Money Matters: This Week in Washington
This Week in Washington for October 23, 2017
October 23, 2017
Dina Ellis and Casey Miller
THE BIG PICTURE
It was a busy week for the Senate. The chamber voted late on October 19 on a budget resolution that is expected to be a significant procedural step towards tax reform, with the President calling the vote the “first step towards massive tax cuts.” In addition to unlocking a mechanism that will allow Republicans to rewrite the tax code without any Democratic votes, the budget resolution allows the tax bill to lower projected revenue by up to US$1.5T over a decade.
With all that the Senate needs to get done, Majority Leader Mitch McConnell (R-KY) is reported to be preparing for longer workweeks, including Fridays and possibly some weekends. On the tax front in the House, the Ways and Means Republicans have scheduled lengthy meetings for this week to discuss the details of their tax bill. The House Freedom Caucus has said that they will support the legislation if it is marked up next week and brought to the House Floor the first week in November. Leadership has called this timetable virtually impossible.
Controversy surrounded the White House last week when the President’s silence on the four military deaths in Niger resulted in President Trump’s incorrect claim on October 16 that President Obama did not call Gold Star families who lost relatives killed in action. Several military families came forward as the week continued to comment on how President Trump treated them after they lost loved ones.
President Trump gave the federal government a “10” for its response to hurricane devastation in Puerto Rico. According to the President, the effort was “probably the most difficult when you talk about relief, when you talk about search, when you talk about all the different levels, and even when you talk about lives saved. You look at the number. I mean, this was—I think it was worse than Katrina.” Senator Elizabeth Warren called for the cancellation of Puerto Rico’s existing debt at a rally on October 18, while the President noted that any new debt for Puerto Rico reconstruction had to be senior to existing debt.
On the healthcare front, Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) reached an agreement on a bipartisan healthcare deal that would fund the subsidy program that President Trump unilaterally cut earlier this month through an executive order. The deal would fund Obamacare’s cost-sharing program for two years. The deal also would allow states to use Obamacare waivers to approve insurance plans with “comparable affordability” to Obamacare plans. President Trump expressed opposition to such deal on Twitter on October 18 claiming it benefitted insurance companies.
President Trump’s third try at a travel ban received another blow last week. U.S. District Court Judge Derrick Watson in Hawaii granted a temporary restraining order, blocking the ban. According to Judge Watson, the ban is contrary to federal immigration law as it “plainly discriminates based on nationality.” A second court in Maryland also blocked the third ban.
According to a Republican official, Ohio Representative Pat Tiberi (R-OH) will not seek reelection and will retire early. Tiberi represents Ohio’s 12th District, which is solidly Republican.
In sports news, the Commissioner of the NFL Roger Goodell said on October 18 that he believes that all players “should” stand for the national anthem. The NFL owners, however, go so far as to impose a rule requiring the players to stand.
LAST WEEK ON THE HILL
SENATE BANKING COMMITTEE
Mr. Andrew M. Smith, Partner, Covington & Burling LLP, on behalf of the Consumer Data Industry Association;
Mr. Marc Rotenberg, President, Electronic Privacy Information Center; and
Mr. Chris Jaikaran, Analyst in Cybersecurity Policy, Congressional Research Service
LEGISLATION INTRODUCED AND PROPOSED
THIS WEEK ON THE HILL
Tuesday, October 24
House Financial Services Committee, Hearing, “
Senate Banking Committee,
The Honorable David J. Ryder, of New Jersey, to be Director of the United States Mint;
Ms. Hester M. Peirce, of Ohio, to be a Member of the Securities and Exchange Commission; and
Mr. Robert J. Jackson, Jr., of New York, to be a Member of the Securities and Exchange Commission.
Wednesday, October 25
House Financial Services Committee, Hearing, “
House Financial Services Committee, Continuation of Hearing, “
Thursday, October 26
Senate Banking Committee,
The Honorable Brian D. Montgomery, of Texas, to be Assistant Secretary for Housing – Federal Housing Commissioner, U.S. Department of Housing and Urban Development;
Mr. Robert Hunter Kurtz, of Virginia, to be Assistant Secretary for Public and Indian Housing, U.S. Department of Housing and Urban Development; and
Ms. Suzanne Israel Tufts, of New York, to be Assistant Secretary for Administration, U.S. Department of Housing and Urban Development.
Government Accountability Office (GAO) Says Leveraged Lending Guidance Could be Challenged: On October 19, the GAO said that the Interagency Guidance issued by the Office of the Comptroller of the Currency (OCC), the Federal Reserve, and the Federal Deposit Insurance Corporation qualifies as a rule that can be challenged by the Congressional Review Act. This decision by the GAO means that Congress now has the opportunity to overturn the guidance on leveraged lending, which relates to loans to firms perceived as risky. The guidance was issued in March of 2013.
National Economic Council (NEC) Director Gary Cohn “Agitated” by Risk Posed by Derivatives Clearinghouses: Speaking at the G-30’s annual international banking seminar, NEC Director Gary Cohn expressed concern that the government has created systemic risk by requiring extensive amounts of derivatives to be cleared through central counterparties (CCP). According to Cohn, “we have expanded the limits of [clearinghouses] probably farther beyond their useful existence.”
On another note, Director Cohn also gave a statement earlier in the week about raising the US$50B asset threshold at which banks face increased regulation. Speaking at the American Bankers Association’s annual conference, he said he expects the final number to be at least US$200B, and could go as high as US$250B.
Speaking at a Georgetown University fintech event on October 19, CFTC Commissioner Brian Quintenz said that digital currencies “may actually transform at some point from something that starts off as a security and transforms into a commodity.”
Feud Continues between OCC and CFPB: Comptroller Noreika accused CFPB Director Richard Cordray of playing politics with respect to the arbitration rule the CFPB issued earlier this year. Noreika said the rule prohibiting mandatory arbitration clauses in financial products benefits lawyers and politicians who get money from lawyers, as well as big banks.
Noreika’s Term as Acting Comptroller Questioned: Noreika also spoke on the issue of his appointment as Acting Comptroller, in response six Democratic Senators who sent a letter accusing Noreika of staying in his position for an impermissible length of time. He is currently classified as a “special government employee,” which allowed him to avoid Senate confirmation, but the classification limits his service in his role to 130 days. Noreika said that the Senate Democrats are “stuck with him” until they get around to confirming his successor, nominee Joseph Otting.
European Commission Recommends the Continuation of Privacy Shield: On October 18, the European Commission recommended the continuation of the U.S.-E.U. Privacy Shield agreement in a report marking the data-transfer deal’s first annual review. E.U. Justice Minister Věra Jourová said in a statement that the Commission’s “first review shows that the Privacy Shield works well, but there is some room for improving its implementation.” The report found that one of the improvements should be more aggressive oversight on the American side of whether companies are complying with the agreement’s requirements.
Credit Union and Bank Group Urge Housing Agency to Let Fannie and Freddie Keep Capital: The National Association of Federally-Insured Credit Unions and the Independent Community Bankers of America sent a letter to the Federal Housing Finance Agency (FHFA), asking the regulator to allow mortgage companies Fannie Mae and Freddie Mac to hold capital to cover quarterly losses. As part of a deal with the Treasury Department, the companies will have reduced their capital reserves to nothing by January.
Also on the Fannie and Freddie front, it was reported last week that mortgage fees fell last year as the two companies competed for business. Average ongoing guarantee fees fell from 42 basis points in 2015 to 40 basis points in 2016.
Finally, the FHFA announced last week that it would require lenders selling loans to Fannie and Freddie to ask prospective borrowers their preferred language. The new requirement is part of an effort to encourage homeownership among people with limited English proficiency.
Federal Reserve Governor Jerome Powell Frontrunner for Chair: According to Trump Administration officials, current Fed Governor Jerome Powell is the leading candidate to become Chair of the Federal Reserve. The President, however, has yet to make a final decision, though he did say he will make a decision within a “very short period of time.”
NOMINATIONS, COMINGS AND GOINGS AT THE AGENCIES
OTHER NOTEWORTHY ITEMS
National Association of Home Builders (NAHB) Urges “Homeownership” Tax Credit: The National Association of Home Builders is encouraging Congress to replace the current mortgage-interest deduction with a homeownership tax credit. According to NAHB Chief Executive Officer Jerry Howard, if the “credit is structured properly, it would be available to more people, particularly middle-income people, and be a true incentive for them to become homeowners.”
Conference of State Bank Supervisors (CSBS) Names Fintech Advisory Panel: On October 19, the Conference of State Bank Supervisors named its fintech advisory panel members, including 33 companies ranging from start-ups to national brands.
Five Companies Launch IPOs that Could Raise Up to US$1.3B: BP Midstream Partners LP, National Vision Holdings Inc., ForeScout Technologies, Inc., Merchants Bancorp Inc., and Chinese lender Hexindai Inc. are planning to launch IPOs in the near future that could total up to US$1.3B. BP Midstream Partners LP is the largest, with an estimated US$850M public offering. It is expected to price its offering around October 25.
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.