Money Matters: This Week in Washington

This Week in Washington for September 18, 2017

September 18, 2017

Dina Ellis and Casey Miller


Fallout from the massive Equifax data breach was a focal point of conversation last week, with millions of consumers trying to figure out whether their personal data was compromised. The breach has caused some to call for greater regulation of credit bureaus, and may derail efforts to provide other forms of regulatory relief to the financial services industry. Moreover, some progressive advocacy groups have used the breach to run ads promoting the Consumer Financial Protection Bureau.

Speaking on the Senate floor on September 14, Senate Minority Leader Chuck Schumer (D-NY) said that Equifax “stunningly and epically failed to perform one of its two essential duties as a company”—protecting people’s personal information. He outlined steps for Equifax to take to address the data breach. Equifax CEO Richard Smith is expected to testify before the House Energy and Commerce Committee and the House Financial Services Committee in the near future. Senate Banking Committee Chairman Mike Crapo (R-ID) said on September 12 that he wasn’t sure if he would hold a hearing on the breach, but that his staff is investigating. On September 14, the Federal Trade Commission announced that it is opening its own investigation into the matter.

In other news, President Trump has been urging Congress to move fast on tax reform, tweeting “The approval process for the biggest Tax Cut & Tax Reform package in the history of our country will soon begin. Move fast Congress!” Department of Treasury Secretary Steven Mnuchin announced that a tax reform outline expected to be released the week of September 25 will include information on a specific corporate tax rate. The plan will also outline a proposal to cut the tax deduction businesses get for interests on their loans. He echoed President Trump’s comments that the tax reform legislation won’t give tax cuts to the rich.

On September 14, the House passed a US$1.2T fiscal 2018 funding bill, which includes certain provisions of the Financial CHOICE Act passed by the House earlier this summer, including sections rolling back provisions of the Dodd-Frank financial overhaul and curtailing the Consumer Financial Protection Bureau. The bill also prohibits the Securities and Exchange Commission from using funds set aside for enforcement under Dodd-Frank, and limits the money available for enforcement to those funds that Congress appropriates. It is highly unlikely that the Senate will act on the spending bill as-is, because the Senate appears to lack the votes necessary to pass such legislation.

Speaker of the House Paul Ryan (R-WI) met with top Democrats to discuss possible legislative solutions to address the future of DREAMers. President Trump announced the next day that there is still no deal, though after dining with Senate Minority Leader Schumer and Housing Minority Leader Pelosi, the parties appear to be close to a solution. Speaker Ryan announced that he is assembling a working group to try to reach a DACA compromise that the House GOP can support.

Finally, Hurricanes Harvey and Irma have raised a timely issue of how to deal with the National Flood Insurance Program. The massive flooding from Harvey is expected to lead to a payout of roughly US$11B from reinsurers to the National Flood Insurance Program. The program is currently US$25B in debt.



Subcommittees Hold Joint Hearing on Monetary Policy:The Subcommittee on Financial Institutions and Consumer Credit and the Subcommittee on Monetary Policy and Trade held a joint hearing entitled “Examining the Relationship Between Prudential Regulation and Monetary Policy at the Federal Reserve.” The hearing dealt with the multiple responsibilities of the Federal Reserve. Witnesses included:

  • Dr. Charles Calomiris, Henry Kaufman Professor of Financial Institutions, Columbia Business School, Columbia University

  • Dr. Stephen G. Cecchetti, Rosen Family Chair in International Finance, Brandeis International Business School, Brandeis University

  • Mr. Jim Sivon, Partner, Barnett Sivon & Natter P.C., on behalf of the Financial Services Roundtable

  • Mr. Bruce Klingner, Senior Fellow for Northeast Asia, Heritage Foundation

  • Ms. Elizabeth Rosenberg, Senior Fellow and Director, Energy, Economics, and Security Program, Center for a New American Security


Ranking Member Sherrod Brown (D-OH) Leads Democrats in Urging Administration Not to Change 401(k)s: Ranking Member Brown and other Democrats sent a letter to Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, as well as Republican Congressional leaders urging them not to make changes to the taxation of 401(k) accounts. The letter was sent in response to reports that the Trump administration and lawmakers were considering taxing money placed in 401(k) accounts up front like is done for Roth IRAs/401(k)s.

Committee Holds Fintech Hearing: On September 12, the Committee held a hearing entitled “Examining the Fintech Landscape.” In his opening statement, Chairman Mike Crapo (R-ID) pointed out that “Fintech is providing new and innovative products and services in areas such as marketplace lending, digital payments and currencies, wealth management, insurance and more.” Witnesses included:

Committee Holds Hearing on the Committee on Foreign Investment in the United States: On September 14, the Banking Committee held a hearing entitled “Examining the Committee on Foreign Investment in the United States.” Witnesses included:

  • The Honorable Clay Lowery, Managing Director, Rock Creek Global Advisors, and former Assistant Secretary for International Affairs, U.S. Department of the Treasury

  • The Honorable Kevin J. Wolf, Partner, Akin Gump Strauss Hauer & Feld LLP and former Assistant Secretary for Export Administration, U.S. Department of Commerce

  • Mr. James Lewis, Senior Vice President, Center for Strategic and International Studies


In Response to Equifax Data Breach, Members Introduce Legislation: Following the announcement that 143 million American consumers were impacted by the Equifax security breach, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, reintroduced the Comprehensive Consumer Credit Reporting Reform Act, which contains reforms aimed to improve the nation’s credit reporting system. Additionally, on September 15, Senators Elizabeth Warren (D-MA) and Brian Schatz (D-HI) introduced the Freedom from Equifax Exploitation (FREE) Act to give control over credit and personal information back to consumers.


CFPB Issues First No-Action Letter: The Consumer Financial Protection Bureau (CFPB) issued its first ever no-action letter to Upstart Network, Inc., a company that uses alternative data in making credit and pricing decisions. The CFPB no-action letter process was announced in 2016 and is to facilitate consumer-friendly innovations where regulatory uncertainty may exist for certain emerging products or services. A no-action letter advises a recipient that staff has no present intention to recommend initiation of an enforcement or supervisory action with respect to the specific matter.

Comptroller of the Currency Keith Noreika Still Working on Fintech Charter: Speaking on September 13, Comptroller Noreika said that the Office of the Comptroller of the Currency is still working on a new special-purpose charter financial technology firms. He also added that the Trump administration would have a higher tolerance of the risks inherent to the firms.

Applications for Deposit Insurance for New Industrial Loan Companies Causes Independent Community Bankers Association (IBCA) to Seek a New Moratorium on Approvals: The ICBA has asked the FDIC to suspend deposit insurance applications of industrial loan charter companies for two years. Despite the fact that the Bank Holding Company Act exempts parents of ILCs from regulation, the president of the ICBA, wrote “SoFi Bank and Square are applying as ILCs and not as commercial banks because their parent companies and their affiliates do not want to be subject to the legal restrictions and supervision attendant to the [Bank Holding Company Act].” To date, lawmakers on Capitol Hill have stayed relatively neutral about the issue.

Department of Treasury Secretary Steven Mnuchin Still Expecting Fannie Mae and Freddie Mac Dividends: After Senate Democr ats and the Republican National Committee called for Fannie and Freddie to be allowed to build reserves to prevent another taxpayer bailout, Secretary Mnuchin declined to comment on whether the Trump Administration would allow the mortgage giants to retain capital. He did say, however, that he still expects their dividends. Fannie and Freddie currently send all of their profits to the Treasury’s general fund.

Treasury Department Sanctions Supporters of Islamic Revolutionary Guard Corps (IRGC): On September 14, the Treasury Department sanctioned 11 entities with ties to Iran. According to Secretary Mnuchin, the “sanctions target an Iranian company providing material support to the IRGC’s ballistic missile program, airlines that support the transport of fighters and weapons into Syria, and hackers who execute cyberattacks on American financial institutions.”

Treasury Sanctions Mexican Entities and Individuals: On September 14, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated four Mexican entities and three Mexican individuals linked to the Cartel de Jalisco Nueva Generacion (CJNG), the Los Cuinis Drug Trafficking Organization (Los Cuinis DTO), the Los Cuinis DTO leader Abigael Gonzalez Valencia, or their associates as Specially Designated Narcotics Traffickers (SDNTs) pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act).

Security and Exchange Commission Commissioner Michael Piwowar says that SEC should Handle Stock Market Rules: Speaking at a STA conference, SEC Commissioner Piwowar said that the SEC should handle writing rules for the structure of stock markets. He said that the job is better for the regulator to handle rather than Congress, because Congress is too easily influenced by corporations. Piwowar said “I could take a look at the draft of a bill and know exactly who was lobbying it based on a business model.”

SEC Launches Nationwide Search to Hire Agency’s First-Ever “Advocate for Small Business Capital Formation”: The SEC announced on September 13 the launch of a nationwide search for candidates for a new senior executive position at the SEC, the Advocate for Small Business Capital Formation. The Advocate will be a “powerful voice for small businesses and small business investors, providing assistance, conducting outreach to better understand their concerns and recommending improvements to the regulatory environment.”

Regulators Issue Joint Notice of Proposed Rulemaking Amending CRA and HMDA Regulations: On September 13, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a joint notice of proposed rulemaking to amend their respective Community Reinvestment Act (CRA) regulations primarily to conform to changes made by the Consumer Financial Protection Bureau (CFPB) to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA).

Commodity Futures Trading Commission Chairman Christopher Giancarlo Speaks at Global Forum for Derivative Markets Conference: CFTC Chairman Giancarlo spoke in Switzerland on September 12 at the Global Forum for Derivatives Markets 38th Annual Bürgenstock Conference. In his speech, he said that a unilateral change by EU authorities to the CFTC-European Commission Equivalence Agreement to be a “violation of trust” between the U.S. and Europe.

CFPB Supervision Touts Recoveries of US$14M in First Half of 2017: The Consumer Financial Protection Bureau (CFPB) announced on September 12 that recent supervisory actions resulted in US$14M in relief to more than 104,000 consumers from January through June 2017. Findings in the Supervisory Highlights report include that some banks misled consumers about checking account fees or overdraft coverage, and some credit card companies deceived consumers about pay-by-phone fees.


President Trump Nominates Head of Federal Housing Agency: The President has nominated Brian Montgomery to lead the Federal Housing Administration. Montgomery is currently Vice Chairman of financial services at consulting firm the Collingwood Group. He also served as Federal Housing Commissioner under President George W. Bush.

Pam Patenaude Confirmed as Department of Housing and Urban Development (HUD) Deputy Secretary: The Senate voted on September 14 by a vote of 80-17 to confirm Pam Patenaude as HUD deputy secretary. Her nomination was held up as Democrats had concerns about President Trump’s plan to cut spending at HUD.


Kevin Fromer Named CEO of Financial Services Forum: Kevin Fromer has been named the next CEO of Financial Services Forum. Fromer is currently an Executive Vice President at HSBC North America. He was also a Treasury Department official under George W. Bush.

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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