THE BIG PICTURE
On Monday, First Lady Melania Trump rolled out her “Be Best” initiative aimed at combating cyberbullying and supporting children’s well-being. In a rose garden ceremony she explained, “As we all know, social media can both positively and negatively affect our children. But too often, it is used in negative ways. When children learn positive online behaviors early on, social media can be used in productive ways and can affect positive change.” The President signed an official proclamation designating May 7th as “Be Best Day.”
On Tuesday, President Trump formally announced his decision to pull the U.S. out of the Iran nuclear deal and to reimpose sanctions, saying that “we cannot prevent an Iranian bomb under the decaying and rotten structure of the current agreement.” While IAEA inspectors reported that Iran was in compliance with the terms of the agreement, the President has long decried the Obama-era deal and expressed skepticism of their findings. The move opens up a divide between the U.S. and its transatlantic partners, with French Prime Minister Emmanuel Macron, German Chancellor Angela Merkel, and UK Prime Minister Theresa May releasing a joint statement expressing “regret and concern” over the President’s decision. President Obama released a statement calling the decision “misguided” and criticized the move saying “at a time when we are all rooting for diplomacy with North Korea to succeed, walking away from the JCPOA risks losing a deal that accomplishes — with Iran — the very outcome that we are pursuing with the North Koreans.”
President Trump’s nominee to lead the CIA, Gina Haspel, faced a grilling during her Senate confirmation hearing this week, with many pointed questions surrounding her involvement in the controversial detention and interrogation program used in the aftermath of 9/11. The CIA had earlier in the week delivered a set of classified documents detailing Ms. Haspel’s history with the agency, the vast majority of which was spent working undercover. Some Senators called for more information on Ms. Haspel to be declassified, to enable a more public discussion of her qualifications to lead the agency. Senator John McCain (R-AZ), who has been an outspoken critic of torture following his experience during the Vietnam War, released a statement urging his colleagues to reject Haspel, saying that he believes “Her refusal to acknowledge torture’s immorality is disqualifying.”
New York Attorney General Eric Schneiderman resigned mere hours after the publication of a New Yorker article detailing the allegations by four women of “nonconsensual physical violence.” Mr. Schneiderman, who was first elected as Attorney General in 2010, had carved out a name for himself in a series of high profile cases including the suit against Trump University and most recently against The Weinstein Company. He had also been vocal in his support of the #MeToo movement. Barbara Underwood, who served as solicitor general under both AG Schneiderman and his predecessor Andrew Cuomo, has been appointed Acting Attorney General, becoming the first woman to hold the position.
On Thursday, North Korea released three American prisoners who had been detained for over a year, following negotiations with Secretary of State Mike Pompeo. President Trump and several senior officials greeted them in the early hours of Thursday morning when they arrived at Andrews Air Force Base. It was also announced on Thursday that President Trump’s summit with North Korean leader Kim Jong Un will be held June 12th in Singapore, with the President tweeting that “We will both try to make it a very special moment for World Peace!”
A series of primaries were held this week in the run-up to the 2018 midterms:
- In West Virginia, Attorney General Patrick Morrisey bested Don Blankenship and Rep. Evan Jenkins in the Republican Senate primary. Mr. Blankenship, a former coal executive who served a one year prison sentence for violating safety standards following the death of 29 people in a coal mine explosion, had in recent weeks seemed to be gaining traction in the polls, but only managed to garner 20% of the vote. Morrisey will now face incumbent Democratic Senator Joe Manchin in the general election.
- Businessman and former state legislator Mike Braun emerged victorious in the Indiana Republican Senate primary, and will now face off against incumbent Democratic Senator Joe Donnelly, widely considered among the most vulnerable Democratic seats.
- In Ohio, President Trump’s pick – Jim Renacci overcame Mike Gibbons in the Senate primary, and will next compete against incumbent Democratic Senator Sherrod Brown. In the gubernatorial primaries, Republican Mike DeWine and Democrat Richard Cordray were selected in the race to replace term-limited Republican Governor John Kasich.
- In North Carolina, incumbent Republican Rep. Robert Pittenger lost to challenger Mark Harris, becoming the first incumbent to lose his race for reelection in 2018. Harris had nearly unseated Rep. Pittenger in 2016, with the vote coming down to a 134 margin in a recount.
Other highlights of last week include:
- President Trump unveiled a planned rescission of US$15B to unused federal funding on Tuesday, the two largest targets of which include a US$7B cut to the Children’s Health Insurance Program and a US$4.3B cut from the Energy Department’s Advanced Technology Vehicles Manufacturing loan program.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
No hearings held.
SENATE BANKING COMMITTEE
No hearings held.
ON THE FLOOR
S.J. Res. 57 Vote Overturns Auto-Loan Rule: In a 234-175 vote that stuck largely to party lines, the House voted on Tuesday to overturn the 2013 Obama-era guidance issued by the CFPB that was intended to prevent racial discrimination in auto lending. Congressional Republicans utilized the Congressional Review Act, which gives Congress the authority to overturn rules issued by administrative agencies and regulators. The measure had previously been approved by the Senate, and is now expected to be signed into law by President Trump.
House Speaker Paul Ryan Plans for Vote on Senate Banking Bill: Speaking at a press conference, House Speaker Paul Ryan (R-WI) announced that the House plans to take up the Senate Bill, saying “So we will be moving the [Senate’s] Dodd-Frank bill. We’re also going to be moving in the Senate a package of bills that we think will actually add to this that the Financial Services Committee has acted on as well.” Speaker Ryan declined to announce a specific timeline, and so it remains to be seen if this will take place before the Memorial Day holiday.
LEGISLATION INTRODUCED AND PROPOSED
H.Res. 886: Rep. Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee introduced H.Res. 886 this week, a resolution that affirms the Brooke Rule, which ensures that families receiving federal housing assistance do not pay more than 30 percent of their adjusted income on rent, and remains a widely recognized standard for affordability of rental housing. Rep. Waters released a statement explaining her opposition to HUD Secretary Ben Carson’s recent proposal, saying it “would put millions of low-income families at risk of financial hardship, eviction, and homelessness. I am committed to fighting against any efforts to raise rents on Americans who are already struggling to make ends meet.”
S.__: Sen. Kamala Harris (D-CA) introduced the Diverse Leadership Act, legislation to ensure that at least one minority and one female candidate are interviewed for each vacancy for the presidency of a reserve bank at each of the 12 reserve banks in the Fed. Sens. Dianne Feinstein (D-CA), Cory Booker (D-NJ), and Kirsten Gillibrand (D-NY) are lead co-sponsors of the bill. This bill is the Senate companion to legislation introduced by Rep. Joyce Beatty (D-OH). The House version (H.R. 485) was introduced in October 2016 and reintroduced in January 2017, as the Ensuring Diverse Leadership Act of 2017. In a statement, Sen. Harris said “It’s long past time the Federal Reserve do more to guarantee that their heads of the table reflect those they serve.”
THIS WEEK ON THE HILL
Tuesday, May 15
Senate Banking Committee will hold a full Committee executive session to vote on the below individuals at 10:00 AM in Dirksen Senate Office Building 538.
- The Honorable Thelma Drake, of Virginia, to be Administrator of the Federal Transit Administration
- Mr. Jeffrey Nadaner, of Maryland, to be Assistant Secretary of Commerce for Export Enforcement
- Mr. Seth Appleton, of Missouri, to be Assistant Secretary of Housing and Urban Development for Policy Development and Research
Senate Banking Committee will hold a full Committee hearing entitled “Nominations” to consider the below individuals following the executive session.
- The Honorable Richard Clarida, of Connecticut, to be a Member and Vice Chairman of the Board of Governors of the Federal Reserve System
- Ms. Michelle Bowman, of Kansas, to be a Member of the Board of Governors of the Federal Reserve System
Wednesday, May 16
House Financial Services Committee (Capital Markets, Securities, and Investment Subcommittee) will hold a hearing entitled “Oversight of the SEC’s Division of Enforcement” 10:00 A.M. in 2128 Rayburn House Office Building
House Financial Services Committee (Terrorism and Illicit Finance Subcommittee) will hold a hearing entitled “Implementation of FinCEN’s Customer Due Diligence Rule” 2:00 P.M. in 2128 Rayburn House Office Building
Thursday, May 17
House Financial Services Committee (Oversight and Investigations Subcommittee) will hold a hearing entitled “Community Development Block Grant-Disaster Recovery Program – Stakeholder Perspectives” 10:00 A.M. in 2128 Rayburn House Office Building
House Financial Services Committee (Housing and Insurance Subcommittee) will hold a hearing entitled “An Overview of Homelessness in America” 2:00 P.M. in 2128 Rayburn House Office Building
Powell Seeks to Downplay Federal Reserve’s Global Impact: Speaking at an event in Zurich this week, Federal Reserve Chair Jerome Powell argued that the global impact of Fed policies is “often exaggerated,” continuing by saying that “the influence of U.S. monetary policy on global financial conditions should not be overstated.” His remarks came amidst the Fed’s gradual increase of the benchmark interest rate following years of keeping it at nearly zero after the financial crisis of 2008. Chairman Powell stressed that he planned to communicate further changes in an effort to minimize disruptions globally.
CFPB Announces Reorganization: The Consumer Financial Protection Bureau under Acting Director Mick Mulvaney is undergoing reorganization, including the folding of the student loan office into the broader financial education office. In an internal memo, Mulvaney announced he intends to create an “office of cost benefit analysis” to help guide the agency’s enforcement priorities. The move of the student loan office drew instant criticism from consumer advocates and some congressional Democrats, with Sen. Elizabeth Warren (D-MA) calling the move part of the Trump administration’s “war on America’s Students. Student loan debt is exploding, more students are getting scammed, and Mick Mulvaney wants to shut down the only federal office fully focused on protecting student borrowers from predatory student loan companies.” It remains to be seen what, if any, impact this move will have on the Bureau’s case against Navient for alleged predatory loan practices. Spokesman John Czwartacki downplayed the change saying that, “the work of the office continues, personnel are all on the job and working on the same material as they were before. The bottom line is there is no functional or even practical change.”
SEC Not Seeking to Make Cybersecurity Cases Its “Bread and Butter”: Speaking at an enforcement conference this week, SEC Cyber Unit Chief Robert Cohen indicated that the SEC was “not looking to bring dozens and dozens of cybersecurity cases every year” and explained the commission only pursued cases where the “facts are particularly bad and when the conduct really violates the statute very clearly.” Cases involving insider trading, market manipulation and fraud will continue to be the main focus.
SEC Adds Dodd-Frank Rule to Semi-Annual Agenda: On Wednesday, the SEC released its Agency Rule List for Spring 2018, including some 30 items for the agency to address in the near future. Among those items was the Dodd-Frank Rule on Disclosure of Hedging by Employees, Officers, and Directors.
Commerce Secretary Ross Expresses Support for Export-Import Bank: Speaking before a Senate Appropriations panel, Commerce Secretary Wilbur Ross sought to emphasize his support for the Export-Import Bank, which has been hamstrung by having no current members on its board of directors. Secretary Ross described the bank as “important” in creating an equal playing field with our economic competitors, including China, saying “One of the ways that China is competing against us, particularly in the less-developed countries, is with the financing from the AIIB, their export bank. So I’m keenly aware that the absence of a functioning Ex-Im Bank that can make decisions more than $10 million on a loan is an important thing.”
House Appropriations Recommends Small Budget Increase for CFTC: The House Appropriations Committee has recommended the modest increase in funding of US$6M for the CFTC. This amount falls short of what the agency had indicated it needed to keep up with developments, after having had its funding remain largely flat for the last few years.
COMINGS AND GOINGS AT THE AGENCIES
SEC Commissioner Piwowar to Depart in July: Commissioner Piwowar, who joined the SEC in 2013, confirmed this week that he does not intend to remain at the SEC beyond the official end of his term in June. His last day will be July 7. Chairman Jay Clayton released a statement praising him “for emphasizing the importance of economic analysis in the agency’s efforts, and for raising the level of involvement and rigor of the Commission’s analysis in matters ranging from rulemaking to enforcement.”
Senate Minority Leader Schumer Recommends Martin Gruenberg for Vice Chairman Post at FDIC: Senate Minority Leader Chuck Schumer (D-NY) has reportedly recommended that Martin Gruenberg be nominated for Vice Chair at the FDIC. Gruenberg’s tenure as Chairman ended in 2017, but has continued to lead the agency while President Trump’s nominee, Jelena McWilliams, remains pending before the Senate.
Adam Lerrick Withdraws as Nominee for Treasury Position: Adam Lerrick has withdrawn from consideration to be assistant Treasury secretary for international finance. His nomination had been pending for over a year, having been announced in March of 2017. Members of the Senate Finance Committee were reported to have had concerns over his relationship with the Argentine Bond Restructuring Agency, where he had previously served as lead negotiator.
OTHER NOTEWORTHY ITEMS
Sen. Sherrod Brown Sends Letters to Major Banks: Senator Sherrod Brown (D-OH) sent letters to six major banks last week, criticizing them for failing to reinvest in American workers following passage of the Tax Cuts and Jobs Act, saying “Though banks are among the biggest winners from the recent partisan tax bill and ongoing unraveling of financial protections, firms . . . continue to view workers as just another cost to be cut to further juice profits. Meanwhile, executives and shareholders are enjoying record compensation packages and stock buybacks.”
Federal Student Loan Interest Rates to Rise: For a second year in a row, interest rates on federal student loans are set to rise. For undergraduate loans, the rate will go from 4.45 percent to 5.045 percent. For graduate loans, the rate will go from 6 percent to 6.595 percent. For PLUS loans, the rate will change from 7 percent to 7.595 percent. The increase will be effective July 1, and will not affect existent student loans.