THE BIG PICTURE

On November 16, the House passed a US$5.5T tax bill, which represents a major step toward achieving tax reform. Not a single Democrat voted for the bill, and 13 Republicans voted against it. The legislation slashes the corporate tax rate to 20 percent and sets the pass-through rate used by many small businesses to 25 percent. Department of the Treasury Secretary Steven Mnuchin said of the bill's passage: "We are committed to work with Congress to provide a simpler and fairer tax system that will lead to better jobs for American workers and higher economic growth. I congratulate the House on today's vote. I look forward to continuing to work with the Senate to pass a pro-growth bill as well." The Senate Finance Committee marked up its own tax reform bill last week.

The Senate is planning to release four FY2018 spending bills next week: Defense, Financial Services, Homeland Security, and Interior and Environment. The Senate will not be in session but staff will be working on the legislation. There is a looming budget deadline of December 8, when current government funding will expire. House Speaker Paul Ryan said that Congress may pass a short-term continuation measure to prevent the government from shutting down.

The White House sent a third disaster request to Congress, asking for US$44B for recovery from the three deadly hurricanes this summer. If approved, Congress will have appropriated almost US$100B in extra funds for hurricane relief. Democrats criticized the funding request, saying that it is not enough for relief in Puerto Rico.

A mistrial was declared in the corruption case of Senator Robert Menendez (D-NJ) after jurors claimed that they were hopelessly deadlocked.

Charges of sexual harassment and assault continue to surface, with a woman claiming that Senator Al Franken (D-MN) kissed and groped her without her consent in 2006. It is unclear at this time whether Senator Franken will resign. Former President George H.W. Bush is also facing allegations, with a woman saying that he touched her inappropriately when he was in office in 1992. Following allegations regarding Senate candidate Roy Moore (R-AL), National Republican Senatorial Committee Chairman Sen. Cory Gardner (R-CO) said last week that the Senate should vote to expel Moore if he wins.

LAST WEEK ON THE HILL

House Passes Flood Insurance Reauthorization: The House passed legislation on November 14 reauthorizing the National Flood Insurance Program (NFIP), despite bipartisan opposition to the legislation. The bill was championed by House Financial Services Chairman Jeb Hensarling (R-TX) and reauthorizes the program for five years. Lawmakers from coastal districts urged their colleagues to vote against the bill, saying that it would make flood insurance less affordable for their constituents.

HOUSE FINANCIAL SERVICES COMMITTEE

House Financial Services Committee Advances 23 Bills: The Committee marked up 23 bills last week, mostly aimed to improve the economy. Chairman Jeb Hensarling (R-TX) said the bills “will increase investment opportunities for more Americans. They will provide smaller businesses with greater access to the capital markets so those businesses can grow and create jobs. And certainly, they will deliver much-needed regulatory relief to community banks and credit unions so those Main Street financial institutions can better serve their customers.” Ranking Member Maxine Waters (D-CA) said in her statement that she's "disappointed that the Committee is moving forward today with marking up a large number of bills that could be harmful to consumers, investors, and our economy."

The bills passed through the Committee include:

  • HR 1638, the “Iranian Leadership Asset Transparency Act”
  • HR 4248, To amend the Securities Exchange Act of 1934 to repeal certain disclosure requirements related to conflict minerals, and for other purposes
  • HR 4289, To amend the Dodd-Frank Wall Street Reform and Consumer Protection Act to repeal certain disclosure requirements related to coal and mine safety
  • HR 4296, To place requirements on operational risk capital requirements for banking organizations established by an appropriate Federal banking agency
  • HR 4302, the “Congressional Accountability for Emergency Lending Programs Act of 2017”

LEGISLATION INTRODUCED AND PROPOSED

Senate Banking Committee Chairman Mike Crapo Releases Text of Bipartisan Bill to Relax Regulations: On November 16, Senators released the text of the Economic Growth, Regulatory Relief and Consumer Protection Act. The bipartisan legislation "right-sizes regulation for smaller financial institutions and includes important consumer protections for veterans, senior citizens and victims of fraud." Some prominent Democrats, including Senate Banking Committee Ranking Member Sherrod Brown (D-OH) and Senator Elizabeth Warren (D-MA), oppose the legislation. A section-by-section of the bill is located here.

THE REGULATORS

Consumer Financial Protection Bureau (CFPB) Director Announces Resignation: Last week, CFPB Director Richard Cordray announced that he will step down this month. Financial Services Committee Ranking Member Maxine Waters thanked Cordray for his service, calling him a "true champion for American consumers." Senate Banking Committee Ranking Member Sherrod Brown (D-OH) said that Americans "owe him a debt of gratitude" for the money that was returned to consumers who were victims of predatory lending schemes. House Financial Services Chairman Jeb Hensarling said that they are "long overdue" for new leadership at the CFPB.

President Trump is expected to name current Office of Management and Budget head Mick Mulvaney as interim CFPB Director.

Federal Reserve Governor Lael Brainard Gives Speech on Fintech: Speaking at a conference sponsored by the University of Michigan in Ann Arbor, Fed Governor Brainard gave a speech on the opportunities offered by fintech, as well as some of the risks. According to Governor Brainard, "the new generation of fintech tools offers the potential to help consumers manage their increasingly complicated financial lives, but also poses risks that will need to be managed as the marketplace matures."

Department of the Treasury Secretary Speaks up on Cryptocurrency: Speaking in an interview last week, Treasury Secretary Steven Mnuchin said that the Department has established cryptocurrency working groups. He said that "It is something we are looking at very carefully and will continue to look at… The first issue and the most important issue is to make sure that people can't use bitcoin for illicit activities. So we want to make sure that you don't have the dark web funded in bitcoins. And that's something that is a concern of ours today."

Treasury Releases Memorandum to the President on Financial Stability Oversight Council’s (FSOC) Designation Processes For Nonbank Financial Companies and Financial Market Utilities: The U.S. Department of the Treasury on November 17 released a memorandum to the President regarding its review of the designation processes of FSOC. In response to the April 21, 2017 Presidential Memorandum, the Treasury makes recommendations on ways to improve FSOC’s processes both for nonbank financial company and for financial market utility designations. The Treasury identifies five policy goals that should be achieved by FSOC’s designation processes, which include: leveraging the expertise of primary financial regulatory agencies; promoting market discipline; maintaining a level playing field among firms; appropriately tailoring regulations to minimize burdens; and ensuring FSOC’s designation analyses are rigorous, clear, and transparent.

Securities and Exchange Commission (SEC) Penalties Fall Under Chairman Jay Clayton: According to a study completed by Georgetown University law professor Urska Velikonja, the SEC tried to obtain US$3.4B in fines and disgorgement in the 12 months ending this September, the lowest total amount since 2013. Also, the number of enforcement cases fell to the lowest in four years, with 612 total.

SEC Gets Preliminary Injunction in Initial Coin Offering Suit: A federal judge in New York entered a preliminary injunction last week freezing the assets of Maksim Zaslafskiy, whom the SEC has accused of defrauding investors through initial coin offerings purportedly backed by real estate and diamonds.

SEC Chair Jay Clayton Rejects Delay of Consolidated Audit Trail (CAT) Reporting: In a statement released on November 14, SEC Chairman Jay Clayton rejected the calls from the New York Stock Exchange, Nasdaq, and CBOE to delay for 12-months reporting requirements under the SEC's new stock market surveillance tool, known as the CAT. The deadline to begin reporting was November 15. Rep. Warren Davidson (R-OH), who sponsored legislation to freeze the reporting requirements, said that the SEC's announcement represents an "all-clear on future cybersecurity threats to our securities markets."

The Federal Housing Administration (FHA) Releases Annual Report to Congress: On November 15, the FHA released its 2017 Annual Report to Congress on the economic condition of the agency’s Mutual Mortgage Insurance Fund (MMI Fund). FHA reports that at the end FY 2017, the MMI Fund had a total economic net worth of US$25.6B and the Capital Ratio that remains above the statutory minimum for a third straight year. The study also showed that the Home Equity Conversion Mortgage (HECM) program is US$14.2B in the hole. HECM is a program aimed to help elderly homeowners by allowing them to access the equity in their home.

Federal Deposit Insurance Corporation (FDIC) Chairman to Stay Until Replaced: Speaking at an event hosted by the Brookings Institution, FDIC Chairman Martin Gruenberg said that he will stay on until someone is confirmed to succeed him. Right now, his term is set to expire on November 29. Gruenberg also spoke at the event about risks to the economy and warned against complacency in the financial system.

Public Company Accounting Oversight Board Slashes Budget: The PCOAB unanimously voted for a budget of US$259.9M, a 3.2 percent budget cut from FY2017. The budget must now be approved by the SEC.

COMINGS AND GOINGS AT THE AGENCIES

Senate Votes to Confirm Joseph Otting as Comptroller of the Currency: The Senate voted last week to confirm President Trump's nominee for Comptroller of the Currency, Joseph Otting. The vote was 54-43, with two Democrats voting in favor. Following the confirmation, Acting Comptroller Keith Noreika submitted his resignation, which will be effective one day after Otting takes office.