THE BIG PICTURE
For the latest advice for businesses dealing with the coronavirus, be sure to check out Paul Hastings’ targeted alert series: https://www.paulhastings.com/coronavirus
The impact of the novel coronavirus continued to reverberate across the nation, with confirmed cases in the U.S. topping 30,000 and over 400 virus-related deaths. New York, California, Illinois, Ohio, and Louisiana issued so-called shelter-in-place orders, drastically limiting the movement of millions outside of essential industries, while other states implemented a variety of social distancing measures in an effort to slow the spread. The U.S. and Canada closed the border to non-essential traffic, and encouraged citizens to return home from abroad. The virus hit the halls of Capitol Hill, with Sen. Rand Paul (R-KY) Rep. Mario Díaz-Balart (R-FL), and Rep. Ben McAdams (D-UT) all testing positive. The stock market continued to plummet, reflecting fears over the economic outlook as activity ground to a halt in many areas the country, wiping out the gains made under President Trump. Treasury Secretary Mnuchin warned that without swift and decisive action, the U.S. could face an unemployment rate of over 20%.
On Monday, the House passed a revised version of the Families First Coronavirus Response Act. The final measure included scaled down paid sick leave provisions, angering many House Democrats who viewed the changes as undermining a core tenant of the measure. The Senate voted 90 – 8 to pass the bill on Wednesday, after Majority Leader Mitch McConnell urged his caucus to overlook “shortcomings” and support the measure. The President signed the bill into law later that evening.
The Senate convened a rare weekend session as they raced to hash out the details of “Phase 3” of their coronavirus response—a massive stimulus package to help buoy the economy. A number of proposals were floated over the course of last week—including loans to airlines and small businesses, direct cash payments to individuals, a payroll tax holiday, student debt relief, a moratorium on rent payments, as well as significant boosts to social safety net programs. Various industries, from transit and hospitality to casinos, were keen to be included in the relief package, while Democrats advocated for a ban on stock buybacks and executive bonuses for recipient companies, as well as incentives for maintaining their workforces. Negotiations on the US$1.6T measure continued late Sunday evening after Democrats blocked the bill from advancing due to concerns over the lack of accountability for companies receiving assistance, as well as insufficient funding for state and local governments and aid for hospitals.
Another round of primaries were held in the race for the Democratic nomination on Tuesday, despite CDC guidance encouraging social distancing. Former Vice President Joe Biden went three for three, emerging victorious in Arizona, Florida, and Illinois. After a poor showing, Sen. Bernie Sanders indicated he would take a step back and assess his campaign. One state declined to hold a primary vote, with Ohio Governor Mike DeWine ordering the polls to close “as a health emergency” in defiance of a court order in an effort to slow the spread of coronavirus.
Other highlights of last week include:
- Several lawmakers came under fire after reports surfaced showing their sale of stock after coronavirus briefings, while they were still publicly downplaying the threat posed by the virus.
- The G-7 conference, which was set to take place at Camp David in June, will instead take place via videoconference amid concerns over coronavirus.
- Former Rep. Duncan Hunter (R-CA) was sentenced to 11 months in prison on Tuesday, after pleading guilty to violating campaign finance laws.
- Rep. Dan Lipinski (D-IL) lost his bid for another term to progressive primary challenger Marie Newman.
- The Director of the Office of Personnel Management, Dan Cabaniss, resigned abruptly on Tuesday after reported tension with the newly installed head of the Presidential Personnel Office.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Waters Announces Committee Plan for Comprehensive Fiscal Stimulus and Public Policy Response to Coronavirus Pandemic: On Wednesday, Committee Chair Rep. Maxine Waters (D-CA) released plans for a legislative package to provide a comprehensive fiscal stimulus and public policy in response to the coronavirus pandemic. Provisions of the plan included, among others: (1) providing at least US$2,000/month for all adults and US$1,000 for each child; (2) suspending all consumer and small business credit payments; (3) suspending all negative consumer credit reporting during the pandemic; (4) prohibiting debt collection, repossession, and garnishment of wages during the pandemic; (5) providing US$5B in emergency homeless assistance; and (6) a temporary ban on stock buybacks and dividends.
SENATE BANKING COMMITTEE
Hearings postponed due to focus on coronavirus response.
LEGISLATION INTRODUCED AND PROPOSED
H.R. 6293: Rep. Lee Zeldin (R-NY) introduced H.R. 6293, which would require issuance of guidance by the United States Interagency Council on Homelessness regarding protecting the homeless from COVID-19.
H.R. 6294: Rep. Scott Tipton (R-CO) introduced H.R. 6294, which would require data-sharing regarding protecting the homeless from COVID-19.
H.R. 6295: Rep. Steve Stivers (R-OH) introduced H.R. 6295, which would require issuance of guidance by the Secretary of Housing and Urban Development regarding protecting the homeless who reside in certain federally assisted properties from COVID-19.
H.R. 6296: Rep. Steve Stivers (R-OH) introduced H.R. 6296, which would provide for the use of Public Housing Operating and Capital Fund amounts to address public health emergencies.
H.R. 6297: Rep. Ted Budd (R-NC) introduced H.R. 6297, which would require public housing agencies to inform residents of a public housing project when a resident of such project tests positive for COVID-19.
H.R. 6306: Rep. French Hill (R-AR) introduced H.R. 6306, which would amend the Expedited Funds Availability Act to temporarily require that certain funds deposited with depository institutions by existing customers be available for withdrawal in real time in States with a public health emergency.
H.R. 6308: Rep. Pramila Jayapal (D-WA) introduced H.R. 6308, which would address root causes of homelessness, meet the needs of community members experiencing harms from homelessness, transition communities towards providing housing for all, and ensure full democratic participation and inclusion of persons experiencing homelessness.
S. 3509: Sen. Sherrod Brown (D-OH) introduced S. 3509, which would provide borrowers the right to request forbearance on mortgage loan payments due to a declared disaster.
THIS WEEK ON THE HILL
Both chambers remain focused on combatting coronavirus.
Federal Reserve Board Announces Establishment of a Commercial Paper Funding Facility: On Tuesday, the Federal Reserve announced that it will establish a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses. Commercial paper markets directly finance a wide range of economic activity, supplying credit and funding for auto loans and mortgages, as well as liquidity to meet the operational needs of a range of companies. By ensuring the smooth functioning of this market, particularly in times of strain such as the current coronavirus-related uncertainty, the Federal Reserve is providing credit that will support families, businesses, and jobs across the economy.
Federal Reserve Board announces establishment of a Primary Dealer Credit Facility: On Tuesday, the Federal Reserve announced that it will establish a Primary Dealer Credit Facility or PDCF. The facility will allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF will offer overnight and term funding with maturities up to 90 days and will be available as of March 20, 2020. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment grade debt securities, including commercial paper and municipal bonds and a broad range of equity securities. The interest rate charged will be the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.
Federal Banking Agencies Encourage Banks to Use Federal Reserve Discount Window: On Monday, the Federal Reserve, FDIC, and OCC released a statement encouraging banks to use the Federal Reserve's "discount window" so that they can continue supporting households and businesses. The discount window provides short-term loans to banks and plays an important role in supporting the liquidity and stability of the banking system.
Federal Banking Agencies Issue Interim Final Rule for Money Market Liquidity Facility: On Thursday, in an effort to support the flow of credit to households and businesses, the Federal Reserve, FDIC, and OCC announced an interim final rule to ensure that financial institutions will be able to effectively use a liquidity facility recently launched by the Federal Reserve Board. On Wednesday, the Board launched the Money Market Mutual Fund Liquidity Facility, or MMLF, to enhance the liquidity and functioning of money markets and to support the economy. The interim final rule modifies the agencies’ capital rules so that financial institutions receive credit for the low risk of their MMLF activities, reflecting the fact that institutions would be taking no credit or market risk in association with such activities. The change only applies to activities with the MMLF.
Federal Banking Agencies Issue Joint Statement on CRA Consideration for Activities in Response to the COVID-19: On Thursday, the Federal Reserve, FDIC, and OCC issued a joint statement encouraging financial institutions to work with affected customers and communities, particularly those that are low- and moderate-income. Pursuant to the Community Reinvestment Act (CRA), the agencies indicated they will provide favorable consideration of certain retail banking services, retail lending activities, and community development activities related to this national emergency.
Treasury and IRS Delay Federal Tax Day from April 15 to July 15 Due to COVID-19 Outbreak: On Friday, the Treasury Department and IRS announced that the tax filings and payments for all federal income taxes (including self-employment tax) due on April 15, 2020, regardless of amount, would now be due on July 15, 2020. This relief only applies to federal income tax, not state tax payments or deposits or payments of any other type of federal tax.
Treasury, IRS, and Labor Announce Plan to Implement Coronavirus-Related Paid Leave and Tax Credits: On Friday, the Treasury Department, IRS, and Labor Department announced that small and midsize employers could begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act, signed into law by the President on March 18.
Treasury Releases International Capital Data for January: On Monday, the Treasury Department released Treasury International Capital (TIC) data for January 2020. The sum total in January of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC inflow of US$122.9B. Of this, net foreign private inflows were US$94.1B, and net foreign official inflows were US$28.7B.
FDIC Announces Steps to Protect Banks and Consumers and to Continue Operations: On Monday, in light of ongoing developments related to the coronavirus, the FDIC announced several steps to ensure the health and safety of its workforce and the continuity of its operations: (1) In light of OMB guidance, the FDIC decided to proceed with tomorrow’s previously announced open Board of Directors meeting on a notational basis; (2) All FDIC employees in all FDIC facilities are now engaged in mandatory telework through at least March 30; (3) Supervisory and other FDIC activities at financial institutions will be conducted off-site for two weeks starting Monday, March 16; (4) The voluntary early retirement and separation programs announced earlier this month have been suspended at this time.
FDIC Chairman Urges FASB to Delay Certain Accounting Rules Amid Pandemic: On Thursday, FDIC Chair Jelena McWilliams sent a letter to the Financial Accounting Standards Board (FASB) urging a delay in transitions to and exclusions from certain accounting rules, including: (1) Excluding COVID-19-related modifications from being considered a concession when determining a troubled debt restructuring (TDR) classification; (2) Permitting financial institutions currently subject to the current expected credit losses (CECL) methodology an option to postpone implementation of CECL given the current economic environment; (3) Imposing a moratorium on the effective date for those institutions that are not currently required to implement CECL to allow these financial institutions to focus on immediate business challenges relating to the impacts of the current pandemic and its effect on the financial system.
CFTC Cancels March 19 Open Meeting: On Monday, the CFTC announced the open meeting scheduled for March 19 had been cancelled in response to recently issued OMB guidance and the President’s emergency declaration regarding COVID-19. The Commission instead considered (1) Final Rule: Amendment to Regulation 23.161—Compliance Schedule Extension for Initial Margin Requirements for Uncleared Swaps and (2) Final Interpretive Guidance: Retail Commodity Transactions Involving Certain Digital Assets, via seriatim. Chairman Tarbert said in a statement that, despite the fluid situation, the agency is “committed to moving forward with our policy agenda while also making sure we are taking appropriate action to facilitate orderly functioning of the U.S. derivatives markets.”
CFTC Provides Relief to Market Participants in Response to COVID-19: On Tuesday, the CFTC announced the Division of Swap Dealer and Intermediary Oversight had issued a number of no-action letters providing temporary, targeted relief to futures commission merchants, introducing brokers, swap dealers, retail foreign exchange dealers, floor brokers, and other market participants in response to the COVID-19 pandemic. The Commission acknowledged that the spread of coronavirus has caused compliance with certain CFTC requirements to be particularly challenging or impossible because of displacement of registrant personnel from their normal business sites due to social distancing and other measures.
CFTC Issues Second Wave of Relief to Market Participants in Response to COVID-19: On Tuesday, the CFTC announced the Division of Market Oversight had issued three no-action letters providing temporary, targeted relief to swap execution facilities (SEFs) and certain designated contract markets (DCMs) in response to the COVID-19 pandemic. “These prudent, targeted, and temporary actions will help facilitate orderly trading and liquidity in our derivatives markets. The CFTC remains squarely focused on promoting their integrity, resilience, and vibrancy through sound regulation,” said Chairman Heath Tarbert.
CFTC Issues Customer Advisory on COVID-19: On Wednesday, the CFTC issued a Customer Advisory informing the public to be on alert for frauds seeking to profit from recent market volatility related to the COVID-19 pandemic. “We will aggressively pursue misconduct in our markets tied to the impact of the coronavirus pandemic,” said CFTC Director of Enforcement James McDonald, adding “There is never an appropriate time to prey on innocent people’s fears.”
CFTC Issues Third Wave of Relief to Market Participants in Response to COVID-19: On Friday, the CFTC announced that in response to the COVID-19 pandemic, the Division of Swap Dealer and Intermediary Oversight had issued two additional no-action letters providing temporary, targeted relief to a large U.S. bank that helps finance America’s oil and gas sector and to those who operate commodity-focused investment funds the CFTC regulates. “End users involved in energy exploration and production are facing unique challenges, and the CFTC is committed to providing targeted relief, where appropriate, that helps these companies weather volatile market conditions,” said Chairman Heath Tarbert. “We are also taking additional steps to provide flexibility for investment funds by granting temporary relief from certain reporting requirements that have become challenging to meet under the present circumstances.”
SEC Enables Immediate Effectiveness of Proposed Rule Change to Facilitate NYSE Electronic Auctions in Light of Temporary Closure of Physical Trading Floor: On Saturday, the SEC noticed for immediate effectiveness a proposed rule filing submitted by the NYSE to facilitate electronic auctions in light of its decision to temporarily close its New York trading floor. NYSE announced that it would temporarily close its trading floor effective Monday, March 23, as a precautionary measure in response to COVID-19. The NYSE rule filing modifies certain rules to set wider price parameters, and to remove volume limits, within which NYSE designated market makers can facilitate auctions in an electronic trading environment.
SEC Provides Conditional Regulatory Relief for Registered Transfer Agents and Others Affected by COVID-19: On Sunday, the SEC announced that it is providing conditional regulatory relief for registered transfer agents and certain other persons with regulatory obligations under the federal securities laws. The impacts of COVID-19 may present challenges for transfer agents and other persons that are affected either directly or indirectly by COVID-19. To address these challenges, the Commission has issued an order that, subject to certain conditions, provides registered transfer agents and certain other persons with exemptive relief for certain regulatory obligations under the federal securities laws through May 30, 2020. Importantly, however, transfer agents at all times continue to be subject to the requirements of Exchange Act Rule 17Ad-12, which requires transfer agents to ensure that they adequately safeguard securities and funds in their possession or custody.
FinCEN Encourages Financial Institutions to Communicate Concerns Related to the Coronavirus: On Monday, FinCEN requested that financial institutions affected by the COVID-19 pandemic to contact FinCEN and their functional regulator as soon as practicable if a COVID-19-affected financial institution has concern about any potential delays in its ability to file required Bank Secrecy Act (BSA) reports. FinCEN also advised financial institutions to remain alert about malicious or fraudulent transactions similar to those that occur in the wake of natural disasters.
CFPB Releases Report On 2019 Administration of the Fair Debt Collection Practices Act: On Friday, the CFPB released the annual report to Congress on the administration of the Fair Debt Collection Practices Act (FDCPA). The report highlighted the continued efforts by the Bureau and the Federal Trade Commission to stop unlawful debt collection practices, including vigorous law enforcement, consumer education and public outreach, and policy initiatives. In the report, the Bureau stated that it handled approximately 75,200 debt collection complaints related to first-party (creditors collecting on their own debts) and third-party collections. Debt collection remains among the most prevalent topics of consumer complaints about financial products or services received by the Bureau.
HUD Provides Relief for Homeowners Amid Nationwide Coronavirus Response: On Wednesday, HUD Secretary Ben Carson authorized the Federal Housing Administration (FHA) to implement an immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages for the next 60 days. Sen. Sherrod Brown (D-OH) said the move was “a step in the right direction” but that “HUD and the Administration must work to expand relief to all hardworking Americans facing economic fallout from the Coronavirus pandemic including renters and those with mortgages not backed by the government.”
FHFA Suspends Foreclosures and Evictions for Enterprise-Backed Mortgages: On Wednesday, in an effort to help borrowers who are at risk of losing their home, the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions for at least 60 days due to the coronavirus national emergency. The foreclosure and eviction suspension applies to homeowners with an Enterprise-backed single-family mortgage. Sen. Sherrod Brown (D-OH) praised the move, saying “Fannie Mae and Freddie Mac are doing what everyone should be doing – offering borrowers relief if they fall behind on their payments during this pandemic and giving them tools to get back on track when it’s over. Every homeowner should have the same opportunity.”
Department of Education Suspends Federal Student Loan Payments, Waives Interest During National Emergency: On Friday, Education Secretary Betsy DeVos announced that the office of Federal Student Aid would execute President Trump's promise to provide student loan relief to tens of millions of borrowers during the COVID-19 national emergency. All borrowers with federally held student loans will automatically have their interest rates set to 0% for a period of at least 60 days. In addition, each of these borrowers will have the option to suspend their payments for at least two months to allow them greater flexibility during the national emergency. This will allow borrowers to temporarily stop their payments without worrying about accruing interest.
COMINGS AND GOINGS AT THE AGENCIES
Brian Brooks Named OCC Chief Operating Officer: On Monday, the OCC announced that Brian Brooks would become its next Chief Operating Officer and First Deputy Comptroller, effective April 1, 2020.
Supreme Court Postpones Oral Arguments: On Monday, the Supreme Court announced that it would postpone oral arguments scheduled to take place in March due to “public health precautions” related to coronavirus. While the building remains open for official business, it is closed to the public.
OTHER NOTEWORTHY ITEMS
Cannabis Groups Seek Access to Emergency Loans: On Friday, five cannabis trade groups wrote to congressional leadership arguing that they should be allowed emergency access to the low-interest loans being made available to small- and medium-sized businesses by the Small Business Administration. They wrote, “We are not seeking special treatment for state-legal cannabis businesses. We only seek to have them treated on an equal level as all other job-generating, tax-paying companies in this country.”
Senate Democrats Push Back Against Proposed HUD Rule: On Tuesday, Sen. Sherrod Brown (D-OH) led 36 of his colleagues in a letter opposing a proposed rule by the Department Housing and Urban Development that would roll back important efforts to make access to housing fair and equitable and fails fulfill the Fair Housing Act’s direction to affirmatively further fair housing (AFFH). The Senators argued, “Our collective future depends on all people having equal access to the opportunity to thrive and realize their potential. The proposed rule is a disappointing abdication of federal efforts to empower communities to address the ongoing effects of discrimination and inequality.”
Senators Call for Moratorium on Evictions Nationwide Amid Coronavirus Crisis: On Tuesday, Sen. Sherrod Brown (D-OH) and Sen. Dianne Feinstein (D-CA) wrote to the National Sheriffs Association in support of a moratorium on evictions in light of the coronavirus pandemic. The Senators pointed to the economic uncertainty for American families created by coronavirus and the importance of reassuring families they can stay in their homes. The Senators also underscored the important work done by law enforcement on the frontlines to respond to urgent, life-threatening situations and the need to focus on the most crucial needs of their communities, rather than evictions.