Money Matters: This Week in Washington

This Week in Washington for August 31, 2020

August 31, 2020

Dina Ellis

THE BIG PICTURE

For the latest advice for businesses dealing with the coronavirus, be sure to check out Paul Hastings’ targeted alert series: https://www.paulhastings.com/coronavirus

Coronavirus cases in the United States surpassed six million and the death toll reached 180,000 as the pandemic continues to ripple throughout the country. Early in the week the CDC issued new testing guidelines, which said individuals “do not necessarily need a test” if they were exposed to the virus but are not showing symptoms. Dr. Anthony Fauci warned the change could cause people to think “that asymptomatic spread is not of great concern, when in fact it is.” On Thursday, after backlash from the medical community, CDC Director Robert Redfield walked the changes back.

The Republican National Convention was held across several days in Charlotte and Washington, DC. The President and his surrogates sought to paint a dark picture of what the country would look like under a Biden administration, describing him as a “Trojan Horse of socialism.” The President promised to restore the country to greatness if elected to a second-term after overcoming what he described as the once-in-a-lifetime coronavirus crisis, which set the economy off-track. Rising stars in the party like former UN Ambassador Nikki Haley praised the President’s foreign policy acumen while Sen. Tim Scott (R-SC) credited the President with creating “the most inclusive economy ever.” The use of the White House as a backdrop for the President’s closing address and the inclusion of naturalization and pardon ceremonies in the programming drew backlash from some quarters as Hatch Act and ethical violations—blurring the line between official government business and the campaign.

The shooting of Jacob Blake by police in Kenosha, Wisconsin sparked days of protests against policy brutality and racial inequality. The Milwaukee Bucks boycotted a playoff game on Wednesday, demanding change and accountability. The move sparked a chain of postponements across other sports leagues as athletes stood in solidarity. Demonstrations between activists, police and counter-protestors grew increasingly violent, and the President announced he would send the National Guard to Kenosha in a bid to restore “law and order.”

High-level discussions between House Speaker Nancy Pelosi and White House chief of staff Mark Meadows on an additional coronavirus relief package yielded little progress as the parties remain at an impasse. Aid to state and local government and enhanced unemployment benefits remain sticking points, as well as differences in scale as Pelosi indicated that the Democrat’s US$2.2T demand remains firm, saying, “We’re not budging,” as Republicans prefer a measure capped at US$1.3T.

Other highlights of last week include:

• New unemployment claims fell slightly to one million last week, as the labor market continues to weather the economic crisis caused by the pandemic.

• White House counselor Kellyanne Conway announced she would leave her post at the end of the month to focus on her family.

• Japanese President Shinzo Abe announced plans to resign as he faces health challenges.

• Jerry Falwell Jr. resigned from his position as president and chancellor of Liberty University after allegations of inappropriate behavior involving him and his wife came to light.

LAST WEEK ON THE HILL

Senate Democrats’ Climate Committee Releases New Report on Climate Action: On Tuesday, the Special Committee on the Climate Crisis released a comprehensive report on the climate crisis titled, “The Case for Climate Action: Building a Clean Economy for the American People.” The report calls on Congress to: (1) reduce U.S. emissions rapidly to achieve 100% global net-zero emissions no later than 2050; (2) stimulate economic growth by increasing federal spending on climate action to at least 2% of GDP annually—and ensure that at least 40% of the benefits from these investments help communities of color and low-income, deindustrialized, and disadvantaged communities; and (3) create at least 10 million new jobs.

Gottheimer and Cleaver Lead Letter Requesting Justice Department Brief on Seizure of Foreign Terrorist Organizations Cryptocurrency Assets: On Tuesday, Congressmen Josh Gottheimer (D-NJ) and Emanuel Cleaver (D-MO) of the House Financial Services Subcommittee on National Security, International Development, and Monetary Policy, led a letter requesting that Attorney General William Barr and Treasury Secretary Steven Mnuchin brief the Subcommittee on the recent seizure of millions of dollars in cryptocurrency raised by designated Foreign Terrorist Organizations. They wrote, “The Department uncovered extensive and sophisticated solicitations of donations via cryptocurrency from some of the world’s most heinous terrorist groups,” adding, “It is vital that Members of the Subcommittee receive a briefing . . . on this action, the largest ever seizure of online terrorist financing.”

Waters Calls on FHFA to Scrap Unnecessary Refinance Penalty: On Wednesday, the House Financial Services Committee Chairwoman Maxine Waters (D-CA) issued a statement criticizing the FHFA after it announced that it would delay its recently announced adverse market fee for refinance mortgages. Waters argued that “Director Calabria is attempting to save face by delaying the penalty until December 1st and then only providing very narrow exemptions moving forward” and called on the agency to “terminate this penalty altogether.”

House Foreign Affairs Committee Announces Contempt Proceedings against Secretary of State Mike Pompeo: On Friday, Rep. Eliot Engel (D-NY), Chairman of the House Foreign Affairs Committee, announced that the Committee will begin work on a resolution holding Secretary of State Mike Pompeo in contempt. Engel cited Secretary Pompeo’s ongoing refusal to comply with the Committee’s subpoena for records as part of an investigation into potential political misuse of Department resources.

HEARINGS

House Oversight Committee Hearing on “Protecting the Timely Delivery of Mail, Medicine, and Mail-in Ballots”: On Monday, the Committee held a hybrid in-person/WebEx hearing to examine operational and organizational changes at the Postal Service that have resulted in delivery delays across the country and the impact of these changes on the rights of eligible Americans to cast their votes through the mail in the November elections.

• Louis DeJoy, Postmaster General, United States Postal Service

• Robert Duncan, Chairman, United States Postal Service Board of Governors

LEGISLATION INTRODUCED AND PROPOSED

H.R. 8097: Rep. Cindy Axne (D-IA) introduced H.R. 8097, which would expand eligibility for certain housing programs for qualified volunteer first responders.

H.R. 8102: Rep. Bill Foster (D-IL) introduced H.R. 8102, which would amend the Expedited Funds Availability Act to require funds deposited by check from the Federal Government to be made available immediately.

THIS WEEK ON THE HILL

Tuesday, September 1

House Select Subcommittee on the Coronavirus Crisis Hearing on “The Administration’s Response to the Economic Crisis”: 1:00 PM in 2154 Rayburn House Office Building and remotely using WebEx

• Steven Mnuchin, Secretary, Department of the Treasury

THE REGULATORS

Agencies Issue Three Final Rules: On Wednesday, the Federal Reserve, FDIC, and OCC finalized three rules. The finalized rules are either identical or substantially similar to interim rules currently in effect that were issued earlier this year. They include: (1) a final rule that temporarily modifies the community bank leverage ratio, as required by the CARES Act; (2) a final rule that makes more gradual, as intended, the automatic restrictions on distributions if a banking organization’s capital levels decline below certain levels; and (3) a final rule that allows institutions that adopt the current expected credit losses or “CECL” accounting standard in 2020 to mitigate the estimated effects of CECL on regulatory capital for two years.

SEC Modernizes the Accredited Investor Definition: On Wednesday, the SEC adopted amendments to the “accredited investor” definition, one of the principal tests for determining who is eligible to participate in our private capital markets. The amendments update and improve the definition to more effectively identify institutional and individual investors that have the knowledge and expertise to participate in those markets. Chairman Jay Clayton praised the move, saying, “For the first time, individuals will be permitted to participate in our private capital markets not only based on their income or net worth, but also based on established, clear measures of financial sophistication. I am also pleased that we have expanded and updated the list of entities, including tribal governments and other organizations, that may qualify to participate in certain private offerings.”

Federal Open Market Committee Announces Approval of Updates to Its Statement on Longer-Run Goals and Monetary Policy Strategy: On Thursday, following an extensive review that included numerous public events across the country, the Federal Open Market Committee (FOMC) announced the unanimous approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy, which articulates its approach to monetary policy and serves as the foundation for its policy actions. The updates reflect changes in the economy over the past decade and how policymakers are taking these changes into account in conducting monetary policy. The updated statement is also intended to enhance the transparency, accountability and effectiveness of monetary policy. “The economy is always evolving, and the FOMC's strategy for achieving its goals must adapt to meet the new challenges that arise,” said Fed Chair Jerome Powell. He continued, “Our revised statement reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities, and that a robust job market can be sustained without causing an unwelcome increase in inflation.”

SEC Adopts Rule Amendments to Modernize Disclosures of Business, Legal Proceedings, and Risk Factors under Regulation S-K: On Wednesday, the SEC announced that it voted to adopt amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. These disclosure requirements have not undergone significant revisions in over 30 years. The amendments the Commission is adopting update these items to reflect the many changes in our capital markets and the domestic and global economy in recent decades. Chairman Jay Clayton noted that he was “particularly supportive of the increased focus on human capital disclosures, which for various industries and companies can be an important driver of long-term value.”

FDIC Releases Latest Quarterly Banking Profile: On Tuesday, the FDIC released the latest Quarterly Banking Profile, reporting that commercial banks and savings institutions saw a decrease in net income of 70% from a year ago, while liquidity and capital levels remained very strong to meet loan demand and absorb any losses in the future. The profiled detailed that for the 5,066 commercial banks and savings institutions insured by the FDIC, aggregate net income totaled $18.8 billion in second quarter 2020, down $43.7 billion (70.0%) from a year ago. The report described the decline in net income as a continuation of uncertain economic conditions, which drove an increase in provision expenses. Chair Jelena McWilliams noted that “although economic stress related to the COVID-19 pandemic continued to affect bank earnings, the industry has remained a source of strength for the economy. Banks of all sizes supported their customers and communities, including by originating more than $480 billion in Paycheck Protection Program loans in the second quarter.”

CFPB Requests Information on the Impact of the CARD Act Regulations on Small Entities and the Consumer Credit Card Market: On Tuesday, the CFPB issued a request for information (RFI) to examine the impact of the rules that implement the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act Rules). Specifically, the Bureau is seeking public input on the CARD Act Rules’ economic impact on small entities. The Bureau is also requesting comments from the public on how the consumer credit card market is functioning as part of a Bureau review required by the CARD Act. In reviewing the economic impact of the CARD Act Rules on small entities, the Bureau is seeking to determine whether the regulations should be continued without change or be amended or rescinded.

CFPB Issues Analysis of HMDA Data Points: On Thursday, the CFPB issued a new Home Mortgage Disclosure Act (HMDA) analysis of the 2019 HMDA Data. Some of the findings in this year’s data points article include: (1) the top 25 open-end lenders accounted for about 573,000 open-end originations, or 53.6% of all open-end originations reported under HMDA; (2) conventional jumbo loans have the highest mean and median credit scores among closed-end mortgages, with a mean score of 765 and a median of 773. FHA borrowers have the lowest mean and median scores among closed-end mortgages, with a mean score of 668 and a median of 663; and (3) among Black and Hispanic White homebuyers seeking conventional conforming loans, the median combined loan-to-value and debt-to-income ratios are higher than their Asian and non-Hispanic White counterparts.

CFPB Guide for Intermediaries to Assist Non-Filers to Access Their Economic Impact Payments: On Thursday, the CFPB released a guide to assist intermediaries in serving individuals to access their Economic Impact Payments (EIPs). The guide, Helping Consumers Claim the Economic Impact Payment: A guide for intermediary organizations, provides step-by-step instructions for frontline staff on how to: (1) discuss the EIP with their clients; (2) determine if clients need to take action; (3) support clients with what to expect; and (4) how to troubleshoot common issues. The CFPB is working with its partners at the IRS to promote awareness of the EIPs and help reach the millions of people who are not required to file a tax return because their income falls below filing requirements access their EIP as provided by the CARES Act.

CFTC Charges Multiple Individuals and Entities in $28 Million Ponzi Scheme: On Friday, the CFTC announced the filing of a civil enforcement action in Maryland District Court charging individuals with orchestrating a US$28M Ponzi scheme and fraudulently soliciting funds from members of the public. The complaint alleges that the defendants fraudulently solicited participants to trade in foreign currency (forex) and digital assets such as bitcoin through pooled trading accounts.

FHA Extends Foreclosure and Eviction Moratorium for Homeowners Through Year End: On Thursday, the FHA announced the third extension of its foreclosure and eviction moratorium through December 31, 2020, for homeowners with FHA-insured single-family mortgages covered under the CARES Act. This extension provides an additional four months of housing security to homeowners, as they will not fear losing their homes as they work to recover financially from the adverse impacts of the pandemic. With this third extension, FHA has now provided more than nine months of foreclosure and eviction relief to FHA-insured homeowners. House Financial Services Committee Chairwoman Maxine Waters (D-CA) criticized the move as an effort “distract from their complete and utter refusal to take more meaningful action to address the growing rental housing crisis.”

EXIM Underscores Partnership with National Association of Federally-Insured Credit Unions in Support of U.S. Small Business Exporters: On Thursday, Export-Import Bank President and Chair Kimberly Reed delivered remarks to the National Association of Federally-Insured Credit Unions (NAFCU), outlining how EXIM and NAFCU can work together to support small businesses. During the virtual event, Reed highlighted how credit unions can partner with small businesses and utilize EXIM’s financing tools and resources to increase export opportunities and support American jobs.

COMINGS AND GOINGS AT THE AGENCIES

Chad Wolf to Be Nominated as Secretary of Homeland Security: On Tuesday, the President announced that he would nominate current acting Secretary of Homeland Security Chad Wolf to the position on a permanent basis.

THE COURTS

TikTok Files Suit to Block Ban: The popular video-sharing app TikTok filed suit in California federal court on Monday, seeking to block the President’s executive order that would ban its usage in the US. In the complaint, TikTok argued that the administration had failed to demonstrate an “unusual and extraordinary threat” as required by the International Emergency Economic Powers Act and contended that the President’s “actions clearly reflect a political decision to campaign on an anti-China platform.”

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Paul Hastings’ Government Relations team is monitoring these issues. We help our clients craft strategies to address federal legislative and regulatory matters. Please reach out to us if your organization needs assistance with congressional or regulatory relations.