questioned the need for state bailouts, suggested that federal aid be preconditioned on the end of sanctuary city policies.

Presumptive Democratic nominee Joe Biden addressed for the first time allegations of assault by a former staffer in an interview on Friday, emphatically denying the claims, saying it “never happened.” House Speaker Nancy Pelosi and Hillary Clinton both threw their support behind Biden last week, calling him a “voice of reason and resilience.”

Other highlights of last week include:

  • An additional 3.8 million workers applied for unemployment benefits last week, bringing the total in the last six weeks to over 30 million.

  • The President issued an executive order compelling meat processing plants to reopen under the Defense Protection Act, as part of an effort to maintain the nation’s food supply chain after widespread infection among workers had caused several to shutter.

  • New White House Press Secretary Kayleigh McEnany held the first “podium” press briefing in over a year, after the practice was abandoned under former Press Secretary Sarah Huckabee Sanders.


House Announces Democratic Members of the House Select Committee on the Coronavirus Crisis: House Speaker Nancy Pelosi announced she had named Rep. Jim Clyburn (D-SC) to lead the Committee and selected Maxine Waters (D-CA), Carolyn Malone (D-NY), Nydia Velázquez (D-NY), Jamie Raskin (D-MD), Bill Foster (D-IL), and Andy Kim (D-NJ) as the additional Democratic members. House Minority Leader Kevin McCarthy has not yet chosen any of the five Republican members.

Senators Urge Federal Reserve to Extend Emergency Capital to PPP Community Lenders: On Monday, a group of 7 Democratic Senators wrote to Federal Reserve Chairman Jerome Powell to highlight the need to open the Federal Reserve’s Paycheck Protection Program Liquidity Facility to nonbank community financial institutions, including all certified community development financial institutions (CDFIs). The Senators wrote, “We are concerned that the most at-risk businesses—smaller businesses, minority- and women-owned businesses, and businesses located in low-income communities—will not have access to the Small Business Administration’s Paycheck Protection Program loans.”

Senate Dems Urge the CFPB to Reinstate Vital HMDA Data Collection: On Wednesday, 19 Democratic Senators, including Sherrod Brown (D-OH), ranking member of the Banking Committee, sent a letter to CFPB Director Kathy Kraninger urging her to reverse her decisions to suspend the quarterly reporting of information under the Home Mortgage Disclosure Act (HMDA) during the COVID-19 pandemic and halt reporting of all HMDA data for lenders. The Senators argued that eliminating these reporting requirements could allow discrimination in mortgage lending to go unchecked during a time when consumers are particularly vulnerable. They wrote to Kraninger that the Bureau “should not use the current public health and economic crises as an opportunity to roll back critical protections for borrowers who may be at risk of discriminatory lending.”

Brown and Schatz Call on SBA to Prioritize Smaller PPP Loans: On Wednesday, Sen. Sherrod Brown (D-OH), ranking member of the Banking Committee and Sen. Brian Schatz (D-HI) called on Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza to prioritize smaller banks and smaller loans in the Paycheck Protection Program. “For small businesses and nonprofits, access to a PPP loan is a matter of survival, but many of them will be left with nothing because the SBA’s current process is not working,” adding that, “the problem is rooted in the SBA and Treasury’s approach to processing loan applications. This approach, which purports to be ‘first-come, first-served,’ is not at all transparent and does a poor job of effectuating Congress’s intentions.”

Brown Urges Administration to Prioritize American Manufacturers of Critical Personal Protection Equipment: On Friday, Sen. Sherrod Brown (D-OH), ranking member of the Banking Committee, sent a letter to Secretary Mnuchin calling for the Trump Administration to prioritize American manufacturers who produce Personal Protective Equipment (PPE) and medical supplies and equipment in CARES Act lending programs. Senator Brown in his letter made clear that American manufacturers and their workers are vital to the economy, our nation’s security, and our response to the current health crisis and will need the federal government to provide financial assistance and relief during and after the COVID-19 crisis.

Waters Calls for Administration to Put Small Business Owners Over Predatory Payday Lenders: On Friday, Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, sent a letter to Treasury Secretary Steven Mnuchin and Small Business Administrator Jovita Carranza, calling attention to the irreparable harm predatory payday lenders have caused America’s consumers and urging Administration officials to deny them access to Paycheck Protection Program (PPP) loans. Waters argued that given “the harm these institutions have inflicted on consumers, there is no reason why Congress, SBA or Treasury should bail out these predatory lenders.”


H.R. 6632: Rep. Darren Soto (D-FL) introduced H.R. 6632, which would amend the CARES Act to provide for repayment terms for mortgages in forbearance.

Patriot Pay Proposal: Sen. Mitt Romney (R-UT) issued a proposal to help compensate essential workers by providing “Patriot Pay,” a temporary bonus of up to US$12 per hour in May, June, and July. One-quarter of this bonus would be paid by their employer, and three-quarters would be paid by the federal government, funded by a refundable payroll tax credit. Sen. Romney argued, “Health care professionals, grocery store workers, food processors, and many others—the unsung patriots on the frontline of this pandemic—every day risk their safety for the health and well-being of our country, and they deserve our unwavering support.”

Pandemic Anti-Monopoly Act: Sen. Elizabeth Warren (D-MA) and Rep. Alexandria Ocasio Cortez (D-NY) announced plans to introduce the Pandemic Anti-Monopoly Act, which would impose a moratorium on risky mergers and acquisitions—and stop large corporations from exploiting the pandemic to engage in harmful mergers and strengthen the federal government's ability to respond effectively to future crises.

COVID-19 Consumer Data Protection Act: Senators Roger Wicker (R-MS), Chair of the Senate Commerce Committee, John Thune (R-SD), Jerry Moran (R-KS), and Marsha Blackburn (R-TN) announced plans to introduce the COVID-19 Consumer Data Protection Act. The legislation would provide all Americans with more transparency, choice, and control over the collection and use of their personal health, geolocation, and proximity data. The bill would also hold businesses accountable to consumers if they use personal data to fight the COVID-19 pandemic.

Medical Supply Transparency and Delivery Act: Senators Tammy Baldwin (D-WI) and Chris Murphy (D-CT), as well as Minority Leader Chuck Schumer, announced legislation that lays out a framework for an effective COVID-19 response by federalizing and adding critical oversight and transparency to the supply chain for critical medical supplies and equipment. The Medical Supply Transparency and Delivery Act would require the president to utilize all available authorities under the Defense Production Act to mobilize a federal response to the pandemic through an equitable and transparent process. Representatives Katie Porter (D-CA), Jason Crow (D-CO), Elissa Slotkin (D-MI), and Tim Ryan (D-OH) will introduce the House companion of this legislation.


The Senate plans to “carefully resume in-person work” on Monday, pressing ahead with confirmation hearings, committee votes, and floor votes on a number of stalled nominations. The House postponed its plan to return to full session until May 11th, following guidance from the Capitol’s attending physician. Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi issued a joint statement, declining the White House’s offer of rapid COVID-19 tests for use by members in order “to keep directing resources to the front-line facilities where they can do the most good the most quickly.”

Tuesday, May 5

Senate Banking Committee “Nomination Hearing”: 2:30 PM in 106 Dirksen Senate Office Building.

Wednesday, May 6

House Appropriations Committee Hearing on “COVID-19 Response”: 10:00 AM in 2359 Rayburn House Office Building.


Agencies Extend Comment Period on Updates to Resolution Plan Guidance for Large Foreign Banks: On Monday, the Federal Reserve and FDIC announced that they will extend, by 30 days, the comment period for the agencies' proposed guidance for resolution plans submitted by certain large foreign banks. The extension will allow interested parties additional time to analyze the issues and to prepare comments through June 4, 2020.

Federal Reserve Board Announces an Expansion of the Scope and Duration of the Municipal Liquidity Facility: On Monday, the Federal Reserve Board announced an expansion of the scope and duration of the Municipal Liquidity Facility (MLF). The facility, which was announced on April 9 as part of an initiative to provide up to US$2.3T in loans to support U.S. households, businesses, and communities, will offer up to US$500B in lending to states and municipalities to help manage cash flow stresses caused by the coronavirus pandemic. The facility, as revised, will purchase up to US$500B of short-term notes issued by U.S. states (including the District of Columbia), U.S. counties with a population of at least 500,000 residents, and U.S. cities with a population of at least 250,000 residents. The new population thresholds allow substantially more entities to borrow directly from the MLF than the initial plan announced on April 9.

Federal Reserve Board Announces It Is Expanding the Scope and Eligibility for the Main Street Lending Program: On Wednesday, the Federal Reserve Board announced it is expanding the scope and eligibility for the Main Street Lending Program. As part of its broad effort to support the economy, the Federal Reserve developed the Main Street Lending Program to help credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic. After receiving more than 2,200 letters from individuals, businesses, and nonprofits, the Board decided to adjust the program. The changes decided upon include: (1) creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage; (2) lowering the minimum loan size for certain loans to US$500,000; and (3) expanding the pool of businesses eligible to borrow. The changes elicited criticism from some quarters, as the term sheet’s guidance that companies should make “commercially reasonable” efforts to retain employees was described as a major loophole. Additionally, the changes open the door to loans to the oil and gas industries, sparking fears of a bailout from the congressional oversight committee who questioned how the changes “promote the broader public interest.”

Federal Reserve Expands Access to Its Paycheck Protection Program Liquidity Facility: On Thursday, the Federal Reserve expanded access to its Paycheck Protection Program Liquidity Facility (PPPLF) to additional lenders and expanded the collateral that can be pledged. The changes will facilitate lending to small businesses via the Small Business Administration's (SBA) Paycheck Protection Program (PPP). As a result of the changes, all PPP lenders approved by the SBA, including non-depository institution lenders, are now eligible to participate in the PPPLF. Additionally, eligible borrowers will be able to pledge whole PPP loans that they have purchased as collateral to the PPPLF.

Federal Reserve Board Finalizes Rule to Extend by 18 Months the Initial Compliance Dates for Certain Parts of Its Single-Counterparty Credit Limit Rule: On Friday, the Federal Reserve Board finalized a rule to extend by 18 months the initial compliance dates for certain parts of its single-counterparty credit limit rule. Under the final rule, the largest foreign banks need to comply with the single-counterparty credit limit rule by July 1, 2021, whereas smaller foreign banks need to comply by January 1, 2022.

SEC Announces Investor Advisory Committee Meeting Focusing on COVID-19: On Monday, the SEC announced that its Investor Advisory Committee will hold a public meeting on May 4th, by remote means. The committee will hold two discussions: a discussion of public company disclosure considerations in a COVID-19 pandemic context and a discussion of public company shareholder engagement/virtual shareholder meetings in a COVID-19 pandemic context.

Small Business Capital Formation Advisory Committee to Discuss the SEC’s Capital Formation Proposal: On Thursday, the SEC released the agenda for the Friday, May 8 meeting of its Small Business Capital Formation Advisory Committee, which will be hosted via video conference. The Committee will discuss the Commission’s recent Capital Formation Proposal, which proposes amendments to simplify, harmonize, and improve certain aspects of the exempt offering framework. During the meeting, the Committee will also continue its discussion from April 2 on how small businesses are coping with COVID-19 and share observations from their areas of the marketplace.

Secretary Mnuchin’s Holds Call with G7 Finance Ministers: On Thursday, Treasury Secretary Steven Mnuchin held a call with his counterparts from Canada, France, Germany, Italy, Japan, the United Kingdom, the European Commission, and the Eurogroup in order to coordinate on timely and effective actions in response to the economic fallout of the COVID-19 pandemic. The Finance Ministers discussed domestic and international economic responses underway, strategies to accelerate economic activity once our economies begin reopening, in line with necessary health and safety measures.

FHFA Chief Combats Misinformation about End of Forbearance: The Federal Housing Finance Agency (FHFA) reiterated that borrowers in forbearance with a Fannie Mae or Freddie Mac (the Enterprises)-backed mortgage are not required to repay the missed payments in one lump sum. “During this national health emergency, no one should be worried about losing their home," said Director Mark Calabria. “No lump sum is required at the end of a borrower's forbearance plan for Enterprise-backed mortgages.”

CFPB Provides Flexibility during COVID-19 Pandemic on Interstate Land Sales Full Disclosure Act: On Monday, the CFPB has issued a statement to provide flexibility for land developers who are subject to the Interstate Land Sales Full Disclosure Act (ILSA) and Regulation J. The statement states that as of April 27, 2020, and until further notice, the Bureau does not intend to take supervisory or enforcement action against developers for delays in filing annual reports of activity or certain financial statements with the Bureau, as required under Regulation J, provided that the developers are making good faith efforts to file these reports within a reasonable time.

CFPB Paves Way for Consumers Facing Financial Emergencies to Obtain Access to Mortgage Credit More Quickly: On Wednesday, the CFPB took steps to make it easier for consumers with urgent financial needs to obtain access to mortgage credit more quickly in the middle of the COVID-19 pandemic. The Bureau is issuing an interpretive rule clarifying that consumers can exercise their rights to modify or waive certain required waiting periods under the TILA-RESPA Integrated Disclosure Rule and Regulation Z rescission rules. The Bureau is also issuing an FAQ document that addresses when creditors must provide appraisals or other written valuations to mortgage applicants in order to expedite access to credit for consumers affected by the COVID-19 pandemic. Director Kathy Kraninger said, “The pandemic is resulting in consumers facing various challenges, and our temporary and targeted solutions are intended to ensure that consumers receive the credit they need in a timely manner.”

CFPB Report Shows Substantial Decline in Credit Applications in March: On Friday, the CFPB released a report examining the effects of the COVID-19 pandemic that found consumer credit applications declined substantially in March. The report found that between the first and last week of March, auto loan inquiries dropped by 52%, new mortgage inquiries dropped by 27%, and revolving credit card inquiries declined by 40% compared to usual patterns seen in the data in earlier years. The report also found significant geographic variation in the decline in inquiries, with states in the South and Mountain regions experiencing smaller drops and the Northeast and California experiencing the largest drops.

HUD Allocates Second Wave of Relief Funds: On Friday, HUD Secretary Ben Carson announced the Department will allocate US$685M in COVID-19 relief funding to help low income Americans residing in public housing. The funding, made available by the CARES Act legislation, will be awarded to Public Housing Authorities across the Nation to prepare, prevent, and respond to a coronavirus outbreak.

DOT Issues Notice Regarding Current Administration and Enforcement of the Essential Air Service Program: The Department of Transportation announced a plan to address the impact of the COVID-19 public health emergency on air carriers participating in the Essential Air Service (EAS) program. The Department issued a notice to all EAS air carriers indicating how those carriers may adjust their schedules and seek compensation due to the significant reduction in passenger demand and the financial impact on air carriers. The Department’s plan authorizes payment of 50% of the contracted per-flight subsidy for flights that are not operated, as long as an EAS air carrier serving a community in the continental United States, Hawaii, and Puerto Rico completes at least one round trip flight a day, six days a week, for that EAS community, and an EAS air carrier serving a community in Alaska completes at least 50% of its weekly schedule for that EAS community.


CFTC’s Quintenz Set to Depart in October: CFTC Commissioner Brian Quintenz announced his plan to depart the agency by the end of October. Quintenz first joined the CFTC in August 2017, and, though his term ended in April, he could have extended through the end of the year unless a successor was confirmed.

New York Fed Taps John Bagley to Assist with Municipal Lending Program: John Bagley, who works as a market structure expert at the Municipal Securities Rulemaking Board, will temporarily join the Federal Reserve Bank of New York as it works to implement its US$500B municipal lending program.

NYDFS Announces Appointment of Richard Weber as General Counsel: On Thursday, the New York State Department of Financial Services announced that Richard Weber had been appointed General Counsel. Mr. Weber has served as the head of financial crime prevention at various financial institutions and, for more than five years, was Chief of the Criminal Investigation Division at the IRS where he spearheaded high profile investigations into FIFA and Silk Road.


Supreme Court to Hold First Remote Oral Arguments: The Supreme Court is set to hear oral arguments by telephone conference on May 4 – 6 in a limited number of previously postponed cases. In keeping with public health guidance in response to COVID-19, the Justices and counsel will all participate remotely. The Court will provide a live audio feed of the arguments to FOX News, the Associated Press, and C-SPAN, and they will, in turn, provide a simultaneous feed to livestream on various media platforms.

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.

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