THE BIG PICTURE
On Tuesday, the President announced via Twitter that he had fired his third national security adviser, John Bolton, as he “disagreed strongly with many of his suggestions” on key issues. Bolton, who was well known for his hawkish foreign policy views, offered a differing account of his termination, saying that he had instead offered to resign.
With the September 30 deadline to fund the government looming, Congressional leaders are working on a stopgap measure to prevent another government shutdown and give both chambers additional time to negotiate. The House is expected to vote on a continuing resolution this week that would extend funding through November 21st, while Senate Republicans continue work on the details of 12 spending bills.
The prolonged uncertainty around North Carolina’s 9th Congressional District was resolved on Tuesday with Republican Dan Bishop besting Democrat Dan McCready by two points. The redo election was held after the State Board of Elections was unable to certify the November 2018 results due to allegations of election fraud involving the Republican nominee Mark Harris.
The President has decided to delay the 5% tariff increase on US$250B of Chinese goods that was set to go into effect on October 1 by two weeks as “a gesture of good will” so as to not fall on China’s 70th anniversary. The move comes amid ongoing efforts at negotiating a trade deal.
The third debate in the Democratic primary was held on Thursday evening, with only 10 candidates qualifying to appear on stage. The contenders sparred on a number of issues, including gun control measures, their views on healthcare reform, racism, and a proposal for universal basic income.
Other highlights of last week include:
- The House Judiciary Committee voted along party lines on a set of procedures that will govern the panel’s hearings on its investigation of the President as it determines whether to recommend articles of impeachment.
- The administration is working on a proposal to ban flavored e-cigarettes amidst a spike in serious illnesses being reported across the country. “We can’t have our youth be so affected,” the President said, “so we’re looking at it very closely.”
- Acting CBP Commissioner Mark Morgan reported that apprehensions at the southern border had fallen to 64,000 in August, marking the third consecutive month of fewer apprehensions.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “A $1.5 Trillion Crisis: Protecting Student Borrowers and Holding Student Loan Servicers Accountable”: On Tuesday, the full Committee held a hearing to consider the student loan debt crisis and discuss potential legislative remedies to increase protections for student loan borrowers.
- Seth Frotman, Executive Director, Student Borrower Protection Center
- Persis Yu, Staff Attorney, National Consumer Law Center
- Ashley Harrington, Senior Policy Counsel, Center for Responsible Lending
- Hasan Minhaj, Writer, Producer, and Host
- Jason Delisle, Resident Fellow, American Enterprise Institute
Hearing on “Examining Private Market Exemptions as a Barrier to IPOs and Retail Investment”: On Wednesday, the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing to examine the role private market exemptions play as a barrier to IPOs and retail investment. Committee Chairwoman Maxine Waters (D-CA) noted that she was “particularly interested in hearing more about the effects of the increasingly favorable regulatory environment for private markets, the impact that it is having on when and whether companies decide to go public, and what this means for investors.” The Subcommittee also considered several draft pieces of legislation.
- Renee Jones, Associate Dean for Academic Affairs and Professor of Law, Boston College Law School
- Elisabeth de Fontenay, Professor of Law, Duke University School of Law
- Mike Pieciak, President, North American Securities Administrators Association, and Vermont Commissioner of Financial Regulation, Vermont Department of Financial Regulation
- Dr. Andrew Lo, Professor, Massachusetts Institute of Technology Sloan School of Management
- Douglas Ellenoff, Partner, Ellenoff Grossman & Schole LLP
Hearing on “Examining the Macroeconomic Impacts of a Changing Climate”: On Wednesday, the Subcommittee on National Security, International Development, and Monetary Policy held a hearing to consider the effects of climate change on the economy and U.S. national security including labor force displacement, rising sea level, decreased crop yields, and infrastructure damage. The Subcommittee also considered a piece of draft legislation that would direct the Federal Reserve and SEC to produce annual reports to Congress projecting the economic costs directly and indirectly caused by the impacts of climate change.
- Andy Karsner, Board Member, Conservation International
- General Stephen Cheney, USMC (Ret.), President of the American Security Project
- Veronica Eady, Assistant Executive Officer for Environmental Justice of the California Air Resources Board
- Alicia Seiger, Managing Director of Stanford’s Sustainable Finance Initiative
- Dr. Marshall Burke, Assistant Professor and Deputy Director of Stanford’s Center on Food Security and the Environment
- Richard Powell, Executive Director, ClearPath
- John Kotek, Vice President of Policy Development and Public Affairs, Nuclear Energy Institute
Hearing on “The Future of Identity in Financial Services: Threats, Challenges, and Opportunities”: On Thursday, the Task Force on Artificial Intelligence held a hearing to consider artificial intelligence and data security, digital identification, and regulatory challenges in the digital space.
- Anne Washington, Assistant Professor of Data Policy, NYU Steinhardt School
- Valerie Abend, Managing Director, Accenture Security
- Jeremy Grant, Coordinator, Better Identity Coalition
- Amy Walraven, President and Founder, Turnkey Risk Solutions
- Andre Boysen, Chief Identity Officer, SecureKey Technologies
SENATE BANKING COMMITTEE
Hearing on “Housing Finance Reform: Next Steps”: On Tuesday, the Committee held a hearing to consider the administration’s housing reform proposal. Chairman Sen. Mike Crapo (R-ID) noted that while ultimately “only Congress has the tools necessary to provide holistic, comprehensive reform to our system” he feels it is important for the Administration “to begin moving forward with incremental steps.” Treasury Secretary Mnuchin reiterated that the administration would prefer to work with Congress on reforms to Fannie Mae and Freddie Mac to “achieve lasting structural reform.” Ranking Member Sen. Sherrod Brown (D-OH) criticized the administration’s reform plan as “half baked” and predicted that it will make it more expensive and difficult for prospective homeowners to obtain mortgages.
- The Honorable Steven T. Mnuchin, Secretary, U.S. Department of the Treasury
- The Honorable Benjamin S. Carson, M.D., Secretary, U.S. Department of Housing and Urban Development
- The Honorable Mark A. Calabria, Ph.D., Director, Federal Housing Finance Agency
Hearing on “Developments in Global Insurance Regulatory and Supervisory Forums”: On Thursday, the Committee held a hearing to receive the testimony from what Chairman Sen. Mike Crapo (R-ID) dubbed “Team USA” – the individuals who represent the U.S. in international insurance supervisory and regulatory forums. The panel received an update on their “ongoing efforts to influence the development of ICS 2.0 so that it works for U.S. insurers, including those operating abroad, and consumers; what aspects of group capital standards developed in the U.S. can help to improve ICS 2.0; changes that could be made to the ICS 2.0 development process going forward to better understand opportunities to improve ICS 2.0 and how to achieve outcome equivalency; and other key initiatives at international forums.”
- Mr. Steven Seitz, Director, Federal Insurance Office, United States Department of the Treasury
- Mr. Thomas Sullivan, Associate Director, Board of Governors, Federal Reserve System
- The Honorable Eric A. Cioppa, Superintendent, Maine Bureau of Insurance, on behalf of the National Association of Insurance Commissioners
ON THE FLOOR
House Passes Five Financial Services Bills: On Tuesday, the House passed five pieces of financial services legislation, including:
- H.R. 2852, the Homebuyer Assistance Act of 2019, which would make it easier for homebuyers to buy a home with a Federal Housing Administration mortgage by alleviating the current shortage of certified appraisers. The measure was introduced by Rep. Brad Sherman (D-CA) and passed by a vote of 419-5.
- H.R. 3620, the Strategy and Investment in Rural Housing Preservation Act of 2019, which would permanently authorize the USDA’s Multifamily Housing Preservation and Revitalization Program and authorizes US$1B to carry out the program. The measure was introduced by Rep. William Lacy Clay (D-MO) and passed by a voice vote.
- H.R. 281, the Ensuring Diverse Leadership Act of 2019, which would require the Federal Reserve Bank to interview at least one individual reflective of gender diversity and one reflective of racial or ethnic diversity in making the appointment of a regional bank president. The measure was introduced by Rep. Joyce Beatty (D-OH) and passed by a voice vote.
- H.R. 241, the Bank Service Company Examination Act, which would amend the Bank Service Company Act by enhancing the coordination of state banking agencies with federal banking agencies in regulating and examining the activities of bank service companies. The measure was introduced by Rep. Roger Williams (R-TX) and Rep. Greg Meeks (D-NY) and passed by a voice vote.
- H.R. 1690, Safe Housing for Families Act of 2019, which would authorize over US$300M over three years to fund the installation and maintenance of carbon monoxide detectors in Department of Housing and Urban Development-subsidized housing units that have combustion-fueled appliances or a ventilation system that connects them to such units. The measure was introduced by Rep. Chuy Garcia (D-IL) and passed by a voice vote.
Senate Confirms Assistant Treasury Secretary: On Thursday, the Senate voted 85-1 to confirm Thomas Feddo to serve as assistant secretary of investment security for the Treasury Department. Mr. Feddo will be the first person to serve in this newly created role, which was established by Congress last year to oversee the work of the Committee on Foreign Investment in the U.S. (CFIUS).
Senate Confirms Michelle Bowman to Full Fed Term: On Thursday, the Senate voted 60-31 to confirm Michelle Bowman to a full 14-year term at the Federal Reserve. Ms. Bowman, who previously served as Kansas state banking commissioner, holds a seat reserved for community banking representatives.
LEGISLATION INTRODUCED AND PROPOSED
- H.R. 4234: Rep. Shea Maloney (D-NY) introduced H.R. 4234, which would amend the Commodity Exchange Act with respect to the regulation of virtual currencies.
- H.R. 4247: Rep. Josh Harder (D-CA) introduced H.R. 4247, the “Financial Watchdog Support Act,” which would amend the Commodity Exchange Act to eliminate the double-sided confirmation requirement for swap data repositories.
- H.R. 4250: Rep. Angie Craig (D-MN) introduced H.R. 4250, which would amend the Commodity Exchange Act to exempt certain charitable organizations from regulation as commodity pool operators.
- H.R. 4251: Rep. Jahana Hayes (D-CT) introduced H.R. 4251, which would amend the Commodity Exchange Act to provide greater protection of proprietary information of other registered entities.
- H.R. 4254: Rep. Carolyn Maloney (D-NY) introduced H.R. 4254, the “Overdraft Protection Act of 2019,” which would amend the Truth in Lending Act to establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions.
- H.R. 4267: Rep. Steven Watkins (R-KS) introduced H.R. 4267, the “Independent and Community Bank Shareholders Protection Act,” which would amend the Federal Deposit Insurance Act with respect to shareholder claims arising from the appointment of a conservator or receiver for certain depository institutions.
- H.R. 4270: Rep. James McGovern (D-MA) introduced H.R. 4270, the “Placing Restrictions on Teargas Exports and Crowd Control Technology to Hong Kong Act,” which would prohibit commercial exports of certain nonlethal crowd control items and defense articles and services to the Hong Kong Disciplined Services
THIS WEEK ON THE HILL
Tuesday, September 17
Senate Appropriations Committee (Subcommittee on Financial Services and General Government) “Subcommittee Markup of the FY2020 Financial Services & General Government Funding Bill”: 2:15 PM in 124 Dirksen Senate Office Building.
Wednesday, September 18
House Financial Services Committee “Full Committee Markup”: 10:00 AM in 2128 Rayburn House Office Building.
Thursday, September 19
Senate Appropriations Committee “Full Committee Markup of FY2020 T-HUD, Agriculture, FSGG Funding Bills”: 10:30 AM in 106 Dirksen Senate Office Building.
Legislation to Be Considered Under Suspension of the Rules:
- H.R. 3625 - PCAOB Whistleblower Protection Act of 2019, as amended (Sponsored by Rep. Sylvia Garcia)
- H.R. 3619 - Appraisal Reform Act of 2019, as amended (Sponsored by Rep. William Lacy Clay)
- H.R. 2290 - Shutdown Guidance for Financial Institutions Act, as amended (Sponsored by Rep. Jennifer Wexton)
- H.R. 2613 - Advancing Innovation to Assist Law Enforcement Act, as amended (Sponsored by Rep. Anthony Gonzalez)
- H.R. 550 - Merchant Mariners of World War II Congressional Gold Medal Act of 2019 (Sponsored by Rep. John Garamendi)
- H.R. 1396 - Hidden Figures Congressional Gold Medal Act (Sponsored by Rep. Eddie Bernice Johnson)
- H.R. 3589 - Greg LeMond Congressional Gold Medal Act (Sponsored by Rep. Mike Thompson)
- H.R. 1830 - National Purple Heart Hall of Honor Commemorative Coin Act (Sponsored by Rep. Sean Maloney)
- S. 239 - Christa McAuliffe Commemorative Coin Act of 2019 (Sponsored by Sen. Jeanne Shaheen)
CFPB and State Regulators Launch American Consumer Financial Innovation Network: On Tuesday, the CFPB working in partnership with multiple state regulators, launched the American Consumer Financial Innovation Network (ACFIN), a network to enhance coordination among federal and state regulators to facilitate financial innovation. ACFIN will enhance shared objectives such as competition, consumer access, and financial inclusion. Bureau Director Kathy Kraninger said in a statement, “ACFIN will provide a platform for Federal and State regulators to coordinate with each other as they develop new rules of the road and apply existing ones. This coordination can provide greater regulatory certainty across jurisdictions and allow regulators to keep pace with market developments.”
CFTC Market Risk Advisory Committee Approves Plain English Disclosures at Public Meeting: The CFTC’s Market Risk Advisory Committee (MRAC) approved plain English disclosures for new derivatives referencing the London Interbank Offered Rate (LIBOR) and other IBORS at its September 9, 2019 public meeting. This standard set of disclosures, prepared by the MRAC’s Interest Rate Benchmark Reform Subcommittee, is intended as a helpful example of “plain English” disclosures that market participants could use, as they deem appropriate, with all clients and counterparties with whom they continue to transact derivatives referencing LIBOR and other IBORs. The disclosures inform clients and counterparties about the implications of using such products.
CFTC to Hold an Open Commission Meeting on September 16: On Monday, CFTC Chairman Heath Tarbert announced the CFTC will hold an open meeting on September 16 to consider the following: (1) Final Rule on Position Limits and Position Accountability for Security Futures Products and (2) Final Rule on Public Rulemaking Procedures (Part 13 Amendments).
CFTC’s Global Markets Advisory Committee to Meet on September 24: On Monday, the CFTC’s Global Markets Advisory Committee (GMAC) announced that it will hold a public meeting on Tuesday, September 24, 2019. CFTC Commissioner Dawn D. Stump is the sponsor of GMAC. At this meeting, the GMAC will hear presentations on developments regarding the implementation of margin requirements for non-centrally cleared derivatives and on the European Market Infrastructure Regulation (EMIR) 2.2, including responses to the consultation by the European Securities and Markets Authority (ESMA) on various aspects of EMIR 2.2 affecting third-country central counterparties (CCPs).
SEC’s Clayton Discusses Bitcoin, Corporate Debt and Anti-Corruption Efforts: SEC Chairman Jay Clayton discussed a wide range of issues while at a conference in New York on Monday. He commented on his concern regarding global anti-bribery efforts, noting that international cooperation hasn’t shown “sufficiently meaningful improvement,” adding that we need to “recognize that we are acting largely alone” in this space. He also discussed the agency’s efforts to monitor the surge in corporate debt, in coordination with the Treasury Department and Federal Reserve, to better understand the potential market implications. He also indicated that he is troubled that people consider trading securities tied to digital currencies such as bitcoin to be as safe as those on the equities market, and decried the lack of rules and protections.
FDIC Releases Results of Summary of Deposits Annual Survey: On Friday, the FDIC released the results of its annual survey of branch office deposits for all FDIC-insured institutions as of June 30, 2019. The FDIC’s Summary of Deposits provides deposit totals for each of the more than 86,000 domestic offices operated by more than 5,300 FDIC-insured commercial and savings banks, savings associations, and U.S. branches of foreign banks.
FHFA Revises Multifamily Loan Purchase Caps for Fannie Mae and Freddie Mac: On Friday, the Federal Housing Finance Agency announced a revised cap structure on the multifamily businesses of Fannie Mae and Freddie Mac. The new multifamily loan purchase caps will be US$100B for each Enterprise, a combined total of US$200B in support to the multifamily market, for the five-quarter period Q4 2019 – Q4 2020. The new caps will apply to all multifamily business – no exclusions. “Multifamily housing is a critical component of addressing our nation’s shortage of affordable housing,” said FHFA Director Mark Calabria. “These new multifamily caps eliminate loopholes, provide ample support for the market without crowding out private capital, and significantly increase affordable housing support over previous levels. The Enterprises should also manage under the caps to provide consistent, stable liquidity to the market throughout the entire five-quarter period.”
Treasury Official Says Cryptocurrencies Could Be “Next Frontier” in War on Terror: On Wednesday, Sigal Mandelker, who serves as the Treasury’s undersecretary for terrorism and financial intelligence, discussed his view that the fintech and cryptocurrency industry must “harness [their] technological expertise and apply it to the tough problems we need to solve in illicit finance—both because not doing so threatens national security and because it is the only way for them to pass regulatory muster.”
Treasury Secretary Discusses GSE Reform and Tax Cuts: During an interview on Monday, Treasury Secretary Steven Mnuchin indicated that while he expects Congressional action on reforming Fannie Mae and Freddie Mac, he’s “perfectly comfortable” making administrative changes if they do not. He also described the economy as “is in very good shape” and “the bright spot of the world,” and revealed the administration may propose “tax cuts 2.0” in 2020.
Treasury Sanctions North Korean State-Sponsored Cyber Hacking Groups: On Friday, the Treasury’s OFAC announced sanctions targeting three North Korean state-sponsored malicious cyber groups responsible for North Korea’s malicious cyber activity on critical infrastructure. “Treasury is taking action against North Korean hacking groups that have been perpetrating cyber attacks to support illicit weapon and missile programs,” said Sigal Mandelker, Treasury Under Secretary for Terrorism and Financial Intelligence. “We will continue to enforce existing U.S. and UN sanctions against North Korea and work with the international community to improve cybersecurity of financial networks.”
Treasury Targets Wide Range of Terrorists and Their Supporters Using Enhanced Counterterrorism Sanctions Authorities: On Tuesday, Treasury’s OFAC utilized newly enhanced counterterrorism sanctions authorities to designate a series of terrorist leaders, facilitators, and entities. The new tools are a result of Executive Order 13224, which went into effect on Tuesday. Treasury designated 15 leaders, individuals, and entities affiliated with terror groups including Hamas, ISIS, al-Qa’ida and the Islamic Revolutionary Guard Corps Qods-Force.
COMINGS AND GOINGS AT THE AGENCIES
James Daly Announces Retirement from the SEC: On Wednesday, the SEC announced that James Daly, Division of Corporation Finance Associate Director, would retire at the end of the month after more than 38 years of service at the SEC.
Eight State AGs File Suit Over SEC’s Broker Conduct Rule: On Monday, a group of eight state AGs filed suit in federal court in New York alleging that the SEC overstepped its authority in adopting its new Regulation Best Interest, and argued that “the failure to adopt a uniform standard and instead rely on a new and amorphous ‘best interest’ standard will result in continued investor confusion as to the duties applicable to broker-dealers and investment advisers.” NY AG Letitia James said that, “instead of adopting the investor protections of Dodd-Frank, this watered-down rule puts brokers first.” On Thursday, the case was consolidated with another suit brought by an investment adviser network.
Supreme Court Clears Path for Asylum Restrictions: On Wednesday, the Supreme Court issued an unsigned order that stays a lower court’s decision to block the administration’s proposed policy to require migrants to first apply for asylum in the country they pass through en route to the United States. Justices Ruth Bader Ginsburg and Sonia Sotomayor dissented, criticizing the order as “especially concerning” given “that the rule the Government promulgated topples decades of settled asylum practices and affects some of the most vulnerable people in the Western Hemisphere—without affording the public a chance to weigh in.”
OTHER NOTEWORTHY ITEMS
President Trump Calls for Republicans to Eliminate Term Limits for Committee Chairs: On Monday, the President proposed that Republicans eliminate term limits on Committee chairmanships as a way to stem the tide of recent retirement announcements, saying “House Republicans should allow Chairs of Committees to remain for longer than six years. It forces great people, and real leaders, to leave after serving.”
CEOs Urge Congressional Leaders to Consider Data Privacy Framework: On Tuesday, dozens of top CEOs wrote to Congressional leaders, asking them to consider the suggestions contained in their data privacy outline which “provides a detailed roadmap of issues that a federal consumer privacy law should address.” The outline calls for consumers to have “reasonable access to clear, understandable statements about the organization’s practices and policies with respect to personal data.”