THE BIG PICTURE
A tweet from the President that urged four freshman Democrats to “go back” to the “crime infested places from which they came” set off a week of controversy that culminated in a resolution of disapproval and renewed efforts on the part of some House Democrats to commence impeachment proceedings. On Tuesday, the House voted on largely party lines to condemn the “racist comments that have legitimized and increased fear and hatred of new Americans and people of color” in a rare formal rebuke of the President. A push by Rep. Al Green (D-TX) to force a vote to consider articles of impeachment failed on Wednesday, with only 95 Democrats supporting the measure and most members voting to delay consideration.
Negotiations on a budget deal between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continued over the weekend after the two sides failed to reach a final deal last week. Despite claims on Thursday that they had “reached an agreement” on overall spending levels, on Friday, Democrats rejected a White House proposal that included a US$1.1T spending offset, saying “these levels are nonstarters.” With Congress set to adjourn for summer recess on July 26, the pressure is on to finalize terms in time to hold a vote.
Other highlights of last week include:
- The administration announced a new regulation on Monday that would drastically limit the ability of Central Americans to claim asylum in the United States. Under the rule, would-be migrants would be required to first seek asylum in the country they pass through en route to the southern border.
- Former Supreme Court Justice John Paul Stevens passed away on Tuesday at the age of 99.
- On Wednesday, the House voted to hold Attorney General Bill Barr and Commerce Secretary Wilbur Ross in criminal contempt for defying subpoenas.
- On Thursday, the President announced that he would nominate Eugene Scalia, the son of late Supreme Court Justice Antonin Scalia, to serve as the next Secretary of Labor.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
“Markup”: On Tuesday, the Committee met to mark up eight pieces of draft legislation, ultimately advancing all of them to the full House.
- H.R. 3621, the Student Borrower Credit Improvement Act, a bill that would help private student loan borrowers remove adverse information for certain defaulted or delinquent loans when they demonstrate a history of timely repayment. This legislation was introduced by Rep. Ayanna Pressley (D-MA). It was passed by a vote of 33-25.
- H.R. 3623, the Climate Risk Disclosure Act of 2019, a bill that would require companies to annually disclose information relating to the financial and business risks associated with climate change. This legislation was introduced by Rep. Sean Casten (D-IL). It was passed by a vote of 34-25.
- H.R. 3624, the Outsourcing Accountability Act of 2019, a bill that would require public companies to annually disclose the total number of employees they employ in each state and foreign country, as well as the percentage change from the previous year. This legislation was introduced by Rep. Cindy Axne (D-IA). It was passed by a vote of 33-25.
- H.R. 3625, the PCAOB Whistleblower Protection Act of 2019, a bill that would establish a whistleblower program at the Public Company Accounting Oversight Board similar to the whistleblower program at the SEC. This legislation was introduced by Rep. Sylvia Garcia (D-TX). It was passed by a voice vote.
- H.R. 3629, the Clarity in Credit Score Formation Act of 2019, a bill that would establish clear federal oversight of the development of credit scoring models by directing the CFPB to set standards. This legislation was introduced by Rep. Stephen Lynch (D-MA), Chairman of the Task Force on Financial Technology. It was passed by a vote of 33-25.
- H.R. 3641, the Stronger Enforcement of Civil Penalties Act of 2019, a bill that would increase the SEC’s penalty authority, and would directly link the size of civil penalties to the scope of harm and associated investor losses. This legislation was introduced by Rep. Katie Porter (D-CA). It was passed by a vote of 33-25.
- H.R. 3701, the Strengthening Fraud Protection Provisions for SEC Enforcement Act of 2019, a bill that would provide the SEC with a 10-year statute of limitations for civil monetary penalties, which would begin on the date at which the violation occurred. This legislation was introduced by Rep. Vicente Gonzalez (D-TX). It was passed by a vote of 33-25.
- H.R. 3702, the Reforming Disaster Recovery Act of 2019, a bipartisan bill that would permanently authorize the Community Development Block Grant-Disaster Relief program and strengthen administration and oversight of the program to ensure disaster relief is distributed efficiently and equitably. This legislation was introduced by Rep. Al Green (D-TX), Chairman of the Subcommittee on Oversight and Investigations and Rep. Ann Wagner (R-MO). It was passed by a bipartisan and unanimous vote of 58-0.
SENATE BANKING COMMITTEE
Hearing on “Economic Mobility: Is the American Dream in Crisis?”: On Wednesday, the Subcommittee on Economic Policy held a hearing to discuss barriers to economic mobility in the United States, including ways to improve economic outcomes for children and families.
- Mr. Oren Cass, Senior Fellow, Manhattan Institute
- Mr. Yuval Levin, Resident Scholar, American Enterprise Institute
- Mr. Ramesh Ponnuru, Visiting Fellow, American Enterprise Institute
- Ms. Thea Mei Lee, President, Economic Policy Institute
- Mr. Keith Miller, Principal, Franchisee Advocacy Consulting
Hearing on “Export Control Reform Implementation: Outside Perspectives”: On Thursday, the full Committee held a hearing to continue the discussion they began during their June 4th “Confront Threats from China” session, and examine control issues surrounding exports of things outbound from the United States, and other re-exports or transfers that may occur abroad.
- Honorable Eric Hirschhorn, former Under Secretary for Industry and Security, U.S. Department of Commerce
- Mr. Nova Daly, Senior Public Policy Advisor, Wiley Rein LLP
- Dr. Ben Buchanan, Senior Faculty Fellow, Center for Security and Emerging Technology, Georgetown University
House Energy and Commerce Committee “Markup”: On Wednesday, the Committee voted 49-0 to advance H.R. 3375, the “Stopping Bad Robocalls Act” after approving amendments to the measure intended to “create transparency around blocked calls as well as redress options for improperly blocked calls.”
Senate Judiciary Committee “Executive Business Meeting”: On Thursday, the Committee voted 18-4 to advance the Combating Money Laundering, Terrorist Financing and Counterfeiting Act (S. 1883). The bill was introduced by Sen. Chuck Grassley (R-IA), who advocated for its passage by saying it “modernizes the current money laundering laws by providing new tools, updating methods and closing loopholes to make sure that law enforcement can prevent, prosecute and identify those who break the law.”
LEGISLATION INTRODUCED AND PROPOSED
H.R. 3821: Rep. Patrick McHenry (R-NC) introduced H.R. 3821, which would amend the Fair Credit Reporting Act to make improvements to the regulation of consumer reporting agencies and protect consumers. Rep. McHenry said in a statement that the industry is “ripe for reform” as “credit reporting agencies have failed to protect consumers’ most sensitive, personal information and have been allowed to operate as an oligopoly.”
S. 1116: Sen. Tammy Duckworth (D-IL) signed on as a co-sponsor of Sen. Marsha Blackburn’s data privacy bill, the Balancing the Rights of Web Surfers Equally and Responsibly (BROWSER) Act, adding bipartisan support to the measure. The bill, originally introduced in April, would require providers of broadband internet access service and edge services to clearly and conspicuously notify users of the privacy policies of those providers as well as give users opt-in or opt-out approval rights with respect to the use of, disclosure of, and access to user information collected by those providers based on the level of sensitivity of the information.
Keep Big Tech out of Finance Act: A discussion draft of a bill dubbed the “Keep Big Tech out of Finance Act” has been making the rounds. The measure would prohibit large platform utilities from being a financial institution or being affiliated with a person that is a financial institution.
THIS WEEK ON THE HILL
Tuesday, July 23
Senate Banking Committee Hearing on “Challenges for Cannabis and Banking: Outside Perspectives”: 10:00 AM in 538 Dirksen Senate Office Building.
Wednesday, July 24
Senate Finance Committee Hearing on “Nominations”: 10:15 AM in 215 Dirksen Senate Office Building.
- The Honorable Brent James McIntosh of Michigan, to be an Under Secretary of the Treasury
- Brian Callanan of New Jersey, to be General Counsel for the Treasury
- Brian McGuire of New York, to be a Deputy Under Secretary of the Treasury
Thursday, July 25
House Financial Services Committee Hearing on “Examining the Use of Alternative Data in Underwriting and Credit Scoring to Expand Access to Credit”: 10:00 AM in 2128 Rayburn House Office Building.
FDIC Board Finalizes Changes to Recordkeeping Requirements for Deposit Insurance Determinations:On Tuesday, the Board of Directors of the FDIC approved amendments to two rules to simplify the process for making insurance determinations in the event a bank is placed into receivership. “Timely access to insured deposits is critical to maintaining public confidence in the banking system and the FDIC’s ability to resolve these institutions,” said FDIC Chairman Jelena McWilliams. “Under the final rule, the FDIC can provide depositors at large failed banks the same rapid access to their insured funds as it does in smaller resolutions.”
SEC Retail Strategy Task Force to Host Roundtable on Combating Elder Investor Fraud: On Thursday, the SEC announced that its Retail Strategy Task Force will host a roundtable on October 3 on combating elder investor fraud. The roundtable will focus on the types of fraudulent and manipulative schemes currently targeting elder investors. The roundtable also will explore views from a broad range of regulators and industry experts on potential steps that regulators, broker-dealers, investment advisers, and others can take to identify and combat elder investor fraud.
SEC May Limit Role Reviewing Contested Shareholder Proposals: During a speech on Tuesday, Bill Hinman, who heads the SEC’s Division of Corporation Finance, said that the Commission was taking under advisement how it could “still actively monitor” contested shareholder proposals without weighing in every time. He added that if they could get “out of the way” it would help “improve the process.”
SEC and NASAA Explain Application of Securities Laws to Opportunity Zone Investments: On Monday, the SEC and NASAA issued a summary that explains the application of the federal and state securities laws to opportunity zone investments. The “opportunity zone” program was established by the Tax Cuts and Jobs Act in December 2017 to provide tax incentives for long-term investing in designated economically distressed communities. “The opportunity zone program has the potential to encourage investment and economic development in many areas across the country that are in need of capital. The staff statement released today will help market participants understand securities laws implications when seeking to raise capital for opportunity zones,” said SEC Chairman Jay Clayton. “In addition, today the SEC is issuing staff guidance regarding the ability of Main Street investors to participate in these offerings.”
Federal Bank Regulatory Agencies Announce Coordination of Reviews for Certain Foreign Funds Under the Volcker Rule: On Wednesday, the Federal Reserve Board, the FDIC and the OCC announced that they will not take action related to restrictions under the Volcker Rule for certain foreign funds for an additional two years. The three federal banking regulatory agencies noted that they had consulted with the staffs of the SEC and CFTC regarding this matter.
FASB Votes to Delay Implementation of CECL for Some Companies: On Wednesday, the Financial Accounting Standards Board voted to delay the implementation of the current expected credit loss (CECL) standard for certain institutions until January 2023.
Boston Fed Chief Calls for Additional Resources to Monitor Fintech Firms: Speaking at a conference on Tuesday, Boston Fed President Eric Rosengren noted that as financial technologies continues to evolve, “we don’t have all the macroprudential tools that we might need in the future,” adding that they need to consider “risks wherever they are in the financial system, not just at the largest banks.”
NCUA Approves Appraisal Rule: On Thursday the National Credit Union Administration Board held its seventh open meeting of 2019 and approved a final rule amending the agency’s regulation requiring real estate appraisals for certain transactions to provide greater clarity and a measure of regulatory relief. “This rule is part of a commonsense approach to regulation that will help put more resources into our communities,” NCUA Board Chairman Rodney Hood said. “Rethinking the appraisal rule is an example of regulatory reform that is positive and can help boost economic activity and job creation, particularly in some of our nation’s more hard-pressed areas.”
CFPB Releases Report on Third-Party Debt Collections: On Thursday, the CFPB released a report entitled “Market Snapshot: Third-Party Debt Collections Tradeline Reporting.” The report found that more than one-in-four consumers (28 percent) with a credit report in the CCP database in 2018 had at least one third-party collections tradeline on their file. The study also found that more than three-out-of-four third-party collections tradelines are for non-financial debt. More than half (58 percent) of these tradelines were for medical debt and another 20 percent for telecommunications or utilities debt.
CFPB Recommends Financial Institutions Report Suspected Financial Exploitation of Older Adults: On Wednesday, the CFPB issued an updated advisory to financial institutions urging them to report to the appropriate local, state, and federal authorities whenever they suspect that an older adult is the target or victim of financial exploitation. The Bureau also recommended that financial institutions file Suspicious Activity Reports (SARs) with the federal government when they suspect elder financial exploitation (EFE). “The Bureau is renewing its efforts to alert banks and credit unions to elder financial exploitation as they are uniquely positioned to detect that an older account holder has been targeted or victimized, and to take action,” said Director Kathy Kraninger. “The Bureau stands ready to work with federal, state and local authorities and financial institutions to protect older adults from abusive financial practices that rob them of their financial security.”
Treasury Secretary Warns Misuse of Cryptocurrencies Constitutes a National Security Risk: Treasury Secretary Steven Mnuchin briefed the media on Monday, and discussed the dangers posed by the illicit use of cryptocurrencies by bad actors. The Secretary called it “a national security issue” as “to a large extent, these cryptocurrencies have been dominated by illicit activities and speculation.” In his remarks, he emphasized the importance of compliance with AML requirements and the BSA, noting cryptocurrencies will be held to the “highest standards.”
Treasury Sanctions Persons Associated with Serious Human Rights Abuse and Corrupt Actors in Iraq:On Thursday, Treasury’s OFAC designated two militia figures, Rayan al-Kildani and Waad Qado, and two former Iraqi governors, Nawfal Hammadi al-Sultan and Ahmed al-Jubouri, pursuant to E.O. 13818. “The United States is taking action against four individuals in Iraq implicated in serious human rights abuse or corruption,” said Sigal Mandelker, Treasury Under Secretary for Terrorism and Financial Intelligence. “We will continue to hold accountable persons associated with serious human rights abuse, including persecution of religious minorities, and corrupt officials who exploit their positions of public trust to line their pockets and hoard power at the expense of their citizens.”
Treasury Sanctions Officials of Venezuela’s Military Counterintelligence Agency: On Friday, Treasury’s OFAC designated four officials of Venezuela’s General Directorate of Military Counterintelligence. “The United States will continue to hold individuals accountable who are involved in the former Maduro regime’s use of intimidation and repression to target and silence political opponents, innocent civilians, and members of the military,” said Treasury Secretary Steven Mnuchin. “The United States will use all of its authorities to target those who have helped the illegitimate Maduro regime repress dissent, free speech, and the will of the Venezuelan people.”
COMINGS AND GOINGS AT THE AGENCIES
Tarbert Begins Term as 14th CFTC Chairman: On Monday, Dr. Heath Tarbert officially began his term as the 14th Chairman of the CFTC, succeeding J. Christopher Giancarlo. On Thursday, Chairman Tarbert announced the following appointments to key executive leadership positions:
- James McDonald will continue to serve as Director of the Division of Enforcement
- Amir Zaidi will continue to serve as Director of the Division of Market Oversight
- Joshua Sterling will serve as Director of the Division of Swap Dealer and Intermediary Oversight
- Bruce Tuckman will continue to serve as Chief Economist and Director of the Office of the Chief Economist
- Michael Short will serve as Director of the Office of External Affairs and Chief Communications Officer
- Sarah Summerville will continue to serve as Director of the Office of Minority and Women Inclusion
OTHER NOTEWORTHY ITEMS
Elizabeth Warren Releases Proposal on Private Equity “Vampires”: Senator and Democratic presidential contender Elizabeth Warren released a policy proposal on Thursday to crack down on what she calls “legalized looting.” In a blog post, she argued that she was “tired of big financial firms looting the economy to pad their own pockets while the rest of the economy suffers.” The proposal would, among other things, impose new rules and regulations on private equity firms, which she likened to “vampires,” who when they take over a company, bleed it “dry and walk away enriched even as the company succumbs.”
Acting IMF Head Calls for Oversight of Digital Currencies: In a speech on Tuesday, acting head of the IMF David Lipton warned that virtual currencies have the potential to form “new monopolies” and warned that “regulators—and the IMF—will need to step up” to ensure that “where the benefits of this technology can be reaped while the risks are minimized.”
State AGs Support Exploration of Cannabis Regulation: 34 state attorneys general wrote a letter to the FDA urging the agency to continue its efforts to regulate cannabis products, while also recognizing the important role states play as regulators. “As the primary enforcers of our respective states’ consumer protection laws, we offer a unique perspective as to the new legalized market of certain cannabis and cannabis-derived compounds, including CBD products,” the AGs explained. “We write to express our hope that the FDA continues to explore manufacturing, testing, and marketing best practices so that consumers are not at risk of misleading advertising or harm to their health from dangerous additives or undisclosed risks of use.”
New York Department of Financial Services Approves Licenses Crypto Exchange for Block Trading: On Monday, NYDFS Superintendent Linda Lacewell announced the approval of licenses for two companies, saying “we are pleased to have approved over 20 virtual currency businesses, and welcome Seed Digital Commodities Market and Zero Hash to New York’s growing virtual currency marketplace,” adding that, “the department’s approval of these new licenses will provide institutional customers with more choice while also protecting consumers and the public through strong anti-money laundering, cybersecurity and other compliance standards in a continuously evolving global financial services marketplace.”