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PH Money Matters: This Week in Washington

This Week in Washington for September 28, 2020

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 in the United States surpassed seven million as deaths topped 200,000—two grim milestones as the toll of the pandemic continues to be felt across the country. Virginia Governor Ralph Northam and Missouri Governor Mike Parsons both tested positive for the virus and are self-isolating. Early in the week, the CDC removed guidance published on its website that identified airborne particles as a primary mode of transmission, claiming it had been posted in error and reverted to existing guidance. The FDA announced plans to toughen standards for issuing emergency use authorizations, decreasing the odds that a vaccine could be approved prior to the election. The president criticized the decision as political and urged the agency to move quickly to approve a vaccine candidate.

On Saturday, the president unveiled Judge Amy Coney Barrett as his choice to fill the vacancy on the Supreme Court left by Justice Ruth Bader Ginsburg’s death. Barrett has served as a judge on the Seventh Circuit Court of Appeals since 2017, and is a favorite of conservative intellectuals. The Senate Judiciary Committee is set to begin hearings on her nomination October 12th. Democrats continued to criticize the rushed process, pointing to the fact that early voting is already under way in several states. While Senators Lisa Murkowski (R-AK) and Susan Collins (R-ME) indicated they would not support a vote prior to the election, Senator Mitt Romney (R-UT) announced he would back Barrett, meaning the Republicans have locked in a sufficient number of votes for confirmation without any Democratic support.

Coronavirus stimulus negotiations remain at a stalemate even as pressure mounts to pass additional relief. Congressional Democrats are working on a draft their own version of a US$2T “skinny” measure as an alternative to Senate Republicans’ bill, after the House’s more comprehensive HEROES Act proposal stalled for months in the Senate. The issue of whether to separate airline aid from the package continues to divide the parties, with Democrats preferring a global measure. However, the looming end of airlines’ payroll protection on October 1st and the threat of mass layoffs is focusing attention on the problem.

Other highlights of last week include:

  • On Wednesday, the House voted 359-57 to pass a stop-gap spending measure to fund the government through December 11th and avert a shutdown. The measure includes US$30B in farm aid and US$8B in nutrition aid. The Senate followed suit on Thursday in a 93-2 vote.
  • The Labor Department reported that an additional 870,000 Americans filed for unemployment benefits last week.
  • The decision of a Kentucky grand jury not to indict three police officers for the death of Breonna Taylor sparked days of protest. One officer was indicted on charges of wanton endangerment for having fired shots into a neighboring apartment.
  • The Congressional Budget Office released a projection on Monday that federal debt levels would soar to nearly double GDP by 2050.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Hearing on “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response”: On Tuesday, the full Committee held a hearing to receive the testimony of Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell to perform oversight of the activities of the Treasury and the Fed under the CARES Act. The pair urged the panel to pass additional relief to help buffer the economy from the effects of the pandemic.

  • The Honorable Steven Mnuchin, Secretary, U.S. Department of the Treasury
  • The Honorable Jerome Powell, Chair, Board of Governors of the Federal Reserve System

Waters Calls on Trump Administration to Rescind Rule That Makes It Harder to Prove Discrimination in Housing: On Thursday, Committee Chairwoman Maxine Waters (D-CA) responded to the announcement by HUD Secretary Ben Carson on the department’s final rule on the disparate impact standard under the Fair Housing Act. Waters urged Carson to rescind the rule, arguing, “The new rule shifts the burden of proof from the perpetrators of discrimination onto the victim, making it significantly more difficult for victims of housing discrimination to prevail in court and ultimately making it easier for discriminatory policies and practices to plague our housing markets.”

SENATE BANKING COMMITTEE

Hearing on “The Quarterly CARES Act Report to Congress”: On Thursday, the full Committee held a hearing to receive testimony from Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell on how the financial resources provided under the CARES Act have benefitted the American people and economy; an update on the status of 13(3) emergency facilities, including an assessment of the opportunities for and need to expand the Main Street Lending Program; steps the Fed and Treasury have taken and will continue to take to provide transparency into the loans, loan guarantees, and other investments under the CARES Act; and opportunities to utilize any remaining funds of the CARES Act to provide financial support and additional liquidity to the economy.

  • The Honorable Steven Mnuchin, Secretary, U.S. Department of the Treasury
  • The Honorable Jerome Powell, Chairman, Board of Governors of the Federal Reserve System

OTHER COMMITTEES

Select Committee on the Coronavirus Crisis Hearing on “Federal Reserve’s Response to the Coronavirus”: On Wednesday, the Select Committee held a hearing to examine the current state of the job market, the federal government’s economic recovery efforts during the coronavirus crisis, how the crisis has exacerbated inequality, and the need for additional fiscal stimulus.

  • The Honorable Jerome Powell, Chair, Board of Governors of the Federal Reserve System

Senate Commerce Committee Hearing on “Revisiting the Need for Federal Data Privacy Legislation”: On Wednesday, the Committee held a hearing to examine the current state of consumer data privacy and legislative efforts to provide baseline data protections for all Americans. The panel also examined lessons learned from the implementation of state privacy laws in the U.S. and the EU General Data Protection Regulation, as well as how the COVID-19 pandemic has affected data privacy.

  • The Honorable Julie Brill, Former Commissioner, Federal Trade Commission
  • The Honorable William Kovacic, Former Chairman and Commissioner, Federal Trade Commission
  • The Honorable Jon Leibowitz, Former Chairman and Commissioner, Federal Trade Commission
  • The Honorable Maureen Ohlhausen, Former Commissioner and Acting Chairman, Federal Trade Commission
  • Mr. Xavier Becerra, Attorney General, State of California

Select Committee on the Modernization of Congress Passes Final Round of Recommendations to Make Congress Work Better: On Thursday, the Select Committee passed its fifth and final package of recommendations to make Congress work better for the American people. 40 new recommendations were passed, which aim to help Congress reclaim its Article One responsibilities, improve the congressional schedule and calendar, boost congressional capacity and reform the budget and appropriations process. The Select Committee also voted in favor of its final committee report, which will be released to the public in the coming weeks. The final vote brings the total recommendations passed by the Select Committee to 97.

House Small Business Committee Hearing on “Paycheck Protection Program: An Examination of Loan Forgiveness, SBA Legacy Systems, and Inaccurate Data”: On Thursday, the Subcommittee on Innovation and Workforce Development held a hearing to address issues caused by the Small Business Administration’s legacy technology and the related concerns about the accuracy of the recently released PPP data, as well as learn more about SBA’s new system for PPP forgiveness.

  • Will Manger, Small Business Administration Chief of Staff and Associate Administrator for the Office of Capital Access, U.S. Small Business Administration

House Small Business Committee Hearing on “A Review of PPP Forgiveness”: On Friday, the Committee held a hearing to provide an overview of the Paycheck Protection Program (PPP) loan forgiveness process and allow Members an opportunity to hear from lenders, borrowers, and other stakeholders about their experiences with the forgiveness process. The committee examined loan forgiveness guidance and proposals for simplifying the loan forgiveness process for certain borrowers.

  • Lynn Ozer, President-SBA Lending, Fulton Bank, Pottstown, PA
  • Amy Bonfig, Owner, Little Saints Academy, St. Joseph, MN
  • Jim Parker, CEO/Director, Riverview Studios, Bordentown, NJ
  • Pete Patel, President and CEO, Promise Hotels, Tulsa, OK

ON THE FLOOR

House Passes Ten Bipartisan Financial Services Bills: The House passed ten financial services bills, including legislation to support diversity in community banking, protect investors and consumer from pandemic-related fraud, combat trafficking, and promote more flexible CARES Act funding. The bills passed include:

  • The Ensuring Diversity in Community Banking Act (H.R. 5322) a bill by Rep. Gregory Meeks (D-NY), passed by voice vote.
  • The COVID-19 Fraud Prevention Act (H.R. 6735), a bill by Rep. Cindy Axne (D-IA), passed by voice vote.
  • The STIFLE Act (H.R. 7592), a bipartisan bill by Rep. Ben McAdams (D-UT) and Rep. Anthony Gonzalez (R-OH), passed by voice vote.
  • The Uniform Treatment of NRSROs Act (H.R. 6934), a bipartisan bill by Rep. Madeleine Dean (D-PA), passed by voice vote.
  • The Promoting Secure 5G Act (H.R. 5698), a bill by Rep. William Timmons (R-SC), passed by voice vote.
  • The Improving Emergency Disease Response via Housing Act (H.R. 6294), a bill by Rep. Scott Tipton (R-CO), bill passed by voice vote.
  • The Negro Leagues Baseball Centennial Commemorative Coin Act (H.R. 4104), a bipartisan bill by Rep. Emanuel Cleaver (D-MO), passed by unanimous consent.
  • The Circulating Collectible Coin Redesign Act (H.R. 1923), a bipartisan bill by Rep. Barbara Lee (D-CA), passed by unanimous consent.
  • The 1921 Silver Dollar Coin Anniversary Act (H.R. 6192), a bipartisan bill by Rep. Andy Barr (R-KY), passed by unanimous consent.
  • The Merrill's Marauders Congressional Gold Medal Act (S.743), a bipartisan bill by Sen. Johnny Isakson (R-GA), passed by unanimous consent.

LEGISLATION INTRODUCED AND PROPOSED

H.R. 8378: Rep. Tom Emmer (R-MN) introduced H.R. 8378, which would amend the securities laws to exclude investment contract assets from the definition of a security.

H.R. 8393: Rep. Jeff Van Drew (R-NJ) introduced H.R.8393, which would provide student loan forgiveness to health care workers who are on the frontline in response to COVID-19.

S. 4676: Sen. Chris Coons (D-DE) introduced S. 4676, which would improve the debt relief program under the CARES Act.

S. 4689: Sen. Ron Wyden (D-OR) introduced S. 4689, which would provide disaster assistance to cannabis businesses.

THIS WEEK ON THE HILL

Tuesday, September 29

House Financial Services Committee (Task Force on Financial Technology) Hearing on “License to Bank: Examining the Legal Framework Governing Who Can Lend and Process Payments in the Fintech Age”: 12:00 PM via WebEx.

Friday, October 2

Select Committee on the Coronavirus Crisis Hearing on “Health and Human Services Department’s Response to the Coronavirus Crisis”: 9:00 AM – Hybrid.

THE REGULATORS

Federal Reserve Board Issues Advance Notice of Proposed Rulemaking on an Approach to Modernize Regulations That Implement the Community Reinvestment Act: On Monday, the Federal Reserve issued an Advance Notice of Proposed Rulemaking (ANPR) that invites public comment on an approach to modernize the regulations that implement the Community Reinvestment Act (CRA) by strengthening, clarifying, and tailoring them to reflect the current banking landscape and better meet the core purpose of the CRA. “The CRA is a seminal piece of legislation that remains as important as ever as the nation confronts challenges associated with racial equity and the COVID-19 pandemic,” said Federal Reserve Board Governor Lael Brainard. “We must ensure that CRA continues to be a strong and effective tool to address systemic inequities.” Sen. Sherrod Brown (D-OH) praised the Fed for its proposal as an alternative to the OCC’s, saying it “has laid out a path for all three bank regulators to work with the communities this law is meant to serve and develop a meaningful rule that works for them—not a rule that works for a single regulator.”

Federal Reserve Board Amends Implementation Date of Modifications to Reserve Bank Payment Services and Corresponding Changes to the Policy on Payment System Risk: On Friday, the Federal Reserve announced that it is amending the implementation date for modifications to the Federal Reserve Banks' payment services to facilitate adoption of a later same-day automated clearinghouse (ACH) processing and settlement window and for corresponding changes to the Federal Reserve Policy on Payment System Risk (PSR policy). The Board previously announced these modifications with an implementation date of March 19, 2021. The implementation date is being amended to March 8, 2021, with the exception of two changes to the PSR policy regarding posting times for settlement of same-day ACH transactions that will still be implemented on March 19, 2021.

SEC Adopts Amendments to Whistleblower Award Program: On Wednesday, the SEC voted 3-2 on party lines to adopt amendments to the rules governing its whistleblower program, which it described as designed to provide greater clarity to whistleblowers and increase the program’s efficiency and transparency. Sen. Sherrod Brown (D-OH) slammed the move, saying the changes would instead introduce “uncertainty and ambiguity in the evaluation of whistleblower tips,” and, “will undermine efforts to uncover fraud and misconduct.”

SEC Adopts Amendments to Modernize Shareholder Proposal Rule: On Wednesday, the SEC voted 3-2 on party lines to adopt amendments to modernize its shareholder proposal rule. SEC Chair Jay Clayton lauded the move, saying, “These amendments ensure there is an appropriate alignment of interests between shareholder-proponents and their fellow shareholders and illustrate again why retrospective review and, as appropriate, modernization of our rules is necessary. There have been many significant changes in communication methods and technology, as well as the methods investors, particularly retail investors, use to access our markets in the 20 years and 75 years since the initial and resubmission thresholds were last revised.”

OCC Clarifies That Federally Chartered Banks and Thrifts May Engage in Certain Stablecoin Activities: On Monday, the Office of the Comptroller of the Currency published a letter clarifying national banks' and federal savings associations' authority to hold "reserves" on behalf of customers who issue certain stablecoins. “National banks and federal savings associations currently engage in stablecoin-related activities involving billions of dollars each day,” Acting Comptroller of the Currency Brian Brooks said. He continued, “This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”

FSOC Issues Statement on Activities-Based Review of Secondary Mortgage Market Activities: On Friday, the Financial Stability Oversight Council voted unanimously to approve a statement summarizing its review of the secondary mortgage market. The Council’s review focused in particular on the activities of Fannie Mae and Freddie Mac (the Enterprises). The Council’s review noted the central role the Enterprises continue to play in the national housing finance markets and found any distress at the Enterprises that affected their secondary mortgage market activities, including their ability to perform their guarantee and other obligations on their mortgage-backed securities (MBS) and other liabilities, could pose a risk to financial stability, if risks are not properly mitigated.

Treasury Amends Regulations to Restrict Revenue Sources to the Cuban Regime: On Wednesday, the Treasury Department’s Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR) to further implement the President’s foreign policy to deny the Cuban regime sources of revenue. The changes restrict lodging at certain properties in Cuba; importing Cuban-origin alcohol and tobacco products; attending or organizing professional meetings or conferences in Cuba; and participating in and organizing certain public performances, clinics, workshops, competitions, and exhibitions in Cuba. These regulatory amendments will become effective upon publication in the Federal Register.

HUD Awards Over $500,000 in CARES Act Funding to State and Local Fair Housing Organizations to Support COVID-19 Related Activities: On Monday, HUD announced over half a million dollars in additional funding to HUD Fair Housing Assistance Program (FHAP) agencies in 12 states to support activities related to COVID-19. Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity, said in a statement, “The funds being provided today will allow them to provide additional COVID-19 related fair housing outreach and purchase the equipment and technology they need and to conduct the wide-ranging types of activities, which will ensure that families have equal access to housing during this challenging period.”

OTHER NOTEWORTHY NEWS

European Commission Adopts New Digital Finance Package: On Thursday, the European Commission adopted a new Digital Finance Package, including Digital Finance and Retail Payments Strategies, and legislative proposals on crypto-assets and digital resilience. The Commission noted that it, by making rules safer and more digital friendly for consumers, it aims to boost responsible innovation in the EU's financial sector, especially for highly innovative digital start-ups, while mitigating any potential risks related to investor protection, money laundering, and cyber-crime.

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