THE BIG PICTURE
Much of last week was focused on immigration, with lawmakers seeking to reach an agreement on the Deferred Action for Childhood Arrivals Act (DACA). A bipartisan group of senators reached a deal last week that would protect DREAMers from deportation, but the Administration and others on Capitol Hill had yet to sign off on it. The debate occurred amidst controversy regarding alleged derogatory comments that President Trump made about certain countries and immigrants from those countries. On a related note, a federal judge in California ordered the Administration to continue accepting applications to the DACA program. Other highlights from last week:
- The House last week passed a controversial surveillance bill, S. 139, that renews Section 702 of the Foreign Intelligence Surveillance Act. The Act allows agencies to retain surveillance powers that privacy advocates have argued against for years. The legislation now heads to the Senate, where it is likely pass.
- A federal judge last week sided with Consumer Financial Protection Bureau Director Mick Mulvaney, denying Deputy Director Leandra English’s request for a preliminary injunction blocking his appointment. English is appealing the ruling.
- After his feud with President Trump, Steve Bannon announced last week that he is stepping down from Breitbart News. Bannon will testify in a closed session before the House Intelligence Committee today.
- Two more GOP Congressmen announced their retirements last week, Rep. Darrell Issa (R-CA) and Ed Royce (R-CA). This brings the total number of GOP-held open seats to 29 districts, lessening the chance that Republicans can hold on to the House.
- On the Committee leadership front, the Republican Steering Committee recommended Rep. Steve Womack (R-AK) to take over as the next Chairman of the Budget Committee.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITEE
Subcommittee Examines Federal Reserve Proposals: On January 10, the Monetary Policy and Trade Subcommittee held a hearing entitled “A Further Examination of Federal Reserve Reform Proposals.” The purpose of the hearing was to examine the following legislation:
- H.R. ____, to amend the Federal Reserve Act to establish requirements for salaries, financial disclosures, and office staff of the Board of Governors of the Federal Reserve System, and for other purposes.
- H.R. ____, to amend the Federal Reserve Act to establish a blackout period for public communications by the Federal Open Market Committee, and for other purposes.
- H.R. ____, to amend the Federal Reserve Act to bring the non-monetary policy related functions of the Board of Governors of the Federal Reserve System into the appropriations process, and for other purposes.
- H.R. ____, to amend the Federal Reserve Act to modify the appointment process for presidents of Federal Reserve Banks.
- H.R. ____, to amend the Federal Reserve Act to revise the membership of Federal Open Market Committee, and for other purposes.
- H.R. ____, to amend the Federal Reserve Act to require the Federal Open Market Committee to establish interest rates on balances maintained at a Federal Reserve Bank by depository institutions.
- H.R. ____, to amend the Federal Reserve Act to require the Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System to provide a written report, and for other purposes.
- Dr. Dean Baker, Co-Director and Senior Economist, Center for Economic and Policy Research
- Dr. George Selgin, Senior Fellow and Director, Center for Monetary and Financial Alternatives, The Cato Institute
Subcommittee Holds Hearing on Regulatory Proposals: On January 9, the Financial Institutions and Consumer Credit Subcommittee held a hearing entitled “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part III.” The purpose of the hearing was to examine the following legislative proposals:
- H.R. ____, a bill to amend the Truth in Lending Act to clarify the exclusion for seller financers from the definition of mortgage originator, and for other purposes.
- Mr. E.J. Gleim, Executive Vice President and Chief Operating Officer, Triad Financial Services, on behalf of the Manufactured Housing Institute
- Mr. Robert Fisher, President and Chief Executive Officer, Tioga State Bank, on behalf of the Independent Community Bankers of America
Subcommittee Holds Hearing on Committee on Foreign Investment in the United States: On January 9, the Monetary Policy and Trade Subcommittee held a hearing entitled “Evaluating CFIUS: Challenges Posed by a Changing Global Economy.” The purpose of the hearing was to examine the history, operations, and any operational challenges of the multi-agency panel.
- Admiral Dennis C. Blair, Co-Chair, The Commission on the Theft of American Intellectual Property, and former Director, National Intelligence, National Security Council
- Mr. Rod Hunter, Partner, Baker & McKenzie LLP, and former Special Assistant to the President and Senior Director, National Security Council
- The Honorable Theodore W. Kassinger, Partner, O’Melveny & Myers LLP, and former Deputy Secretary, U.S. Department of Commerce
- Dr. Scott Kennedy, Director, Project on Chinese Business & Political Economy, Center for Strategic & International Studies
SENATE BANKING COMMITTEE
New Members: Senator Jerry Moran (R-KS) rejoined and newly-elected Senator Doug Jones (D-AL) has joined the Committee.
Committee Holds Hearing on Money Laundering: On January 9, the Committee held a hearing entitled "Combating Money Laundering and Other Forms of Illicit Finance: Opportunities to Reform and Strengthen BSA Enforcement." The hearing was the Committee's first step in an effort to potentially overhaul banking regulations designed to prevent money laundering and other forms of illicit finance. Witnesses included:
- Mr. Greg Baer, President, The Clearing House Association;
- Mr. Dennis Lormel, President and CEO, DML Associates (and former Chief, FBI Financial Crimes Program); and
- Ms. Heather Lowe, Legal Counsel and Director of Government Affairs, Global Financial Integrity.
There is significant industry support for anti-money laundering reforms. There is a lot of attention on a bicameral basis to update money-laundering laws. The Senate Banking Committee will have another hearing this week on the matter, and there is also a bill pending in the Senate Judiciary Committee. On the House side, Reps. Steve Pearce (R-NM) and Blaine Luetkemeyer (R-MO) introduced legislation that would create a national database of corporations and their true owners. The plan would require new and existing corporations to register with the Treasury Department's Financial Crimes Enforcement Network (FinCEN).
FINANCIAL SERVICES ON THE FLOOR
The House passed the following bills under suspension of the rules:
- H.R. 770 - American Innovation $1 Coin Act, as amended (Sponsored by Rep. Jim Himes (D-CT)/ Financial Services Committee)
- H.R. 4279 - Expanding Investment Opportunities Act, as amended (Sponsored by Rep. Trey Hollingsworth / Financial Services Committee)
LEGISLATION INTRODUCED AND PROPOSED
Democratic Senators Introduce Equifax Legislation: Senators Elizabeth Warren (D-MA) and Mark Warner (D-VA) introduced the Data Breach Prevention and Compensation Act last week. The legislation requires the Federal Trade Commission to impose financial penalties on credit reporting agencies when personal information is stolen.
THIS WEEK ON THE HILL
Wednesday, January 17
House Financial Services Committee, Markup, 10:00AM in 2128 Rayburn House Office Building
- An Amendment in the Nature of a Substitute expected to be offered by Mr. Williams is being distributed with this notice. Members wishing to offer amendments are counseled to do so with reference to this text.
- An Amendment in the Nature of a Substitute expected to be offered by Mr. Barr is being distributed with this notice. Members wishing to offer amendments are counseled to do so with reference to this text.
- An Amendment in the Nature of a Substitute expected to be offered by Mr. Rothfus is being distributed with this notice. Members wishing to offer amendments are counseled to do so with reference to this text.
- An Amendment in the Nature of a Substitute expected to be offered by Mr. Poliquin is being distributed with this notice. Members wishing to offer amendments are counseled to do so with reference to this text.
- HR 4768, the “National Strategy for Combating the Financing of Transnational Criminal Organizations Act”
Senate Banking Committee, Vote on Nominations, 10:00AM in 538 Dirksen Senate Office Building
- The Honorable Jerome H. Powell, to be Chairman of the Board of Governors of the Federal Reserve System
- The Honorable Randal Quarles, reappointment as a Member of the Board of Governors of the Federal Reserve System
Senate Banking Committee, Hearing, “Combating Money Laundering and Other Forms of Illicit Finance: Administration Perspectives on Reforming and Strengthening BSA Enforcement” – Following votes on nominations
- The Honorable Sigal Mandelker, Under Secretary for Terrorism and Financial Crimes, U.S. Department of the Treasury
- Mr. M. Kendall Day, Acting Deputy Assistant Attorney General, Criminal Division, U.S. Department of Justice
President Trump to Attend World Economic Forum: The President will attend the World Economic Forum in Davos, Switzerland later this month. According to White House Press Secretary Sarah Huckabee Sanders, the President "welcomes opportunities to advance his America First agenda with world leaders."
Treasury Department to Recommend Updates to Community Reinvestment Act: The Treasury Department will issue recommendations on updates to the Community Reinvestment Act, a law designed to stimulate lending to low-income borrowers. According to a Treasury spokesperson, the law is “outdated” and was “written in the 1970s before the internet and the rise of interstate banking.” The Department expects to issue recommendations early this year.
Administration "Very Focused" on Cryptocurrencies: According to Treasury Secretary Steven Mnuchin, the Trump Administration is very focused on cryptocurrencies and has set up a working group to examine the market. Speaking at the Economic Club of Washington, DC, Mnuchin said that officials want to "make sure that bad people cannot use these currencies to do bad things" and that "consumers who are trading this understand the risks."
Treasury Sanctions Individuals and Entities for Human Rights Abuses and Censorship in Iran, and Support to Sanctioned Weapons Proliferators: On January 12, the Department of the Treasury's Office of Foreign Assets Control (OFAC) designated 14 individuals and entities in connection with serious human rights abuses and censorship in Iran, and support to designated Iranian weapons proliferators. "The United States will not stand by while the Iranian regime continues to engage in human rights abuses and injustice. We are targeting the Iranian regime, including the head of Iran's judiciary, for its appalling mistreatment of its citizens, including those imprisoned solely for exercising their right to freedom of peaceful assembly, and for censoring its own people as they stand up in protest against their government," said Treasury Secretary Steven T. Mnuchin.
Also on January 12, the Trump Administration announced it will extend waivers on Iran nuclear sanctions, keeping alive the landmark 2015 deal for at least another several months.
Securities and Exchange Commission Disbands Stock Market Advisory Committee: The SEC disbanded its Equity Market Structure Committee. The committee was responsible for advising the agency about rules for the stock market.
SEC Holds Inaugural Committee Meeting: On another SEC Committee-related note, the agency held its first meeting of the Fixed Income Market Structure Advisory Committee on January 11. The Committee has been charged with making structural reform recommendations regarding U.S. bond markets that will allow them to focus energies on improvements that benefit retail investors. According to SEC Chair Jay Clayton, "Main Street investors want liquidity. It is a sign of stability and resiliency."
Federal Reserve Board announces Reserve Bank income and expense data and transfers to the Treasury for 2017: The Federal Reserve Board on January 10 announced preliminary results indicating that the Reserve Banks provided for payments of approximately US$80.2B of their estimated 2017 net income to the U.S. Treasury. The 2017 audited Reserve Bank financial statements are expected to be published in March and may include adjustments to these preliminary unaudited results.
Federal Reserve Board announces appointment of the chairs and deputy chairs of the Federal Reserve Banks for 2018: Also on January 10, the Fed announced the designation of the chairs and deputy chairs of the 12 Federal Reserve Banks for 2018. Each Reserve Bank has a nine-member board of directors. The Board of Governors in Washington appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair.
Federal Reserve Board announces it has finalized a rule adjusting the Board's maximum civil money penalties: The Federal Reserve Board on January 12 announced that it has finalized a rule adjusting the Board's maximum civil money penalties, as required by law. In November 2015, a law was passed that requires all federal agencies to adjust their maximum civil money penalty limits annually for inflation, rather than every four years as previously required. The maximum civil money penalty limits depend on several factors, including the severity and type of violation. Additionally, the law dictates the annual adjustment formula for federal agencies. A civil money penalty is a fine imposed by a federal agency as a result of misconduct. The final rule increases the maximum civil money penalty limits for 2018.
Federal Emergency Management Agency (FEMA) Acquires More Reinsurance for Flood Program: FEMA announced that it acquired US$1.46B of reinsurance form the private market, which will allow it to expand its use of reinsurance to help pay future claims. The agency paid a US$235M premium for the coverage, which covers losses above US$4B from a single flooding event.
COMINGS AND GOING AT THE AGENCIES
President Trump Sends Nominees to Senate: The President sent several nominations to the Senate last week, including:
- Marvin Goodfriend for Federal Reserve Governor
- Randal Quarles for Federal Reserve Governor (term expires later this month)
- Janlena McWilliams for Chair of Federal Deposit Insurance Corporation
- Thomas Workman for Independent Insurance Expert at Financial Stability Oversight Council
- Adam Lerrick for Treasury Department Deputy Under Secretary
Robert Jackson and Hester Peirce Sworn In as SEC Commissioners: Robert J. Jackson Jr. and Hester M. Peirce were sworn into office as SEC Commissioners on January 11 by SEC Chairman Jay Clayton. Mr. Jackson and Ms. Peirce were nominated to the SEC by President Donald Trump, and their nominations were confirmed by the U.S. Senate on Dec. 21. Both new commissioners participated in the inaugural meeting of the SEC’s Fixed Income Market Structure Advisory Committee.
The SEC now has a full panel of five commissioners for the first time since 2015.
Dr. Timothy Timura Named Deputy Chief Economist at SEC: The Securities and Exchange Commission has named Dr. Timothy Timura, CFA, as Deputy Director and Deputy Chief Economist in the agency’s Division of Economic and Risk Analysis (DERA). Dr. Timura joins DERA from the faculty of the Kogod School of Business at American University, where he has been an Executive in Residence.
SEC Names Richard Best As Regional Director of Atlanta Office: On January 10, the Securities and Exchange Commission named Richard R. Best as Regional Director of its Atlanta office. Mr. Best will succeed Walter Jospin, who is leaving the agency at the end of this month. For the past two-and-a-half years, Mr. Best has served as Director of the SEC’s Salt Lake office, where he supervises the agency’s enforcement program in Utah.
Keith Noreika Returns to Law Firm: Former Acting Comptroller of the Currency Keith Noreika has returned to serving as a partner at his old law firm, Simpson Thacher & Bartlett LLP.
OTHER NOTEWORTHY ITEMS
First-Time Homebuyers Face More Debt: According to a study by the American Enterprise Institute's International Center on Housing Risk, first-time homebuyers are expected to take on more debt in 2018 due to rising prices for entry-level homes.