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
Coronavirus cases reached 6.3 million in the United States as leaders urged Americans to exercise good judgment and maintain social distance over the Labor Day holiday weekend. Infection rates have fallen overall from their July peak, and the country is now averaging 40,000 cases a day. Dr. Anthony Fauci emphasized the importance of bringing case counts down before the arrival of colder weather given the increased risk of spread indoors and the concurrent threat of influenza. The President expressed optimism during a press conference on Monday that a safe and effective vaccine could be ready by October, but Moncef Slaoui, head of Operation Warp Speed, cautioned the timeline was “unlikely, but not impossible.” The President’s comments drew criticism from Democrats, who questioned whether the approval process was being politicized, and warned a rushed vaccine could undermine public trust.
Another round of primaries was held in the run-up to the 2020 election, with Massachusetts Senator Ed Markey fending off a challenge by Rep. Joe Kennedy. While at the outset Kennedy was favored in the race, Markey, one of the architects of the “Green New Deal” garnered support from a coalition young progressives like Rep. Alexandria Ocasio-Cortez and was able to turn the tide. House Ways and Means Committee Chairman Richard Neal was also able to defeat Holyoke Mayor Alex Morse in a primary challenge that focused attention on health care special interests.
Negotiations over an additional coronavirus relief measure remain at a stalemate. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin agreed to keep the issues of government funding and COVID stimulus separate in an effort to avoid a government shutdown. The move however, greatly reduces pressure to agree on any additional relief before the election. Senate Majority Leader Mitch McConnell signaled an additional package would be difficult to pass due to the climate in Washington, but plans to hold a vote on his pared down “skinny” bill this week.
Other highlights of last week include:
- The US economy added 1.4 million jobs in August and the unemployment rate dropped to 8.4% even as an additional 881,000 Americans applied for jobless benefits. Despite this more positive report, Fed Chairman Jerome Powell projected recovery will “get harder from here” until the pandemic is under control.
- It was announced that Fox News anchor Chris Wallace will moderate the first debate between President Trump and former Vice President Joe Biden on September 29th.
- The Congressional Budget Office projected the deficit will triple this year to US$3.3T, the highest percentage of US GDP since 1945.
LAST WEEK ON THE HILL
Select Subcommittee Releases Eight Weeks of Coronavirus Task Force Reports: On Monday, the Subcommittee on the Coronavirus Crisis, released eight weeks of White House Coronavirus Task Force reports obtained in response to a Subcommittee request. These reports were previously sent by the White House to states but were not disclosed to the public. Subcommittee Chair James Clyburn said in a statement that the reports show “the White House has known since June that coronavirus cases were surging across the country and many states were becoming dangerous ‘red zones’ where the virus was spreading fast,” and criticized the President for keeping “these alarming reports private while publicly downplaying the threat to millions of Americans.”
Select Subcommittee Releases Preliminary Analysis of Paycheck Protection Program Data: On Tuesday, the Select Subcommittee on the Coronavirus Crisis released a preliminary staff report on the Paycheck Protection Program showing that billions of dollars in PPP loans may have been diverted to fraud, waste, and abuse. Based on this report, Subcommittee Chair James Clyburn sent a letter to the Small Business Administration and Treasury Department Inspectors General requesting a review of the Administration’s management of PPP.
Crapo Encourages OCC to Develop Rules on Cryptocurrency, Payments: On Tuesday, Sen. Mike Crapo (R-ID), Chair of the Senate Banking Committee, sent a letter to the Office of the Comptroller of the Currency encouraging it to develop rules of the road for the use of cryptocurrencies and/or distributed ledger technology (DLT) in payments for national banks. “The cryptocurrency ecosystem is as diverse in its products and functions as the rest of financial services,” Crapo wrote. “These and similar innovations are inevitable, beneficial and the U.S. should lead in their development.”
Senate Democrats Demand Immediate U.S. Sanctions for Russian Interference in 2020 Elections: On Thursday, leading Senate Democrats urged the Treasury Department to sanction Russian individuals and government actors for their interference in the 2020 election. The Senators argued that “Congress mandated a broad range of sanctions tools, and it is long past time for the administration to send a direct message to President Putin.” The group referenced recent reports by the National Counterintelligence and Security Center that Russia is working to “publicly denigrate former Vice President Biden” and urged Mnuchin to “identify and target for sanctions all those determined to be responsible for ongoing election interference.”
Senate Democrats Probe CFPB’s Failure to Alert Borrowers to Mortgage Relief Options During Pandemic: On Friday, Senators Sherrod Brown (D-OH), Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Robert Menendez (D-NJ), and Jack Reed (D-RI), sent a letter to CFPB Director Kathy Kraninger regarding the agency’s failure to use its authority to ensure that borrowers are aware of the mortgage relief options they are legally entitled to during the COVID-19 pandemic. “Your agency has the duty and the authority to take actions that ensure families can stay in their homes and prevent a series of irreversible foreclosures. But you are failing to meet your responsibilities,” the senators wrote.
Select Committee on the Coronavirus Crisis Hearing on “The Administration’s Response to the Economic Crisis”: On Tuesday, the Committee held a hearing on the Administration’s response to the country’s economic crisis. The panel examined the urgent need for additional economic relief for children, workers, and families, and the Administration’s implementation of key stimulus programs passed by Congress earlier this year.
- Steven Mnuchin, Secretary, Department of the Treasury
House Financial Services Committee Virtual Roundtable on “Dismantling Barriers to Housing for America's Seniors and People with Disabilities”: On Thursday, Rep. Katie Porter (D-CA) hosted a roundtable to focus on finding solutions to the barriers to accessing safe and affordable housing faced by seniors and people with disabilities.
- Linda Couch, Vice President of Housing Policy, LeadingAge
- Sara Pratt, Counsel, Relman Colfax, PLLC, Former Deputy Assistant Secretary for Fair Housing Enforcement and Programs at HUD
- Allison Donald, Memphis Center for Independent Living
- Kelsey Brewer, Communications and Policy Manager, Jamboree Housing
House Financial Services Committee Virtual Roundtable on “Continued Economic Challenges to Fighting the Recession Caused by the COVID Pandemic”: On Friday, Rep. Josh Gottheimer (D-NJ) hosted a Democratic roundtable focused on the economic impacts of COVID-19, prospects for recovery, and what Congress can and should do to assist state and local recovery.
- Austan Goolsbee, Professor of Economics, University of Chicago and former Chairman of President Obama’s Council of Economic Advisers
- Lisa Cook, Professor of Economics, Michigan State University and former Senior Economist on President Obama’s Council of Economic Advisers
LEGISLATION INTRODUCED AND PROPOSED
H.R. 8142: Rep. Val Demings (D-FL) introduced H.R. 8142, which would provide for a moratorium on evictions from and foreclosures on residences during a major disaster or emergency.
H.R. 8153: Rep. Darren Soto (D-FL) introduced H.R. 8153, which would direct the Secretary of Commerce, in consultation with the Federal Trade Commission, to conduct a study and submit to Congress a report on the state of the blockchain technology and use in consumer protection.
Reclaiming American Rare Earths: Congressmen Lance Gooden (R-TX) and Vicente Gonzalez (D-TX) introduced the Reclaiming American Rare Earths (RARE) Act, legislation intended to reduce America's dependence on China for rare earth minerals used in technology manufacturing. The measure would establish tax incentives for the domestic production of rare earth elements and minerals, and is a companion measure to legislation introduced in the Senate by Ted Cruz (R-TX).
THIS WEEK ON THE HILL
Tuesday, September 8
House Financial Services Committee (Subcommittee on Diversity and Inclusion) Hearing on “Holding Financial Regulators Accountable for Diversity and Inclusion: Perspectives from the Offices of Minority and Women Inclusion”: 12:00 PM via WebEx.
Wednesday, September 9
Senate Banking Committee Hearing on “The Status of the Federal Reserve Emergency Lending Facilities”: 10:00 AM via WebEx.
Select Committee on the Coronavirus Crisis Hearing on “Ensuring A Free, Fair, And Safe Election During The Coronavirus Pandemic”: 1:00 PM via WebEx.
Thursday, September 10
House Financial Services Committee Hearing on “The Need for Financial Aid to America’s States and Territories During the Pandemic: Supporting First Responders, Assisting Schools in Their Efforts to Safely Educate, and Preventing Mass Layoffs”: 12:00 PM via WebEx.
Agencies Extends Comment Period Related to the Proposed Updated Interagency Questions and Answers Regarding Flood Insurance: On Tuesday, the Federal Reserve Board, FDIC, OCC, NCUA, and FCA announced they were extending the public comment period for the proposed Interagency Questions and Answers Regarding Flood Insurance by 60 days to provide bankers and other interested parties additional time to provide feedback on the proposal. The agencies are extending the end of the comment period to November 3, 2020.
Fed’s Main Street Lending Program Is Now Fully Operational for Loans to Nonprofit Organizations: On Friday, the Federal Reserve Bank of Boston announced that the Main Street Lending Program is now fully operational and is accepting submissions of eligible loans to nonprofit organizations, submitted by registered lenders. “Nonprofit entities—including most hospitals, educational institutions, and social service organizations—play critical roles in our society and our economy, while employing a significant share of the country’s workforce,” said Eric Rosengren, president of the Boston Federal Reserve Bank, which is administering the program for the Federal Reserve System.
CDC Orders Temporary Halt in Residential Evictions: On Wednesday, the CDC announced a temporary ban on residential evictions for nonpayment of rent through the end of the year. In order for the ban to take effect, tenants would need to certify that they have lost a “substantial” portion of their wages, earn less than US$99K a year, and face homelessness if evicted. House Financial Services Committee Chairwoman Maxine Waters (D-CA) criticized the move as “needlessly forces struggling families to jump through hoops, including signing legal documents that could subject them to frivolous litigation, just to avoid being kicked out on the street.” She noted that without rental assistance, evictions were only being delayed, not prevented and urged passage of the House Heroes Act which included housing protections.
CFTC Provides Additional Relief to Market Participants Transitioning from LIBOR: On Monday, the CFTC announced that the Division of Swap Dealer and Intermediary Oversight, Division of Market Oversight, and Division of Clearing and Risk have each issued revised no-action letters providing additional relief to swap dealers and other market participants related to the industry-wide initiative to transition from swaps that reference the London Interbank Offered Rate (LIBOR) and other interbank offered rates to swaps that reference alternative benchmarks. “Today’s relief will help smooth the transition away from interbank offered rates (IBORs), particularly with respect to older, legacy swaps that are sitting on the books of dealers and their clients, and in particular end-users around the world,” said CFTC Chairman Heath Tarbert.
SEC Awards Over $2.5 Million to Joint Wall Street Whistleblowers: On Tuesday, the SEC announced an award of over US$2.5M to joint whistleblowers whose tip based largely on highly probative independent analysis of a public company’s filings led to several successful enforcement actions. The Commission has awarded approximately US$510M to 92 individuals since issuing its first award in 2012. This includes awards to 25 individuals in this fiscal year, totaling approximately US$123M.
SEC Investor Advisory Committee to Meet Virtually: On Tuesday, the SEC announced it would hold a virtual public meeting on September 24. The Committee will hold two panel discussions: a discussion regarding self-directed IRAs, and a discussion regarding minority community investor inclusion.
Department of Labor Proposes Rule on Employee Benefit Plan Proxy Voting and Exercises of Other Shareholder Rights: On Monday, the Department of Labor made available a proposed rule that would address the application of the prudence and exclusive purpose duties under the Employee Retirement Income Security Act (ERISA) with respect to proxy voting and exercises of other shareholder rights. “The proposed proxy rule would ensure that individuals responsible for the retirement savings of millions of American workers are voting proxies only where it is financially in the interest of the plan to do so,” said Secretary of Labor Eugene Scalia. “The proposal would provide clarity and further the prudent management of plan assets and resources.”
HUD Provides $100 Million in CARES Act Funding to Native American Tribes to Support Coronavirus Recovery Efforts: On Monday, HUD Secretary Ben Carson announced that HUD has awarded a total of US$100M to Tribes across the Nation as part of HUD’s Indian Community Development Block Grant Imminent Threat program. This funding will help address problems that pose an imminent threat to public health or safety of Tribal residents and will be used to help Tribes prevent, prepare for, and respond to COVID-19.
Appeals Court Deals Blow to House Democrats’ Pursuit of Testimony from Don McGahn: On Monday, in a 2-1 decision by the D.C. Circuit Court of Appeals, the Court dismissed House Democrats’ lawsuit seeking the testimony of former White House Counsel Don McGahn, finding the House Committee lacked the legal grounds to enforce their subpoena. Judge Thomas Griffith wrote for the majority stated that, “If Congress (rather than a single committee in a single chamber thereof) determines that its current mechanisms leave it unable to adequately enforce its subpoenas, it remains free to enact a statute that makes the House’s requests for information judicially enforceable.”
District Court Judge Allowed to Move Forward with Flynn Hearing: On Monday, the D.C. Circuit Court of Appeals, sitting en banc, decided 8-2 to reject former National Security Advisor Mike Flynn’s efforts to have his case dismissed immediately, and found that DC District Court Judge Emmett Sullivan could proceed with a planned hearing on DOJ’s decision to drop the criminal case against Flynn.
OTHER NOTEWORTHY NEWS
Bank of England Governor Discusses Benefits and Risks of Stablecoins: During a webinar on Thursday, Bank of England Governor Andrew Bailey urged financial regulators to coordinate on payment innovations. He argued that, “Payments regulation should reflect the financial stability risk, rather than the legal or technological form, of payment activities,” adding, “Firms that are systemically important should be subject to standards of operational and financial resilience that reflect the risks they pose, with sufficient data available to monitor emerging risks. These may sound like common sense points, but innovation is increasingly challenging regulators' ability to ensure they are met.”