Money Matters: This Week in Washington
This Week in Washington for October 2, 2017
October 02, 2017
Dina Ellis and Casey Miller
THE BIG PICTURE
Last week was a busy one in DC. The White House, the House Ways and Means Committee, and the Senate Finance Committee released their proposal for tax reform on September 27. Broad provisions include: individual tax rates of 12%, 25%, and 35%; doubling standard deduction to US$24K for married couples and US$12K for single filers; cutting corporate tax rate to 20%; eliminating valuable tax breaks including most itemized deductions; and eliminating the estate tax. The National Association of Home Builders endorsed the White House plan to reduce the mortgage cap for the mortgage interest tax deduction, a tax break once thought untouchable. This breaks with industry allies, such as the National Association of Realtors, who still oppose eliminating the mortgage interest tax deduction.
On September 29, the Senate released its fiscal 2018 budget resolution that paves the way for a tax overhaul. The resolution allows the Senate Finance Committee to add up to US $1.5T to the deficit over the next 10 years, and includes instructions for the Senate Committee on Energy and Natural Resources to save at least US$1B over the next 10 years. The resolution did not include language to roll back Dodd-Frank regulations.
The Obamacare repeal effort is dead for now, with Senate Republicans deciding last week not to vote on the Graham-Cassidy bill. The decision was reached on September 26 after it became clear the bill would fail, with three key Republican Senators defecting (Susan Collins (R-ME), John McCain (R-AZ), and Rand Paul (R-KY)).
In other hurricane-related news, President Trump also lifted the Jones Act, waiving shipping restrictions to encourage hurricane relief efforts for Puerto Rico. The President also announced on September 26 that he has plans to visit the hurricane-ravaged country, and said that he planned to make the trip on Tuesday of this week.
Equifax CEO Richard Smith announced his retirement last week, but is expected to testify before the Senate Banking Committee on Wednesday. House Financial Services Ranking Member Maxine Waters (D-CA) issued a statement saying that the CEO’s retirement “does not relieve the company of its duty to provide answers to… the many millions of Americans who had their sensitive financial and personally identifiable information exposed due to the company’s failures to safeguard consumers’ data.” The company also announced last week that it will offer free lifetime credit freezes. The Credit Union National Administration announced on September 29 that it will be filing a lawsuit against the company.
On the election front, the victory of Roy Moore in Alabama’s Republican Senate primary over incumbent Senator Luther Strange (R-AL) has bolstered Breitbart News and Chairman Steve Bannon’s effort to fight the GOP establishment. According to Breitbart, they will be expanding their target list in 2018. In Arizona, Democratic Rep. Kyrsten Sinema will take on GOP Sen. Jeff Flake.
In other news, former Representative Anthony Weiner (D-NY) was sentenced last week to 21 months in prison for sending lewd texts to a minor, after pleading guilty earlier this year to a related charge. To top off the week, Department of Health and Human Services Secretary Tom Price resigned on September 29 amid scandal regarding the number and expense of private flights chartered using government funds. The total was upwards of US$400K.
LAST WEEK ON THE HILL
Senator Blocks Bill to Extend Need-Based Student Loan Program: The Perkins Loan program expired at midnight on Saturday, after Senator Lamar Alexander (R-TN) blocked a bill to extend it. The lapse may deprive tens of thousands of college students financial aid that consists of federal dollars and college contributions. The program provided US$1.2B in funding to 528,000 students in the 2014-15 school year.
HOUSE FINANCIAL SERVICES COMMITTEE
Subcommittee Holds Hearing on Low-Income Housing Program: On September 27, the Subcommittee on Housing and Insurance held a hearing to examine the Family Self-Sufficiency Program (FSS), a program that enables HUD-assisted families to increase their earned income and reduce their dependency on welfare assistance and rental subsidies. “Today’s subcommittee on the Family Self-Sufficiency Program was essential in learning what needs to be done to achieve our goal of helping families both increase their employability and become less dependent on government assistance,” said Subcommittee Chairman Sean Duffy (R-WI). Witnesses included:
- Mr. Aaron Gornstein, President and CEO, Preservation of Affordable Housing
- Mr. Jeffrey Lubell, Director of Housing and Community Initiatives, Abt Associates
- Mr. Stacy L. Spann, Executive Director, Housing Opportunities Commission of Montgomery County
- Ms. Kristin Siglin, Senior Vice President, Policy, Housing Partnership Network
- Ms. Sherry Riva, Executive Director, Compass Working Capital
Subcommittee Holds Hearing on Insurance for Non-Profit Organizations: On September 28, the Subcommittee on Housing and Insurance held a hearing entitled “Examining Insurance for Non-Profit Organizations.” The purpose of the hearing was to examine the ability of non-profit organizations to purchase property and auto insurance. “The input from this subcommittee hearing was an important opportunity to hear opinions about whether or not we change the rules expanding from liability to property coverage for non-profits,” said Subcommittee Chairman Sean Duffy (R-WI) after the hearing. Witnesses included:
- Mr. Baird Webel, Specialist in Financial Economics, Congressional Research Service
- Ms. Pamela E. Davis, Founder, President and Chief Executive Officer, Alliance of Nonprofits for Insurance
- Mr. Tom Santos, Vice President, Federal Affairs, American Insurance Association
- Mr. Kevin Cothron, President and Chief Executive Officer, Southeast Nonprofit Insurance Programs
Committee Members Form Bipartisan Working Group on Fannie and Freddie: Rep. Sean Duffy (R-WI), Chairman of the House Financial Services Subcommittee on Housing and Insurance, and Emanuel Cleaver (D-MO), Ranking Member, are creating a bipartisan working group to overhaul Fannie Mae and Freddie Mac. The two received the blessing of Committee Chairman Jeb Hensarling (R-TX) last week to work on the project, though Hensarling has said that he still plans to proceed with his PATH Act legislation. The PATH Act would wind down the government-backed mortgage companies.
SENATE BANKING COMMITTEE
- The Honorable Sigal Mandelker, Under Secretary for Terrorism and Financial Crimes, U.S. Department of the Treasury
- Ms. Susan A. Thornton,Acting Assistant Secretary, Bureau of East Asian and Pacific Affairs, U.S. Department of State
Senators Draft Letter to SEC on Consolidated Audit Trail: After it was revealed that the SEC’s EDGAR filing system was breached, Senators on the Banking Committee are drafting a letter to SEC Chairman Jay Clayton asking that the Commission delay implementing a stock market surveillance tool known as the “consolidated audit trail.” In the draft letter, Senators state that “in light of the recent revelation of a cyber-breach of the [SEC’s] EDGAR filing system, we urge the Commission to delay in implementing the CAT database until a full investigation can be conducted and proper countermeasures taken.”
LEGISLATION INTRODUCED AND PROPOSED
Senators Introduce Legislation to Raise “Systemically Important Financial Institution” Level: Senators David Perdue (R-GA) and Claire McCaskill (D-MO) introduced
THIS WEEK ON THE HILL
Tuesday, October 3
Senate Banking Committee, Hearing, “
Mr. Timothy J. Sloan, Chief Executive Officer and President, Wells Fargo & Company
House Financial Services Committee, Hearing, “
The Honorable Jay Clayton, Chairman, U.S. Securities and Exchange Commission
Tuesday, October 3
House Financial Services Committee, Hearing, “
Financial Stability Oversight Council (FSOC) De-designates American International Group (AIG) as Systemically Important Financial Institution: At an FSOC meeting on September 29, regulators agreed to relax supervision of insurer AIG, nine years after the government rescued the company from collapsing. The Council, chaired by Department of Treasury Secretary Steven Mnuchin, voted to drop AIG’s designation as a systemically important financial institution (SIFI), a label used for companies whose failure could threaten the economy. Both Secretary Mnuchin and Federal Reserve Chair Janet Yellen voted to de-designate the company.
Comptroller of Currency Keith Noreika Confirms that Fintech Charter Can Be Used by Commercial Firms: On September 28, Acting Comptroller Noreika affirmed that the agency’s fintech charter could be used by commercial companies. This is a pivot from former Comptroller Thomas Curry’s position, who said that “proposals that would mix banking and commerce are inconsistent with the OCC’s chartering standards and would not be approved.”
Fannie Mae and Freddie Mac Send US$5.1B to Treasury Department: On September 29, Fannie and Freddie made their quarterly dividend payments to Treasury. The payments totaled over US$5.1B, bringing the total they’ve paid to date to nearly US$275.9B.
NOMINATIONS, COMINGS AND GOINGS AT THE AGENCIES
Senate Confirms Heath Tarbet for Treasury Post: On September 27, the Senate voted 87-8 to confirm Heath Tarbet as Assistant Secretary for International Markets and Development, putting him in charge of the Committee on Foreign Investment in the United States (CFIUS). Tarbet is currently a financial services attorney.
Search for Next Fed Chair Continues: President Trump met with a number of candidates last week to take over the top job at the Federal Reserve. On the list are former Fed Governor Kevin Warsh, current Fed Governor Jerome Powell, and Director of the National Economic Council Gary Cohn. Current Chair Janet Yellen’s term ends in February.