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PH Money Matters: This Week in Washington

This Week in Washington for October 28, 2019

THE BIG PICTURE

The House’s impeachment inquiry continued to progress, with the Committees receiving closed door testimony from a number of officials, including from current acting Ambassador to Ukraine, Bill Taylor. Taylor, a career civil servant, is emerging as a key witness in the inquiry. Taylor testified about “how pervasive the efforts were” to obtain the alleged quid pro quo from Ukraine among administration officials. Taylor provided the Committee with extensive notes and contemporaneous communications between himself and other officials, which provided a comprehensive chronology of events dating back to June.

On Friday, in a victory for House Democrats, the chief federal judge in DC ordered the Department of Justice to turn over the evidence from former Special Counsel Robert Mueller’s grand jury to the House Judiciary Committee, including all portions that were redacted and “any underlying transcripts or exhibits referenced in the portions of the Mueller Report that were redacted.”

Other highlights of last week include:

  • On Monday, in a blow to gerrymandering reformers, the Supreme Court tossed out a lower court’s decision that Michigan’s electoral maps were overly partisan and needed to be redrawn.
  • On Thursday, it was announced that an inquiry begun by Attorney General Bill Barr into the origins of the Russia probe has become a criminal investigation, expanding the powers of investigators to interview officials and obtain documents.
  • The US and China are reportedly close to finalizing the terms of phase one of a preliminary trade agreement, with both sides hopeful that the President and China’s Xi Jinping will sign a deal next month.
  • Former Congressman John Conyers Jr. (D-MI), who resigned in 2017 after allegations of sexual misconduct surfaced, passed away on Sunday at the age of 90.
  • On Sunday freshman Rep. Katie Hill (D-CA) announced that she would resign from Congress amidst an ethics probe into whether she had an inappropriate romantic relationship with a staffer.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Hearing on “The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America”: On Tuesday, the full Committee held a hearing to discuss the impact of the Trump Administration’s housing finance reform plans. The Committee also considered the following draft pieces of legislation: (1) H.R. __, ‘‘Improving Rural Access to Power Act of 2019”; (2) H.R. __, To require the Director of the Federal Housing Finance Agency to require each enterprise to include a preferred language question on the form known as the Uniform Residential Loan Application, and for other purposes; (3) H.R. __, ‘‘Homeowner Protection Act of 2019’’; (4) H.R. __, Discussion draft that would prevent the Treasury Secretary from selling preferred stock of Fannie Mae and Freddie Mac and require the FHFA Director to provide Congress with 30 days’ notice before making any policy changes. Secretary Mnuchin in his testimony affirmed that, “The Treasury does not propose, and indeed opposes, reducing or eliminating,” the GSEs support of affordable housing. FHFA Director Calabria testified that, “If the circumstances present itself to where we have to wipe out the shareholders [of Fannie Mae and Freddie Mac], we will.” Chairwoman Maxine Waters (D-CA) had some harsh criticism of the proposal, saying it would bring turmoil to the market.

  • The Honorable Steven T. Mnuchin, Secretary, U.S. Department of the Treasury
  • The Honorable Dr. Benjamin S. Carson, Secretary, U.S. Department of Housing and Urban Development
  • The Honorable Dr. Mark A. Calabria, Director, Federal Housing Finance Agency

Hearing on “An Examination of the Decline of Minority Depository Institutions and the Impact on Underserved Communities”: On Tuesday, the Subcommittee on Consumer Protection and Financial Institutions held a hearing to examine the decline of minority depository institutions and the subsequent impact on underserved communities. The Subcommittee also considered the following draft pieces of legislation: (1) H.R. __, the “Ensuring Diversity in Community Banking Act of 2019”; (2) H.R. __, To establish a Financial Agent Mentor-Protégé Program within the Department of the Treasury.

  • Kenneth Kelly, Chairman and CEO, First Independence Bank, and Chair, National Bankers Association (NBA)
  • Jill Sung, CEO, Abacus Federal Savings Bank, and Chair, Independent Community Bankers Association’s (ICBA) Minority Bank Council
  • Mara Falero, Vice President of Marketing and Communication, Jetstream Federal Credit Union, representing the National Association of Federally-Insured Credit Unions (NAFCU)
  • Jeff Bowman, President and CEO, Bay Bank
  • Aron Betru, Managing Director, Center for Financial Markets, Milken Institute

SENATE BANKING COMMITTEE

Hearing on “Oversight of the Status of the Consolidated Audit Trail”: On Tuesday, the full Committee held a hearing to focus on oversight of the status of the Consolidated Audit Trail, as well as on outstanding issues and challenges that remain to achieving an operational CAT. The Senators questioned witnesses on the adequacy of cybersecurity measures that were in place to safeguard against security breaches.

  • Kenneth Kelly, Chairman and CEO, First Independence Bank, and Chair, National Bankers Association (NBA)
  • Jill Sung, CEO, Abacus Federal Savings Bank, and Chair, Independent Community Bankers Association’s (ICBA) Minority Bank Council
  • Mara Falero, Vice President of Marketing and Communication, Jetstream Federal Credit Union, representing the National Association of Federally-Insured Credit Unions (NAFCU)
  • Jeff Bowman, President and CEO, Bay Bank
  • Aron Betru, Managing Director, Center for Financial Markets, Milken Institute

Hearing on “Data Ownership: Exploring Implications for Data Privacy Rights and Data Valuation”: On Thursday, the full Committee held a hearing to consider issues surrounding data ownership, valuation and privacy. Chairman Mike Crapo (R-ID) noted that as the Committee continues to explore ways to give individuals real control over their data, it is important to “learn more about what relationship exists between true data ownership and individuals’ degree of control over their personal information; how a property right would work for different types of personal information; how data ownership interacts with existing privacy laws, including the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act and GDPR; and different ways that companies use personal data, how personal data could be reliably valued and what that means for privacy.”

  • Jeffrey Ritter, Founding Chair, American Bar Association Committee on Cyberspace Law External Lecturer
  • Chad Marlow, Senior Advocacy and Policy Counsel, American Civil Liberties Union
  • Will Rinehart, Director of Technology and Innovation Policy, American Action Forum
  • Michelle Dennedy, Chief Executive Officer, DrumWave Inc.

ON THE FLOOR

House Passes Bipartisan Financial Services Bill to Crack Down on Shell Companies and Fight Money Laundering: On Tuesday, the House voted 249-173 to pass H.R. 2513, “The Corporate Transparency Act of 2019,” bipartisan legislation introduced by Congresswoman Carolyn Maloney (D-NY), Chair of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, and Congressman Peter King (R-NY). The measure would close significant loopholes that are commonly abused by bad actors and would make it harder for terrorists, traffickers, corrupt officials and other criminals to hide, launder, move and use their money. This legislation requires corporations and Limited Liability Companies to disclose their beneficial owners to the Financial Crimes Enforcement Network, ending the ability of criminals, terrorists, and kleptocrats to abuse anonymous shell companies for illicit activities. H.R. 2513 included the text of H.R. 2514, the “Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act (COUNTER Act)”, introduced by Congressmen Emanuel Cleaver (D-MO) and Steve Stivers (R-OH).

LEGISLATION INTRODUCED AND PROPOSED

H.R. 4783: Rep. Al Green (D-TX) introduced H.R. 4783, which would require the Director of the Federal Housing Finance Agency to require each enterprise to include a preferred language question on the form known as the Uniform Residential Loan Application.

H.R. 4808: Rep. Jim Clyburn (D-SC) introduced H.R. 4808, which would require Community Development Block Grant and Surface Transportation Block Grant recipients to develop a strategy that supports inclusive zoning policies and to allow for a credit that supports housing affordability. Sen. Cory Booker (D-NJ) introduced parallel legislation in the Senate, as S. 2684.

H.R. 4813: Rep. Chuy Garcia (D-IL) introduced H.R. 4813, which would prohibit large platform utilities from being a financial institution or being affiliated with a person that is a financial institution.

H.R. 4818: Rep. Andy Barr (R-KY) introduced H.R. 4818, which would impose sanctions with respect to the provision of certain vessels for the construction of Russian energy export pipelines.

H.R. 4841: Rep. Dean Phillips (D-MN) introduced H.R. 4841, which would require the prudential banking regulators to provide annual testimony to Congress on their supervision and regulation activities.

Draft Measure Regarding Stablecoins: On Tuesday, Rep. Sylvia Garcia (D-TX) introduced the text of draft legislation called the “Stablecoins are Securities Act of 2019.” The measure would establish the treatment of managed stablecoins under the securities laws.

Brown, Warren Introduce Bicameral Legislation to Protect Students from Predatory For-Profit Colleges: On Wednesday, Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) introduced legislation to protect students from the predatory practices of for-profit colleges by ending taxpayer subsidies to these schools. The Students Not Profits Act would also remove for-profit colleges as part of the definition that makes them eligible to receive Title IV Federal student aid funds, including Pell Grants, Perkins loans, and TEACH Grants. Representative Pramila Jayapal (D-WA-07) has introduced the House version of the bill.

THIS WEEK ON THE HILL

Tuesday, October 29

House Financial Services Committee (Subcommittee on Oversight & Investigations) Hearing on “Financial Services and the LGBTQ+ Community: A Review of Discrimination in Lending and Housing”: 10:00 AM in 2128 Rayburn House Office Building.

THE REGULATORS

U.S. Financial Regulatory Agencies Join the Global Financial Innovations Network: On Thursday, the CFTC, FDIC, OCC and SEC announced they would join the Global Financial Innovation Network (GFIN). Participation in the GFIN enhances the agencies’ abilities to encourage responsible innovation in the financial services industry in the United States and abroad. The agencies join 46 other financial authorities, central banks and international organizations from around the globe that are members of the GFIN to foster greater cooperation among financial authorities on a variety of innovation topics, regulatory approaches and lessons learned.

FDIC Advisory Committee on Economic Inclusion Hold Meeting: On Tuesday, the FDIC’s Advisory Committee on Economic Inclusion met to discuss developments in credit scoring and underwriting, the status of the mortgage markets and efforts to create sustainable bank accounts. Committee members also shared insights into key challenges facing their communities and organizations.

SEC Chairs Says Brokers Should Be Ready for Regulation Best Interest: Speaking at a conference on Wednesday, SEC Chairman Jay Clayton warned brokers that they should “be ready” for the implementation of Regulation Best Interest, which is set to go into effect in June 2020. He noted the agency has “no specific plans” to have inspectors conduct a compliance sweep but said “people should be ready.”

SEC Enforcement Chief Discusses Efforts to Regulate Cryptocurrencies: Speaking at a forum on Wednesday, Steven Peikin, co-director of the SEC's enforcement division, said that the agency’s response to the “entirely new asset class” of cryptocurrencies was among his proudest achievements. He said, “We've had to figure out how to analyze [a new product] and, where appropriate, to bring enforcement actions. And I think we've done that in a pretty thoughtful and incremental way that has really changed behavior over a pretty short period of time.”

SEC Warns Investors about Phony Certificates of Deposit: On Wednesday, the SEC’s Office of Investor Education and Advocacy issued an Investor Alert to warn investors about phony Certificates of Deposit (CDs) promoted through internet advertising and “spoofed” websites that mimic the actual sites of legitimate financial institutions. Investors should be extremely cautious when purchasing CDs from sites found only through internet searches.

SEC Investor Advisory Committee to Meet on Nov. 7: On Tuesday, the SEC announced that its Investor Advisory Committee will hold a public meeting on Nov. 7. The committee will hold two panel discussions: one in the morning on whether investors use environmental, social and governance (ESG) data in investment/capital allocation decisions and one in the afternoon on the SEC’s Concept Release on Harmonization of Securities Offering Exemptions.

Chairman Tarbert Announces Elevation of LabCFTC: On Thursday, CFTC Chairman Heath Tarbet announced that LabCFTC will become an independent operating office of the CFTC, reporting directly to the Chairman. In his remarks, he noted, “LabCFTC was established to be a beachhead in the emerging world of fintech. Blockchain, digital assets and other developments hold great promise for our economy. Now is the time for LabCFTC to play an even greater role as we work to develop and write the rules for these transformative new products. That reality requires engagement at the highest levels within the CFTC, which is why I am elevating LabCFTC.”

Senate Banking Committee Democrats Demand CFPB Continue to Collect Mortgage Data in Order to Protect Consumers: On Thursday, Sen. Sherrod Brown (D-OH) – ranking member of the Senate Banking Committee along with seven Senators wrote to Bureau Director Kathy Kraninger to demand that the CFPB continue to collect all Home Mortgage Disclosure Act data points. “We are deeply troubled that the CFPB announced that it would reopen the 2015 HMDA rule before the new data points had even been collected. We urge you to follow the intent of Congress and maintain collection of all data points added by the 2015 final rule. This data is critical to monitor market trends, credit access and discrimination in our housing market,” the Senators wrote.

CFPB to Host Symposium on November 6: On Thursday, the CFPB announced that it will hold a symposium on Section 1071 of the Dodd-Frank Act on November 6, 2019. Section 1071 amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect, report and make public certain information concerning credit applications made by women-owned, minority-owned and small businesses. The symposium will provide a public forum for the Bureau and the public to hear various perspectives on the small business lending marketplace and the Bureau’s upcoming implementation of Section 1071.

Treasury Removes Sanctions Imposed on Turkish Ministries and Senior Officials Following Pause of Turkish Operations in Northeast Syria: On Wednesday, the Treasury’s Office of Foreign Assets Control (OFAC) removed sanctions imposed on the Government of Turkey’s Ministry of National Defence and the Ministry of Energy and Natural Resources, as well as the Minister of National Defence, Minister of Energy and Natural Resources, and the Minister of the Interior, following Turkey’s pause in military operations in Syria as agreed to with the United States on October 17, 2019.

Treasury and State Announce New Humanitarian Mechanism to Increase Transparency of Permissible Trade Supporting the Iranian People: On Friday, the Departments of the Treasury and State announced a new humanitarian mechanism to ensure unprecedented transparency into humanitarian trade with Iran. This mechanism will help the international community perform enhanced due diligence on humanitarian trade to ensure that funds associated with permissible trade in support of the Iranian people are not diverted by the Iranian regime to develop ballistic missiles, support terrorism or finance other malign activities. Concurrently, Treasury’s Financial Crimes Enforcement Network (FinCEN) identified Iran as a jurisdiction of primary money laundering concern under Section 311 of the USA PATRIOT Act and issued a new rulemaking to protect the U.S. financial system from malign Iranian financial activities.

Brown Criticizes NCUA Head for Appearing in White House Video: Sen. Sherrod Brown (D-OH) wrote to NCUA Chairman Rodney Hood after Hood appeared in a video praising the unemployment rate among African Americans under the current administration that was published by the White House. Brown wrote that the video raised “serious concerns about the NCUA’s independence” and noted “politicizing an independent agency like the NCUA threatens our economy and puts working families at risk.”

Warren Questions Treasury over Volatility in Repo Market: In a letter to Treasury Secretary Steven Mnuchin, Sen. Elizabeth Warren (D-MA) asked for an explanation for the recent volatility in the repo market and whether it was an indicator for trouble in the financial system. Warren wrote “I do not question the actions of the New York Fed, but I write to seek clarity on why they were necessary, and the implications of the cause of the spikes.” She also expressed concern that the regulators were using the spikes as a pretext to loosen liquidity rules saying, “These rules were designed to ensure that banks have enough cash on hand to meet their obligations in the event of another market crash.”

COMINGS AND GOINGS AT THE AGENCIES

A. Wayne Johnson Exits Education Department to Launch Senate Bid: On Thursday, a top aide to Education Secretary Betsy DeVos, A. Wayne Johnson, announced he would resign his position in order to launch a bid for the open Senate seat in Georgia. In his announcement, Johnson advocated for the cancellation of most student loan debt.

OTHER NOTEWORTHY ITEMS

Association of National Numbering Agencies Launches Task Force: On Wednesday, the Association of National Numbering Agencies (ANNA) launched a task force to consider ways to standardize the digital asset labeling across financial markets. ANNA Executive Director Ewe Meyer said, “With digital assets emerging as a new investment class, the availability of quality, standardized reference data will serve as the foundation for a trusted token market … This evaluation process on digital assets is an important part of that journey.”

New York Department of Financial Services Planning Fresh Look at Crypto Licensing Rules: Speaking at an event on Tuesday, NYDFS Superintendent Linda Lacewell discussed the state’s Bitlicense requirements and told the media that “the regulations are working well, but we want to hear from industry about how they’re operating in practicality for industry and if there are any tweaks that we should make.”

Independent Community Bankers of America Launches Campaign against Credit Unions: On Monday, the Independent Community Bankers of America (ICBA) launched a nationwide campaign calling on “policymakers and the public to ‘Wake Up’ to the risky practices, costly tax subsidies and irresponsibly lax oversight of the nation’s credit unions.” ICBA President and CEO Rebeca Romero Rainey said, “With credit unions abandoning their founding mission in the name of expansion and risky lending, it is long past time for Congress to level the playing field between community banks and credit unions while reining in the National Credit Union Administration’s expand-at-all-costs agenda.”