THE BIG PICTURE
After a 35-day partial government shutdown, the longest in U.S. history, the President announced on Friday that an agreement had been reached to reopen the shuttered agencies. The President and congressional leaders agreed to a short-term spending deal that would reopen the government through February 15th while negotiations over border security funding continue. Pressure had been mounting on the administration as the effects of the shutdown spread across the country—with reports of furloughed employees lining up at food banks, flights out of major airports being canceled due to air traffic controller shortages, and the President’s top economic advisor warning that GDP growth could drop to zero this quarter. On Friday the continuing resolution passed the Senate by voice vote and the House by unanimous consent; the President then signed the measure into law. According to Acting White House Chief of Staff Mick Mulvaney, federal employees will receive back pay by the end of this week.
Roger Stone, a longtime advisor and friend of President Trump, was arrested early Friday morning and charged with obstruction of an official proceeding, making false statements, and witness tampering. The charges stem from Special Counsel Robert Mueller’s investigation. Following his release on bail, Mr. Stone told the press that he felt the charges were “politically motivated.”
The State of the Union was formally postponed after a series of exchanges between the President and House Speaker Nancy Pelosi. On Wednesday, the President wrote a letter to Speaker Pelosi indicating he intended to go forward with his State of the Union address on January 29th as previously scheduled. The Speaker responded that she would not allow him use of the House floor until the end of the shutdown. Despite reports that the President was considering going forward with his speech at an alternate location, he ultimately decided to wait until the shutdown had ended, stating that he had made this decision “because there is no venue that can compete with the history, tradition and importance of the House Chamber.”
The President’s former personal attorney Michael Cohen postponed his planned testimony before the House Oversight Committee, citing “ongoing threats against his family from President Trump and Mr. Giuliani.” Given Mr. Cohen’s reluctance to voluntarily appear before the House, the Senate Intelligence Committee issued a subpoena to Mr. Cohen on Thursday. It remains to be seen whether the House Committee will follow suit.
Other highlights of last week include:
- On Tuesday, the Supreme Court ruled 5-4 along ideological lines that President Trump’s ban on transgender individuals serving in the military can go into effect while a court challenge works its way through the courts.
- Shahira Knight, the President’s legislative affairs director, is reportedly planning to leave the administration just seven months after accepting the position. Ms. Knight previously served as deputy director of the National Economic Council.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
No hearings were held.
Committee Updates: Committee Chair Maxine Waters (D-CA) announced the six Committee Members who will serve as Subcommittee Chairs.
- Congresswoman Carolyn Maloney (NY-12) will Chair the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets.
- Congressman Gregory Meeks (NY-5) will Chair the Subcommittee on Consumer Protection and Financial Institutions.
- Congressman William Lacy Clay (MO-1) will Chair the Subcommittee on Housing, Community Development and Insurance.
- Congressman Emanuel Cleaver (MO-5) will Chair the Subcommittee on National Security, International Development and Monetary Policy.
- Congresswoman Joyce Beatty (OH-3) will Chair the newly created Subcommittee on Diversity and Inclusion.
- Congressman Al Green (TX-09) will Chair the Subcommittee on Oversight and Investigations.
Ranking Member McHenry Calls for Hearings: In a letter to Chairwoman Waters, Ranking Member Patrick McHenry requested hearings on “critical areas” he felt the committee should prioritize, including cybersecurity, fintech regulation, the impact of Brexit on the U.S. economy, data breaches, and anti-money laundering rules.
SENATE BANKING COMMITTEE
No hearings were held.
LEGISLATION INTRODUCED AND PROPOSED
Rep. Meeks Introduces Bills to Help Federal Workers: Rep. Gregory Meeks (D-NY) introduced two bills: the Federal Workers Banking Assistance Act, which would incentivize banks to provide interest-free loans, fee waivers, and other affordable financial products to furloughed employees and government contractors impacted during a shutdown, and the Federal Worker Credit Protection Act, which would allow furloughed employees to remove negative information from their credit reports should they resolve late payments three months after the end of this shutdown. “One too many times, federal workers have been used as pawns in political gamesmanship . . . the least we can do is provide financial relief and protection by allowing workers to repair their credit and receive affordable or free financial services,” said Meeks in a statement.
THIS WEEK ON THE HILL
Legislation to be considered under suspensions of the rules:
- H.R. 624 - Promoting Transparent Standards for Corporate Insiders Act (Sponsored by Rep. Maxine Waters)
- H.R. 502 - FIND Trafficking Act (Sponsored by Rep. Juan Vargas)
- H.R. 56 - Financial Technology Protection Act (Sponsored by Rep. Ted Budd)
- H.Res. 77 - Expressing the sense of Congress that financial institutions and other companies should work proactively with their customers affected by the shutdown of the Federal Government who may be facing short-term financial hardship and long-term damage to their creditworthiness through no fault of their own (Sponsored by Rep. Maxine Waters)
Legislators Call on FHFA Acting Director to Detail His Plans for Agency: On Friday, Rep. Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, and Sen. Sherrod Brown (D-OH), Ranking Member of the Senate Banking Committee, sent a letter to Joseph Otting, Comptroller of the Currency, who was recently appointed to serve as Acting Director of the Federal Housing Finance Agency. In the letter, Rep. Waters and Sen. Brown called on Otting to explain his recent comments regarding his plans for the agency and the GSEs, Fannie Mae and Freddie Mac, specifically reports that he told employees he planned “to move Fannie Mae and Freddie Mac out of conservatorship,” adding that “your comments call into question the independence of the FHFA under your leadership.”
Federal Banking Agencies Issue Shared National Credit Review Report: On Friday, the Federal Reserve, FDIC, and OCC released their Shared National Credit Review Report, finding that while there has been some improvement in credit quality, risk level remains elevated in leveraged loans. The report detailed that risk in the portfolio of large syndicated bank loans has declined due to improving conditions in most sectors. Despite the improvement, the dollar volume of loans rated below “pass,” as a percentage of total loans, remains elevated compared with levels experienced in prior economic cycles. The next report will be published following the third-quarter 2019 SNC examination.
Senator Calls for Report from CFTC on Shutdown Effects: Senator Debbie Stabenow (D MI), the top Democrat on the Agriculture Committee, wrote to CFTC Director Chris Giancarlo regarding the effects of the CFTC’s diminished capacity during the shutdown, saying, “While the CFTC is shut down, the markets it regulates are still open,” and expressing concern about the risk to financial markets, food aid, and local farmer committees. She also questioned, “To what extent is the CFTC hindered in its ability to work with financial regulators in other countries during the government shutdown?”
COMINGS AND GOINGS AT THE AGENCIES
CFPB Announces Changes to Senior Leadership: Consumer Financial Protection Bureau Director Kathleen Kraninger announced leadership changes within the Bureau, with several individuals joining the leadership team. Andrew Duke will serve as the Policy Associate Director for External Affairs. Laura Fiene will serve as West Regional Director. Ms. Fiene joined the CFPB at its inception in 2011. Marisol Garibay will serve as the Acting Chief Communications Officer. Delicia Reynolds Hand will serve as Deputy Associate Director for External Affairs. Ms. Hand joined the Bureau in 2012. Lora McCray will serve as Director for the Office of Minority and Women Inclusion.
Chris D’Angelo to Depart CFPB: On Wednesday, Chris D’Angelo, who serves as the CFPB’s associate director of supervision, enforcement and fair lending, announced his plan to leave the bureau to work for New York Attorney General Letitia James. His new role will be chief deputy attorney general for financial justice.
Kudlow Discusses Federal Reserve Vacancies: The President’s top economic advisor, Larry Kudlow, told reporters that after declining to re-nominate economist Marvin Goodfriend, and after Nellie Liang withdrew from consideration, the President is considering new candidates for vacancies for “a couple open seats” on the Federal Reserve Board. He reported that the “biggest criteria” for potential nominees is “people who understand that when the business side of the economy, when the supply side of the economy surges, we can do so with more people working, frankly at higher wages, and higher productivity and that’s what the data are showing, without causing higher inflation.”
10th Circuit Issues Ruling in Monsoon: On Thursday, a 10th Circuit panel ruled that under provisions of the Dodd-Frank Act, the SEC has the right to sue over allegations of securities fraud despite the fact that most of the company’s customers are overseas, saying, “We conclude that Congress has ‘affirmatively and unmistakably’ indicated that the anti-fraud provisions of the federal securities acts apply extraterritorially when the statutory conduct-and-effects test is met.”
OTHER NOTEWORTHY ITEMS
Progressive Groups Call for Minority Leader to Fight for Democratic Nominees: In the face of lingering vacancies for Democratic posts at regulatory agencies, progressive groups wrote a letter to Senate Minority Leader Chuck Schumer (D-NY), calling on him to use the Democrats’ “ample leverage” to push for Democrats to be seated on the bipartisan boards that run agencies like the SEC and FDIC and arguing that Democrats must “demonstrate to Trump and Senate Republicans a willingness to use every tool at their disposal in pursuit of functional agencies carrying out critical tasks in the public interest.”
UK’s Financial Conduct Authority Releases Proposed Approach to Crypto Regulation: On Wednesday, the United Kingdom’s Financial Conduct Authority (FCA) released “Guidance on Cryptoassets,” a consultation paper, describing it as “the next step in the FCA’s work on crypto assets” that “sets out details on where different types of crypto assets might fall in the regulatory perimeter.”
Pennsylvania Issues Guidance on Crypto Exchanges: On Wednesday, Pennsylvania’s Department of Banking and Securities published a guidance that clarified the state’s position on cryptocurrencies. The guidance explained that under Pennsylvania law, cryptocurrencies are not “money,” as only fiat currency, or currency issued by the United States government, is classified as “money.” Therefore, crypto exchanges do not require money transmission licenses to operate in the state.
Bank for International Settlements Calls for Stronger Regulation of Capital Markets: In a report issued on Wednesday, the Bank for International Settlement suggested that governments should strengthen the independence and investigatory powers of financial regulators over capital markets. The report also suggested that “raising the efficiency, consistency and fairness of legal proceedings, e.g. through the creation of specialized financial courts, could usefully boost investor protection, as would policies that raise the predictability and efficiency of insolvency procedures.”
Chamber of Commerce Evaluates Cost of Shutdown: On Thursday, the Chamber of Commerce estimated that the shutdown had cost contractors $US2.3B and noted that the “pain being inflicted on American families and businesses is significant, and in many cases long lasting.”