THE BIG PICTURE

Congress passed a short-term funding bill at the beginning of last week, which funds the government until February 8. The deal would reauthorize the Children's Health Insurance Program for six years, and would delay Obamacare's medical device and Cadillac plan taxes for two years and its health insurance tax for one year.

The New York Times published a story last week, revealing that President Trump tried to fire special counsel Robert Mueller in June and only backed down when White House counsel Don McGahn threatened to quit. President Trump called the story "fake news." Last week, Mueller interviewed Attorney General Jeff Sessions for several hours as part of his ongoing investigation into Russia ties.

The President spoke at the World Economic Forum in Davos, Switzerland, highlighting his "America First" policy and reiterating that the U.S. is "open for business." Speaking to Apple CEO Tim Cook, he urged the company to move manufacturing jobs from China to the U.S.

The White House presented an immigration plan last week that would provide a path to citizenship for 1.8 million undocumented immigrants. A senior White House official said that the proposal is a "compromise position" that they believe will get 60 votes. The proposal includes a US$25B fund for border security.

Related to the budget, the White House announced that it will deliver its request to Congress on February 12 or later. It also announced on January 24 that its long-awaited infrastructure plan would be released in a couple of weeks.

The Senate confirmed Trump's pick for Health and Human Services Secretary, Alex Azar. Also confirmed last week was Jerome Powell as chairman of the Federal Reserve.

In court news, the U.S. Court of Appeals for the D.C. Circuit agreed to expedite an appeal from the Consumer Financial Protection Bureau's deputy director Leandra English in her suit claiming that she should be acting director of the agency.

On the election front, former Republican presidential candidate Mitt Romney is expected to announce his run for Utah's Senate seat this week

LAST WEEK ON THE HILL

SENATE BANKING COMMITTEE

Committee Holds Hearing on the Committee for Foreign Investment in the United States (CFIUS): On January 25, the Senate Banking Committee held a hearing entitled "CFIUS Reform: Administration Perspectives on the Essential Elements." The hearing was to examine legislation that would overhaul CFIUS in order to tackle threats posed by China's overseas investment. Witnesses included:

  • The Honorable Heath P. Tarbert, Assistant Secretary of the Treasury for International Markets and Investment Policy;
  • The Honorable Richard Ashooh, Assistant Secretary of Commerce for Export Administration; and
  • Mr. Eric Chewning, Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy (MIBP).

Committee Holds Nomination Hearing: On January 23, the Committee held a hearing to evaluate the following nominations:

  • Ms. Jelena McWilliams, to be Chairperson and a Member of the Board of Directors of the Federal Deposit Insurance Corporation;
  • Dr. Marvin Goodfriend, to be a Member of the Board of Governors of the Federal Reserve System; and
  • Mr. Thomas E. Workman, to be a Member of the Financial Stability Oversight Council.

If confirmed, McWilliams could soon be leading a smaller, all-Republican board. According to her testimony at the hearing, she will focus on easing regulatory requirements for community banks, encouraging the creation of new banks, and tackling cybersecurity. If confirmed, FDIC Vice Chairman Thomas Hoenig will remain Chairman until his term ends in April.

Also at the hearing, Democrats grilled Federal Reserve nominee Marvin Goodfriend over why his predictions of impending inflation over the last few years were so wrong.

THIS WEEK ON THE HILL

Monday, January 29

The following bills will be considered in the House under suspension of the rules:

H.R. 1457 - To establish requirements for use of a driver’s license or personal identification card by certain financial institutions for opening an account or obtaining a financial product or service, and for other purposes, as amended (Sponsored by Rep. Scott Tipton / Financial Services Committee)

H.R. 1426 - Federal Savings Association Charter Flexibility Act of 2017 (Sponsored by Rep. Keith Rothfus / Financial Services Committee)

H.R. 2255 - To clarify that nonprofit organizations may accept donated mortgage appraisals, and for other purposes, as amended (Sponsored by Rep. Dave Trott / Financial Services Committee)

H.R. 4292 - Financial Institution Living Will Improvement Act of 2017 (Sponsored by Rep. Lee Zeldin / Financial Services Committee)

H.R. 4792 - Small Business Access to Capital After a Natural Disaster Act (Sponsored by Rep. Nydia Velázquez / Financial Services Committee)

Tuesday, January 30

House Financial Services Subcommittee on Financial Institutions and Consumer Credit, Hearing entitled “Examining Opportunities and Challenges in the Financial Technology (“Fintech”) Marketplace,10:00 AM in 2128 Rayburn House Office Building

  • Mr. Nathaniel Hoopes, Executive Director, Marketplace Lending Association
  • Mr. Brian Knight, Director, Program on Financial Regulation and Senior Research Fellow, Mercatus Center, George Mason University
  • Mr. Brian Peters, Executive Director, Financial Innovation Now
  • Mr. Andrew Smith, Partner, Covington and Burling, LLP
  • Prof. Adam J. Levitin, Professor of Law, Georgetown University Law Center

Senate Banking Committee, Hearing, "The Financial Stability Oversight Council Annual Report to Congress," 10:00AM at 538 Dirksen Senate Office Building

  • The Honorable Steven T. Mnuchin, Secretary, United States Department of the Treasury.

House Financial Services Subcommittee on Oversight and Investigations, Hearing entitled “Following the Money: How Human Traffickers Exploit U.S. Financial Markets,” 2:00 PM in 2128 Rayburn House Office Building

  • Mr. Bassem Banafa, Financial Forensics Consultant, Bassem Banafa, LLC
  • Dr. Louise I. Shelley, Founder and Director, Terrorism, Transnational Crime and Corruption Center, George Mason University
  • The Honorable Cyrus R. Vance Jr., District Attorney, New York County, District Attorney’s Office
  • Ms. Tina Frundt, Founder and Director, Courtney’s House

THE REGULATORS

Regulators Pen Op-Ed on Cryptocurrency: Securities and Exchange Commission (SEC) Chairman Jay Clayton and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo wrote an op-ed for the Wall Street Journal last week to address the regulation of virtual currencies. According to the regulators, "many of the internet-based cryptocurrency-trading platforms have registered as payment services and are not subject to direct oversight by the SEC or CFTC." It seems that the regulators are moving closer to the viewpoint that virtual currencies need their own dedicated regulator.

Clayton Speaks at Securities Regulation Institute on Cryptocurrency: SEC Chairman Jay Clayton delivered remarks at the Securities Regulation Institute on January 22, with one of his main talking points being virtual currency and professionals who operate in the space. Clatyon said, "Market professionals, especially gatekeepers, need to act responsibly and hold themselves to high standards. To be blunt, from what I have seen recently, particularly in the initial coin offering space, they can do better… First, and most disturbing to me, there are ICOs where the lawyers involved appear to be, on the one hand, assisting promoters in structuring offerings of products that have many of the key features of a securities offering, but call it an ‘ICO.’"

CFTC Announces Third Cryptocurrency Fraud Suit this Month: The CFTC announced last week that it had sued and frozen the assets of the creators of purported cryptocurrency "My Big Coin." The creators allegedly took US$6M from buyers and used it on shopping sprees and paying off early investors.

Consumer Financial Protection Bureau (CFPB) Finalizes Changes to Prepaid Accounts Rule: The Consumer Financial Protection Bureau (Bureau) announced on January 25 that it has finalized updates to its 2016 prepaid rule. The Bureau’s 2016 prepaid rule put in place requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The changes announced today adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule by one year to April 2019.

CFPB Publishes Request for Information on Civil Investigative Demands: On January 24, the CFPB published the Request for Information (RFI) about the Bureau’s Civil Investigative Demands (CIDs) that was announced as part of Acting Director Mick Mulvaney’s call for evidence last week. This RFI will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities.

Six Accountants Charged with Using Leaked Confidential PCAOB Data in Quest to Improve Inspection Results for KPMG: On January 22, the Securities and Exchange Commission announced charges against six certified public accountants – including former staffers at the Public Company Accounting Oversight Board (PCAOB) and former senior officials at KPMG LLP – arising from their participation in a scheme to misappropriate and use confidential information relating to the PCAOB's planned inspections of KPMG.

Agencies to Give Favorable Community Reinvestment Act Consideration to Revitalization Activities in Disaster Areas Affected by Hurricane Maria: On January 25, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency announced they will give favorable consideration under Community Reinvestment Act (CRA) regulations to institutions that are located outside of the U.S. Virgin Islands and Puerto Rico, which were designated as major disaster areas in the aftermath of Hurricane Maria, for bank activities that help to revitalize or stabilize these areas. The CRA encourages financial institutions to help meet local credit and community development needs. The agencies give CRA consideration for bank activities such as loans, investments, or services with a primary purpose of community development.

Treasury Sanctions Additional Individuals and Entities in Connection with the Conflict in Ukraine and Russia’s Occupation of Crimea: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on January 26 designated 21 individuals and 9 entities under four Executive Orders (E.O.s) related to Russia and Ukraine, including three individuals and two entities related to Russia’s transfer of four turbines made by a Russian-German joint venture to Crimea. The action is part of Treasury’s continued commitment to maintain sanctions pressure on Russia until it fully implements its commitments under the Minsk agreements. This action underscores the U.S. government’s opposition to Russia’s occupation of Crimea and firm refusal to recognize its attempted annexation of the peninsula.

Treasury Sanctions Taliban and Haqqani Network Financiers and Facilitators: On January 25, OFAC to expose and disrupt the financing of the Taliban and Haqqani Network by designating six individuals as Specially Designated Global Terrorists (SDGTs) pursuant to Executive Order (E.O.) 13224, which targets terrorists and those providing support to terrorists or acts of terrorism. Four of the individuals – Abdul Samad Sani, Abdul Qadeer Basir Abdul Baseer, Hafiz Mohammed Popalzai, and Maulawi Inayatullah – were designated for acting on behalf of the Taliban, while the remaining two – Faqir Muhammad and Gula Khan Hamidi – were sanctioned for acting on behalf of the Haqqani Network.

Treasury Sanctions North Korean Overseas Representatives, Shipping Companies, and Chinese Entities Supporting the Kim Regime: On January 24, OFAC sanctioned nine entities, 16 individuals, and six vessels in response to North Korea's ongoing development of weapons of mass destruction (WMD) and continued violations of United Nations Security Council Resolutions (UNSCRs). Today's sanctions target agents of the Kim regime financing or otherwise supporting North Korea's WMD programs and other illicit businesses. As a result of today's action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked, and U.S. persons are prohibited from dealing with any of the designated parties.