THE BIG PICTURE
On Thursday, the House voted 232-196 on nearly party lines to adopt a resolution establishing the rules and procedures for impeachment hearings. Only two Democrats joined the Republicans in opposing the measure. In a rare move, Speaker Nancy Pelosi presided over the vote, underscoring the seriousness of the proceeding. Minority Leader Kevin McCarthy (R-CA) spoke out against the process claiming, “Democrats are trying to impeach the President because they are scared they can’t defeat him at the ballot box.”
As the November 21st deadline to fund the government approaches, legislators are already acknowledging that another stopgap continuing resolution may be necessary to prevent a government shutdown. On Thursday, the Senate voted 84-9 to pass a four-bill spending package that includes Agriculture-FDA, Commerce-Justice-Science, Interior-Environment, and Transportation-HUD. Despite this, little progress has been made toward a comprehensive package that could be signed into law.
Former congressman Beto O’Rourke, once a rising star in the Democratic Party after challenging Ted Cruz for his Senate seat in Texas, ended his presidential campaign on Friday after struggling to raise funds and failing to gain traction in the polls. O’Rourke wrote in a blog post that it was “in the best interest of the country” to unify around a single candidate.
Other highlights of last week include:
- The Washington Nationals won their first World Series title in franchise history after defeating the Houston Astros in a thrilling 7 game series that united the District.
- Rep. Greg Walden (R-OR), the top Republican on the House Energy and Commerce Committee, announced he would not seek reelection saying, “the time has come to pursue new challenges and opportunities.”
- The national debt hit a record high on Friday, topping US$23T after an additional US$1T was borrowed in the last nine months.
- The President, a life-long New Yorker, has formally changed his primary residency from the state of New York to Florida.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “Financial Services and the LGBTQ+ Community: A Review of Discrimination in Lending and Housing”: On Tuesday, the Subcommittee on Oversight & Investigations held a hearing to focus on the extent and effects of discrimination against persons who identify as lesbian, gay, bisexual, transgender, or queer (“LGBTQ+”) when seeking housing or credit in the United States. The testimony examined the relevant data that are currently available to inform policy makers regarding the nature and scope of such discrimination.
- Harper Jean Tobin, Director of Policy, National Center for Transgender Equality
- Michael Adams, CEO, SAGE (Services and Advocacy for GLBT Elders)
- Kerith Conron, Research Director, Williams Institute, UCLA School of Law
- Alphonso David, President, Human Rights Campaign
- Hua Sun, Professor, Iowa State University
- Francis Creighton, President and CEO, Consumer Data Industry Association
“Markup”: The Committee met to mark up four pieces of legislation, ultimately advancing them all to the full House for consideration.
- H.R. 4634, the Terrorism Risk Insurance Program Reauthorization Act of 2019, a bill by Chairwoman Waters that would provide a long-term reauthorization of the Terrorism Risk Insurance Program and prevent the critical program from expiring at the end of 2020. The bill passed the Committee by a unanimous vote of 57–0.
- H.R. 4863, the United States Export Finance Agency Act, a bill by Representative Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, to reauthorize the Export-Import Bank for ten years, increase the agency’s lending authority from $135 billion to $175 billion over a seven-year period, and improve the agency with a series of key reforms. After intense negotiations over proposed amendments, the bill passed the Committee by a vote of 30–27.
- H.R. 4841, the Prudential Regulator Oversight Act, a bill by Representative Dean Phillips (D-MN) that requires the federal prudential banking regulators to provide annual testimony to the House Financial Services Committee, along with semiannual reports on their supervisory and regulatory activities. The bill passed the Committee by a unanimous vote of 55–0.
- H.R. 4458, the Cybersecurity and Financial System Resilience Act, a bill by Representative Patrick McHenry (R-NC), Ranking Member of the House Financial Services Committee, that would help strengthen cybersecurity at the prudential banking regulators as well as the financial institutions they supervise. The bill passed the Committee by a voice vote.
SENATE BANKING COMMITTEE
No hearings held.
House Agriculture Committee Hearing on “Reauthorization of the Commodity Futures Trading Commission”: On Wednesday, the full Committee met to consider H.R. 4895, legislation to reauthorize the Commodity Futures Trading Commission through 2025. The Committee advanced the measure by voice vote. The bipartisan legislation would improve system safeguards requirements for clearinghouses, trading platforms and swap data repositories; clarify provisions for relief in the event of a broker bankruptcy; strengthen the resiliency of financial market infrastructure; add whistleblower protections for employees of organizations under CFTC jurisdiction; codify no action letters that have been in the place making permanent relief for churches, university endowments, and other charitable organizations that use the markets to provide healthcare and retirement plans for their employees; enable further cooperation between the CFTC and international regulatory bodies; establish an internship program to promote diversity in hiring; and authorize the CFTC to make an honors program that will help them grow their own talent.
House Education Committee “Markup”: On Wednesday and Thursday, the full Committee met to consider H.R. 4674, the College Affordability Act. On Thursday, the bill was advanced on a party-line vote (28-22) with unanimous Democratic support. Committee Chairman Bobby Scott praised the measure as “a comprehensive bill that will immediately lower the cost of college while putting a down payment on investments that we need to make in the future.”
ON THE FLOOR
House Passes Five Financial Services Bills: On Monday, the House passed five pieces of financial services legislation, including:
- H.R. 1865: The National Law Enforcement Museum Commemorative Coin Act, a bill to require the Secretary of the Treasury to mint a coin in commemoration of the opening of the National Law Enforcement Museum in the District of Columbia. This bill was introduced by Representative Bill Pascrell (D-NJ) and passed by a voice vote.
- H.R. 2423: The Women’s Suffrage Centennial Commemorative Coin Act, a bill to require the Secretary of the Treasury to mint coins in commemoration of ratification of the 19th Amendment to the Constitution of the United States, giving women in the United States the right to vote. This bill was introduced by Representative Elise Stefanik (R-NY) and passed by a voice vote.
- H.R. 2514: The Coordinating Oversight, Upgrading, and Innovating Technology and Examiner Reform Act, bipartisan legislation that closes loopholes in the Bank Secrecy Act, increases penalties for those who break the law, and helps provide financial institutions with new tools to fulfill their obligations under the law. This bill was introduced by Representative Emanuel Cleaver (D-MO) and Representative Steve Stivers (R-OH) and passed by a voice vote.
- H.R. 4067: The Financial Inclusion in Banking Act, a bill which requires the Consumer Bureau to study how to better address the needs of underbanked, unbanked, and underserved communities. This bill was introduced by Representative David Scott (D-GA) and passed by a voice vote.
- H.R. 4860: The Equity Crowdfunding Act, a bill to subject crowdfunding vehicles to the jurisdiction of the Securities and Exchange Commission. This bill was introduced by Representative Patrick McHenry (D-NC), Ranking Member of the House Committee on Financial Services, and Representative Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services and passed by a voice vote.
House Passes Sanctions Bill: On Tuesday, the House voted overwhelmingly 403-16 to pass H.R. 4695, the Protect Against Conflict by Turkey Act or the PACT Act, which was introduced last month by Rep. Eliot Engel (D-NY). The measure would impose sanctions and various restrictions related to Turkey's military invasion of northern Syria.
LEGISLATION INTRODUCED AND PROPOSED
S. 2649: Sen. Jerry Moran (R-KS) introduced S. 2649, the Financial Institutions Examination Fairness and Reform Act, which would amend the Federal Financial Institutions Examination Council Act of 1978 to improve the examination of depository institutions.
S. 2685: Sen. Jack Reed (D-RI) introduced S. 2685, the Consumer Credit Control Act of 2019, which would amend the Fair Credit Reporting Act to require that a consumer authorize the release of certain information.
S. 2738: Sen. Ron Wyden (D-OR) introduced S. 2738, which would amend the Internal Revenue Code of 1986 to provide a tax credit for angel investors in start-up businesses, to provide a credit for wages paid by start-up businesses to their first employees.
H.R. 4863: Rep. Maxine Waters (D-CA) introduced H.R. 4863, the United States Export Finance Agency Act of 2019, which would promote the competitiveness of the United States, to reform and reauthorize the United States Export Finance Agency.
H.R. 4918: Rep. Bryan Steil (R-WI) introduced H.R. 4918, which would provide for a five year extension of certain exemptions and reduce disclosure requirements for companies that were emerging growth companies and would continue to be emerging growth companies but for the five-year restriction on emerging growth companies.
H.R. 4966: Rep. Ayanna Pressley (D-MA) introduced H.R. 4966, the Greater Supervision in Banking Act, which would require the chief executive officers of global systemically important bank holding companies to provide annual testimony to Congress. “Ten years later and banks’ shareholders are reaping record profits while much of the country has yet to recover from the 2008 financial crisis,” said Congresswoman Pressley. “As working-class families continue to pay the price, the nation’s biggest banks are continuing to rack up billions in fines for illegal practices while avoiding any meaningful accountability. Congress has a duty to hold these systemically important banks and their executives accountable on behalf of the American people.”
H.Res. 658: Rep. Lacy Clay (D-MO) introduced H.Res. 658, a resolution expressing support for the designation "Housing America Month" and honoring the importance of affordable housing and community development programs and resources that allow communities across the country to provide access to safe, secure housing for all Americans, regardless of income level.
THIS WEEK ON THE HILL
Thursday, November 7
Senate Banking Committee Hearing on “Examining Bipartisan Bills to Promote Affordable Housing Access and Safety”: 10:00 AM in 538 Dirksen Senate Office Building.
Federal Reserve Cuts Interest Rates for Third Time: The Federal Reserve announced that the FOMC had decided to lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent, the third interest rate cut of the year. Federal Reserve Vice Chairman for Supervision Randal Quarles said, “The U.S. economy is doing well, and I am optimistic about the outlook” adding that, “by lowering the federal funds rate this year, we are supporting the continued expansion of the economy.”
Agencies Propose Rule to Amend Swap Margin Rules: The Federal Reserve, FCA, FDIC, FHFA and OCC announced a proposal to change the swap margin rules to facilitate the implementation of prudent risk management strategies at certain banks and swap entities. The swap margin rule would no longer require swap entities to hold initial margin for uncleared swaps with affiliates. However, inter-affiliate transactions would still be subject to variation margin requirements. Furthermore, to aid in the transition away from LIBOR, the agencies proposed to allow certain technical amendments to legacy swaps without altering their status under the swap margin rules. For smaller counterparties, the proposal would provide clarification on documentation requirements and implementation relief. In addition, the proposal would extend the effective date by one year to September 1, 2021, for smaller counterparties to meet initial margin requirements.
Agencies Announce Dollar Thresholds in Regulations Z and M for Exempt Consumer Credit and Lease Transactions: The CFPB and Federal Reserve announced the dollar thresholds in Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) that will apply for determining exempt consumer credit and lease transactions in 2020. Based on the annual percentage increase in the CPI-W as of June 1, 2019, the protections of the Truth in Lending Act and the Consumer Leasing Act generally will apply to consumer credit transactions and consumer leases of US$58,300 or less in 2020. However, private education loans and loans secured by real property (such as mortgages) are subject to the Truth in Lending Act regardless of the amount of the loan.
Federal Bank Regulatory Agencies Issue Final Rule to Simplify Capital Calculation for Community Banks: The Federal Reserve, FDIC, and OCC finalized a rule that simplifies capital requirements for community banks by allowing them to adopt a simple leverage ratio to measure capital adequacy. The community bank leverage ratio framework removes requirements for calculating and reporting risk-based capital ratios for a qualifying community bank that opts into the framework.
Agencies Announce Threshold for Smaller Loan Exemption from Appraisal Requirements for Higher-Priced Mortgage Loans: The Federal Reserve, CFPB, and OCC announced that the threshold for exempting loans from special appraisal requirements for higher priced mortgage loans during 2020 will increase from US$26,700 to US$27,200. The threshold amount will be effective January 1, 2020 and is based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as of June 1, 2019.
OCC Innovation Officer Urges Fintech Companies to “Talk to Us”: Speaking at a panel event, Beth Knickerbocker, chief innovation officer at the OCC, urged Fintech companies to “come early and often and talk to us” to ensure regulatory compliance. She added, “This is a great opportunity right now in the period of the cycle that we're at to come and speak to the regulators. We're open to it. We're setting up different mechanisms so that folks can feel more comfortable speaking to us.”
Financial Stability Oversight Council to Meet November 7th: The Financial Stability Oversight Council will meet in executive session on Thursday, November 7. The preliminary agenda includes proposed amendments to the Council’s interpretive guidance on nonbank financial company designations, the Council’s 2019 annual report, a discussion of the activities of cloud service providers, and a discussion of the current expected credit losses (CECL) accounting standard.
NCUA’s Harper Calls for Dedicated Consumer Compliance Exams of Large Credit Unions: National Credit Union Administration Board Member Todd Harper has requested public comment on his proposal to create a dedicated consumer compliance exam program for large, complex credit unions. “For more than three decades, the NCUA has focused its examination program primarily on safety and soundness reviews,” Harper said. “This policy worked well when the NCUA oversaw a large number of small credit unions serving a limited field of membership with only a few basic financial products, but today’s credit unions are larger and more complex, with 317 credit unions exceeding $1 billion in assets having 71.7 million members.” Harper would like to add three new full-time employees in the NCUA’s Office of Consumer Financial Protection in 2020, who would develop and later launch a dedicated consumer compliance examination program for large, complex credit unions.
FHFA Releases New Strategic Plan and Scorecard for Fannie Mae and Freddie Mac: The FHFA released a new Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and a new 2020 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions. The Strategic Plan provides a framework for how FHFA will guide Fannie Mae and Freddie Mac (the Enterprises) to fulfill their statutory missions, focus on safety and soundness, and prepare for a responsible end to the conservatorships. The Scorecard aligns the Strategic Plan with the Enterprises’ tactical priorities and operations, serving as an essential tool to hold the Enterprises accountable for the effective implementation of the Strategic Plan.
Treasury and IRS Announce Proposed New Tax Form to Collect Opportunity Zone Fund Data: The Treasury and IRS released a proposed Form 8996 for Qualified Opportunity Funds (QOFs) for the 2019 tax year. The form is designed to collect information on the amount of investment by opportunity funds in business property by census tract. Specifically, the new form 8996 requires QOFs to report the EIN of each business in which the QOF has an ownership interest, the census tract location of the tangible property of the business, and the value of the QOF’s investment. It will also require QOFs to report the value and census tract location of qualified business property it owns or leases directly.
CFTC Chairman Discusses Self-Reports: Speaking at an event, CFTC Chairman Heath Tarbert discussed the agency’s stance toward entities that self-report violations, saying that the CFTC would reward those who report and cooperate with reduced penalties. He also noted that the agency plans to release guidance on penalties and reiterated his pledge to crack down on wrongdoers.
CFTC to Hold an Open Commission Meeting on November 5: The CFTC announced that it will hold an open meeting on Tuesday, November 5, 2019, at 10:00 a.m. to consider the following: (1) Proposed Rule: Correcting Amendment to Commission Regulation 160.30 (Privacy of Consumer Financial Information); (2) Foreign Board of Trade (FBOT) Applications of Euronext Amsterdam, Euronext Paris, and European Energy Exchange; (3) Other Commission Business.
SEC to Host Veterans Day Program for Active Duty Service Members and Veterans: The SEC announced that it will host a Veterans Day program on Tuesday, Nov. 12. The program will feature a conversation with SEC Chairman Jay Clayton and Colonel James Tuite of the U.S. Army’s “Old Guard” that will focus on financial readiness, including the basics of saving, investing, preparing for retirement and avoiding scams, for an audience of active duty service members and veterans. Following the conversation, the SEC’s Veterans Committee will hold a Veterans Day Expo featuring several unique speakers as well as memorabilia and pictures from SEC employees’ time in service.
SEC Issues Agenda for Nov. 4 Meeting of the Fixed Income Market Structure Advisory Committee: The SEC released the agenda for the Nov. 4 meeting of the Fixed Income Market Structure Advisory Committee (FIMSAC). Panel topics will include (1) Structured Disclosures by Municipal Issuers; (2) Alternative Compensation Models for Credit Rating Agencies; (3) Updates from the Technology and Electronic Trading Subcommittee and the Corporate Bond Transparency Subcommittee; (4) Fixed Income Index Construction; (5) Interdealer Government Securities Trading Platforms; and (6) LIBOR Transition Update and SOFR Volatility.
HUD and Justice Department Sign Interagency Memorandum on the Application of False Claims Act: HUD Secretary Ben Carson and Attorney General William Barr issued a Memorandum of Understanding between the two agencies that sets prudential guidance on the appropriate use of the False Claims Act (FCA) for violations by Federal Housing Administration (FHA) lenders. “This agreement clearly outlines our FHA mortgage program requirements, so they do not impede or discourage lenders from offering affordable FHA-insured loans to credit-worthy borrowers,” said Secretary Carson.
U.S. and India Sign Joint Statement on Economic and Financial Partnership: Indian Finance Minister Nirmala Sitharaman and U.S. Secretary of the Treasury Steven Mnuchin met in New Delhi to continue the India – U.S. Economic and Financial Partnership, a dialogue meant to deepen the economic partnership between the two countries and advance work in a number of areas to support economic growth and security. Following the conclusion of the dialogue, Indian Finance Minister Sitharaman and Treasury Secretary Mnuchin signed a joint statement affirming their commitment to greater economic cooperation on global economic issues, both bilaterally and multilaterally in the G20 and other fora.
COMINGS AND GOINGS AT THE AGENCIES
Natasha Vij Greiner Named Associate Director in SEC’s Investment Adviser/Investment Company Examination Program: The SEC announced that Natasha Vij Greiner had been named Associate Director in its Office of Compliance Inspections and Examination’s (OCIE) investment adviser and investment company examination program. Ms. Greiner has served in various roles at the SEC for the past 18 years, including recently as Acting Chief Counsel and Assistant Chief Counsel in the Division of Trading and Markets.
Supreme Court to Review SEC’s Disgorgement Power: The Supreme Court is set to review whether the SEC still has the power to pursue disgorgement as a remedy to wrongdoing following the court’s 2017 decision in Kokesh.
Class Certified in Suit Against Department of Education: A group of students who claim they were defrauded by for-profit institutes and that the Department of Education is slow-rolling their loan forgiveness, were granted class certification by a federal judge in California, defeating arguments by the Department of Education that the complaint depended too heavily on individual circumstances. In the decision, Judge Alsup found that “they have identified a single uniform policy—namely, the department's alleged ‘blanket refusal’ to adjudicate borrower defenses—which ‘bridges all their claims.’”
OTHER NOTEWORTHY ITEMS
Date Set for Maryland Special Election: Maryland Governor Larry Hogan has set the date for the special election to fill the seat vacated by Rep. Elijah Cummings in the state’s 7th congressional district, who passed away last month at the age of 68. The election will be held on February 4, 2020.
ICE Chief Discusses Bitcoin’s Potential: Speaking on an earnings call, Intercontinental Exchange chief Jeffrey Sprecher said that Bitcoin has the potential to become “digital gold” but added that “we don’t think that that whole space will be relevant and grow unless there are real use cases.”
Legislators Demand Premium Caps on Flood Insurance Reauthorization: A bipartisan group of 64 House members led by Reps. Bill Pascrell (D-NJ) and Garret Graves (R-LA) wrote to House leadership to urge that they “work with us to ensure the Waters-McHenry package reflects our priorities for premium caps and delays the impacts of Risk Rating 2.0 before it comes to the House floor for a vote.”
Senate Democrats Criticize HUD Secretary Carson for Undercutting Transgender Rights: Sen. Sherrod Brown (D-OH) led 32 Senators in demanding HUD Secretary Ben Carson retract his statements about the rights of transgender individuals, following dismissive remarks he made during a staff meeting according to the Washington Post. The senators warned, “If you are truly committed to recognizing the value of the people you are charged to serve as HUD Secretary, you must publicly retract your statements about the rights of transgender individuals, support their basic rights to seek shelter consistent with their identity, and take no actions that undermine these rights.”
Senate Democrats Demand CFPB Investigate Mismanagement of Student Loan Forgiveness Program: A group of 23 Democratic Senators demanded that CFPB Director Kathy Kraninger investigate student loan servicer Pennsylvania Higher Education Assistance Agency (PHEAA) for mismanagement of the Public Service Loan Forgiveness Program. The Senators wrote, “Under your leadership, the CFPB has failed to ensure that PHEAA makes good on the promise of loan forgiveness. Since 2017, the CFPB has refused to exercise its authority to conduct supervisory examinations of PHEAA’s servicing practices and its management of the PSLF program. We have repeatedly pressed the CFPB to conduct this critical oversight, but you have provided nothing but excuses for the CFPB’s inaction.”