THE BIG PICTURE
On Monday, President Trump released his budget proposal, outlining his priorities and calling for a 5% cut in overall domestic spending while allocating US$8.6B for a border wall. Among the items on the chopping block – the SEC’s reserve fund, which the agency uses for long-term tech improvements, a reduction of HUD funding by 16.4%, including cuts to Community Development Block Grants and the HOME Investment Partnerships Program, as well as a 31% cut to the EPA’s budget and a restructuring of the CFPB.
On Wednesday, the President’s former campaign chairman Paul Manafort was sentenced to 43 months in prison by a federal judge in the District of Columbia, a portion of which will be served concurrently with the 47-month sentence he received last week in Virginia. Moments after the sentencing, Manhattan District Attorney Cyrus Vance announced that Mr. Manafort had been indicted on 16 counts of mortgage fraud and falsifying records, saying “no one is above the law in New York.”
President Trump signed his first veto on Friday, rejecting Congress’s efforts to block his national emergency declaration which authorized funds for a wall on the Southern border. On Thursday, the Senate passed the resolution by a vote of 59-41, with 12 Republicans breaking rank and joining the Democrats in a rare rebuke of the President. While the House passed the measure last month, neither chamber was able to pass the resolution of disapproval by a veto-proof two-thirds majority.
Other highlights of last week include:
- Former Congressman and Senate Candidate from Texas Beto O’Rourke announced his campaign for the Presidency on Thursday. Speculation continues to swirl around former Vice President Joe Biden, who has not yet formally announced a decision.
- On Monday the Democratic National Committee announced the selection of Milwaukee, Wisconsin as the site for their 2020 presidential convention.
- Following the resignation of FDA Commissioner Scott Gottlieb earlier this month, the President announced on Tuesday that he had tapped National Cancer Institute Director Ned Sharpless to serve as the acting commissioner.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Preparing for the Storm: Reauthorization of the National Flood Insurance Program: On Wednesday, the full Committee held a hearing to discuss the future of the National Flood Insurance Program. They considered four draft pieces of legislation (1) H.R. __, “Waters_009”; (2) H.R. __, “Maj_Mitigation”; (3) H.R. __, “Maj_Mapping”; and (4) H.R. __, “National Flood Insurance Program Administrative Reform Act of 2019.” Chairwoman Waters committed to a bipartisan approach, and pledged to work closely with Ranking Member McHenry on a long-term reauthorization.
- Maria Cox Lamm, South Carolina Department of Natural Resources, on behalf of the Association of State Flood Plain Managers
- Christopher Heidrick, Heidrick & Company Insurance and Risk Management Services, LLC, on behalf of the Independent Insurance Agents and Brokers of America
- Velma Smith, Senior Officer, The Pew Charitable Trusts
- Mabél Guzmán, Broker, @properties, on behalf of the National Association of Realtors
- Collin O’Mara, President and CEO, National Wildlife Federation, on behalf of the SmarterSafer Coalition
- Raymond J. Lehmann, Director of Finance, Insurance and Trade Policy, Street Institute
Promoting Corporate Transparency: Examining Legislative Proposals to Detect and Deter Financial Crime: On Wednesday, the Subcommittee on National Security, International Development and Monetary Policy held a hearing to consider legislative proposals to detect and deter financial crime, including: H.R. 389, “Kleptocracy Asset Recovery Rewards Act”; HR.____, “Corporate Transparency Act of 2019” (Draft); H.R.____, “To make reforms to the Federal Bank Secrecy Act and anti-money laundering laws” (Draft).
- Jacob Cohen, Former Director, Office of Stakeholder Engagement, FinCEN
- Dennis M. Lormel, President & CEO, DML Associates, LLC
- Amit Sharma, CEO, FinClusive
- Gary Shiffman, Ph.D., Founder and Chief Executive Officer, Giant Oak, Inc.
Putting Investors First? Examining the SEC’s Best Interest Rule: On Thursday, the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets held a hearing to consider the SEC’s proposed “best interest” rule. Rep. Carolyn Maloney criticized the proposal as “still far too weak” and urged the SEC to strengthen it “so that retail investors get the protections they need and deserve.”
- Susan MacMichael John, Chair, Certified Financial Planner Board of Standards, Inc.
- Dina Isola, Investment Advisor Representative, Ritholtz Wealth Management
- Barbara Roper, Director of Investor Protection, Consumer Federation of America
- Lee Baker, President, AARP Georgia State
- The Honorable Harvey L. Pitt, Chief Executive Officer, Kalorama Partners
SENATE BANKING COMMITTEE
Executive Session: On Tuesday, the Committee met in Executive Session to consider the nominations below, ultimately advancing all three.
- Mr. Jeffrey Nadaner, to be an Assistant Secretary of Commerce, Department of Commerce was advanced by a vote of 25-0.
- Ms. Claudia Slacik, to be a Member of the Board of Directors of the Export-Import Bank was advanced by a vote of 23-2.
- The Honorable Thelma Drake, to be Federal Transit Administrator, Department of Transportation by a vote of 24-1.
The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress: On Tuesday, the Committee held a hearing to receive the CFPB Director’s semi-annual report. Ms. Kraninger faced toughed questioning from Ranking Member Sherrod Brown (D-OH) over the continued employment of controversial associate director Eric Blankenstein at the agency. Democrats on the panel expressed their disapproval of the agency’s decision to suspend MLA examinations, calling it a “dreadful error.” Senator Elizabeth Warren, who championed the creation of the agency, suggested Ms. Kraninger should “do your job or resign.”
- The Honorable Kathleen L. Kraninger, Director, Consumer Financial Protection Bureau
Financial Stability Oversight Council Nonbank Designations: On Thursday, the Committee held a hearing to receive testimony on the Financial Stability Oversight Council, or FSOC, nonbank designation process. Ranking Member Sherrod Brown (D-OH) argued that “we should be strengthening FSOC, giving it more authority to address risks, and making sure it has the staff and resources to protect Americans’ savings and homes from financial crisis.”
- Mr. Douglas Holtz-Eakin, President, American Action Forum
- Mr. Paul Schott Stevens, President and CEO, Investment Company Institute
- Professor Jeremy C. Kress, Assistant Professor of Business Law, University of Michigan Ross School of Business
Nomination of Heath Tarbert: On Wednesday, the Senate Agriculture Committee held a hearing to consider the nomination of Heath Tarbert to serve as the next Chairman of the CFTC. Dr. Tarbert pledged to fight to protect U.S. oversight authority from the EU’s EMIR saying “our clearinghouses and exchanges here in the U.S. need to be exclusively supervised and regulated by U.S. regulators” and stressing the importance of having “jurisdiction and sovereignty to regulate our own markets.”
- Dr. Heath P. Tarbert, Nominee to be Chairman and a Commissioner of the Commodity Futures Trading Commission
ON THE FLOOR
H.R. 758: On Monday, the House passed H.R. 758, the Cooperate with Law Enforcement Agencies and Watch Act of 2019, by a vote of 404-7. The bill would provide law enforcement more access to the critical information it needs to combat terrorism and financial crimes, by giving a safe harbor for banks that keep customer accounts open at law enforcement’s request.
H.R. 974: On Monday, the House passed H.R. 974, the Federal Reserve Testimony Clarification Act, by voice vote. The bill would require the Vice Chairman for Supervision of the Federal Reserve Board to provide a written testimony on board efforts regarding the supervision of certain financial institutions, and clarified that if the position is vacant, the Chair of the Board shall appear and provide testimony on supervision and regulation efforts.
H.R. 1414: On Monday, the House passed H.R. 1414, the FinCEN Improvement Act of 2019, by voice vote. The bill would increase coordination between FinCEN and the financial intelligence units of other countries on cryptocurrency initiatives.
H.R. 1122: On Tuesday, the House passed H.R. 1122, the Housing Choice Voucher Mobility Demonstration Act, by a vote of 387-22. The bill would help improve services and flexibility for Americans who are receiving housing assistance.
H. Con. Res. 24: On Thursday, the House voted 420-0 to pass a resolution calling on DOJ to release the final report from Special Counsel Robert Mueller’s investigation. House Financial Services Committee Chairwoman Maxine Waters (D-CA) advocated for full transparency, arguing that the “gravity and magnitude of this investigation” necessitates “the public release of the … findings.”
H. Res. 206: On Thursday, the House passed Chairwoman Waters’ resolution acknowledging that the lack of sunlight and transparency in financial transactions and corporate formation poses a threat to our national security and our economy’s security and supporting efforts to close related loopholes, by voice vote.
NCUA: On Thursday, the Senate confirmed by voice vote the nominations of Rodney Hood and Todd Harper to serve on the National Credit Union Administration’s board.
LEGISLATION INTRODUCED AND PROPOSED
Fraud Compensation: On Thursday, Senators Mark Warner (D-VA) and John Kennedy (R-LA) introduced the Securities Fraud Enforcement and Investor Compensation Act, which would give the SEC power to seek restitution for investors harmed by securities fraud. The bill would give the SEC a broader range of tools to seek compensation for investors who have lost money to Ponzi schemes and other investment scams, and would also extend the window of time for which the SEC can pursue a claim on an investor’s behalf from five years to ten. The bill is in response to the June 2017 Supreme Court decision in Kokesh v. SEC where the Court ruled the SEC only has five years to bring disgorgement claims against bad actors to try to compensate harmed investors.
Carbon Monoxide Detectors: On Tuesday, Senator Kamala Harris (D-CA) introduced S.755, a bill that would require carbon monoxide detectors to be placed in public housing. In a statement, Sen. Harris said that, “Housing is a human right. The federal government has an obligation to ensure that residents of public housing can raise their families in a safe and healthy environment.”
Carried Interest: On Wednesday, Rep. Bill Pascrell (D-NJ) introduced H.R. 1735, the Carried Interest Fairness Act of 2019, legislation that would eliminate the so-called “carried interest” loophole in the tax code.
THIS WEEK ON THE HILL
No hearings scheduled during recess period.
Fed Governor Discusses Idea for Improving the Community Reinvestment Act: On Tuesday, Federal Reserve Governor Lael Brainard discussed suggestions for improving the Community Reinvestment Act. She suggested the definition of the “assessment area” of a bank’s community “could be flexible enough to allow banks that conduct most or all of their retail activity online to identify states in which they have a significant level of deposits, lending, or other banking activity.” Later in the week, she emphasized the importance of a unified approach between the Fed, OCC, and FDIC to “ensure that the CRA is implemented as consistently as possible both within and across the agencies.”
Regulators Adopt Interim Final Rule to Facilitate Transfers of Legacy Swaps: On Friday, the Fed, FCA, FDIC, FHFA, and OCC acted to ensure that qualifying swaps may be transferred from a UK entity to an affiliate in the EU or the United States without triggering new margin requirements. The action is in response to the possibility of a non-negotiated withdrawal of the UK from the EU.
CFTC Announces Consent Agreement with Foreign Trading Platform: On Monday, the CFTC announced that a federal court had entered a Consent Order resolving a CFTC action against 1pool Ltd., located in the Marshall Islands, and its chief executive officer and owner for illegally offering retail commodity transactions that were margined in bitcoin, failing to register as a futures commission merchant, and failing to meet its supervisory duties by not having the required anti-money laundering procedures in place. The Order imposes a civil monetary penalty of US$175K and requires the disgorgement of US$246K of gains. The Order also requires the defendants to pay to all known U.S. customers the bitcoin held by defendants in U.S. customers’ accounts and includes the defendants’ certification that they have repaid to U.S. customers approximately 93 bitcoins, valued at approximately US$570K.
CFTC to Hold an Open Commission Meeting on March 25: On Friday, CFTC Chairman Christopher Giancarlo announced that the CFTC will hold an open meeting on Monday, March 25 to consider (1) comparability determinations for Japan and Australia, (2) final rules on segregation of assets held as collateral in uncleared swap transactions, the de minimis exception to the swap dealer definition and financial surveillance examination program requirements for self-regulatory organizations, and (3) Brexit-related updates.
SEC Announces Fintech Forum to Discuss Distributed Ledger Technology and Digital Assets: On Friday, the SEC announced that its staff will host a public forum focusing on distributed ledger technology (DLT) and digital assets on May 31, 2019. The forum is being organized by the agency’s Strategic Hub for Innovation and Financial Technology (FinHub). Panelists will explore such topics as initial coin offerings, digital asset platforms, DLT innovations, and how these technologies impact investors and the markets.
FDIC Chairwoman Criticizes Foreign Fund Restrictions: In a speech on Monday, FDIC Chairwoman Jelena McWilliams said the Volcker rule “rule is overly complex and, frankly, impractical to implement” for various types of foreign funds, and indicated reform was a priority.
Treasury Sanctions Russia over Continued Aggression in Ukraine: On Friday, Treasury’s OFAC designated six Russian individuals and eight entities in response to Russia’s continued and ongoing aggression in Ukraine. The action targeted individuals and entities playing a role in Russia’s unjustified attacks on Ukrainian naval vessels in the Kerch Strait, the purported annexation of Crimea, and backing of illegitimate separatist government elections in eastern Ukraine. These actions complemented sanctions also taken by the EU and Canada, and underscore the strength and commitment of the transatlantic partnership to counter Russia’s continued destabilizing behavior and malign activities.
Treasury Sanctions Russia-based Bank Attempting to Circumvent U.S. Sanctions on Venezuela: On Monday, Treasury’s OFAC designated Evrofinance Mosnarbank, a Moscow-based bank that is jointly owned by Russian and Venezuelan state-owned companies. Secretary Steven Mnuchin said the move “demonstrates that the United States will take action against foreign financial institutions that sustain the illegitimate Maduro regime and contribute to the economic collapse and humanitarian crisis plaguing the people of Venezuela.”
Consumer Financial Protection Bureau Announces 18th Edition of Supervisory Highlights: The Consumer Financial Protection Bureau released its 18th edition of Supervisory Highlights. The report covers Bureau supervision activities generally completed between June 2018 and November 2018, and includes examination findings in the areas of automobile loan servicing, deposits, mortgage servicing, and remittances.
COMINGS AND GOINGS AT THE AGENCIES
Jason Burt Named Associate Regional Director for Enforcement in SEC’s Denver Office: The SEC announced on Thursday that Jason Burt has been named the Associate Regional Director for enforcement in the SEC’s Denver Regional Office. Mr. Burt first joined the SEC’s Division of Enforcement as a staff attorney in 2007.
OTHER NOTEWORTHY ITEMS
McCarthy Advocates for Blockchain Technology: During the inaugural hearing of the Select Committee on the Modernization of Congress, House Minority Leader Kevin McCarthy (R-CA) argued in favor of adopting blockchain technology as part of the legislative process, saying “Blockchain is changing and revolutionizing the security of the financial industry . . . why wouldn’t we institute blockchain on our own to be able to check the transparency of our own legislative documents.”
Bipartisan Group of Senators Announce Support for Robocall Bill: A bipartisan group of ten Senators signed on as co-sponsors of the Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act. The bill was initially introduced by Senators John Thune (R-SD) and Ed Markey (D-MD) and is intended to deter criminal robocall violations and improve enforcement of section 227(b) of the Communications Act of 1934.
Basel Committee Issues Warning on Crypto Assets: On Wednesday, the Basel Committee issued a warning regarding crypto assets, saying “the continued growth of crypto asset trading platforms and new financial products related to crypto assets has the potential to raise financial stability concerns and increase risks faced by banks.” The group stressed the importance of implementing risk management processes.