Money Matters: This Week in Washington

This Week in Washington for October 9, 2017

October 09, 2017

Dina Ellis and Casey Miller


Dominating headlines last week was the national tragedy in Las Vegas, NV, where a shooter opened fire on a crowded concert, killing 59 people and wounding over 500. The shooting has re-sparked the national conversation about gun control, with some conservative lawmakers saying that they are open to the banning of “bump stocks,” which are attachments used to make semiautomatic rifles fire at the same rate as automatic ones. The National Rifle Association has asked the Bureau of Alcohol, Tobacco, Firearms and Explosives to review whether bump stocks comply with federal law.

Both the House and the Senate passed budget resolutions on October 5. The House plan slashes spending and calls for lawmakers to find US$203B in savings over 10 years from mandatory programs. The Senate plan also slashes domestic spending, while giving the Pentagon a record US$695B over 10 years. The two plans will need to be resolved.

In the upcoming week, President Trump is expected to refuse to certify that Iran is complying with its 2015 international nuclear agreement. This is part of a broader policy change on Iran. If the President refuses to sign, Congress could then reinstate sanctions under an expedited 60-day review process, if it chooses to do so. Such action is despite Secretary of Defense James Mattis recently testifying before the Senate Armed Services Committee that the Department believes Iran has been sticking to the deal.

Related to the Affordable Care Act, the President announced that he would roll back part of the healthcare legislation’s contraceptive mandate. Officials said that organizations that have a “religious or moral objection” to providing the coverage would have “full protection.”

White House Chief of Staff John Kelly’s personal phone has been compromised since potentially December. According to the White House, he used the phone rarely, but it is still possible that hackers or foreign governments had access to data on Kelly’s phone when he was with the Department of Homeland Security and after he joined the White House.

Congressman Tim Murphy (R-PA) is resigning amid a made-for-Hollywood scandal. According to reports of text messages, Rep. Murphy urged the woman he was having an extramarital affair with to have an abortion when they thought she might be pregnant. When she pointed to the pro-life statements he’s made, he said that the pro-life statements were written by staff and that he “cringe[s]” when he reads them. Murphy originally said that he would not seek re-election, but as coverage of the scandal increased, he announced that he will be stepping down on October 21.

For all you Twitter followers, President Trump is now the most followed world leader on the site. He passed Pope Francis to take the top spot, with 39.7 million followers. The Pope has 39.5 million followers.


Senate Confirms Randal Quarles as Vice Chairman of the Federal Reserve: The Senate confirmed Randal Quarles to serve as Governor of the Federal Reserve. Quarles will also serve as the first official Vice Chairman of Supervision and Regulation, which is a position created by Dodd-Frank in 2010.


Committee Holds Hearing Examining Equifax Data Breach: On October 5, the Committee held a hearing entitled “Examining the Equifax Data Breach.” The purpose of the hearing was to get a better understanding of the timeline and causes of the breach; how Equifax notified consumers and shareholders following the breach; the failures of the information security regime used by Equifax; the company’s initiatives to identify and reduce the risk of future breaches; and whether there is any need to enact federal data security and breach notification legislation. The sole witness at the hearing was Richard Smith, former Chairman and Chief Executive Officer of Equifax. Committee Democrats have secured what is known as a “Minority Day” hearing in order to dig further into the data breach.

Committee Holds Hearing on Securities and Exchange Commission: On October 4, the Committee held a hearing entitled “Examining the SEC’s Agenda, Operations, and Budget.” The purpose of the hearing was to examine the SEC’s operations and the extent to which it is meeting its statutory missions. The hearing focused on FY 2017 SEC funding and the SEC’s FY 2018 budget request, as well as cybersecurity at the SEC. The sole witness at the hearing was Jay Clayton, Chairman of the Securities and Exchange Commission. Chairman Clayton spoke on a variety of topics, from initial coin offerings (ICOs) to the consolidated audit trail (CAT), the SEC’s stock market surveillance tool. Chairman Hensarling expressed concerns about the CAT and encouraged the agency to postpone its November launch of the system.

Committee Holds Hearing on Sustainable Housing Finance: On October 3, the Committee held a hearing entitled “Sustainable Housing Finance: An Update from the Director of the Federal Housing Finance Agency.” The purpose of the hearing was to receive an update on measures the FHFA has taken as the conservator of Fannie Mae and Freddie Mac, as well as the agency’s strategic plan for the government-sponsored enterprises (GSEs) and an update on their financial condition. The sole hearing witness was Mel Watt, Director of the Federal Housing Finance Agency. At the hearing, Director Watt said that he is working with the Treasury Department to help Fannie Mae and Freddie Mac avoid drawing on their US$258B line of credit to continue operating.


Committee Holds Hearing on Equifax Data Breach: On October 4, the Committee held a hearing entitled “An Examination of the Equifax Cybersecurity Breach.” The sole witness was Richard Smith, former Chairman and Chief Executive Officer of Equifax. Chairman Mike Crapo (R-ID) said that the Committee wanted to know why it took Equifax so long to tell the public about the breach, why company executives were trading stocks at that time, and how strong Equifax’s cybersecurity practices are. Members of Congress on a bipartisan basis are offering proposals to reform the credit reporting system, and House Financial Services Chairman Jeb Hensarling (R-TX) said that he hopes to advance data security and breach notification legislation. There is a strong likelihood that there will be some form of legislation that comes out of the Equifax breach, but what that looks like is yet to be determined.


Democratic Members Introduce the Megabank Accountability and Consequences Act: House Financial Services Ranking Member Maxine Waters joined other Democrats on October 4 in introducing legislation that would lead to the breakup of any bank if it engages in repeated consumer violations and is considered important to the global financial system. In a press conference unveiling the bill, Waters said, “These institutions should no longer be allowed to abuse hard-working Americans.”


Wednesday, October 11

House Agriculture Committee, Hearing, “Examining the 2017 Agenda for the Commodity Futures Trading Commission,” 10:00AM, 1300 Longworth House Office Building

House Financial Services Committee, Markup, 10:00AM, 2128 Rayburn House Office Building

  • H.R. 477, the “Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017”

  • H.R. 1116, the “Taking Account of Institutions with Low Operation Risk Act of 2017”

  • H.R. 1585, To amend the Securities Act of 1933 to codify certain qualifications of individuals as accredited investors for purposes of the securities laws.

  • H.R. 1645, the “Fostering Innovation Act of 2017”

  • H.R. 1699, the “Preserving Access to Manufactured Housing Act of 2017”

  • H.R. 2121, the “Pension, Endowment, and Mutual Fund Access to Banking Act”

  • An Amendment in the Nature of a Substitute expected to be offered by Mr. Rothfus. Members wishing to offer amendments are counseled to do so with reference to this text.

  • H.R. 2148, the “Clarifying Commercial Real Estate Loans”

  • H.R. 2201, the “Micro Offering Safe Harbor Act”

  • H.R. 2396, the “Privacy Notification Technical Clarification Act”

    H.R. 2706, the “Financial Institution Customer Protection Act of 2017”

  • H.R. 2954, the “Home Mortgage Disclosure Adjustment Act”

  • H.R. 3072, the “Bureau of Consumer Financial Protection Examination and Reporting Threshold Act of 2017”

  • H.R. 3299, the “Protecting Consumers’ Access to Credit Act of 2017”

  • H.R. 3312, the “Systemic Risk Designation Improvement Act of 2017”

  • H.R. 3758, the “Senior Safe Act of 2017”

  • H.R. 3857, the Protecting Advice for Small Savers Act of 2017”

  • H.R. 3898, the “Impeding North Korea’s Access to Finance Act of 2017”

  • H.R. 3903, the “Encouraging Public Offerings Act of 2017”

  • H.R. 3911, the “Risk-Based Credit Examination Act”

  • H.R. 3948, the “Protection of Source Code Act”

  • H.R. 3971, the “Community Institution Mortgage Relief Act of 2017”

  • H.R. 3972, the “Family Office Technical Correction Act of 2017”

  • H.R. 3973, the “Market Data Protection Act of 2017”

Thursday, October 12

House Financial Services Committee, Hearing, “The Future of Housing in America: Oversight of the Department of Housing and Urban Development,” 9:30AM, 2128 Rayburn House Office Building


Consumer Financial Protection Bureau Finalizes Payday Lending Rule: On October 5, the Consumer Financial Protection Bureau (CFPB) finalized a rule that is aimed at stopping payday “debt traps” by requiring lenders to determine upfront whether people can afford to repay their loans. The protections cover loans that require consumers to repay all or most of the debt at once, including payday loans, auto title loans, deposit advance products, and longer-term loans with balloon payments. The CFPB found that many people who take out these loans end up repeatedly paying expensive charges to roll over or refinance the same debt. The rule also curtails lenders’ repeated attempts to debit payments from a borrower’s bank account, a practice that racks up fees and can lead to account closure. The rule has been seen as a last piece of unfinished business for CFPB Director Richard Cordray, who is expected to step down in order to make a run for Governor in Ohio. What happens to the rule after Cordray leaves is unknown, and Congress may try to overturn the rule using the Congressional Review Act (CRA). It is unknown whether legislators would have enough votes in the Senate to overturn the rule using the CRA.

The rule comes as a federal racketeering trial gets under way in New York. Prosecutors are alleging that a businessman in Kansas City ran a US$2B payday-lending enterprise, charging people as much as 700% interest on short-term loans.

Acting Comptroller of the Currency Rescinds Deposit Advance Product Guidance: On October 5, Acting Comptroller of the Currency Keith A. Noreika approved rescission of the agency’s Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products that was published in the Federal Register on November 26, 2013, and accompanying OCC Bulletin 2013-40. According to Noreika, “The continuation of the OCC’s guidance would subject national banks and federal savings associations to potentially inconsistent regulatory direction and undue burden as they prepare to implement the requirements of the CFPB’s final rule.”

CFPB Issues Interim Final Rule To Help Mortgage Servicers Communicate With Certain Borrowers At Risk Of Foreclosure: On October 4, the CFPB issued an interim final rule and a proposed rule to provide mortgage servicers more flexibility and certainty around requirements to communicate with certain borrowers under the Bureau’s 2016 mortgage servicing amendments. The interim final rule gives servicers more flexibility regarding when to communicate about foreclosure prevention options with borrowers who have requested a cease in communication under federal debt collection law. The proposed rule would provide more certainty for mortgage servicers about when to provide periodic statements to consumers in connection with their bankruptcy case.

Treasury Department Releases Second Report on Financial Regulations: On October 6, the U.S. Department of the Treasury released a report detailing how to streamline and reform the U.S. regulatory system for the capital markets. According to the Department, its evaluation of current capital market regulations found that there are reforms that can be undertaken to promote growth and vibrant financial markets while maintaining strong investor protections. The report was in response to Executive Order 13772 issued by President Trump on February 3, 2017, which calls on the Treasury Department to identify laws and regulations that are inconsistent with a set of Core Principles of financial regulation.

Speaking at a meeting of bankers in Dallas, Acting Comptroller Keith Noreika expressed support for some of the recommendations in the Treasury report. He also called for steps to ease asset thresholds included in Dodd-Frank that determine whether banks are subject to certain provisions of the law.

IRS Awards US$7.2M to Equifax to Verify Taxpayer Identity: Questions surrounded the awarding of a contract to Equifax by the IRS after it came to light that the agency granted the company a US$7.2M no-bid contract. According to the IRS, which sent a letter to certain lawmakers, the agency had no choice but to grant the contract to Equifax because no other company is capable of providing the necessary service of verifying taxpayer identity.

White House Backpedals After Trump Says He Would “Wipe Out” Puerto Rico Debt: on the Geraldo Rivera show the evening of October 3, President Trump said that the United States would need to “wipe out” Puerto Rico’s US$75B debt, sending Wall Street into a tailspin. Office of Management and Budget Director Mick Mulvaney went on CNN to backpedal, saying that the President’s comments can’t be taken “word-for-word.”

White House Looking for Social Security Number Replacement: The White House is looking for a replacement of Social Security numbers as the main form of identification in the financial system. The nine-digit numbers are a top target for hackers. According to Rob Joyce, the White House Cybersecurity Coordinator, the White House has “called for the departments and agencies to bring forward their ideas” on other identification tools.

White House Expected to Ask Congress to Forgive Flood Insurance Debt: It is expected that the White House will ask Congress to forgive US$16B of the National Flood Insurance Program’s debt. House Financial Services Chairman Jeb Hensarling (R-TX) said that he had an open mind, but Senate Banking Committee Chairman Mike Crapo (R-ID) said that he is skeptical. Chairman Crapo also said that it wouldn’t make sense to forgive the debt without enacting reforms.

Federal Deposit Insurance Corporation Reports Slow Response to Data Breaches: In a report released on October 6, the FDIC’s inspector general found that the FDIC failed to follow its own procedures for promptly notifying individuals that their personal information may have been compromised. The report found that it took an average of three months for the FDIC to perform its analysis of the breached data and make a decision to notify individuals.

Federal Reserve Governor Jerome Powell is Confident Volcker Rule Reform is Coming: Speaking at a George Washington Law School event on October 3, Fed Governor Jerome Powell said that he is confident that the five regulators with Volcker Rule jurisdiction will reach an agreement on a proposed regulation to ease the burden on banks. He did say, however, that it won’t be “quick or easy.”

Speaking at the same event, Commodity Futures Trading Commission Chairman Christopher Giancarlo said that the Financial Stability Oversight Council is focusing too much on stricter federal oversight of nonbank financial institutions and not enough focus on calibrating regulations in a way that is beneficial for financial stability.

Securities and Exchange Commission to Vote on Changing Corporate Disclosure Rules: On Wednesday, the SEC is expected to vote on whether to propose changing public companies’ disclosure requirements. It will vote on whether to propose updates to Regulation S-K, which governs companies’ non-financial reporting requirements for SEC filings. The SEC was directed to simplify Regulation S-K in the 2015 Fixing America’s Surface Transportation (FAST) Act.

Treasury Department Inspector General Finds No Wrongdoing in Secretary Travel: According to a report released by the Treasury Department Inspector General, Steven Mnuchin did not violate any laws with his usage of government-funded planes. However, the report found that Mnuchin should provide more detail in the future about how he uses the planes and why he needs them. The Secretary has racked up a travel bill of almost US$811.8K.

Liberal Groups Subjected to Extra IRS Scrutiny, Also: A new report released by the Department of Treasury Inspector General for Tax Administration revealed that the agency subjected numerous liberal-leaning groups to enhanced scrutiny when seeking tax-exempt status. The agency has received backlash in the past for subjecting conservative groups to additional scrutiny.

International Monetary Fund Head Thinks it May Have Future in Digital Currency: Christine Lagarde, the Managing Director of the IMF, pointed to the IMF’s special drawing rights (SDRs) as having a potential digital future. Speaking at a Bank of England forum, she said there was a “question mark” over whether SDRs could take the place of existing international currencies. According to Lagarde, it is “not a far-fetched hypothetical.”


Goldman Sachs Examining Bitcoin: Goldman Sachs CEO tweeted on October 3 that the bank is examining Bitcoin, an indicator that banks are debating whether and how to get in on the cryptocurrency action.

European Central Bank Looking at ICOs: According to European Central Bank Governing Council member Ewald Nowotny, the ECB is debating putting “concrete legal restrictions” in place for ICOs. He called the hype around cryptocurrencies “dangerous and dubious.”

Get In Touch With Us

Contact Us