THE BIG PICTURE

Since Congress hasn’t had the votes to overturn the Affordable Care Act (Obamacare), the President is taking Executive action. It was reported on Thursday that he would cut off subsidy payments to insurance companies that sell Obamacare. The subsidies total approximately US$7B dollars and are used to provide health insurance access to low-income Americans. The decision may put pressure on Congress to address healthcare reform, and may draw lawsuits. President Trump also signed an Executive Order on October 12 that would allow trade associations and other groups to offer their own health plans. This may offer cheaper insurance options for some, but may leave the Obamacare plans with sicker patients which may lead to higher premiums or insurers dropping out of the market.

President Trump will be moving forward with a new combative strategy on Iran. He has decertified the nuclear deal known as the Joint Comprehensive Plan of Action (JCPOA). Congress has 60 days to reapply sanctions that were lifted under the deal, but the President is going to encourage Congress to instead amend the Iran Nuclear Agreement Review Act (INARA) to impose automatic sanctions that go into place if certain events occur.

Regarding appointments, the President said that he will leave a lot of spots vacant because he thinks they are unnecessary. Brian Brooks recently withdrew his name from consideration for the position of Treasury Deputy Secretary, and a Treasury Department spokesperson said that Secretary Mnuchin has no intention of filling the spot. Brooks was the second person to withdraw from consideration, with Jim Donovan dropping out in May. Of 600 key agency positions, only 165 have received nominations.

In Ohio, though Consumer Financial Protection Bureau Director Richard Cordray hasn’t declared his candidacy for governor yet, both Democrats and Republicans are acting as if he is running. Democrats are said to be laying the groundwork for a campaign, and Republicans are looking for ammunition to use against Cordray.

On the other coast, Senator Diane Feinstein (D-CA) announced that she will run for reelection in 2018, despite months of speculation that the 84-year-old would retire.

This week, the House will be in session, while the Senate is out.

LAST WEEK ON THE HILL

House Passes Disaster Funding Bill: On October 12, the House passed a US$36.5B funding package to aid hurricane recovery in Puerto Rico and several states, as well as wildfire responses in California. The legislation wipes out US$16B of the National Flood Insurance Program’s debt, a move that has been supported by some groups and opposed by others. The Heritage Foundation urged lawmakers to vote “no” on the bill. House Financial Services Ranking Member Maxine Waters (D-CA) supported the legislation.

The U.S. Virgin Islands recently requested an additional US$5.5B in hurricane-related aid. The package passed by the House includes a US$4.9B emergency loan to Puerto Rico.

The bill is likely to be taken up by the Senate this week.

HOUSE FINANCIAL SERVICES COMMITTEE

Mega Markup: On October 12, the House Financial Services Committee passed 22 bills to ease regulations. Some highlighted legislation includes: two bills that would change the way the Securities and Exchange Commission handles data; a bill that would raise the asset threshold for Consumer Financial Protection Bureau supervision from US$10B to US$50B; a bill to remove US$50B asset threshold for labeling banks as “systemically important,” and instead require banks labeled as “globally systemically important” to be subject to “Systemically Important Financial Institution” (SIFI) standards. A full list of bills passed out of Committee follows:

  • H.R. 3898, the “Impeding North Korea’s Access to Finance Act of 2017” was AGREED TO, as amended, by a recorded vote of 56 ayes and 0 nays (FC-73).
    • An amendment in the nature of a substitute offered by Mr. Barr, no. 1, was AGREED TO by a voice vote.
  • H.R. 1116, the “Taking Account of Institutions with Low Operation Risk Act of 2017” was AGREED TO by a recorded vote of 39 ayes and 21 nays (FC-74).
  • H.R. 1699, the “Preserving Access to Manufactured Housing Act of 2017” was AGREED TO by a recorded vote of 42 ayes and 18 nays (FC-75).
    • An amendment offered by Mr. Ellison, no. 1, was NOT AGREED TO by a voice vote.
    • An amendment offered by Mr. Ellison, no. 2, was NOT AGREED TO by a voice vote.
  • H.R. 2121, the “Pension, Endowment, and Mutual Fund Access to Banking Act” was AGREED TO, as amended, by a recorded vote of 60 ayes and 0 nays (FC-76).
    • An amendment in the nature of a substitute offered by Mr. Rothfus, no. 1, was AGREED TO, as amended, by a voice vote.
    • An amendment offered by Mr. Foster, no. 1a, was AGREED TO by a voice vote.
  • H.R. 2396, the “Privacy Notification Technical Clarification Act” was AGREED TO, as amended, by a recorded vote of 40 ayes and 20 nays (FC-77).
  • An amendment in the nature of a substitute offered by Mr. Trott, no. 1, was AGREED TO by a voice vote.
    • An amendment offered by Ms. Waters, no. 2, was NOT AGREED TO by a voice vote.
  • H.R. 2706, the “Financial Institution Customer Protection Act of 2017” was AGREED TO, as amended, by a recorded vote of 59 ayes and 1 nay (FC-78).
    • An amendment in the nature of a substitute offered by Mr. Luetkemeyer, no. 1, was AGREED TO, as amended, by a voice vote.
    • An amendment offered by Mr. Heck, no. 1a, was AGREED TO by a voice vote.
  • H.R. 2954, the “Home Mortgage Disclosure Adjustment Act” was AGREED TO, as amended, by a recorded vote of 36 ayes and 24 nays (FC-79).
    • An amendment in the nature of a substitute offered by Mr. Emmer, no. 1, was AGREED TO by a voice vote.
  • H.R. 3072, the “Bureau of Consumer Financial Protection Examination and Reporting Threshold Act of 2017” was AGREED TO by a recorded vote of 39 ayes and 21 nays (FC-80).
  • H.R. 3312, the “Systemic Risk Designation Improvement Act of 2017” was AGREED TO, as amended, by a recorded vote of 47 ayes and 12 nays (FC-81).
    • An amendment offered by Mr. Foster, no. 1, was AGREED TO by a voice vote.
  • H.R. 3971, the “Community Institution Mortgage Relief Act of 2017” was AGREED TO by a recorded vote of 41 ayes and 19 nays (FC-82).
  • H.R. 477, the “Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017” was AGREED TO by a recorded vote of 37 ayes and 23 nays (FC-83).
  • H.R. 3903, the “Encouraging Public Offerings Act of 2017” was AGREED TO, as amended, by a recorded vote of 60 ayes and 0 nays (FC-84).
    • An amendment offered by Mr. Budd, no. 1, was AGREED TO by a voice vote.
  • H.R. 3911, the “Risk-Based Credit Examination Act” was AGREED TO by a recorded vote of 60 ayes and 0 nays (FC-85).
  • H.R. 3857, the Protecting Advice for Small Savers Act of 2017” was AGREED TO by a recorded vote of 34 ayes and 26 nays (FC-86).
  • H.R. 3972, the “Family Office Technical Correction Act of 2017” was AGREED TO, as amended, by a recorded vote of 60 ayes and 0 nays (FC-87).
    • An amendment offered by Mrs. Maloney, no. 1, was AGREED TO by a voice vote.
  • H.R. 3973, the “Market Data Protection Act of 2017” was AGREED TO by a recorded vote of 59 ayes and 1 nay (FC-88).
  • H.R. 2148, the “Clarifying Commercial Real Estate Loans” was AGREED TO, as amended, by a recorded vote of 59 ayes and 1 nay (FC-89).
    • An amendment offered by Mrs. Maloney, no. 1, was AGREED TO by a voice vote.
  • H.R. 1585, a bill to amend the Securities Act of 1933 to codify certain qualifications of individuals as accredited investors for purposes of the securities laws, was AGREED TO, as amended, by a recorded vote of 58 ayes and 2 nays (FC-90).
    • An amendment in the nature of a substitute offered by Mr. Hill, no. 1, was AGREED TO by a voice vote.
  • H.R. 1645, the “Fostering Innovation Act of 2017” was AGREED TO by a recorded vote of 48 ayes and 12 nays (FC-91).
  • H.R. 2201, the “Micro Offering Safe Harbor Act” was AGREED TO by a recorded vote of 34 ayes and 26 nays (FC-92).
  • H.R. 3758, the “Senior Safe Act of 2017” was AGREED TO by a recorded vote of 60 ayes and 0 nays (FC-93).
  • H.R. 3948, the “Protection of Source Code Act” was AGREED TO, as amended, by a recorded vote of 46 ayes and 14 nays (FC-94).
    • An amendment offered by Mr. Foster, no. 1, was AGREED TO by a voice vote.

Committee Holds Housing Hearing: On October 12, the Committee held a hearing entitled “The Future of Housing in America: Oversight of the Department of Housing and Urban Development.” The sole witness was Department of Housing and Urban Development Secretary Ben Carson. In his opening statement, Committee Chairman Jeb Hensarling (R-TX) said that HUD hasn’t fulfilled its mission of reducing poverty, but he acknowledged that it is an “invaluable part of the nation’s social safety net.” At the hearing, Secretary Carson received sharp criticism from Democrats on the President’s behalf for the President’s October 12 tweets regarding Puerto Rico. Secretary Carson vowed that Puerto Rico would not be abandoned, despite the President’s tweets saying that relief workers can’t be there “forever.”

SENATE BANKING COMMITTEE

Senate Banking Committee Chairman Mike Crapo (R-ID): Banking Committee Chairman Mike Crapo sent a letter to the heads of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) asking if they need more power to supervise credit-reporting companies like Equifax. Crapo wrote: “I am concerned there may be a gap with respect to supervision of credit reporting agencies for data security standards.”

LEGISLATION INTRODUCED AND PROPOSED

Rep. Patrick McHenry (R-NC) Introduces Legislation on Credit Monitoring Regulations: Also related to the Equifax data breach, Financial Services Committee member Patrick McHenry introduced legislation on October 12 that would require the federal government to create uniform cybersecurity standards for credit bureaus and submit them to onsite examinations. The bill would also create a national framework for credit freezes so that victims of identity theft, active military personnel, people over 65 years of age, and children are protected. Finally, the bill would stop the credit bureaus from using Americans’ Social Security Numbers as a basis for identification by 2020.

THIS WEEK ON THE HILL

Tuesday, October 17

Senate Banking Committee, Hearing, “Consumer Data Security and the Credit Bureaus,” 10:00AM, 538 Dirksen Senate Office Building

THE REGULATORS

President Trump wants a Fed Chair who Will Roll Back Regulations: According to White House sources, the President is looking for a Fed Chair and governors who will roll back regulations, but also have experience in monetary policy. Current contenders for Fed Chair are: Kevin Warsh (former Fed Chair), John Taylor (Stanford University economist), Jerome Powell (current Fed Governor), Gary Cohn (National Economic Council Director), and Janet Yellen (current Fed Chair). White House Chief of Staff John Kelly said on October 12 that the decision on Fed Chair is “some time away.” It is rumored that Warsh and Powell are the front-runners.

Office of Comptroller of the Currency (OCC) Releases Bulletin on Community Reinvestment Act (CRA): On October 12, the OCC issued a bulletin altering the way banks are rated under the Community Reinvestment Act (CRA) rating of a national bank. The proposed policy would relax the method for downgrading banks by only considering CRA-related factors. This is a shift from Obama-era policy, which allowed banks to receive lower CRA ratings based on non-CRA factors.

Treasury Secretary Steven Mnuchin Meets With French Economy and Finance Minister Bruno Le Maire: United States Treasury Secretary Steven Mnuchin and French Economy and Finance Minister Bruno Le Maire met on October 12 and agreed on a set of measures to strengthen the bilateral U.S.-French cooperation in the fight against terrorist financing. Secretary Mnuchin and Minister Le Maire said: “Terrorism must be eradicated. We will combat all channels and sources of terrorist financing. Today’s decisions to cooperate more closely are an important step in the fight against terrorist financing.”

IRS Temporarily Suspends Contract with Equifax: The IRS has temporarily suspended its US$7.2M no-bid contract that it awarded to Equifax. This means that taxpayers, for the moment, will not be able to establish accounts through the IRS’s “Secure Access” program, which gives online access to records and transcripts. The IRS made the announcement after new stories revealed that Equifax’s website may have been compromised a second time. Equifax has said that they are “confident that [they] are the best party to perform the services required in [the] contract.”

Federal Reserve Governor Lael Brainard Gives Speech at Monetary Policy Panel: On October 12, Fed Governor Lael Brainard gave a speech at the Panel on Monetary Policy “Rethinking Macroeconomic Policy,” a conference sponsored by the Peterson Institute for International Economics. She spoke about monetary policy and issues that she finds relevant for the challenges faced by policymakers. She further spoke on policy implications and complications.

Federal Reserve Governor Jerome Powell also gave a speech the same day at the 2017 Annual Membership Meeting of the Institution of International Finance. He spoke about the “Prospects for Emerging Market Economies in a Normalizing Global Economy.”

SEC Proposes Rules to Implement FAST Act Mandate to Modernize and Simplify Disclosure: On October 11, the Securities and Exchange Commission voted to propose amendments to simplify disclosure requirements for public companies, investment advisers, and investment companies and to implement a mandate under the Fixing America's Surface Transportation (FAST) Act. The proposed amendments would “make adjustments to update, streamline or otherwise improve the Commission's disclosure framework.”

FDIC Advisory Committee on Economic Inclusion to Meet This Week: The Federal Deposit Insurance Corporation (FDIC) Advisory Committee on Economic Inclusion (ComE-IN) will meet on Wednesday, October 18 to discuss economic inclusion for persons with disabilities, provide updates on efforts to expand access to Safe transaction accounts, present research related to neighborhood access to bank branches, and discuss the results of a 2016 FDIC survey of entry-level consumer checking and savings accounts.

NOMINATIONS, COMINGS AND GOINGS AT THE AGENCIES

President Trump to Nominate Kirstjen Nielsen to be Department of Homeland Security Secretary: President Trump announced on October 11 that he would nominate White House Deputy Chief of Staff Kirstjen Nielsen to the post of Secretary of Department of Homeland Security. Nielsen was current White House Chief of Staff John Kelly’s top aide when he was Secretary of the Department.

White House Plans to Nominate Finance Committee Staffer to be Employee Benefits Security Administration Secretary: The White House is planning to nominate Preston Rutledge as Assistant Secretary for the Employee Benefits Security Administration. Rutledge has been the Committee’s Senior Tax and Benefits Counsel since 2011.

Walter Jospin, Regional Director of the SEC’s Atlanta Office, to Leave the Agency: On October 11, the Securities and Exchange Commission announced that Walter E. Jospin, Regional Director of the agency’s Atlanta office, is leaving the agency. Mr. Jospin will remain in his position until his successor is selected.

OTHER NOTEWORTHY ITEMS

Industry Executives Express Concern About Consolidated Audit Trail and Cybersecurity: Speaking at a conference in Washington, executives from NYSE Group Inc. and CBOE Holdings Inc. questioned whether the SEC should push back the deadline for exchange operators to start feeding information to the CAT. Currently the deadline is November 15, but in light of the SEC’s disclosure that the EDGAR system was breached, industry wants more assurance that data will be safe.

JP Morgan CFO Says Bank “Open Minded” on Digital Currencies: Speaking a month after CEO Jamie Dimon referred to cryptocurrency Bitcoin as a “fraud,” JP Morgan Chase CFO Marianne Lake said that the bank is open to digital currencies. According to Lake, the bank is “open-minded for digital currencies that are properly controlled and regulated.”