THE BIG PICTURE
On Monday, the House Judiciary Committee launched a wide-ranging investigation into various allegations of misconduct surrounding the President, sending letters to 81 individuals and entities with ties to President Trump’s campaign, business, family and administration requesting documents and information. The President criticized the probe, calling it a “witch hunt” and “a disgrace to our country.”
Former Colorado Governor John Hickenlooper announced his campaign for the presidency on Monday, joining an increasingly crowded Democratic field. Despite the diverse set of candidates who have already announced, there are a few big names that are opting out of the 2020 race. Among those who announced they were not throwing their hats in the ring for 2020 last week - former New York Mayor Mike Bloomberg, Oregon Senator Jeff Merkley, Ohio Senator Sherrod Brown, and Hillary Clinton.
In a surprising reversal, the Justice Department announced it had dropped the corruption charges against former Illinois Republican Congressman Aaron Schock as part of a deferred prosecution agreement. Mr. Schock resigned from Congress in 2015 amid a scandal over his lavish spending while in office, including a remodel of his office inspired by the television series Downton Abbey. In 2016 he was indicted on 24 felony counts of wire fraud and misusing taxpayer and campaign funds. The terms of the deal require Mr. Schock to repay US$42K to the IRS and US$68K in campaign funds.
Paul Manafort, President Trump’s former campaign chairman and longtime lobbyist, was sentenced to 47 months in prison by a federal judge in Virginia, well below the sentencing guidelines. Manafort will also be sentenced Wednesday in DC on separate charges that he served as an unregistered foreign agent for Ukraine, laundered money and tampered with a witness.
Other highlights of last week include:
- During a hearing on sexual assault in the military on Wednesday, Senator Martha McSally (R-AZ) revealed for the first time publicly that she had experienced sexual assault while in the Air Force.
- Following a story detailing close ties between Fox News and President Trump published in the New Yorker last week, the DNC announced that they would not allow the network to host a presidential primary debate.
- Head of the FDA, Scott Gottlieb, announced his resignation on Tuesday. During his tenure, he made tobacco and vaping use prevention his signature issue.
- White House communications director Bill Shine has resigned from his position and will join President Donald Trump's reelection campaign. Shine, a former co-president of Fox News, joined the Trump administration last July but has maintained a low profile since then.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Markup of “FY19 Budget Views and Estimates”: On Wednesday, the full Committee met to consider the Views and Estimates for the Fiscal Year 2020 Budget Resolution.
Hearing on “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau”: On Thursday the full Committee held a hearing to receive the testimony of CFPB Director Kathy Kraninger regarding the Bureau’s Spring 2018 Semi-Annual Report to the Congress. The Director faced tough questioning from Chairwoman Waters, who questioned whether she would “restore” the agency’s fair lending office, which was moved into the director’s office as one of former acting director Mick Mulvaney’s first moves. She also signaled that the agency hasn’t closed the door on going further in its efforts to overhaul its payday lending regulations, saying that it is weighing calls to revisit the payments-related portion of those rules. In addition, the Committee considered a discussion draft of Legislation entitled the “Consumers First Act” which would direct Bureau leadership to reverse all anti-consumer actions taken under former acting director Mulvaney’s leadership, particularly to resume examinations to insure lenders are in compliance with the Military Lending Act.
The Honorable Kathy Kraninger, Director, Consumer Financial Protection Bureau
Mr. Hilary Shelton, Director & Senior Vice President for Advocacy and Policy, National Association for the Advancement of Colored People
Ms. Linda Jun, Senior Policy Counsel, Americans for Financial Reform
Ms. Jennifer Davis, Government Relations Deputy Director, National Military Family Association
Mr. Seth Frotman, Executive Director, Student Borrower Protection Center
Mr. Scott Weltman, Managing Shareholder, Weltman, Weinberg & Reis Co., L.P.A.
SENATE BANKING COMMITTEE
No hearings held.
ON THE FLOOR
Election Reform Bill: On Friday, House Democrats passed a sweeping electoral and campaign finance reform bill by a vote of 234-193. The measure, H.R. 1, the “For The People Act,” was championed by Rep. John Sarbanes (D-MD) who served as lead author, and aims to expand voting rights, implement new ethics rules and increase transparency in elections. The bill includes provisions enable automatic voter registration, strengthen resources to stave off foreign threats on elections and would make Election Day a national holiday for federal workers.
Anti-Semitism Resolution: On Thursday, the House voted 407-23 on a resolution that condemned hate, in an indirect rebuke of Freshman Rep. Ilhan Omar (D-MN) who has been embroiled in controversy over a series of tweets that some felt contained anti-semitic tropes. All of the no votes came from the Republican side of the aisle, including Conference Chairwoman Liz Cheney of Wyoming.
LEGISLATION INTRODUCED AND PROPOSED
FinTech: On Monday, Congressmen David Scott (D-GA) and Barry Loudermilk (R-GA) introduced H.R. 1491, the FINTECH Act of 2019, which would mandate federal financial regulatory harmonization and establish a Fintech Council within the Treasury Department to serve as a single point of entry into the federal financial regulatory system. “As startup companies develop new technologies that help consumers take more control of their finances, they risk an onslaught of government agencies rushing in with new regulations,” Rep. Loudermilk said in a statement. “The mad dash for regulatory control often results in conflicting regulations from multiple agencies, which stifles innovation, ultimately harming consumers."
Pot Banking Bill: On Thursday, Congressman Ed Perlmutter (D-CO) and Denny Heck (D-WA) introduced bipartisan legislation designed to shield lenders from federal penalties for transactions with cannabis-related businesses. “The majority of American voters have spoken,” Perlmutter said. “And it's happening whether we act or not.”
THIS WEEK ON THE HILL
Monday, March 11
Legislation to Be Considered Under Suspension of the Rules:
1) H.R. 1122 - Housing Choice Voucher Mobility Demonstration Act of 2019 (Rep. Emanuel Cleaver)
2) H.R. 974 - Federal Reserve Supervision Testimony Clarification Act (Rep. Josh Gottheimer)
3) H.R. 1414 - FinCEN Improvement Act of 2019 (Rep. Jennifer Wexton)
4) H.R. 758 - Cooperate with Law Enforcement Agencies and Watch Act of 2019 (Rep. French Hill)
Tuesday, March 12
Senate Banking Committee “Executive Session” The Committee will meet in Executive Session to consider the nominations of Mr. Jeffrey Nadaner, to be an Assistant Secretary of Commerce, Department of Commerce; Ms. Claudia Slacik, to be a Member of the Board of Directors of the Export-Import Bank; The Honorable Thelma Drake, to be Federal Transit Administrator, Department of Transportation. Immediately following the Executive Session, the Committee will transition to the Consumer Financial Protection Bureau’s Semi-Annual Report to Congress.
Senate Banking Committee hearing entitled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress”: 10:00 in 538 Dirksen Senate Office Building.
Senate Judiciary Committee hearing entitled “GDPR & CCPA: Opt-ins, Consumer Control, and the Impact on Competition and Innovation”: 10:00 AM in 226 Dirksen Senate Office Building.
Wednesday, March 13
House Financial Services Committee hearing entitled “Preparing for the Storm: Reauthorization of the National Flood Insurance Program”: 10:00 AM in 2128 Rayburn House Office Building.
House Financial Services Committee (Subcommittee on National Security, International Development and Monetary Policy) hearing entitled “Promoting Corporate Transparency: Examining Legislative Proposals to Detect and Deter Financial Crime”: 2:00 PM in 2128 Rayburn House Office Building.
Senate Agriculture Committee hearing entitled “Nomination of Heath Tarbert”: 10:00 AM in 328A Russell Senate Office Building.
Thursday, March 14
Senate Banking Committee hearing entitled “Financial Stability Oversight Council Nonbank Designations”: 10:00 in 538 Dirksen Senate Office Building.
House Financial Services Committee (Subcommittee on Investor Protection, Entrepreneurship and Capital Markets) hearing entitled “Putting Investors First? Examining the SEC’s Best Interest Rule”: 9:30 AM in 2128 Rayburn House Office Building.
Financial Stability Oversight Council Proposes Changes to Nonbank Designations Guidance: On Wednesday, the FSOC voted unanimously to issue for public comment proposed interpretive guidance regarding nonbank financial company designations. The proposed guidance would implement an activities-based approach to identifying and addressing potential risks to financial stability. “Today’s proposal would make significant improvements to how the Council identifies, assesses, and responds to potential risks to U.S. financial stability,” said Treasury Secretary Steven Mnuchin. The proposal was criticized by Sen. Sherrod Brown (D-OH), Ranking Member of the Senate Banking Committee, who said it would “undermine important post-crisis financial safeguards” and said “FSOC is no longer protecting financial stability or taxpayers.”
Federal Reserve Board Votes to Keep Countercyclical Capital Buffer at 0%: On Wednesday, the Federal Reserve announced that it had voted to affirm the Countercyclical Capital Buffer at the current level of 0 percent. Fed Governor Lael Brainard was the only dissenting vote.
Federal Reserve Governor Warns of Risk of Economic Slowdown: Speaking at Princeton University on Thursday, Federal Reserve Governor Lael Brainard warned that softening spending and sentiment “could be a harbinger of some slowing in the underlying momentum of domestic demand.” This could signal that gradual interest rate hikes could be halted as “the best way to safeguard the gains we have made on jobs and inflation is to navigate cautiously on rates.”
Federal Reserve to Limit Use of “Qualitative Objection” in Comprehensive Capital Analysis and Review Exercise: The Federal Reserve Board on Wednesday announced that it will limit the use of the "qualitative objection" in its Comprehensive Capital Analysis and Review (CCAR) exercise, effective for the 2019 cycle. The changes eliminate the qualitative objection for most firms due to the improvements in capital planning made by the largest firms.
CFPB Issues Advance Notice of Proposed Rulemaking on Property Assessed Clean Energy Financing:On Monday, the CFPB issued an Advance Notice of Proposed Rulemaking (ANPR) on residential Property Assessed Clean Energy (PACE) financing. “Today’s action is the next step in the Bureau’s efforts to implement the Economic Growth, Regulatory Relief and Consumer Protection Act as expeditiously as possible,” said CFPB Director Kathleen Kraninger. “I look forward to reviewing the comments in response to the questions we are asking to facilitate the required rulemaking.”
FDIC Unveils New Resources during National Consumer Protection Week 2019: In observance of National Consumer Protection Week (NCPW), March 3–9, the FDIC on Monday unveiled new resources to help consumers understand their rights and make well-informed decisions about money. The FDIC has added a new online Information and Support Center to the agency's existing educational resources, also included is a new FDIC Knowledge Center, which provides easy-to-find answers to questions about banking and lending.
SEC Commissioner Criticizes Share Buybacks: SEC Commissioner Robert Jackson released the findings of his investigation into share buybacks in response to an inquiry from Senator Chris Van Hollen (D-MD). Commissioner Jackson found that “buybacks are used as a way to maximize executive pay — not [to] do the right thing for companies,” and linked the practice to lower stock prices.
CFTC Releases Enforcement Advisory on Self Reporting and Cooperation for CEA Violations Involving Foreign Corrupt Practices: The CFTC’s Division of Enforcement released an advisory to provide guidance on the Division’s new cooperation and self-reporting policy in which it may recommend a resolution with no civil monetary penalty. The new policy “applies to companies and individuals not registered (or required to be registered) with the CFTC.”
CFTC Chairman Discusses Technology, Markets and Policy: On Wednesday, the Chairman of the CFTC Christopher Giancarlo delivered a speech at the Annual DC Blockchain Summer where he discussed “The Digital Trinity: Technology, Markets and Policy.” He jokingly referred to himself as “Crypto Dad” and termed Commissioner Hester Pierce his “crypto spouse.” He commented on the benefits blockchain technology could have had during the 2008 financial crisis, saying “what a difference it would have made a decade ago if blockchain technology had been the informational foundation of Wall Street’s derivatives exposures. At a minimum, it would certainly have allowed for far prompter, better-informed, and more calibrated regulatory intervention instead of the disorganized response that unfortunately ensued.”
SEC Investment Adviser Exams Likely Down in 2019: SEC Office of Compliance Inspections and Examinations Deputy Director Daniel Kahl revealed that due to the shutdown, fewer investment advisers will see SEC examiners. He noted that it was unlikely that the SEC would be able to match or exceed the 17 percent coverage of advisers the agency achieved in fiscal 2018, saying “This year we’ll obviously very likely take a hit as a result of the circus of the government shutdown.”
SEC's Clayton Explores Setting Limits on Market Data Feeds: SEC Chairman Jay Clayton said on Friday that the agency is looking to reform the current two-tiered system for access to data wherein large firms are able to obtain data faster, and propose to make lower-cost data more readily available. Mr. Clayton also said the agency would explore the question of whether stock data “needs to be upgraded to better meet the needs of investors and market participants in today’s modern markets.”
SEC to Launch Major Review of Equity Trading Rules: Speaking at a forum on Friday, SEC Chairman Jay Clayton said that the agency was beginning a broad review of rules that have underpinned the trading markets since 2005. “As technology and business practices evolve, so must our regulatory framework. There are many areas that the commission got right, some that may have missed their mark, and some that were positive in 2005 but may no longer be so.”
COMINGS AND GOINGS AT THE AGENCIES
FDIC General Counsel to Depart at the End of the Month: The FDIC announced on Monday that Charles Yi, the agency’s top lawyer, would be leaving at the end of March. In a statement Chairwoman Jelena McWilliams praised his “steady focus on the FDIC’s mission and mandate.”
Mark Brown Appointed Head of Federal Student Aid Office: Education Secretary Betsy DeVos announced the appointment of Air Force general Mark Brown to serve as chief operating office of Federal Student Aid. He joined the Education Department in October following a 32 year military career. DeVos said that, “We are thrilled to have Mark taking up the mantle of modernization” at Federal Student Aid.
HUD Secretary Carson Announces Plan to Leave after First Term: On Monday, HUD Secretary Ben Carson said in an interview that he planned to leave office following President Trump’s first term, saying “I would be interested in returning to the private sector, because I think you have just as much influence — maybe more — there."
OTHER NOTEWORTHY ITEMS
Senate Report Details Equifax Failures: A report released by the Senate Homeland Security Investigations Subcommittee on Wednesday detailed multiple recurring failures by Equifax which contributed to the 2017 data breach which affected millions. Sen. Tom Carper (D-DE) said that for years Equifax “neglected cybersecurity and repeatedly ignored potential vulnerabilities.”
White House Launches National Quantum Coordination Office: On Monday, the White House Office of Science and Technology Policy (OSTP) announced the launch of the National Quantum Coordination Office, which will coordinate efforts across government agencies. “There’s no better time and place to be engaging in quantum R&D than right now in the United States,” said Kelvin Droegemeier, Director of OSTP, adding that “our Nation is on the verge of incredible breakthroughs in this emerging technology.”
Democratic Senators Criticize SEC Settlement: On Monday, Democratic Senators Elizabeth Warren (MA), Sherrod Brown (OH), Dick Durbin (IL) and Richard Blumenthal (CT) wrote to SEC Chairman Jay Clayton demanding an explanation of the agency’s settlement with a for-profit college which they termed “shocking” in its “failure to appropriately” hold the institution accountable. In the letter they said “This weak settlement by the SEC is an insult to the victims,” adding “It neither holds executives truly accountable for their misdeeds nor deters future bad behavior.”
Industry Association Calls on SEC to Strengthen Rules for Shareholder Advisors: On Tuesday, the National Association of Manufacturers called on the SEC to strengthen regulations of advisory firms that make recommendations on how shareholders should decide their vote on a range of boardroom issues, saying they should be required to register with the SEC and provide companies draft copies of their recommendations.
France’s Proposed Digital Tax Draws Criticism from Rep. Kevin Brady: Congressman Kevin Brady (R-TX) threatened to retaliate against France’s newly proposed 3% tax on tech giants, saying, “If France goes through with this tax, it would result in double taxation and violate longstanding norms, spurring a reaction in the United States that could very well include a review of American tax and regulatory policies to ensure a level playing field in global markets.”
Klobuchar, Scott Launch Bipartisan Senate Entrepreneurship Caucus: U.S. Senators Amy Klobuchar (D-MN) and Tim Scott (R-SC) launched the bipartisan Senate Entrepreneurship Caucus to address the most pressing issues facing entrepreneurs and serve as a forum for collaboration and coordination. Startup rates have recently fallen to near 30-year lows, threatening the fundamentals that lead to sustained economic growth—the caucus will work to diagnose the causes of this “startup slump” and formulate a comprehensive strategy to counteract it. The caucus will also serve as a clearinghouse for proposals from interested groups who wish to share their ideas with policymakers who are committed to supporting our nation’s entrepreneurs.
Philadelphia Bans Cashless Stores: Following Massachusetts’ lead, lawmakers in Philadelphia passed a ban on cashless stores and restaurants. The law will go into effect in July. City Councilman William Greenlee, who championed the measure, described the move towards cashless enterprises as discriminatory towards lower income and marginalized populations.
Denver Announces Blockchain Pilot for Upcoming Election: On Thursday, the city of Denver announced that they would utilize a blockchain system to store and track votes in May’s municipal election that would allow overseas and active-duty military personnel to vote using a blockchain-based smartphone app.