THE BIG PICTURE
The coronavirus outbreak continued to dominate the news, with the United States reporting over 500 cases across 30 states and infections surpassing 100,000 worldwide. Major public events like the South by Southwest festival were canceled as officials focused on containment and mitigation efforts. After days of intensive negotiations, the House voted to pass a US$8.3B emergency funding bill to combat the virus, with the Senate quickly following suit. On Friday, the President signed the measure into law and traveled to Atlanta to tour CDC headquarters, expressing confidence in the administration’s response. Despite that, concern about the accessibility of testing around the country dogged officials after a delayed rollout limited capacity at the local level. Fears over the outbreak were reflected in stock market turmoil, resulting in the Fed announcing an emergency rate cut in an effort to contain damage to the economy from the “evolving risks” posed by the virus.
On the eve of Super Tuesday, both Pete Buttigieg and Sen. Amy Klobuchar ended their campaigns and endorsed former Vice President Joe Biden at rallies in Dallas, consolidating support behind the perceived moderate alternative to Sen. Bernie Sanders. The momentum following Biden’s victory in South Carolina carried into Tuesday, with Biden exceeding expectations and carrying 10 of 14 states, including a surprise victory in Texas, adding substantially to his delegate count. After being largely written off following a weak showing in Iowa and New Hampshire, Biden has emerged resurgent as the frontrunner for the nomination. On Wednesday, former New York City Mayor Mike Bloomberg dropped out and endorsed Biden. On Thursday, after having taken time to reflect, Sen. Elizabeth Warren also ended her campaign but promised to continue the fight, as “big dreams never die.” Over the weekend, Biden continued to rack up endorsements, including from Sen. Kamala Harris who dropped out of the race last year.
Other highlights of last week include:
- The Supreme Court announced that it will hear a case challenging the constitutionality of the Affordable Care Act, a decision that will likely bring the fight over healthcare coverage to the forefront of the presidential election.
- The February jobs report was released, revealing that the U.S. economy added 273,000 jobs as the unemployment rate fell to 3.5%.
- On Friday, the President announced that he was replacing acting White House chief of staff Mick Mulvaney with Rep. Mark Meadows (R-NC).
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Hearing on “The Traffickers’ Roadmap: How Bad Actors Exploit Financial Systems to Facilitate the Illicit Trade in People, Animals, Drugs, and Weapons”: On Wednesday, the Subcommittee on National Security, International Development, and Monetary Policy held a hearing to bring in transnational criminal organization experts on narcotics, human, wildlife, and WMD trafficking to examine the similarities in the business models found across the transnational trafficking networks, including the supply chains, facilitators, and finances. The hearing followed the launch of the bipartisan Counter-Trafficking Initiative, a long-term Committee effort designed to explore and expose the breadth and reach of transnational trafficking networks and their illicit finances. The Subcommittee also considered two pieces of legislation: (1) H.R. __, the Stopping Trafficking, Illicit Flows, Laundering, and Exploitation Act; (2) H.R. 1387, the CONFRONT Act.
- Travis L. Adkins, Lecturer, African & Security Studies, Walsh School of Foreign Service, Georgetown University
- Dr. Togzhan Kassenova, Senior Fellow, Project on International Security, Commerce, and Economic Statecraft (PISCES), Center for Policy Research, SUNY-Albany
- Celina B. Realuyo, Adjunct Professor, The George Washington University Elliott School of International Affairs
- Gretchen Peters, Executive Director, Center on Illicit Network and Organized Crime (CINTOC) and The Alliance to Counter Crime Online (ACCO)
- Angel Nguyen Swift, Founder and Director, STAT (Stand Together Against Trafficking) and Advisor, Enigma Technologies
Hearing on “Drivers of Discrimination: An Examination of Unfair Premiums, Practices, and Policies in the Auto Insurance Industry”: On Wednesday, the Subcommittee on Housing, Community Development, and Insurance held a hearing to consider the effects of unfair premiums, practices, and policies in the auto insurance industry. In addition, the Subcommittee considered two pieces of legislation: (1) H.R. 1756, the Preventing Credit Score Discrimination in Auto Insurance Act; (2) H.R. __, the FAIR Study Act.
- Douglas Heller, Insurance Expert, Consumer Federation of America
- Elizabeth Kelleher Dwyer, Superintendent of Insurance, the State of Rhode Island, on behalf of the National Association of Insurance Commissioners
- Eric Poe, CPA and Chief Operating Office, CURE Auto Insurance
- Sonja Larkin-Thorne, Consumer Advocate (retired)
- Erin Collins, Vice President-State Affairs, National Association of Mutual Insurance Companies
Field Hearing on “Modern-Day Redlining: the Burden on Underbanked and Excluded Communities in New York”: On Friday, the Subcommittee on Consumer Protection and Financial Institutions held a field hearing in Queens, New York focused on modern-day redlining and its implications on unbanked and under-banked communities.
- Jaime Weisberg, Senior Campaign Analyst, Association for Neighborhood and Housing Development (ANHD)
- Annetta Seecharran, Executive Director, Chhaya CDC
- Cathie Mahon, President and Chief Executive Officer, Inclusiv
- Noel Andrés Poyo, Executive Director, National Association For Latino Community Asset Builders (NALCAB)
- Bruce Marks, Chief Executive Officer, Neighborhood Assistance Corporation of America (NACA)
- Kim Saunders, President and Chief Executive Officer, National Bankers Association (NBA)
SENATE BANKING COMMITTEE
Hearing on “Threats Posed by State-Owned and State-Supported Enterprises to Public Transportation”: On Thursday, the full Committee held a hearing to focus on the threats posed by state-owned and state-supported enterprises on public transportation.
- The Honorable John Cornyn, United States Senator, Texas
- The Honorable Tammy Baldwin, United States Senator, Wisconsin
- Mr. Michael O’Malley, President, Railway Supply Institute
- Mr. Scott Paul, President, Alliance for American Manufacturing
- Ms. Emily de La Bruyère, Principal, Horizon Advisory
- Mr. Frank Cilluffo, Director, McCrary Institute for Cyber and Critical Infrastructure Security and Director, Center for Cyber and Homeland Security, Auburn University
House Committee on Small Business Hearing on “Building Blocks of Change: The Benefits of Blockchain Technology for Small Businesses”: On Wednesday, the Committee held a hearing to explore how innovators and entrepreneurs are using blockchain technology to help small businesses boost productivity, increase security, open new markets, and change the way business is done in different sectors of the economy.
- Mr. Shane Bigelow, CEO, Ownum, LLC., Cleveland, OH, Testifying on behalf of the Chamber of Digital Commerce
- Ms. Dawn Dickson, Founder and CEO, PopCom, Columbus, OH
- Mr. Marvin Ammori, General Counsel, Protocol Labs, Wilmington, DE, Testifying on behalf of the Blockchain Association
- Mr. Jim Harper, Visiting Fellow, American Enterprise Institute, Washington, DC
ON THE FLOOR
House Passes Four Bipartisan Financial Services Bills: On Wednesday, the House passed four bipartisan financial services bills intended to protect servicemembers from predatory debt collectors, improve the availability of affordable housing and mortgage credit, and address concerns that China is trapping developing nations in a cycle of predatory debt.
- H.R. 5003, the Fair Debt Collection Practices for Servicemembers Act, a bill introduced by Rep. Madeleine Dean (D-PA), passed by a unanimous vote of 355-0.
- H.R. 5932, the Ensuring Chinese Debt Transparency Act, a bill introduced by Rep. French Hill (R-AR), passed by a unanimous vote of 356-0.
- H.R. 4351, the Yes in My Backyard Act, a bill introduced by Rep. Denny Heck (D-WA), passed by voice vote.
- H.R. 5931, the Improving FHA Support for Small Dollar Mortgages Act, a bipartisan bill introduced by Rep. Wm. Lacy Clay (D-MO) and Rep. Steve Stivers (R-OH), passed by a voice vote.
LEGISLATION INTRODUCED AND PROPOSED
H.R. 6081: Rep. French Hill (R-AR) introduced H.R. 6081, which would require the President to report on financial institutions' involvement with officials of the Iranian Government.
H.R. 6116: Rep. Blaine Luetkemeyer (R-MO) introduced H.R. 6116, which would amend the Consumer Financial Protection Act of 2010 to make the Bureau of Consumer Financial Protection an independent Consumer Financial Protection Commission. In a statement, Rep. Luetkemeyer criticized a “lack of accountability” at the CFPB and explained the measure would “eliminate the director position in favor of a commission to ensure the CPFB can be held accountable and maintain the transparency the American people expect.”
H.R. 6127: Rep. Ann Wagner (R-MO) introduced H.R. 6127, which would amend the Securities Exchange Act of 1934 with respect to risk-based examinations of Nationally Recognized Statistical Rating Organizations.
S. 3367: Sen. Catherine Cortez Masto (D-NV) introduced S. 3367, the Diversity in Corporate Leadership Act of 2020, which would require the SEC to establish a Diversity Advisory Group to study and make recommendations on strategies to increase gender, racial, and ethnic diversity among the members of the board of directors of issuers, and amend the Securities Exchange Act of 1934 to require issuers to make disclosures to shareholders with respect to gender, racial, and ethnic diversity.
S. 3386: Sen. Tom Cotton (R-AR) introduced S. 3386, the Protecting America From Foreign Investors Compromised by the Chinese Communist Party Act, which would require the Committee on Foreign Investment in the United States to consider whether a foreign person that is a party to a transaction undergoing review by the Committee is connected to a foreign country that has installed information and communications technology designed, developed, manufactured, or supplied by persons owned or controlled by, or subject to the jurisdiction or direction of, a foreign adversary.
THIS WEEK ON THE HILL
Tuesday, March 10
Senate Banking Committee Hearing on “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress”: 10:00 AM in 538 Dirksen Senate Office Building.
SEC Amends Exemptions from Investment Adviser Registration for Advisers to Rural Business Investment Companies: On Monday, the SEC adopted amendments to rules 203(l)-1 and 203(m)-1 in order to implement congressionally mandated exemptions from registration for investment advisers who advise rural business investment companies (RBICs). The amendments include RBICs in the definition of the term “venture capital fund” and exclude their assets from the definition of the term “assets under management” for purposes of the private fund adviser exemption. “These amendments implement congressionally-mandated exemptions to the Advisers Act that are intended to reduce regulatory burdens for advisers to RBICs,” said SEC Chairman Jay Clayton, adding, “It is my hope that the reduction in regulatory burdens will encourage capital formation in rural areas where capital to form and grow a business all too often is more scarce than it should be.”
SEC Requests Comment on Fund Names Rule: On Monday, the SEC issued a request for public comment on its current requirements that restrict the use of potentially misleading fund names. Fund names are often the first piece of information investors see and they can have a significant impact on an investment decision. The request seeks feedback on whether the current requirements are effective and whether there are viable alternatives that the Commission should consider. The request is the latest in the Commission's ongoing efforts to review and improve its existing rules to better inform and protect investors.
SEC Provides Conditional Regulatory Relief and Assistance for Companies Affected by the Coronavirus: On Wednesday, the SEC announced that it is providing conditional regulatory relief for certain publicly traded company filing obligations under the federal securities laws. The impacts of the coronavirus may present challenges for certain companies that are required to provide information to trading markets, shareholders, and the SEC. To address potential compliance issues, the Commission has issued an order that, subject to certain conditions, provides publicly traded companies with an additional 45 days to file certain disclosure reports that would otherwise have been due between March 1 and April 30, 2020.
Treasury Sanctions Individuals Laundering Cryptocurrency: On Monday, Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two Chinese nationals involved in laundering stolen cryptocurrency from a 2018 cyber intrusion against a cryptocurrency exchange. The cyber intrusion was linked to Lazarus Group, a U.S.-designated North Korean state-sponsored malicious cyber group. Secretary Steven Mnuchin said in a statement, “the United States will continue to protect the global financial system by holding accountable those who help North Korea engage in cyber-crime.”
Federal Reserve Board Approves Rule to Simplify Its Capital Rules for Large Banks: On Wednesday, the Federal Reserve Board approved a rule to simplify its capital rules for large banks, preserving the strong capital requirements already in place. The “stress capital buffer,” or SCB, integrates the Board's stress test results with its non-stress capital requirements. As a result, required capital levels for each firm would more closely match its risk profile and likely losses as measured via the Board's stress tests. The rule is broadly similar to the proposal from April 2018, with a few changes in response to comments.
FDIC Offers Voluntary Retirement and Early Separation Program: On Thursday, the FDIC announced that it would offer voluntary retirement and early separation opportunities to approximately 20 percent of its employees to help reshape the agency's workforce for the future and to enhance preparedness. Chairman Jelena McWilliams described the decision as “part of a deliberate strategy to further reduce layers of management, acquire new skillsets, and allow the agency to proactively address succession planning prior to any crisis or emergency situation.” House Financial Services Committee Chairwoman Maxine Waters (D-CA) issued a statement expressing concern over the move saying the “FDIC should be working to ensure stability in the financial system, not to destabilize the livelihoods of its employees.”
Agencies Postpone National Interagency Community Reinvestment Conference: On Thursday, the Federal Reserve, OCC and FDIC announced that after careful consideration of the growing public health concerns associated with the coronavirus (COVID-19), the 2020 National Interagency Community Reinvestment Conference, scheduled to take place March 9-12 in Denver, would be postponed.
Agencies Invite Comment on Updates to Resolution Plan Guidance for Large Foreign Banks: On Friday, the Federal Reserve and FDIC invited public comment on proposed changes to the guidance for resolution plans submitted by large foreign banks, including plans that are due by July 1, 2021. The updates focus on the agencies' expectations around a firm's derivatives and trading activities and payment, clearing, and settlement activities.
CFPB Takes Key Steps to Prevent Consumer Harm: On Friday, the CFPB announced three steps to advance its strategy on one of its key priorities—preventing consumer harm. The Bureau is: (1) implementing an advisory opinion program to provide clear guidance to assist companies in better understanding their legal and regulatory obligations through advisory opinions; (2) amending and reissuing its responsible business conduct bulletin, which articulates that the Bureau intends to provide credit to entities for their responsible conduct based on its extent and significance; and (3) engaging with Congress to advance proposed legislation that would authorize the Bureau to award whistleblowers who report violations of Federal consumer financial law.
CFTC’s Energy and Environmental Markets Advisory Committee to Meet: On Friday, the CFTC’s Energy and Environmental Markets Advisory Committee (EEMAC) announced that it will hold a public meeting on Tuesday, March 24. At this meeting, the EEMAC will hear remarks on the Commission’s Position Limits for Derivatives proposed rule as approved on January 30, 2020. Specifically, the EEMAC will examine: (1) the proposed position limits for spot months, single month, and all-months-combined and (2) the proposed bona fide hedge exemptions from such position limits and related procedures. The EEMAC will also hear a presentation from the Market Intelligence Branch on recent developments within the energy derivatives marketplace.
COMINGS AND GOINGS AT THE AGENCIES
SEC Names Kathleen Hutchinson as Deputy Director of International Affairs: On Wednesday, the SEC announced Kathleen M. Hutchinson as the new Deputy Director in the agency's Office of International Affairs (OIA). Ms. Hutchinson joined the SEC and served most recently as an Assistant Director in OIA’s Regulatory Policy group.
Supreme Court Hears Case on Constitutionality of CFPB Structure: The Supreme Court heard oral arguments in Seila Law v. CFPB on Tuesday, a case that could determine the constitutionality of the CFPB’s leadership structure. In questioning, the justices appeared to grapple with the issue of preserving the Bureau’s autonomy while also addressing the separation-of-powers concerns raised by its leadership structure, as under Dodd-Frank the Director can only be fired for cause.
Supreme Court Hears Case on SEC’s Disgorgement Power: The Supreme Court heard oral arguments in SEC v. Liu, a case that revolves around the agency’s “disgorgement” powers, wherein the Commission, through the federal courts, seeks to claw back illegal profits from wrongdoers with the aim of reimbursing victims. The justices considered whether disgorgement falls under the grant of “any equitable relief” that Congress allows courts.
OTHER NOTEWORTHY ITEMS
Group of Banking Associations Calls for Vote on Pot Banking Bill: On Friday, a group of banking associations from 49 states and Puerto Rico wrote to Sen. Mike Crapo (R-ID) and Sherrod Brown (D-OH) who lead the Senate Banking Committee, urging the Committee to vote on the SAFE Banking Act. “Although there are admittedly broader public policy questions at play, we ask that you evaluate and address this pressing banking problem, which is within your power to resolve,” the group wrote adding, “Doing so will reap immediate public safety, tax and regulatory benefits while Congress continues to grapple with broader decisions about national drug policy.”
ECB Issues Warning to Banks over Potential Increase in Cybercrime Related to Coronavirus: In a letter, the European Central Bank urged banks to test their system “in light of a potential increase of cyber-attacks and potential higher reliance on remote banking services.” The warning reflected concerns that bad actors could seek to take advantage of fallout from disruptions caused by coronavirus.
IMF and World Bank Pledge to Help Member Countries Respond to Coronavirus: In a joint statement on Monday, the IMF and World Bank announced they would use “available instruments to the fullest extent possible, including emergency financing, policy advice, and technical assistance” to assist member countries as they respond to the coronavirus. They affirmed that assisting countries in strengthening their public health response systems “is crucial to contain the spread of this and any future outbreaks.”
Senators Call on UK to Reverse Huawei 5G Agreement: A bipartisan group of twenty senators led by Ben Sasse (R-NE) and Chuck Schumer (D-NY) called on the UK parliament to reconsider the decision to allow Chinese company Huawei to be a part of the country’s 5G infrastructure. They argued “given the significant security, privacy, and economic threats posed by Huawei, we strongly urge the United Kingdom to revisit its recent decision, take steps to mitigate the risks of Huawei, and work in close partnership with the U.S. on such efforts going forward.”