The Big Picture

EPA Administrator Scott Pruitt resigned last week following months of reports detailing ethical missteps. While Mr. Pruitt cited “unrelenting attacks” on himself and his family, his tenure at EPA was clouded by the scandals which led to the launching of over a dozen investigations by the EPA’s Office of the Inspector General, the GAO, and the House Oversight Committee. He will be replaced on an acting basis by former coal lobbyist Andrew Wheeler, who was confirmed as Mr. Pruitt’s deputy in April.

The President interviewed candidates to replace Justice Anthony Kennedy on the Supreme Court on Monday and Tuesday. While the White House has not confirmed the names if the finalists, it is widely believed that among those still in contention are federal appeals court judges Amy Coney Barrett of the 7th Circuit, Brett Kavanaugh of the D.C. Circuit, Raymond Kethledge of the 6th Circuit, Amul Thapar of the 6th Circuit, and Thomas Hardiman of the 3rd Circuit. The President intends to announce his nominee on July 9th.

The Senate Intelligence Committee released a bipartisan report that endorsed the conclusions of the U.S. intelligence community that Russia interfered in the 2016 election with the intent of helping President Trump and hurting Hillary Clinton, calling the intelligence community’s assessment “a sound intelligence product.” In contrast to claims made by the President, the Committee noted that it “concurs with intelligence and open-source assessments that this influence campaign was approved by President Putin.” A “comprehensive, classified report” is still in the works.

At midnight on Thursday, tariffs on US$34B of Chinese goods officially went into effect, marking what could be the first salvo in a trade war as Chinese officials announced reciprocal tariffs. An additional US$16B in tariffs could go into effect later this summer. There has been increasing tension between the President and members of his own party on the issue of tariffs, and on Monday the U.S. Chamber of Commerce launched a campaign against the tariffs, with Chamber President Tom Donohue cautioning that “the administration is threatening to undermine the economic progress it worked so hard to achieve.”

On Thursday the President announced that he had selected Bill Shine to join the White House as Assistant to the President and Deputy Chief of Staff for Communications. Mr. Shine previously served as Co-President of Fox News Channel and Fox Business Network, before he was ousted in May 2017 over allegations that he had covered up sexual harassment claims at the network.

Last Week on the Hill

All was quiet on Capitol Hill during the July 4th recess.

This Week on the Hill

Tuesday, July 10

The House is scheduled to vote on several financial services bills on Tuesday, July 10th, including:

  • H.R. 6139 - Improving Investment Research for Small and Emerging Issuers Act (Sponsored by Rep. Bill Huizenga)
  • H.R. 1861 - The Larry Doby Congressional Gold Medal Act (Sponsored by Rep. Jim Renacci)
  • H.R. 4537 - International Insurance Standards Act of 2018 (Sponsored by Rep. Sean Duffy)
  • H.R. 5793 - Housing Choice Voucher Mobility Demonstration Act of 2018 (Sponsored by Rep. Sean Duffy)
  • H.R. 5749 - Options Markets Stability Act, as amended (Sponsored by Rep. Randy Hultgren)
  • H.R. 5877 - Main Street Growth Act, as amended (Sponsored by Rep. Tom Emmer)
  • H.R. 5953 - BUILD Act (Sponsored by Rep. Barry Loudermilk)
  • H.R. 5970 - Modernizing Disclosures for Investors Act, as amended (Sponsored by Rep. Ann Wagner)

Thursday, July 12

House Financial Services Committee Hearing Entitled "The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System”: 10:00 AM in 2128 Rayburn House Office Building

House Financial Services Committee (Terrorism and Illicit Finance Subcommittee) Hearing Entitled “Countering the Financial Networks of Weapons Proliferation”: 2:00 PM in 2128 Rayburn House Office Building

Senate Banking Committee Hearing Entitled “An Overview of the Credit Bureaus and the Fair Credit Reporting Act”: 10:00 AM in 538 Dirksen Senate Office Building

The Regulators

IRS Announces International Joint Task Force to Combat Transnational Tax Crimes: Leaders of tax enforcement authorities from Australia, Canada, the Netherlands, the United Kingdom and the United States have established a joint operational alliance, the Joint Chiefs of Global Tax Enforcement (J5), to increase collaboration in the fight against international and transnational tax crime and money laundering. The alliance focuses on building international enforcement capacity by sharing information and intelligence, enhancing operational capability by piloting new approaches, and conducting joint operations to bring those who enable and facilitate offshore tax crime to account.

Federal Reserve & FDIC Extends Living Will Filing Deadline for 14 Firms: The Federal Reserve Board and the Federal Deposit Insurance Corporation on Monday announced that they have extended the next resolution plan (more commonly known as living wills) filing deadline for 14 domestic firms by one year to December 31, 2019, to allow additional time for the agencies to provide feedback to the firms on their last submissions and for the firms to produce their next plan submissions. They also noted that pursuant to the Economic Growth, Regulatory Reform, and Consumer Protection Act, the Board will determine which firms with more than $100 billion but less than $250 billion in total consolidated assets will be subject to the resolution plan requirement moving forward.

Federal Reserve Issues Statement on Impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act: Consistent with the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), the Federal Reserve Board on Friday issued a statement describing how the Board will no longer subject primarily smaller, less complex banking organizations to certain Board regulations, including those relating to stress testing and liquidity. The Board's statement also provided guidance on the Board's implementation of other EGRRCPA changes, including those relating to assessments and high volatility commercial real estate exposures.

Federal Reserve Board Invites Public Comment on ISO 20022 Proposal: The Federal Reserve Board on Thursday invited public comment on a proposal to adopt the ISO® 20022 message format for the Fedwire® Funds Service. If approved, the proposed action would replace the Fedwire Funds Service's current, proprietary message format. Potential benefits to the adoption of the ISO 20022 message format include enhanced efficiency of both domestic and cross-border payments between the Fedwire Funds Service and other payment or messaging systems as well as a richer set of payment data that could help banks and other entities meet evolving requirements to screen payments for sanctions and anti-money laundering purposes. The proposed migration to the ISO 20022 message format would take place in three phases beginning in 2020 and ending in 2023.

Federal Reserved Concerned About Escalating Trade Tensions: According to minutes released from the Federal Open Market Committee’s meeting on Thursday, “most participants noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending.”

FDIC Announces Meeting of Advisory Committee on Community Banking: The FDIC announced Thursday that it will hold a meeting of the Advisory Committee on Community Banking on Wednesday, July 11. FDIC senior staff will brief Committee members on recent legislation, as well as other regulatory burden reduction initiatives. In addition, staff will discuss various supervisory policy issues and provide information on community bank research. The FDIC Ombudsman also will provide an update to the Committee.

CFTC Staff Issues Report Assessing CME Agricultural Block Trades: The CFTC Market Intelligence Branch (MIB) issued a report on Monday that analyzes agricultural block trading in the grains, oilseeds, and livestock markets at the Chicago Mercantile Exchange (CME). Key findings include (1) Block trades in the agricultural markets are a very small portion of the overall volume, but are somewhat more significant on specific dates and for certain contract months; (2) Block trades are primarily occurring in nearby months (futures expirations occurring within the next 90 days); (3) Market makers appear to be offsetting much of the block volume into the central limit order book; (4) All block trades reviewed appear to be priced within the CME rule for “fair and reasonable” prices.

NYSE Withdraws Proposed Rule: Following a similar withdrawal by the Nasdaq exchange, the New York Stock Exchange withdrew a proposed rule change that would have affected listings for blank check companies by lowering the initial holders requirement from 300 to 150 round lot holders and eliminating completely the public stockholders continued listing requirement. The proposal had sought to reduce administrative burdens for such listings.

Comings and Goings at the Agencies

CFTC Names Matthew Daigler Senior Counsel: CFTC Chairman J. Christopher Giancarlo announced Tuesday that Matthew A. Daigler has joined the CFTC to serve as a Senior Counsel to the Chairman. Mr. Daigler will advise the Chairman on Commission matters, including the Chairman’s Swaps Regulation Version 2.0 agenda.

CFPB Deputy Director Resigns: CFPB Deputy Director Leandra English announced her plan to resign, ending her legal battle to serve as acting director. Ms. English had been named as deputy director by former Director Richard Cordray just before his departure in November.

White House Announces NEC Appointments: Andrew Olmem who currently serves as a special assistant to the President for financial policy will replace Shahira Knight as the acting deputy director for domestic policy. Ms. Knight is heading to lobby group Clearing House. Clete Willems, who currently serves as special assistant to the president for International Trade, Investment, and Development will replace Everett Eissenstat as the acting deputy director for international policy.

The Courts

FTC Settles Privacy Shield Case: A California company has agreed to settle Federal Trade Commission allegations that it falsely claimed it was in the process of being certified as complying with the EU-U.S. Privacy Shield framework, which establishes a process to allow companies to transfer consumer data from European Union countries to the United States in compliance with EU law. “Today’s settlement demonstrates the FTC’s continuing commitment to vigorous enforcement of the Privacy Shield,” FTC Chairman Joe Simons commented. “We believe Privacy Shield is a critical tool for ensuring transatlantic data flows and protecting privacy that benefits both companies and consumers.” This was the FTC’s fourth case enforcing Privacy Shield.