THE BIG PICTURE
The President asserted executive privilege over the unredacted copy of Special Counsel Robert Mueller’s report and any underlying evidence, precluding House Democrats from obtaining the materials and setting the stage for a court battle. House Judiciary Chairman Jerry Nadler described the decision as an “escalation in the Trump administration’s blanket defiance of Congress’s constitutionally mandated duties.” The move came just hours before the Committee was set to vote on holding Attorney General Bill Barr in contempt of Congress over his failure to comply with the panel’s subpoena for the unredacted report. The panel moved forward, voting 24-16 along party lines to hold the AG in contempt.
Further tensions between the executive and legislative branch were evident on Monday, when after several prior delays, Treasury Secretary Steven Mnuchin formally rejected the House Ways and Means Committee’s request for six years of the President’s personal and business tax returns. Secretary Mnuchin said in a statement that he had determined the request “lacks a legitimate legislative purpose.” In response, Chairman Richard Neal issued subpoenas for the returns, escalating a dispute that will likely end up in court. Later in the week, White House Counsel Don McGahn declined to comply with a subpoena for documents and testimony from the House Judiciary Committee, following instructions from the White House to disregard the request.
Other highlights of last week include:
- On Monday, the President’s former personal attorney Michael Cohen reported to prison to begin his three-year sentence.
- The President issued an Executive Order imposing sanctions with respect to the iron, steel, aluminum, and copper sectors of Iran on Wednesday.
- The President announced his decision to nominate acting Defense Secretary Pat Shanahan as his nominee for the role on a permanent basis after he was cleared of favoritism charges related to his former employer.
- Trade negotiations with China ended without any concrete agreement, though both described the talks as “constructive” and pledged to continue efforts to reach a compromise.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
“Mark Up”: On Wednesday, the Committee held a markup of five bills and two resolutions, ultimately passing both resolutions and advancing all pieces of legislation to the House.
- A resolution to establish the Task Force on Financial Technology in the Committee on Financial Services was agreed by unanimous consent. The Chair of the task force will be Rep. Stephen Lynch (D-MA), while Rep. French Hill (R-AR) serves as the top Republican.
- A resolution to establish the Task Force on Artificial Intelligence in the Committee on Financial Services was agreed by unanimous consent. The Chair of the task force will be Rep. Bill Foster (D-IL), while Rep. French Hill (R-AR) serves as the top Republican.
- H.R. 1988, the “Protect Affordable Mortgages for Veterans Act of 2019” introduced by Rep. David Scott (D-GA) and Rep. Lee Zeldin (R-NY), advanced by a voice vote.
- H.R. 2409, the “Expanding Access to Capital for Rural Job Creators Act” introduced by Rep. Cindy Axne (D-IA) and Rep. Alex Mooney (R-WV), advanced by a voice vote.
- H.R. 2514, the “Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act of 2019” introduced by Rep. Emanuel Cleaver (D-MO) and Rep. Steve Stivers (R-OH), advanced by a unanimous vote.
- H.R. 2515, “To amend the Securities and Exchange Act of 1934 to amend the definition of whistleblower” introduced by Rep. Al Green (D-TX) and Rep. Bill Huizenga (R-MI), advanced by a voice vote.
- H.R. 2534, the “Insider Trading Prohibition Act of 2019” introduced by Rep. Jim Himes (D-CT), advanced by a voice vote.
Hearing on “A Review of the State of and Barriers to Minority Homeownership”: On Wednesday, the Subcommittee on Housing, Community Development and Insurance held a hearing to review the state of and barriers to minority home ownership, including the consideration of four pieces of draft legislation: (1) H.R. 2162, The “Housing Financial Literacy Act of 2019”; (2) H.R. ____, The “Homeownership for Dreamers Act”; (3) H.R.____, The “TLAIB_013”; (4) H.R.____, The “Making FHA More Affordable Act of 2019.”
- Alanna McCargo, Vice President, Housing Finance Policy, the Urban Institute
- Nikitra Bailey, Executive Vice President, Center for Responsible Lending
- Joseph Nery, Partner, Nery & Richardson LLC and Past President of the National Association of Hispanic Real Estate Professionals (NAHREP), current National Board Member
- Jeffrey Hicks, President, National Association of Real Estate Brokers
- Carmen Castro-Conroy, Managing Counselor, Montgomery County, Housing Initiative Partnership, Inc.
- JoAnne Poole, 2019 Vice Chair, Multicultural Real Estate Leadership Advisory Group, National Association of Realtors
- Joel Griffith, Research Fellow, Financial Regulations, the Heritage Foundation
Committee Update: On Wednesday, Chairwoman Maxine Waters (D-CA) announced Congressman Michael San Nicolas (D-GU) as Vice Chair of the Committee in the 116th Congress. San Nicolas was elected to serve as Vice Chair by Committee Democrats. Del. San Nicolas noted that “as the first Vice Chair of this Committee who is a Delegate of a U.S. Territory, this appointment is a testament to the Committee’s focus on inclusion and openness to new talent.”
SENATE BANKING COMMITTEE
Hearing on “Data Rights and Collection in a Digital Economy”: On Tuesday, the Committee held a hearing focused on data rights in the digital economy, with an eye to protecting Americans’ sensitive personal information. Chairman Mike Crapo (R-ID) was particularly interested in taking a closer look at the European Union’s General Data Protection Regulation and other approaches to data privacy, including the impact on the financial services industry and how companies collect and use information in marketing and decision-making related to credit, insurance, or employment. Ranking Member Sherrod Brown (D-OH) praised the bipartisan push for action, saying “Unlike some issues that we’ve had greater differences on, this is something that we can really do.”
- Mr. Peter Chase, Senior Fellow, The German Marshall Fund of the United States
- Mr. Jay Cline, Privacy and Consumer Protection Leader, Principal, PwC U.S.
- Mr. Maciej Ceglowski, Founder, Pinboard
Hearing on “Review of the FY2020 Budget Request for the CFTC & SEC”: On Wednesday, the Senate Appropriation Committee’s Subcommittee on Financial Services and General Government held a hearing to review the FY2020 budget requests for the CFTC and SEC. The heads of both agencies requested a boost in funding to facilitate increased staffing and to strengthen their cybersecurity capabilities to keep up with rapid technological changes. During his testimony, CFTC Chairman Giancarlo revealed that the agency planned to propose cross-border swaps rules to reduce the risks to the U.S. financial system. SEC Chairman Jay Clayton endorsed a Senate bill, S. 799, which would give the agency additional time to recoup funds from Ponzi schemes and bad actors, supplanting the Supreme Court’s ruling in Kokesh.
- The Honorable J. Christopher Giancarlo, Chairman, U.S. Commodity Futures Trading Commission
- The Honorable Jay Clayton, Chairman, U.S. Securities and Exchange Commission
ON THE FLOOR
Senate Confirms Export-Import Nominees: On Wednesday, the Senate voted to confirm Kimberly Reed as president of the Export-Import Bank, as well as Spencer Bachus and Judith Pryor to serve as board members. The bank had been hamstrung since 2015, lacking the quorum needed to approve deals valued at greater than US$10M. Senate Banking Committee Ranking Member Sherrod Brown (D-OH) applauded the vote, saying it was “an important step forward” but argued there was more work to do, and urged the confirmation of “Claudia Slacik who would bring valuable experience to the Board.”
House Passes Disaster Aid Bill: On Friday, the House passed a US$17B supplemental disaster aid package by a vote of 257-150. The President had urged House Republicans to oppose the measure, criticizing what he viewed as excessive funding for Puerto Rico.
LEGISLATION INTRODUCED AND PROPOSED
H.R. 2545: Rep. Elijah Cummings (D-MD) introduced H.R. 2545, which would create an Office of Cybersecurity at the Federal Trade Commission for supervision of data security at consumer reporting agencies, to require the promulgation of regulations establishing standards for effective cybersecurity at consumer reporting agencies, to impose penalties on credit reporting agencies for cybersecurity breaches that put sensitive consumer data at risk. Sen. Elizabeth Warren (D-MA) introduced a companion bill, S.1336 in the Senate.
H.R. 2578: House Financial Services Committee Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC) introduced H.R. 2578, which would extend the National Flood Insurance Program’s authorization through Sept. 30. In a statement, they described the measure as “prevent[ing] harm to homeowners and the housing market while also providing time to reach bipartisan consensus on much-needed reforms to the program,” and pledged that they “remain committed to a long-term bipartisan flood insurance reauthorization bill and will continue to work together toward that goal.”
H.R. 2572: Rep. Bill Foster (D-IL) introduced H.R. 2572, which would amend the Federal Deposit Insurance Act to clarify the definition of a deposit broker.
H.R. 2613: Rep. Anthony Gonzalez (R-OH) introduced H.R. 2613, which would require the Director of the Financial Crimes Enforcement Network to carry out a study on the use of emerging technologies within the Financial Crimes Enforcement Network.
H.R. 2650: Rep. Donald Payne (D-NJ) introduced H.R. 2650, which would prohibit retail businesses from refusing cash payments.
H.R. 2684: Rep. Mark Takano (D-CA) introduced H.R. 2684, which would require the Federal Insurance Office of the Department of the Treasury to conduct a study to identify disparities between communities in auto insurance costs and payout amounts based on the predominant racial makeup of such communities.
Loan Shark Prevention Act: Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez are teaming up to introduce a measure dubbed the “Loan Shark Prevention Act” which would establish a “national usury rate” of 15 percent on credit cards and other consumer loans.
THIS WEEK ON THE HILL
Wednesday, May 15
House Financial Services (Subcommittee on Investor Protection, Entrepreneurship and Capital Markets) Hearing on “Promoting Economic Growth: A Review of Proposals to Strengthen the Rights and Protections for Workers”: 10:00 AM in 2128 Rayburn House Office Building.
House Financial Services (Subcommittee on National Security, International Development and Monetary Policy) Hearing on “Assessing the Use of Sanctions in Addressing National Security and Foreign Policy Challenges”: 2:00 PM in 2128 Rayburn House Office Building.
Senate Banking Committee Hearing on “Oversight of Financial Regulators”: 9:30 AM in 538 Dirksen Senate Office Building.
Thursday, May 16
House Financial Services Hearing on “Oversight of Prudential Regulators: Ensuring the Safety, Soundness and Accountability of Megabanks and Other Depository Institutions”: 10:00 AM in 2128 Rayburn House Office Building.
SEC Proposes Actions to Improve Cross-Border Application of Security-Based Swap Requirements: On Friday, the SEC proposed a package of rule amendments and interpretive guidance to improve the framework for regulating cross-border security-based swaps transactions and market participants. The agency argued that the proposals are intended to improve the regulatory framework by pragmatically addressing implementation issues and efficiency concerns, and in some cases further harmonizing the regulatory regime governing security-based swaps administered by the Commission with the regulatory regime governing swaps administered by the CFTC. “These proposals preserve important investor and market protections, while at the same time addressing several of the practical implementation challenges that have been identified,” said SEC Chairman Jay Clayton.
SEC Proposes Amendments Tailor the Accelerated and Large Accelerated Filer Definitions: On Thursday, the SEC voted to propose amendments to the accelerated filer and large accelerated filer definitions. The proposed amendments would reduce costs for certain lower-revenue companies by more appropriately tailoring the types of companies that are categorized as accelerated and large accelerated filers while maintaining effective investor protections. As a result of the proposed amendments, smaller reporting companies with less than US$100M in revenues would not be required to obtain an attestation of their internal control over financial reporting from an independent outside auditor. SEC Chairman Jay Clayton said that “Investors in these lower-revenue companies will benefit from more tailored control requirements. Many of these smaller companies – including biotech and health care companies – will be able to redirect the savings into growing their companies by investing in research and human capital.”
Consumer Financial Protection Bureau Proposes Regulations to Implement the Fair Debt Collection Practices Act: On Tuesday, the CFPB issued a proposed rule to implement the Fair Debt Collection Practices Act. The agency argued the proposal would provide consumers with clear protections against harassment by debt collectors and straightforward options to address or dispute debts. The Bureau said the proposed rule would set clear, bright-line limits on the number of calls debt collectors may place to reach consumers on a weekly basis; clarify how collectors may communicate lawfully using newer technologies; and require collectors to provide additional information to consumers to help them identify debts and respond to collection attempts. House Financial Services Committee Chairwoman Maxine Waters (D-CA) criticized the proposal, saying “This proposed rule does not come close to protecting consumers from predatory behavior. Instead, it allows debt collectors to needlessly harass and threaten consumers by sending unlimited emails and text messages and calling them seven times a week to collect debts. Hardworking Americans deserve better than this.”
Treasury Identifies the Venezuelan Defense and Security Sector as Subject to Sanctions and Further Targets Venezuelan Oil Moving to Cuba: On Friday, Treasury Secretary Steven Mnuchin, in consultation with Secretary of State Michael Pompeo, determined that persons operating in the defense and security sector of the Venezuelan economy may be subject to sanctions. In addition, the Department of the Treasury’s Office of Foreign Assets Control designated two companies that operate in the oil sector of the Venezuelan economy, OFAC also identified two vessels, which transported oil from Venezuela to Cuba, as blocked property owned by the two companies. In a statement, Secretary Mnuchin said “The U.S. will take further action if Cuba continues to receive Venezuelan oil in exchange for military support. As we have repeatedly said, the path to sanctions relief for those who have been sanctioned is to take concrete and meaningful actions to restore democratic order.”
Federal Reserve Issues Warning on High-Risk Corporate Debt: In a report released on Monday, the Federal Reserve warned that “credit standards for new leveraged loans appear to have deteriorated further over the past six months,” and that “the historically high level of business debt and the recent concentration of debt growth among the riskiest firms could pose a risk to those firms and, potentially, their creditors.”
FHA Proposes New Lender Certification Requirements: On Thursday, the FHA proposed several revisions to its lender certification requirements with the goal of providing lenders and servicers greater certainty in how to satisfy the agency’s compliance requirements. FHA is proposing significant changes to its loan-level and annual lender-level certifications to provide more precision and needed clarity to compliance documents. Specifically, FHA is proposing revisions to its Addendum to Uniform Residential Loan Application (Form 92900-A) and to its annual lender certification form. In addition, FHA is revising its ‘defect taxonomy’ to clarify the various loan defect categories and how the agency weighs the severity of each defect.
FHA Offers Incentives for Property Owners Who Invest in Opportunity Zones: On Thursday, the FHA announced a package of incentives to encourage multi-family property owners to invest in thousands of neighborhoods located in Opportunity Zones across the nation. FHA is introducing reduced application fees paid by property owners applying for certain multifamily mortgage insurance programs for the development or rehabilitation of apartment units located, or proposed to be located, in Opportunity Zones. In addition, FHA is designating teams of senior underwriters to review these applications to ensure the most attentive and timely processing.
FinCEN Releases Guidance on Cryptocurrency: On Thursday, FinCEN released a new guidance sheet which outlined how some cryptocurrencies may be subject to U.S. money transmitter rules under the Bank Secrecy Act. The guidance noted that it “does not establish any new regulatory expectations or requirements,” but said that “when dapps perform money transmission, the definition of money transmitter will apply to the dapp, the owners/operators of the dapp, or both.”
COMINGS AND GOINGS AT THE AGENCIES
Former SEC Commissioner Stein Joins Board of IEX Group: Former SEC Commissioner Kara Stein, who left the agency in January, has joined the board of IEX Group, a startup exchange operator. In a statement Ms. Stein said she hopes the company will “continue to improve market transparency for both public companies and investors.”
FDIC Announces Retirement of CFO Steve App: On Thursday, the FDIC announced the retirement of Steve App, Deputy to the Chairman and Chief Financial Officer. Mr. App has served as CFO for the past 17 years, part of nearly 40 years of federal service. Replacing him as Deputy to the Chairman and CFO is Bret Edwards, who is currently Director of Division of Resolutions and Receiverships.
9th Circuit Upholds Constitutionality of CFPB’s Structure: On Monday a three-judge panel on the 9th Circuit issued a ruling agreeing with a 2018 decision in a D.C. appellate case which found the Consumer Financial Protection Bureau’s structure was constitutional.
OTHER NOTEWORTHY ITEMS
Federal Reserve of Boston Plans Blockchain Supervisory Node: Boston Fed Senior Vice President Jim Cunha announced plans for a “supervisory node,” arguing that “we are surrounded by very large financial institutions and banks and we know that all of them are experimenting with the blockchain technology. So the more we can work with them and understand their roadmap, the more we know that we’re moving in a right direction.”
State AGs Urge Passage of Safe Harbor Bill: 38 state and territorial AGs called on Congress to pass pot banking legislation in a letter which argued “an effective safe harbor would bring billions of dollars into the banking sector, enabling law enforcement; federal, state and local tax agencies; and cannabis regulators in 33 states and several territories to more effectively monitor cannabis businesses and their transactions.”