THE BIG PICTURE
Christine Blasey Ford, who has accused Supreme Court nominee Brett Kavanaugh of sexual assault, agreed to appear before the Senate Judiciary Committee this Thursday for a hearing on her allegations. The agreement followed a series of high profile and at times tense negotiations over the weekend. Committee Chairman Chuck Grassley (R-IA) had initially set a hearing for Monday, but through her attorney Ms. Ford responded with her own set of terms, including a request for an FBI investigation. While the exact terms of Thursday’s hearing have not yet been resolved, Ms. Ford indicated she is committed to “moving forward with an open hearing.”
In a further escalation of trade tensions with China, on Monday, President Trump announced a new set of tariffs on US$200B worth of Chinese goods. Beginning on September 24th, a 10% tariff will go into effect, which is set to rise to 25% in 2019. In contrast to previous rounds of tariffs which primarily targeted industrial goods, this latest set focuses on consumer products. Following the move, China vowed to retaliate with tariffs on US$60B worth of U.S. goods.
Representative Chris Collins (R-NY), who was indicted on charges of insider trading last month, announced in an email to supporters that he plans to actively campaign and would serve in Congress if re-elected. Rep. Collins had previously suspended his campaign, but reversed course last week and decided to remain in the race citing the “the protracted and uncertain nature” of efforts to replace him on the ballot. The decision has caused some to wonder whether Democratic challenger Nate McMurray has a chance to win what is typically among the most conservative districts in New York.
An article published in the New York Times which described U.S. Deputy Attorney Rod Rosenstein as having considered secretly recording conversations with the President, and possibly invoking the 25th amendment sent shockwaves through the establishment on Friday afternoon. While Mr. Rosenstein denied the claims, issuing a statement calling the article “inaccurate and factually incorrect,” the incident has caused many to speculate whether Mr. Rosenstein, who appointed Special Counsel Robert Mueller and currently oversees the Russia investigation, could soon be fired.
Other highlights of last week include:
- On Monday, Richard Clarida was sworn in as a member and Vice Chairman of the Board of Governors of the Federal Reserve System.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
No hearings held.
SENATE BANKING COMMITTEE
Hearing on “Fintech: Examining Digitization, Data, and Technology”: On Tuesday, the full Committee held a hearing to consider different perspectives on financial technology, or fintech. Committee Chair Mike Crapo (R-ID) noted that “in order to fully embrace the immense benefits that can result from technological innovation, we must ensure that proper safeguards are in place and consumers are fully informed.”
- Mr. Steven Boms, President, Allon Advocacy, on behalf of Consumer Financial Data Rights (CFDR);
- Mr. Stuart Rubinstein, President, Fidelity Wealth Technologies;
- Mr. Brian Knight, Director of the Innovation and Governance Program, Mercatus Center at George Mason University;
- Ms. Saule Omarova, Professor of Law and Director, Jack Clarke Program on the Law and Regulation of Financial Institutions and Markets, Cornell University.
ON THE FLOOR
Senate Passes Spending Bill: With the September 30th deadline on government funding looming, on Tuesday, the Senate voted 93-7 to pass a bill funding the departments of Defense, Education, Labor, and HHS. The bill heads to the House this week where it is likely to be passed and advanced to the President for signature. However, it remains to be seen if President Trump will sign the appropriations bills, as in recent days he has described the compromise bills as “ridiculous” and called for Republicans to “get tough.”
THIS WEEK ON THE HILL
Financial Services Bills to be Considered under Suspension of the Rules:
- H.R. 6332 – Improving Strategies to Counter Weapons Proliferation Act (Sponsored by Rep. Scott Tipton)
- H.R. 4753 – Federal Reserve Supervision Testimony Clarification Act, as amended (Sponsored by Rep. Frank Lucas)
- H.R. 5036 – Financial Technology Protection Act, as amended (Sponsored by Rep. Ted Budd)
- H.R. 6729 – Empowering Financial Institutions to Fight Human Trafficking Act of 2018 (Sponsored by Rep. Ann Wagner)
- H.R. 6737 – Protect Affordable Mortgages for Veterans Act of 2018 (Sponsored by Rep. Lee Zeldin)
- H.R. 6751 – Banking Transparency for Sanctioned Persons Act of 2018, as amended (Sponsored by Rep. Mia Love)
Tuesday, September 25
House Financial Services Committee (Housing and Insurance Subcommittee) Hearing Entitled “HUD Office of Inspector General Report: HUD’s Oversight of the Alexander County (IL) Housing Authority”: 4:00 PM 2128 Rayburn House Office Building
Wednesday, September 26
House Financial Services Committee (Capital Markets, Securities, and Investment Subcommittee) Hearing Entitled “Oversight of the SEC’s Division of Investment Management”: 10:00 AM 2128 Rayburn House Office Building
House Financial Services Committee (Monetary Policy and Trade Subcommittee) Hearing Entitled “Administration Goals for Major Sanctions Programs”: 2:00 PM 2128 Rayburn House Office Building
Thursday, September 27
House Financial Services Committee Hearing Entitled “Oversight of the Federal Housing Finance Agency’s role as conservator and regulator of the Government Sponsored Enterprises”: 10:30 AM 2128 Rayburn House Office Building
Friday, September 28
House Financial Services Committee (Financial Institutions and Consumer Credit Subcommittee) Hearing Entitled “Examining Opportunities for Financial Markets in the Digital Era”: 9:00 AM 2128 Rayburn House Office Building
Banking Agencies Propose Rule Regarding the Treatment of High Volatility Commercial Real Estate: On Tuesday, the Federal Reserve, FDIC, and OCC invited comment on a proposal to modify the agencies’ capital rules for high volatility commercial real estate exposures, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The proposal would amend the regulatory capital rule to revise the definition of “high volatility commercial real estate (HVCRE) exposure” to conform to the statutory definition of a “high volatility commercial real estate acquisition, development, or construction (HVCRE ADC) loan.”
SEC Provides Regulatory Relief and Assistance for Hurricane Victims: The SEC announced that it is providing regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, municipal advisors, and others affected by Hurricane Florence. To address compliance issues caused by Hurricane Florence, the Commission issued an order that conditionally exempts affected persons from certain requirements of the federal securities laws for periods following the weather event. Additionally, the Commission adopted interim final temporary rules that extend the filing deadlines for specified reports and forms that companies must file pursuant to Regulation Crowdfunding and Regulation A.
SEC Announces Plan to Host Roundtable on Regulatory Approaches to Combating Retail Investor Fraud: The SEC announced that its Division of Trading and Markets will host a roundtable on September 26th on combating retail investor fraud. The Commission staff is interested in views from a broad range of market participants, regulators, and industry experts concerning potential steps that might be taken to enhance the ability of regulators, broker-dealers and others to combat retail investor fraud.
SEC Announces Plan to Host Roundtable on the Proxy Process: The SEC announced that its staff will host a roundtable on November 15th to hear investor, issuer, and other market participant views about the proxy process and rules. The proxy process is central to investors’ participation in corporate governance at U.S. public companies. The roundtable will focus on key aspects of the U.S. proxy system, including proxy voting mechanics and technology, the shareholder proposal process, and the role and regulation of proxy advisory firms.
SEC Commissioner Jackson Discusses Harm of For-Profit Exchanges: Speaking at an event hosted by George Mason University, Democratic Commissioner Robert Jackson called for regulators to take off their “kid gloves” and increase oversight of stock exchanges, arguing that the “SEC has stood on the sidelines while enormous market power has become concentrated in just a few players.”
Agencies Approve Amendments to Swap Margin Rule: The Farm Credit Administration, the FDIC, the Federal Housing Finance Agency, the Federal Reserve, and the OCC approved final amendments to swap margin requirements to conform with recent rule changes that impose new restrictions on certain qualified financial contracts of systemically important banking organizations (QFC Rules). Under the amendments, legacy swaps entered into before the applicable compliance date will not become subject to the margin requirements if they are amended solely to comply with the requirements of the QFC Rules.
House Dems Call on Fed to Maintain Capital Requirements for Megabanks: In a letter to Fed Chairman Jay Powell, 19 House Democrats led by Maxine Waters (D-CA) and Ranking Member of the Financial Services Committee, called on the Federal Reserve to maintain strong capital requirements for Global Systemically Important Banks (G-SIBS). They argued that “strong capital requirements are the cornerstone of an effective regulatory regime that promotes financial stability while supporting stable economic growth,” and urged Chairman Powell “not to forget [the] costly lesson [of the financial crisis] and maintain the appropriately tough capital requirements on G-SIBs.”
House Republicans Call for IRS to Release Cryptocurrency Guidance: In a letter to the IRS, four House Republicans, led by Rep. Kevin Brady (R-TX), Chairman of the House Ways and Means Committee, called on the agency to release guidelines for dealing with cryptocurrencies. The letter stated that they are “concerned that the IRS is seeking to enforce guidance that does not adequately advise taxpayers of their tax obligations when using virtual currencies.”
COMINGS AND GOINGS AT THE AGENCIES
Nellie Liang Expected to be Nominated for Open Board Seat: The President is rumored to be considering nominating Nellie Liang, who has worked at the Federal Reserve for 31 years, to an open seat on the board. Two of the President’s other nominees, Michelle Bowman and Marvin Goodfriend, remain pending before the Senate.
Mark Wolfe Named Associate Director of the Office of Derivatives Policy and Trading Practices: The SEC announced that Mark Wolfe has been named Associate Director of the Office of Derivatives Policy and Trading Practices in the agency’s Division of Trading and Markets. Mr. Wolfe previously spent nearly seven years at the SEC from 1999 through 2006. He first joined the SEC staff in November 1999 as an attorney in the Office of Compliance Inspections and Examinations’ market oversight program. From April 2003 to September 2006 he was a senior counsel in the Division of Enforcement.
Christopher Hetner, Senior Advisor to the Chairman for Cybersecurity Policy, to Leave the SEC: The SEC announced that Christopher Hetner, Senior Advisor to Chairman Jay Clayton for Cybersecurity Policy, plans to leave the agency. Mr. Hetner will remain in the Chairman’s Office during the identification of and transition to his successor. Mr. Hetner previously served as Senior Advisor for Cybersecurity Policy for former Chair Mary Jo White and former Acting Chairman Michael Piwowar. Mr. Hetner helped to establish the position in 2016 to better coordinate cybersecurity policy efforts across federal financial regulators, enhance the SEC’s ability to assess cyber-related market risks, and improve the SEC’s cybersecurity posture.
Maine Bureau of Insurance Superintendent to Join FSOC: Eric Cioppa, who currently serves as Maine’s top insurance regulator is set to join the Financial Stability Oversight Council as a nonvoting member, replacing New Jersey Insurance Division Director Peter Hartt, whose term expired last week. l
OTHER NOTEWORTHY ITEMS
NYAG Finds Cryptocurrency Exchanges Vulnerable to Manipulation: Following a study of several cryptocurrency exchanges, New York AG Barbara Underwood’s office issued a report revealing that some cryptocurrency exchanges lack the requisite safeguards to ensure “fairness, integrity and security.” The report also detailed that the AG’s office had referred three platforms to the New York State Department of Financial Services “for potential violation of New York’s virtual currency regulations.” The CEO of one of those platforms, Kraken, which had refused to participate, took to Twitter to respond, likening NY to an “abusive controlling ex.”
UK Watchdog Calls for Crypto Regulation: In a report released last week, the UK treasury watchdog warned that the current ambiguity in the cryptocurrency market is “clearly not sustainable.” The report also argued that thoughtfully crafted “proportionate regulat[ion]” could result in the UK becoming “a global center.”
New Jersey to Propose Fiduciary Rule: Following the invalidation of a federal counterpart earlier this year, New Jersey Governor Phil Murphy is planning to introduce a state level fiduciary rule, which would require financial advisers to act in their client’s best interests. Gov. Murphy said in a statement that while President Trump is “dismantling the consumer protections implemented in the wake of the 2008 economic crash, we are building stronger safeguards for our consumers.”