THE BIG PICTURE
The House continued the pubic phase of its impeachment inquiry, holding three days of hearings featuring a number of career diplomats, military officials and political appointees. Over the course of the week, the panel heard detailed testimony regarding the existence of a quid-pro-quo, undercutting a number of the administration’s talking points. The President signaled later in the week that he would welcome a full Senate trial, as a way to present evidence in his defense.
The House voted on Tuesday to pass a four-week continuing resolution that would extend government funding through December 20th. The bill also includes provisions to raise military pay by 3.1%, boost funding to the Commerce Department as it readies to conduct the 2020 census, and renews three surveillance provisions through March. The Senate quickly followed suit on Thursday, and that evening the President signed the measure into law, averting a midnight shutdown.
On Wednesday, the fifth Democratic primary debate was held in Atlanta, and was the first debate in this election cycle to have an all-female panel of moderators. Ten candidates qualified to appear on stage and sparred on a number of issues, including impeachment, agricultural policy, a proposed wealth tax, climate change and military intervention. South Bend Mayor Pete Buttigieg, who has been experiencing a surge in the polls in Iowa, sought to maintain his momentum and deflected criticism about his perceived lack of experience.
Other highlights of last week include:
- On Wednesday, Rep. Carolyn Maloney (D-NY) was chosen to serve as the next Chairwoman of the Committee on Oversight and Reform. The move leaves a vacancy at House Financial Services Subcommittee on Capital Markets, which Rep. Brad Sherman (D-CA) has announced his intention to pursue.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “America for Sale? An Examination of the Practices of Private Funds”: On Tuesday, the full Committee held a hearing to examine the impact of private funds on businesses and workers. The Committee also considered three pieces of legislation: (1) H.R. 3848, The Stop Wall Street Looting Act of 2019; (2) H.R.__, Private Fund Board Disclosure Act of 2019; (3) H.R.__, Investment Adviser Alignment Act.
- Eileen Appelbaum, Co-Director, Center for Economic and Policy Research
- Wayne Moore, Trustee, Los Angeles County Employee Retirement Association
- Giovanna De La Rosa, United for Respect, former Toys “R” Us Employee
- Drew Maloney, President and CEO, American Investment Council
- Brett Palmer, President, Small Business Investor Alliance
Hearing on “An Examination of Regulators’ Efforts to Preserve and Promote Minority Depository Institutions”: On Wednesday, the Subcommittee on Consumer Protection and Financial Institutions held a hearing to focus on the prudential regulators that oversee MDIs, allowing the Subcommittee to assess whether or not they are achieving statutory goals Congress established in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to preserve and promote MDIs. Chairwoman Waters emphasized the vital role the MDIs play in low and moderate-income communities, and noted “regulators have failed to live up to their statutory obligations to preserve and promote MDIs.”
- Beverly Cole, Deputy Comptroller for the Northeastern District and Designated Federal Officer (DFO) for the Minority Depository Institutions Advisory Committee (MDIAC),Office of the Comptroller of the Currency
- Betty Rudolph, National Director for MDIs and CDFIs, Federal Deposit Insurance Corporation
- Arthur W. Lindo, Deputy Director, Division of Supervision and Regulation, Board of Governors of the Federal Reserve System
- Martha Ninichuk, Director of the Office of Credit Union Resources and Expansion, National Credit Union Administration
Hearing on “Safe and Decent? Examining the Current State of Residents’ Health and Safety in HUD Housing”: On Wednesday, the Subcommittee on Housing, Community Development, and Insurance held a hearing to explore the confluence of issues contributing to deteriorating living conditions for HUD tenants, and explore potential solutions. The Subcommittee also examined several pieces of draft legislation: (1) H.R. 3745, HUD Inspection Oversight Act of 2019; (2) H.R. __, Tenant Empowerment Act; (3) H.R. __, Ensuring Performance-Based Contract Administrators Actually Perform Act; (4) H.R. __, Lead Service Line Abatement Act; (5) H.R. __, Promoting Resident Opportunities and Self- Sufficiency Act.
- Susan Rollins, Executive Director, Housing Authority of St. Louis County
- Margaret Salazar, Executive Director, Oregon Housing and Community Services Department
- Deborah Thrope, Deputy Director, National Housing Law Project
- Geraldine Collins, Board President, National Alliance of HUD Tenants
- Shalonda Rivers, President and Resident, 22nd Avenue Apartment Tenants Association
- The Honorable Orlando J. Cabrera, Partner, Arnall Golden Gregory
Hearing on “Banking on Your Data: the Role of Big Data in Financial Services”: On Thursday, the Task Force on Financial Technology held a hearing to examine the role of data in the financial services industry. The Task Force also considered the following draft legislation: (1) H.R. 4008, the No Biometric Barriers to Housing Act of 2019; (2) H.R. __, Safeguarding Non-bank Consumer Information Act; (3) H.R. __, Financial Information Data Modernization Act.
- Ms. Lauren Saunders, Associate Director, National Consumer Law Center
- Dr. Seny Kamara, PhD., Associate Professor of Computer Science, Brown University and Chief Scientist, Aroki Systems
- Dr. Christopher Gillard, PhD., Professor of English, Macomb Community College and Digital Pedagogy Lab Advisor
- Mr. Don Cardinal, Managing Director, Financial Data Exchange (“FDX”)
- Mr. Duane Pozza, Partner, Wiley Rein
SENATE BANKING COMMITTEE
Hearing on “Markup of S. 2877”: On Wednesday, the Committee met to consider S. 2877, the Terrorism Risk Insurance Program Reauthorization Act of 2019. The Committee advanced the measure with unanimous support. The bill, originally introduced by Senators Thom Tillis (R-NC) and Tina Smith (D-MN), extends TRIA for seven years and requires reports on cyber terrorism risks and coverage, and the availability and affordability of terrorism risk insurance, including specifically for places of worship. Ranking Member Sherrod Brown (D-OH) championed the program as “emblematic of our ability to use government to make the economy work better for everybody, especially during the most difficult times.”
Hearing on “Nominations”: On Wednesday, the Committee met to receive testimony from five nominees who have been selected to serve in key roles within the Department of the Treasury, the Department of Housing and Urban Development, and the Export-Import Bank. The nominees for roles at HUD faced tough questioning from Committee Democrats who honed in their potential involvement in several controversial policies, such as a proposal to revise the 2013 disparate impact rule.
- Mr. Mitchell A. Silk, of New York, to be an Assistant Secretary of the Treasury;
- The Honorable Brian D. Montgomery, of Texas, to be Deputy Secretary of Housing and Urban Development;
- Mr. David C. Woll, Jr., of Connecticut, to be an Assistant Secretary of Housing and Urban Development;
- Mr. John Bobbitt, of Texas, to be an Assistant Secretary of Housing and Urban Development;
- Mr. Peter J. Coniglio, of Virginia, to be Inspector General, Export-Import Bank.
House Judiciary Committee “Mark-Up”: On Wednesday, the Committee held a mark-up of several measures, including H.R. 3884, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. The MORE Act is championed as one of the most comprehensive marijuana reforms bills ever introduced in the U.S. Congress and aims to correct the historical injustices of failed drug policies that have disproportionately impacted communities of color and low-income communities by decriminalizing marijuana at the federal level, reassessing marijuana convictions, and investing in local communities. U.S. Senator Kamala Harris has introduced the companion bill in the Senate. The Committee advanced the measure by a vote of 24-10.
ON THE FLOOR
House Passes Five Financial Services Bills: On Monday, the House passed five bipartisan financial services bills to reauthorize the Terrorism Risk Insurance Program, ensure disaster relief is distributed fairly, address homelessness and protect investors.
- H.R. 3702, the Reforming Disaster Recovery Act of 2019, a bipartisan bill that would permanently authorize the Community Development Block Grant-Disaster Relief (CDBG-DR) program and strengthen administration and oversight of the program to ensure disaster relief is distributed efficiently and equitably. This bill was introduced by Rep. Al Green (D-TX), and Rep. Ann Wagner (R-MO), and passed by a vote of 290-118.
- H.R. 4029, the Tribal Eligibility for Homeless Assistance Grants Act of 2019, a bill to address homelessness among Native Americans and Alaska Natives by making tribes and tribally designated housing entities eligible for McKinney-Vento Homeless Assistance Grant funding. This bill was introduced by Rep. Denny Heck (D-WA) and passed by a voice vote.
- H.R. 4300, the Fostering Stable Housing Opportunities Act, a bill that would help to ensure that youth who are aging out of foster care and are at risk of homelessness will have critical assistance to help them achieve housing stability and self-sufficiency. This bill was introduced by Rep. Madeleine Dean (D-PA) and passed by a voice vote.
- H.R. 4344, the Investor Protection and Capital Markets Fairness Act, a bill that would substantially strengthen the authority of the SEC to recover the wrongful gains of securities law violators for investors. This bill was introduced by Rep. Ben McAdams (D-UT) and passed by a vote of 314-95.
- H.R. 4634, the Terrorism Risk Insurance Program Reauthorization Act of 2019, a bill that would provide a long-term reauthorization of the Terrorism Risk Insurance Program and prevent the critical program from expiring at the end of 2020.This bill was introduced by Rep. Maxine Waters (D-CA), and passed by a vote of 385-22.
House Passes Bill to Increase Corporate Diversity: On Tuesday, the House voted 281-135 to pass H.R. 5084, , the Improving Corporate Governance Through Diversity Act of 2019, a bill that requires public companies to annually disclose the voluntarily, self-identified gender, race, ethnicity, and veteran status of their board of directors, nominees, and senior executive officers. This bill was introduced by Rep. Gregory Meeks (D-NY), Chairman of the Subcommittee on Consumer Protection and Financial Institutions, and cosponsored by Rep. Carolyn Maloney (D-NY), Chair of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets.
LEGISLATION INTRODUCED AND PROPOSED
H.R. 5116: Rep. Bryan Steil (R-WI) introduced H.R. 5116, which would improve the quality of proxy advisory firms for the protection of investors and the U.S. economy, and in the public interest, by fostering accountability, transparency, responsiveness, and competition in the proxy advisory firm industry.
H.R. 5132: Rep. Jennifer Wexton (D-VA) introduced H.R. 5132, which would require the Financial Crimes Enforcement Network to issue an advisory about how homegrown violent extremists and other perpetrators of domestic terrorism procure firearms and firearm accessories.
H.R. 5180: Rep. Chuy Garcia (D-IL) introduced H.R. 5180, which would amend the Bank Holding Company Act of 1956 to restore the separation between banking and commerce by prohibiting bank holding company ownership of nonfinancial assets.
H.R. 5184: Rep. Tom O’Halleran (D-AZ) introduced H.R. 5184, which would require the Secretary of Housing and Urban Development to improve services for survivors of domestic violence, dating violence, sexual assault, or stalking and their families.
H.R. 5187: Rep. Maxine Waters (D-CA) introduced H.R. 5187, the “Housing is Infrastructure Act of 2019” which would facilitate the development of affordable housing. Sen. Kamala Harris (D-CA) introduced a companion measure in the Senate.
H.R. 5194: Rep. Sean Casten (D-IL) introduced H.R. 5194, which would require the Board of Governors of the Federal Reserve System, in consultation with the heads of other relevant Federal agencies, to develop financial risk analyses relating to climate change.
H.R. 5197: Rep. Sylvia Garcia (D-TX) introduced H.R. 5197, the “Managed Stablecoins are Securities Act of 2019” which would establish the treatment of managed stablecoins under the securities laws. Rep. Garcia said in a statement that managed stablecoins “are clearly securities under existing law,” adding that, “this legislation simply clarifies the statute to remove any ambiguity. Bringing clarity to the regulatory structure of these digital assets protects consumers and ensures proper government oversight going forward.”
H.R. 5223: Rep. Joyce Beatty (D-OH) introduced H.R. 5223, which would amend the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to adjust the affordable housing allocations.
H.R. 5244: Rep. Ilhan Omar (D-MN) introduced H.R. 5244, which would establish new units of public housing and private market affordable housing, to provide grants to combat gentrification and neighborhood destabilization.
H.R. 728: Rep. Al Green (D-TX) introduced H.R. 728, which would condemn the decision of Federal Housing Finance Agency Director Mark Calabria to remove the borrower’s preferred language question and the housing counseling question from the Universal Residential Loan Application.
THIS WEEK ON THE HILL
No hearings scheduled during Thanksgiving recess.
OCC and FDIC Propose Rule to Clarify “Valid When Made” Doctrine: On Monday, the OCC announced that it is soliciting comments on a proposed rule to clarify that when a national bank or savings association sells, assigns, or otherwise transfers a loan, interest permissible prior to the transfer continues to be permissible following the transfer. The proposal will address confusion about the effect of a transfer on a loan’s valid interest rate, including confusion resulting from a recent decision from the U.S. Court of Appeals for the Second Circuit (Madden v. Midland Funding, LLC). The FDIC followed suit on Tuesday, issuing a similar proposed rule related to state-chartered banks. Consumer advocate groups slammed the proposal, claiming that it would “encourage predatory lenders to try to use rent-a-bank schemes with rogue out-of-state banks to evade state laws.” Sen. Sherrod Brown (D-OH) was joined by five other Senators in sending a letter criticizing the move, arguing that “given the OCC’s and FDIC’s prior efforts to eradicate rent-a-bank arrangements, it is disturbing to see the agencies now reverse course and propose rules that could actively enable these predatory lending schemes.”
Federal Bank Regulatory Agencies Finalize Rule to Update Calculation of Counterparty Credit Risk for Derivative Contracts: On Tuesday, the Federal Reserve, FDIC and OCC jointly announced a final rule updating how certain banking organizations are required to measure counterparty credit risk for derivative contracts under their regulatory capital rules. The final rule implements the “standardized approach for measuring counterparty credit risk,” also known as SA-CCR. This updated methodology better reflects improvements made to the derivatives market since the 2007-2008 financial crisis, such as central clearing and margin requirements. SA-CCR would replace the “current exposure methodology” for large, internationally active banking organizations, while other smaller banking organizations could voluntarily adopt SA-CCR.
Federal Bank Regulatory Agencies Issue Final Rule on Treatment of High Volatility Commercial Real Estate: On Tuesday, the Federal Reserve, FDIC and OCC finalized a rule to modify the treatment of high volatility commercial real estate (HVCRE) exposures, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rule clarifies certain terms contained in the HVCRE exposure definition, generally consistent with their usage in the Call Report instructions. The final rule also clarifies the treatment of credit facilities that finance one-to-four-family residential properties and the development of land, which is substantially similar to the proposal issued in July.
Agencies Finalize Changes to Supplementary Leverage Ratio: The Federal Reserve, FDIC, and OCC announced on Tuesday that they had finalized changes to a capital requirement for banking organizations predominantly engaged in custodial activities, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The final rule is unchanged from the proposal issued for public comment in April 2019.
Treasury Official Raises Concerns over Digital Currencies: Treasury Deputy Secretary Justin Muzinich issued a warning on Thursday over the risk privately issued digital currencies have on governance. He noted that while Treasury “value[s] innovation and welcome[s] efficiency improvements,” concerns exist about the risk of reducing democratic accountability in the economy as “decentralized, privately issued digital currencies are not simply a means of payment, but depending on their structure can shift some functions traditionally performed by government to the private sector.” He noted that policymakers are going to take “a very hard look at these issues.”
Fed Chair and President Trump Hold Meeting: Federal Reserve Chairman Jay Powell met with the President and the Treasury Secretary Monday morning at the White House to discuss the economy, growth, employment and inflation. The meeting was only the second time the President and Fed Chair have met since Chairman Powell was appointed. Powell told the President and Secretary Mnuchin that he and his colleagues on the FOMC will set monetary policy, as required by law, to support maximum employment and stable prices, and emphasized that they will make those decisions based solely on careful, objective and non-political analysis. Afterward the President tweeted that the meeting had been “very good & cordial.”
SEC Announces Conference on Macroeconomic and Structural Trends and Dynamics Affecting the Capital Markets: On Wednesday, the SEC announced that it will host a conference on Dec. 4, entitled “The State of Our Securities Markets.” The conference will bring together current and former government officials and experts from different areas of the private sector to explore and discuss the ever-changing economic, risk and market environment, and what they mean for the structure and function of the securities markets. Areas of focus at the conference will include global macroeconomic trends—and their impacts on our capital markets; changes to the global equity and credit markets—including how today’s markets differ from those of the early 2000s and market concentration and fragmentation within certain areas of the securities markets, including relevant causes and potential risks and effects.
SEC Commissioner Pierce Terms Diversity Quotas “Offensive”: Speaking at a luncheon on Wednesday, SEC Commissioner Hester Pierce discussed her view on diversity quotas for corporate boards, describing them as “offensive” and saying, “by putting people in these little boxes, we make massive assumptions about how they think and that takes away their humanity.”
CFPB to Assess Integrated Mortgage Disclosure Rule: The CFPB on Wednesday requested public comment on an assessment it will conduct on the TRID Integrated Disclosure Rule (the Truth in Lending Act and Real Estate Settlement Procedures Act). As part of its assessment, the Bureau intends to address the TRID Rule’s effectiveness in meeting the purposes and objectives of Title X of the Dodd-Frank Act, the specific goals of the rule, and other relevant factors. The public is invited to comment on the feasibility and effectiveness of the assessment plan, recommendations to improve the assessment plan and recommendations for modifying, expanding or eliminating the TRID Rule, among other questions.
CFPB Considering Changes to Consent Order Termination Process: Speaking at a conference on Thursday, CFPB Director Kathy Kraninger discussed the Bureau’s plans for consent order termination. She noted that they were “vital” for ensuring compliance, but added that it was important they remain in effect “only as long as needed to achieve their desired” goals. She said “the bureau has terminated a few consent … [is] currently identifying ways to improve this process to promote consistency,” and that in order to provide clarity and consistency an updated policy would be forthcoming.
FCC Chair Warns of New Robocall Regulations If Carriers Fail to Implement Screening Measures: In a speech on Thursday, FCC Chairman Ajit Pai revealed that commission staff is working on additional rules and regulations if carriers fail to implement the SHAKEN/STIR caller ID transparency standards by the end of the year, saying they are “actively working on developing regulations,” and if the industry “doesn’t get the job done on time, I will not hesitate to call an FCC vote on these new rules.”
Commissioner Stump Discusses Progress in the CFTC’s Data Protection Initiative: CFTC Commissioner Dawn Stump, who announced the Data Protection Initiative in March, provided an update on the DPI’s progress on Thursday. She emphasized that data is critical to our markets and our regulatory mission. At the same time, she noted that the CFTC must be mindful of cyber threats and its data risk profile. She highlighted the creation of a Data Catalogue, which documents all the data the CFTC captures and provides the agency with a view into all of the information ingested from the markets it regulates. She also recommended that the CFTC review the structure of the agency’s data organization, create a data business plan and develop a long-term strategy to generate internal operational efficiencies and become a 21st century, data-driven regulator.
FHFA Plans to Reintroduce Capital Rule Proposal in 2020: FHFA Director Mark Calabria said in a statement on Tuesday that because the “2018 capital rule was proposed before FHFA began the process of retaining capital at the enterprises as a first step toward ending the conservatorships” it makes sense to re-propose the rule, taking into account important issues that were raised in the first round of commentary. He said the rule will be “finalized within a timeline fully consistent with ending the conservatorships.”
Supreme Court Issues Stay on Subpoena for the President’s Financial Records: On Monday, the Supreme Court issued a temporary stay of the DC Circuit’s ruling that would have allowed House Democrats to subpoena the President’s accounting firm for his financial records. The President’s personal attorneys appealed that decision, which would otherwise have gone into effect Wednesday.
OTHER NOTEWORTHY ITEMS
Senate Democrats Call on HUD to Reverse Promotion of Controversial Official: In a letter to HUD Secretary Ben Carson, Sen. Sherrod Brown (D-OH) led a group of five Senators in demanding HUD rescind the promotion of Eric Blankenstein to Executive Vice President at the Government National Mortgage Association. The Senators cited Blankenstein’s racist and sexist remarks, and the previous Inspector General investigation into Blankenstein’s conduct and treatment of his subordinates at the CFPB, arguing that given his “troubling history in positions of power” it is “unconscionable” for HUD to elevate him.
House Members Call for Digital Identity Task Force: In a letter to Treasury Secretary Steven Mnuchin, Reps. Bill Foster (D-IL) and Barry Loudermilk (R-GA) have asked for the creation of a digital identity task force. They argued such a move could “help to advance the state of digital identity in financial services, as well as help to address threats to both consumers and the financial services sector caused by inadequate identity solutions.”
House Members Criticize HUD for Ignoring Low-Income Tenants Seeking to Save Their Homes: On Monday, Rep. Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, Rep. Rashida Tlaib (D-MI) and Rep. Ayanna Pressley (D-MA) wrote a letter to HUD Secretary Ben Carson to express concerns regarding the agency’s proposed National Standards for the Physical Inspection of Real Estate (NSPIRE) demonstration and its lack of resident participation in the development and implementation of the agency’s new physical inspection model. They wrote that they were “concerned that HUD’s implementation of the demonstration so far has not included tenant perspectives in its stakeholder engagement, and that HUD has failed to indicate how it will do so.”
Global Supervisors Describe Risk of “Systemic Crisis” Caused by Cloud Computing: Pablo Hernandez de Cos, chairman of the Basel Committee on Banking Supervision described his concern about the increased use of cloud computing and outsourced technologies by financial services firms. He noted that increased interdependence “could cause an IT risk event to escalate into a systemic crisis, particularly where services are concentrated in one or a few dominant players.”