THE BIG PICTURE
Democrats won the Governorships in both Virginia and New Jersey in last week's election, with many saying that the elections were a referendum on President Donald Trump. Speaker of the House Paul Ryan said in response to the elections that it emphasizes the need for Republicans to keep their promises with respect to tax reform. The Senate is planning to mark up their tax bill today.
In honor of Veteran's day, the House passed seven bills to support Veterans. Measures passed included:
- H.R. 918, Veteran Urgent Access to Mental Healthcare Act
- H.R. 1133, Veterans Transplant Coverage Act
- H.R. 1900, National Veterans Memorial and Museum Act
- H.R. 2123, Veterans E-Health and Telemedicine Support (VETS) Act
- H.R. 2601, Veterans Increased Choice for Transplanted Organs and Recovery (VICTOR) Act
- H.R. 3634, Securing Electronic Records for Veterans Ease (SERVE) Act
- H.R. 3949, Veterans Apprenticeship and Labor Opportunity Reform (VALOR) Act
Representative Bob Goodlatte (R-VA) announced last week that he will retire from Congress next year. The longtime Congressman currently serves as Chairman of the House Judiciary Committee. Additionally, GOP Representative Frank LoBiondo (R-NJ) announced that he also will not seek reelection next year.
LAST WEEK ON THE HILL
House Passes Risk-Based Credit Examination Act: On November 7, the House passed the Risk-Based Credit Examination Act. The legislation, introduced by Rep. Ann Wagner (R-MO), amends the Securities Exchange Act of 1934 to provide the Securities and Exchange Commission's Office of Credit Ratings with discretion concerning reviewable matters during its annual examination of nationally recognized statistical rating organizations.
HOUSE FINANCIAL SERVICES COMMITTEE
Changes to Committee's Flood Insurance Overhaul Bill: House Financial Services Committee Chairman Jeb Hensarling (R-TX) is planning to remove two major provisions of the Committee's proposed legislation, H.R. 2874, overhauling the National Flood Insurance Program (NFIP). First, he will drop a provision that would block NFIP coverage for homes valued at over US$1M. Second, he would delay until 2019 a provision that would exempt commercial properties from mandatory coverage requirements.
The House Rules Committee is planning to resume consideration of the bill today. House Financial Services Ranking Member Maxine Waters (D-CA) and other coastal members have been speaking out in opposition to the bill, saying that the bill would make flood insurance "more expensive, less available and less fair for millions of Americans."
House Passes Micro Offering Safe Harbor Act: On November 9, the House passed the Micro Offering Safe Harbor Act. Under H.R. 2201, sponsored by Rep. Tom Emmer (R-MN), private businesses would be permitted to seek community-based financing of up to $500,000 per year to hire new workers or expand their operations. The bill includes a number of investor protections to help prevent fraud and abuse. “This important bill will help unlock seed capital for small businesses and startup companies,” said Financial Services Committee Chairman Jeb Hensarling (R-TX). Ranking Member Maxine Waters (D-CA) spoke against the bill, saying it would "create an unnecessary and potentially dangerous loophole in federal and state securities laws." Ranking Member Water's opposition will make it harder for the bill to pass the Senate.
Subcommittee Holds Hearing on Financial Intelligence and Enforcement: On November 8, the Terrorism and Illicit Finance Subcommittee held a hearing entitled " Financial Intelligence and Enforcement: Treasury’s Role in Safeguarding the American Financial System. The purpose of the hearing was to provide an overview of the functions of the U.S. Department of the Treasury's Office of Terrorism and Financial Intelligence. The sole witness was Sigal Mandelker, Under Secretary of the Office of Terrorism and Financial Intelligence.
Subcommittee Holds Hearing on Administration Priorities for International Financial Institutions: Also on November 8, the Subcommittee for Monetary Policy and Trade held a hearing entitled "Administration Priorities for the International Financial Systems. The purpose of the hearing was to examine the Administration's efforts to reform the World Bank, International Monetary Fund, and other international financial institutions (IFIs). The sole witness was David Malpass, Under Secretary for International Affairs at the Department of Treasury.
Subcommittee Holds Hearing on Federal Reserve Reform Proposals: On November 7, the Monetary Policy and Trade Subcommittee held a hearing entitled "Examining Federal Reserve Reform Proposals." The purpose of the hearing was to evaluate three legislative proposals to "create a more independent, accountable, and transparent Federal Reserve that would improve economic opportunities for all Americans." The Subcommittee examined the following legislation:
- Dr. Mickey Levy, Managing Director and Chief Economist, Berenberg Capital Markets
- Dr. Andrew T. Levin, Professor of Economics, Dartmouth College
- Dr. Jered Bernstein, Senior Fellow, Center on Budget and Policy Priorities
- Dr. Charles I. Plosser, Visiting Fellow, Hoover Institution
Subcommittee Holds Hearing on Sustainable Housing: On November 7, the Subcommittee on Housing and Insurance held a hearing entitled "Sustainable Housing Finance, Part III." The purpose of the hearing was to provide the Subcommittee with views and perspectives on the need to enact comprehensive housing finance reform, the legal, statutory or regulatory impediments to the return of private capital to the housing finance system, and what factors and metrics Congress should consider to reform the housing finance system. Witnesses included:
- Mr. Peter Wallison, Senior Fellow and Arthur F. Burns Fellow in Financial Policy Studies, AEI
- Dr. Mark Zandi, Chief Economist, Moody's Analytics
- Dr. Michael Lea, Cardiff Consulting Services
- Ms. Alanna McCargo, Co-director, Housing Finance Policy Center, Urban Institute
- The Honorable Theodore "Ted" Tozer, Senior Fellow, Center for Financial Markets, Milken Institute
SENATE BANKING COMMITTEE
Senate Banking Committee Chairman Mike Crapo (R-ID) Meets with Federal Reserve Chair Nominee Jerome Powell: Chairman Crapo met with Jay Powell, President Trump’s nominee for Chairman of the Board of Governors of the Federal Reserve System, on November 8. Following the meeting, Senator Crapo issued the following statement: “Governor Powell and I had a positive meeting today. We discussed his views on monetary policy, tailoring federal financial regulation and other priorities for the Federal Reserve. He is well-equipped to lead our economy and the country in a positive direction, and I look forward to hearing more from him during his nomination hearing.”
The Committee will hold a hearing on Jerome Powell's nomination at 10:00AM on November 28.
Senate Banking Committee Approves North Korea Legislation: On November 7, the Senate Banking Committee approved the BRINK Act, legislation aimed at cutting off the Kim regime's access to banking services. In his opening statement, Chairman Crapo praised the bill's sponsors, saying "Senators [Pat] Toomey [R-PA] and [Chris] Van Hollen [D-MD] deserve extra recognition for their hard work and leadership to strengthen the sanctions regime targeting North Korea."
LEGISLATION INTRODUCED AND PROPOSED
Senators Introduce Legislation Moving the Qualifying Asset Threshold for Exams: Senators Joe Donnelly (D-IN) and Dean Heller (R-NV) introduced legislation to move the qualifying asset threshold for 18-month bank examinations from US$1B to US$3B. Currently banks in this category are subject to annual examinations.
Senators Introduce Legislation on Committee on Foreign Investment in the United States: U.S. Senators John Cornyn (R-TX) and Dianne Feinstein (D-CA), along with the Chairman of the Senate Select Committee on Intelligence, Richard Burr (R-NC), today introduced the Foreign Investment Risk Review Modernization Act (FIRRMA) to modernize and strengthen the process by which the Committee on Foreign Investment in the United States (CFIUS) reviews acquisitions, mergers, and other foreign investments in the United States for national security risks.
THIS WEEK ON THE HILL
Tuesday, November 14
House Financial Services Committee, Markup, 10:00 AM in 2128 Rayburn HOB
- HR 1153, the “Mortgage Choice Act of 2017”
- HR 1638, the “Iranian Leadership Asset Transparency Act”
- 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 3093, the “Investor Clarity and Bank Parity Act”
- HR 3221, the “Securing Access to Affordable Mortgages Act”
- HR 3299, the “Protecting Consumers’ Access to Credit Act of 2017”
- HR 3978, the “TRID Improvement Act of 2017”
- HR 4015, the “Corporate Governance Reform and Transparency Act of 2017”
- HR 4247, the “Restoring Financial Market Freedom Act of 2017”
- HR 4248, To amend the Securities Exchange Act of 1934 to repeal certain disclosure requirements related to conflict minerals, and for other purposes.
- HR 4258, the “Family Self-Sufficiency Act”
- HR 4263, the “Regulation A+ Improvement Act of 2017”
- HR 4267, the “Small Business Credit Availability Act”
- HR 4270, the “Monetary Policy Transparency and Accountability Act of 2017”
- HR 4278, the “Independence from Credit Policy Act of 2017”
- HR 4279, the “Expanding Investment Opportunities Act”
- HR 4281, the “Expanding Access to Capital for Rural Job Creators Act”
- HR 4289, To amend the Dodd-Frank Wall Street Reform and Consumer Protection Act to repeal certain disclosure requirements related to coal and mine safety.
- HR 4292, the “Financial Institution Living Will Improvement Act of 2017”
- HR 4293, the “Stress Test Improvement Act of 2017”
- HR 4294, the Prevention of Private Information Dissemination Act of 2017”
- HR 4296, To place requirements on operational risk capital requirements for banking organizations established by an appropriate Federal banking agency.
- HR 4302, the “Congressional Accountability for Emergency Lending Programs Act of 2017”
- HR 4324, the “Strengthening Oversight of Iran’s Access to Finance Act”
FINANCIAL SERVICES ON THE HOUSE FLOOR
- H.R. 3973 - Market Data Protection Act of 2017, as amended (Sponsored by Rep. Warren Davidson / Financial Services Committee)
Securities and Exchange Commission Plans to Continue to Pursue Punitive Penalties: According to an agency official, the SEC is still planning to pursue punitive penalties for companies that settle enforcement charges. According to Stephanie Avakian, co-director of the SEC's enforcement division, "there is no plan to reduce corporate penalties."
SEC Chairman Clayton Raises Concerns about Virtual Currency Offerings: Speaking at the Practicing Law Institute in New York, Chairman Clayton expressed concern for the potential for misconduct with cryptocurrency. According to Clayton, there is a "distinct lack of information about many online platforms that list and trade virtual coins or tokens offered and sold in Initial Coin Offerings…Trading of tokens on these platforms appears to be susceptible to price manipulation and other fraudulent trading practices."
SEC Announces the Formation and First Members of Fixed Income Market Structure Advisory Committee: On November 9, the SEC announced the formation and first members of its Fixed Income Market Structure Advisory Committee. The committee, whose initial focus will be on the corporate bond and municipal securities markets, will provide advice to the Commission on the efficiency and resiliency of these markets and identify opportunities for regulatory improvements. The committee is comprised of a group of outside experts, including individuals representing the views of retail and institutional investors, small and large issuers, trading venues, dealers, and self-regulatory organizations, among others.
Former SEC Head says Budget Cuts will Hurt Enforcement: Speaking in New York on November 10, former SEC Chair Mary Jo White said that the "greatest impact on enforcement of the securities laws will be brought about by budget cuts [at the SEC and the Justice Department]." House Republicans and the White House are proposing to maintain the SEC's budget at its current level, while the White House has proposed a four percent cut to the Justice Department budget. In July, the House Appropriations Committee passed a US$349M budget increase for the Department.
SEC Warns Investors About Paid-to-Click Scams: The Securities and Exchange Commission is warning investors to beware online “paid-to-click” scams that promise an easy payday by merely purchasing a membership or an advertising product up front and then clicking on a certain number of online ads each day. The SEC’s investor alert explains that these online advertising programs may have little to no revenues besides membership fees or sales of “ad packs” and may be nothing more than a Ponzi scheme. The SEC filed an enforcement case that was unsealed last week in federal court in Florida, alleging that roughly 99 percent of the purported “profits” paid to earlier investors came directly from the buy-in fees collected from newer investors.
Acting Comptroller of the Currency Keith Noreika Discusses Merging Banking and Commerce: Speaking on November 8, Office of the Comptroller of the Currency Chair Keith Noreika discussed the possibility of merging banking and commerce, saying that the separation may not make sense anymore with the emergence and growth of fintech. According to Noreika, "such dogma props up bureaucracies that maintain the separation and serves the interest of the status quo without regard to why the separation exists in the first place or whether the separation has any usefulness in today's economy." There was immediately backlash to his comments, with Chris Cole, executive vice president of the Independent Community Bankers of America, calling Noreika's speech "baloney."
Acting Comptroller Noreika also said at the same event that agencies could put out a proposal to reform the Volcker Rule by next spring.
Three Departments Implement Changes to the Cuba Sanctions Rules: On November 8, the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce's Bureau of Industry and Security (BIS) announced amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), respectively, to implement changes to the Cuba sanctions program announced by the President in June. The State Department is taking complementary steps to implement these policy changes that cumulatively seek to channel economic activities away from the Cuban military, intelligence, and security services, while maintaining opportunities for Americans to engage in authorized travel to Cuba and support the private, small business sector in Cuba. The changes took effect on Thursday, November 9, 2017.
COMINGS AND GOINGS AT THE AGENCIES
Randal K. Quarles Sworn in as Member of the Board of Governors of the Federal Reserve System and as Vice Chair for Supervision: Randal K. Quarles was ceremonially sworn in as a member of the Board of Governors of the Federal Reserve System and as Vice Chair for Supervision on Monday in the atrium of the Board's Eccles building in Washington.
Kenneth Blanco Tapped to Lead Financial Crimes Enforcement Network (FinCEN): Kenneth Blanco has been named Director of FinCEN, a bureau in Treasury's Office of Terrorism and Financial Intelligence (TFI). Blanco is a longtime criminal prosecutor at the Department of Justice.
Federal Reserve Bank of New York President to Retire Next Year: Federal Reserve Bank of New York Chairman William Dudley plans to retire in the middle of next year. In a statement released November 6, the New York Fed said that it will "ensure that a successor is in place well before the end of his term." Speaking at the Economic Club in New York, Dudley said that there is "still work left to do" on post-crisis regulation.
Office of Financial Research Director to Step Down Early: Department of Treasury Secretary Steven Mnuchin announced last week that Richard Berner, the Director of the Office of Financial Research, will step down effective December 31. This is one year before his six-year term is up.
OTHER NOTEWORTHY ITEMS
Puerto Rico Bondholders Offer US$1.5B Loan to Oversight Board and Commonwealth Government: Investors in the class of Puerto Rican bonds known as COFINA (Spanish acronym) have offered a zero-interest loan to Puerto Rico's oversight board and commonwealth government. A source familiar with the strategy said that the quicker Puerto Rico can get back on its feet, the quicker the bondholders can get repaid.
Bank CEOs Ask for More Risk-Based Approach to Regulation: As Congress works on legislation aimed to ease financial regulations, several bank CEOs urged lawmakers to impose stricter regulation based on business model, rather than simply raising the asset threshold. Speaking at the Clearing House's annual conference, U.S. Bancorp CEO Andy Cecere said that they are "very focused on this because the rules ought to be risk-based as opposed to a simple asset number."