THE BIG PICTURE

On Thursday, the House voted 301-123 to pass a continuing resolution that would prevent a government shutdown and fund the government through November 21st. The Senate is expected to pass the stopgap spending measure this week before the September 30 deadline, sending the bill to the President’s desk.

The field of candidates in the Democratic primary continued to narrow last week, with New York City Mayor Bill de Blasio’s announcement that he would end his campaign. De Blasio said that “it’s clearly not my time” but pledged to “keep speaking up for working people and for a Democratic Party that stands for working people.”

President Trump announced on Wednesday that he would nominate Robert O’Brien, who currently serves as Special Presidential Envoy for Hostage Affairs at the State Department, to replace John Bolton as his national security adviser.

The President’s former campaign manager Cory Lewandowski appeared before the House Judiciary Committee on Tuesday, in an at times contentious hearing where he sparred with members over details of the Mueller report. Following his appearance, Mr. Lewandowski teased a potential run for Senate in New Hampshire, saying his testimony showed he’d be “a fighter.”

Rep. Paul Cook (R-CA) joined a growing number of House Republicans in announcing he would not seek another term. Instead Rep. Cook plans to run for a seat on the San Bernardino County Board of Supervisors.

Other highlights of last week include:

  • Trade negotiations between the U.S. and China continued last week as the parties sat down for talks in Washington. A Chinese delegation is set to tour the farm belt this week.
  • Senate Majority Leader Mitch McConnell (R-KY) announced his support for an amendment to an appropriations package that would provide US$250M to improve election security.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Full CommitteeMarkup”: The Committee met over three days to markup several pieces of legislation, ultimately advancing 12 bills to benefit consumers, investors, and vulnerable families, including six bipartisan measures, to the full House.

  • H.R. 4344: The Investor Protection and Capital Markets Fairness Act, a bill by Rep. Ben McAdams (D-UT), passed the Committee by a bipartisan vote of 49-5.
  • H.R. 4029: The Tribal Eligibility for Homeless Assistance Grants Act of 2019, a bill by Rep. Denny Heck (D-WA), passed the Committee by voice vote.
  • H.R. 4300: The Fostering Stable Housing Opportunities Act, a bill by Rep Madeleine Dean (D-PA), passed the Committee by a unanimous, bipartisan vote of 47-0.
  • H.R. 4302: The Homeless Assistance Act, a bill by Rep. Brad Sherman (D-CA), passed the Committee by a unanimous, bipartisan vote of 49-0.
  • H.R. 123: The Alternative Data for Additional Credit FHA Pilot Program Reauthorization Act, a bill by Rep. Al Green (D-TX), passed the Committee by a vote of 32-22.
  • H.R. 132: The North America Development Bank Improvement Act, a bill by Rep. Henry Cuellar (D-TX), passed the Committee by a vote of 32-23.
  • H.R. 4067: The Financial Inclusion in Banking Act, a bill by Rep. David Scott (D-GA), passed the Committee by a unanimous, bipartisan vote of 55-0.
  • H.R. 4328: The Protecting Innocent Consumers Affected by a Shutdown Act, a bill by Rep. Maxine Waters (D-CA), passed the Committee by vote of 32-22.
  • H.R. 4242: The Greater Accountability in Pay Act, a bill by Rep. Nydia Velázquez (D-NY), passed the Committee by a vote of 32-21.
  • H.R. 4335: The 8-K Trading Gap Act, a bill by Rep. Carolyn Maloney (D-NY), passed the Committee by a unanimous, bipartisan vote of 52-0.
  • H.R. 4329: The ESG Disclosure Simplification Act, a bill by Rep. Juan Vargas (D-CA), passed the Committee by a vote of 31-22.
  • H.R. 4320: The Corporate Management Accountability Act, a bill by Rep. Katie Porter (D-CA), passed the Committee by a vote of 31-22.

SENATE BANKING COMMITTEE

No hearings held

OTHER COMMITTEES

Senate Appropriations CommitteeFull Committee Markup of FY2020 T-HUD, Agriculture, FSGG Funding Bills”: On Thursday, the Committee voted to advance a US$24.2B FY2020 Financial Services and General Government Appropriations Act. The bill, which recommends an increase of US$773M above the FY2019 enacted level, includes targeted funding increases for the Treasury Department to combat money laundering and terrorism financing; for the SEC and CFTC to oversee our nation’s securities, swaps, and futures markets; for the Federal courts to support the administration of justice; and for the General Services Administration’s Federal Buildings Fund. The measure was approved by a committee vote of 31-0.

ON THE FLOOR

Ban on Forced Arbitration Clears the House: On Friday, the House voted 225-186 along largely party lines to pass H.R. 1423, the “Forced Arbitration Injustice Repeal (FAIR) Act” which would prohibit a predispute arbitration agreement from being valid or enforceable if it requires arbitration of an employment, consumer, antitrust, or civil rights dispute. House Judiciary Chairman Jerry Nadler (D-OH) championed the measure on the floor saying it “supports liberty, it supports constitutional rights, it supports the little guy against the giant corporation.”

House Passes Nine Financial Services Bills: On Friday, the House passed nine financial services bills that protect whistleblowers, support home buyers, advance technologies to thwart bad actors, protect government employees and others affected by a government shutdown, in addition to creating several commemorative coins and medals.

  • H.R. 3625, the PCAOB Whistleblower Protection Act of 2019, introduced by Rep. Sylvia Garcia (D-TX), was passed by a voice vote.
  • H.R. 3619, the Appraisal Fee Transparency Act of 2019, introduced by Rep. William Lacy Clay (D-MO), was passed by a voice vote.
  • H.R. 2613, Advancing Innovation to Assist Law Enforcement Act, introduced by Rep. Anthony Gonzalez (R-OH), was passed by a voice vote.
  • H.R. 2290, Shutdown Guidance for Financial Institutions Act, introduced by Rep. Jennifer Wexton (D-VA), was passed by a voice vote.
  • H.R. 3589, Greg LeMond Congressional Gold Medal Act, introduced by Rep. Mike Thompson (D-CA), was passed by a voice vote.
  • H.R. 1830, National Purple Heart Hall of Honor Commemorative Coin Act, introduced by Rep. Sean Patrick Maloney (D-NY), was passed by a voice vote.
  • H.R. 1396, Hidden Figures Congressional Gold Medal Act, introduced by Rep. Eddie Bernice Johnson (D-TX), was passed by a voice vote.
  • H.R. 550, Merchant Mariners of World War II Congressional Gold Medal Act of 2019, introduced by Rep. John Garamendi (D-CA), was passed by a voice vote.
  • S. 239, Christa McAuliffe Commemorative Coin Act of 2019, introduced by Sen. Jeanne Shaheen (D-NH), was passed by a voice vote.

LEGISLATION INTRODUCED AND PROPOSED

H.R. 4308: Rep. Joseph Morelle (D-NY) introduced H.R. 4308, the Cost Assistance Made Possible for Undergraduate Students Act (CAMPUS) Act, which would amend the Higher Education Act of 1965 to establish an emergency grant aid program.

H.R. 4335: Rep. Carolyn Maloney (D-NY) introduced H.R. 4335, the 8-K Trading Gap Act of 2019, which would amend the Securities Exchange Act of 1934 to require the Securities and Exchange Commission to issue rules that prohibit officers and directors of certain companies from trading securities in anticipation of a current report.

H.R. 4344: Rep. Ben McAdams (D-UT) introduced H.R. 4344, which would amend the Securities Exchange Act of 1934 to allow the Securities and Exchange Commission to seek and Federal courts to grant disgorgement of unjust enrichment.

H.R. 4351: Rep. Denny Heck (D-WA) introduced H.R. 4351, the Yes in My Backyard Act, which would require certain grantees under title I of the Housing and Community Development Act of 1974 to submit a plan to track discriminatory land use policies.

H.R. 4366: Rep. Denver Riggleman (R-VA) introduced H.R. 4366, the North Korea Banking Oversight Act of 2019, which would require oversight of licenses involving financial services and the Democratic People’s Republic of Korea.

H.R. 4367: Rep. John Rose (R-TN) introduced H.R. 4367, the Fight Illicit Finance through Technical Assistance Act of 2019, which would support the capacity of the International Monetary Fund to prevent money laundering and financing of terrorism.

H.R. 4384: Rep. Charlie Crist (D-FL) introduced H.R. 4384, which would amend the Federal Deposit Insurance Act to ensure that certain custodial deposits of a well-capitalized insured depository institution are not considered to be funds obtained by or through a deposit broker.

THIS WEEK ON THE HILL

Tuesday, September 24

House Financial Services Committee Hearing on “Oversight of the Securities and Exchange Commission: Wall Street’s Cop on the Beat”: 10:00 AM in 2128 Rayburn House Office Building.

House Financial Services Committee (Subcommittee on Diversity and Inclusion) Hearing on “Examining the Racial and Gender Wealth Gap in America”: 2:00 PM in 2128 Rayburn House Office Building.

Wednesday, September 25

House Financial Services Committee (Subcommittee on Consumer Protection and Financial Institutions) Hearing on “Promoting Financial Stability: Assessing Threats to the U.S. Financial System”: 10:00 AM in 2128 Rayburn House Office Building.

Senate Banking Committee Hearing on “Facilitating Faster Payments in the U.S.”: 10:00 AM in 538 Dirksen Senate Office Building.

House Financial Services Committee (Subcommittee on Housing, Community Development, and Insurance) Hearing on “Protecting Seniors: A Review of the FHA’s Home Equity Conversion Mortgage (HECM) Program”: 2:00 PM in 2128 Rayburn House Office Building.

Thursday, September 26

House Financial Services Committee Hearing on “Examining Legislation to Protect Consumers and Small Business Owners from Abusive Debt Collection Practices”: 10:00 AM in 2128 Rayburn House Office Building.

House Financial Services Committee (Task Force on Financial Technology) Hearing on “The Future of Real-Time Payments”: 2:00 PM in 2128 Rayburn House Office Building.

THE REGULATORS

Federal Reserve Board Cuts Interest Rates: On Wednesday, following a meeting of the Federal Open Market Committee, the Federal Reserve announced the Committee had decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent, the second cut since July. Two officials voted against the rate cut, while a third advocated for a larger one. In a press conference, Fed Chairman Jay Powell told the media that “We took this step to keep the economy strong in the face of some notable developments and to provide insurance against ongoing risks.” Afterwards, the President criticized Chairman Powell via Tweet, saying “Jay Powell and the Federal Reserve Fail Again. No ‘guts,’ no sense, no vision!”

SEC Approves Changes to Volcker Rule: On Wednesday, SEC Chairman Jay Clayton announced that the agency was joining the FDIC, OCC, and CFTC in approving revisions to the Volcker Rule’s ban on proprietary trading. “The amendments the commission has adopted today draw on the Volcker Rule agencies’ collective experience in implementing the rule and overseeing compliance in our complex marketplace over a number of years,” Clayton said. “These amendments further the Volcker Rule’s statutory objectives, while simplifying, clarifying and better tailoring the application of the rule.” On Monday, after the CFTC greenlit the changes, Commissioner Dan Berkovitz said in a statement that “the revised Volcker Rule will render enforcement of the rule difficult if not impossible by leaving implementation of significant requirements to the discretion of the banking entities.”

SEC Proposes Rules to Update Statistical Disclosures for Banking Registrants: On Tuesday, the SEC announced that it had proposed rules to update the statistical disclosures that bank and savings and loan registrants provide to investors, and eliminate disclosures that overlap with Commission rules, U.S. GAAP or IFRS. The proposed rules would replace Industry Guide 3, Statistical Disclosure by Bank Holding Companies, with updated disclosure in a new subpart of Regulation S-K. “Guide 3 has not been substantively updated for more than 30 years” said SEC Chairman Jay Clayton. “Today’s proposals are another example of how thoughtful reviews can improve disclosures for the benefit of investors and public companies.”

SEC Adopts New Rules and Amendments under Title VII of Dodd-Frank: On Thursday, the SEC announced that it had taken a significant step toward establishing the regulatory regime for security-based swap dealers by adopting a package of rules and rule amendments under Title VII of Dodd-Frank. These actions establish recordkeeping and reporting requirements for security-based swap dealers and major security-based swap participants and amend the recordkeeping and reporting requirements for broker-dealers. Under these rules, these companies will be required to create and retain fundamental business records to document and track their operations, facilitating the Commission’s ability to monitor compliance and reducing risk to the market. “These rules will help the Commission ensure compliance with rules designed to promote financial responsibility and investor protection,” said SEC Chairman Jay Clayton.

SEC to Consider ETF Rule at Open Meeting: The SEC is set to consider a rule on exchange-traded funds this Wednesday during its Open Meeting. According to the agenda, the Commission will consider whether to adopt a new rule under the Investment Company Act of 1940 that will permit exchange-traded funds that satisfy certain conditions to operate without first obtaining an exemptive order, as well as related form amendments and the rescission of certain exemptive relief to ETFs and their sponsors. The Commission will also consider whether to issue a related order granting exemptive relief from certain provisions of the Securities Exchange Act of 1934.

CFPB to Enhance Consumer Complaint Database: On Wednesday, the CFPB announced that it will continue the publication of consumer complaints, data fields and narrative descriptions through the Bureau’s Consumer Complaint Database while making several enhancements to the information available to users of the database. The enhancements include: modified disclaimers to provide better context to the published data; integrating financial information and resources into the complaint process to help address questions and better inform consumers before they submit a complaint; and information to assist consumers who wish to contact the financial company to get answers to their specific questions. Additionally, the Bureau will work to provide enhanced features for the database that include dynamic visualization tools on recent complaint data.

CFPB Issues Request for Information Regarding Tech Sprints: On Wednesday, the CFPB published a request for information regarding so-called Tech Sprints. The Bureau is exploring Tech Sprints as a model for collaborative innovation. Used successfully by the Financial Conduct Authority (FCA) in the United Kingdom, Tech Sprints gather regulators, technologists, financial institutions, and subject matter experts from key stakeholders for several days to work together to develop innovative solutions to clearly-identified challenges. The Bureau seeks comments and information to identify opportunities to utilize Tech Sprints as a means to encourage regulatory innovation and collaborate with stakeholders in developing viable solutions to regulatory compliance challenges.

CFPB Will No Longer Defend Constitutionality of Leadership Structure: CFPB Director Kathy Kraninger informed Congressional leaders on Tuesday that the Bureau had reversed its position and had “determined that the for-cause removal provision of the Consumer Financial Protection Act of 2010…is unconstitutional.” She added that she had “directed the Bureau’s attorneys to refrain from defending the for-cause removal provision in the lower courts.”

CFPB and FTC to Host December Workshop on Accuracy in Consumer Reporting: The Consumer Financial Protection Bureau and the Federal Trade Commission will host a public workshop on December 10, 2019 to discuss issues affecting the accuracy of both traditional credit reports and employment and tenant background screening reports. The December workshop seeks to bring together stakeholders – including industry representatives, consumer advocates, and regulators – for a wide-ranging public discussion on the many issues impacting the accuracy of consumer reports.

Senate Banking Committee Democrats Urge CFPB to Protect Access to Affordable Mortgages: Sen. Sherrod Brown (D-OH), Ranking Member of the Senate Banking Committee led the other Democratic members in writing to CFPB Director Kathy Kraninger, urging her to maintain strong consumer protections and access to credit as it revises the Qualified Mortgage (QM) and Ability to Repay (ATR) rules under the Truth in Lending Act. “As you consider amending the existing QM rule, the Bureau must not undermine the elements of the rule that have made it effective: prohibitions on unsustainable product features and a verifiable demonstration at loan origination that the lender has evaluated the borrower’s ability to repay their loan,” wrote the Senators.

NCUA Approves Payday Alternative Loan Rule: On Thursday, the NCUA Board voted 2-1 to approve a final rule allowing federal credit unions to offer an additional payday alternative loan (PAL) option to members. The rule will (1) allow a federal credit union to offer a PALs II loan for any amount up to $2,000; (2) require PALs II loans to have a minimum term of one month with a maximum of 12 months; (3) allow a federal credit union to make a PALs II loan immediately upon the borrower’s establishing membership; and (4) restrict a federal credit union to offering only one type of PAL loan to a member at any given time. Senate Banking Committee Ranking Member Sen. Sherrod Brown (D-OH) criticized the move, saying the NCUA “should make it easier, not harder for hardworking Americans to obtain safe and affordable loans and pay back their loans responsibly.”

Treasury Sanctions Iran’s Central Bank and National Development Fund: On Friday, Treasury’s Office of Foreign Assets Control took action against the Central Bank of Iran, the National Development Fund of Iran, and Etemad Tejarate Pars Co. under its counterterrorism authority, Executive Order (E.O.) 13224. The President told reporters that they were the “highest sanctions ever imposed on a country.” Treasury Secretary Steven Mnuchin said in a statement that “Iran’s brazen attack against Saudi Arabia is unacceptable. Treasury’s action targets a crucial funding mechanism that the Iranian regime uses to support its terrorist network, including the Qods Force, Hizballah, and other militants that spread terror and destabilize the region. The United States will continue its maximum pressure campaign against Iran’s repressive regime, which attempts to achieve its revolutionary agenda through regional aggression while squandering the country’s oil proceeds.”

Treasury Increases Pressure on Alex Saab and His Network in Venezuela: On Tuesday, the Treasury’s OFAC designated three individuals and 16 entities for their connections to Alex Nain Saab Moran and his business partner, Alvaro Enrique Pulido Vargas, who have enabled former President Nicolás Maduro and his illegitimate regime to corruptly profit from imports of food aid and distribution in Venezuela.

Treasury Releases Proposed Regulations to Reform National Security Reviews for Certain Foreign Investments and Other Transactions in the United States: On Tuesday, Treasury issued proposed regulations to comprehensively implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and to better address national security concerns arising from certain investments and real estate transactions. FIRRMA and the proposed regulations strengthen and modernize the Committee on Foreign Investment in the United States (CFIUS), an interagency committee authorized to review certain transactions involving foreign investment in the U.S. to determine the effect of such transactions on the national security of the United States. Treasury Secretary Steven Mnuchin said in a statement that, “Today’s proposed regulations will provide clarity and certainty to investors regarding CFIUS’s enhanced authorities to address national security risks that arise from certain foreign investments, and continue modernizing the CFIUS process.”

FDIC Finalizes Proposal to Eliminate Inter-Affiliate Swaps Initial Margin: On Tuesday, the FDIC approved a proposal to eliminate the requirement that banks collect initial margin when transacting with their affiliates. House Financial Services Committee Chairwoman Maxine Waters (D-CA) slammed the move as something that had long been on Wall Street’s “wishlist” and amounted to “a $40 billion giveaway to … megabanks at the expense of our economic stability and U.S. taxpayers.”

FDIC Finalizes Rules to Simplify Capital Calculation for Qualifying Community Banking Organizations: On Tuesday, the FDIC finalized a rule that introduces an optional simplified measure of capital adequacy for qualifying community banking organizations (i.e., the community bank leverage ratio (CBLR) framework), as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. The FDIC also finalized a rule that permits non-advanced approaches banking organizations to use the simpler regulatory capital requirements for mortgage-servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions, and minority interest when measuring their tier 1 capital as of January 1, 2020. Finally, the FDIC also finalized a rule that makes technical changes to incorporate the CBLR framework into the deposit insurance assessment system.

CFTC’s Technology Advisory Committee to Meet on October 3: On Wednesday the CFTC’s Technology Advisory Committee (TAC) announced that it will hold a public meeting on Thursday, October 3. CFTC Commissioner Brian Quintenz is the sponsor of the TAC. At this meeting, the TAC will hear presentations and actionable recommendations from the TAC subcommittees on Automated and Modern Trading Markets, Distributed Ledger Technology and Market Infrastructure, Virtual Currencies, and Cybersecurity.

COMINGS AND GOINGS AT THE AGENCIES

Dorothy DeWitt Named as Director of CFTC’s Division of Market Oversight: On Tuesday, CFTC Chairman Heath Tarbert announced that Dorothy DeWitt had been named the next Director of the Division of Market Oversight. Ms. DeWitt joins the CFTC from Coinbase, a cryptocurrency company, where she served as Vice President and General Counsel for Business Lines and Markets.

New York Department of Financial Services Announces First-Ever Student Advocate and Director of Consumer Advocacy: On Tuesday, Superintendent Linda Lacewell announced that Winston Berkman-Breen has been appointed Student Advocate and Director of Consumer Advocacy for the New York State Department of Financial Services. As Student Advocate and Director of Consumer Advocacy, Mr. Berkman-Breen will advocate on behalf of students and serve as a liaison between DFS and New York consumers with concerns. He will drive the student debt resolution process by reviewing and analyzing complaint data from student borrowers to deliver and execute appropriate recommendations to the Department.

Former CFTC Chairman Joins Board of Chamber of Digital Commerce: On Tuesday, the Chamber of Digital Commerce announced that Christopher Giancarlo, who stepped down as Chairman of the CFTC in July, had joined their board of advisors.

OTHER NOTEWORTHY ITEMS

CME Group Announces Launch of Bitcoin Options: On Friday, CME Group announced that it will launch options on its Bitcoin futures contracts in Q1 2020, pending regulatory review. “Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products. “These new products are designed to help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment.”