Money Matters: This Week in Washington

This Week in Washington for December 9, 2019

December 09, 2019

Dina Ellis

THE BIG PICTURE

The House Intelligence Committee released a 300-page report on Tuesday as part of the impeachment inquiry, detailing their findings thus far, and accusing President Trump of abusing the power of the presidency by placing “his own personal and political interests above the national interests of the United States.” The proceedings then shifted to the Judiciary Committee, with the panel hearing from four constitutional legal experts on Wednesday. The President declined to cooperate and refused to have his legal team participate in any remaining hearings. Later in the week, Speaker Nancy Pelosi announced the House would begin drafting articles of impeachment, increasing the likelihood that they will vote to impeach before the end of the year.

The field of candidates for the Democratic nomination narrowed last week as Montana Governor Steve Bullock and California Senator Kamala Harris suspended their campaigns. Bullock acknowledged that he had faced obstacles and was unable to break through to the top tier. Harris, once considered one of the frontrunners in the race, struggled with fundraising and in her announcement lamented the role of money in politics saying, “I’m not a billionaire. I can’t fund my own campaign,” and therefore lacked a viable path forward.

A number of congressional retirements were announced last week. On Wednesday, Rep. Denny Heck (D-WA) who sits on the Intelligence Committee said he would not seek another term, saying the myriad investigations “have rendered my soul weary.” On Thursday, Rep. Tom Graves (R-GA) announced he would not seek another term, saying he looked forward to “a new season in life.” On Friday Rep. George Holding (R-NC) made his announcement, citing partly the newly redrawn district map in the state.

Other highlights of last week include:

• In response to pressure for transparency from rival Pete Buttigieg, presidential contender Sen. Elizabeth Warren disclosed US$1.9M in earnings from private legal work dating back to 1986, including from large corporate clients.

• Rep. Duncan Hunter (R-CA) pled guilty to misusing campaign funds on Tuesday and is scheduled to be sentenced in March.

• The November jobs report was released on Friday, revealing that the U.S. economy added 266,000 jobs, far exceeding expectations.

• On Friday, the President’s attorneys appealed a decision from the Second Circuit to the Supreme Court to block the House from obtaining his financial records through subpoenas to financial services companies.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Hearing on “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions?”: On Wednesday, the full Committee held a hearing to receive testimony from the representatives of four federal regulators—the NCUA, FDIC, Fed and OCC—on various supervisory and regulatory developments, rulemakings, and other regulatory activities enacted since they last appeared before the Committee. Chairwoman Maxine Waters (D-CA) opened the hearing by expressing concern that the regulators were following a “dangerous deregulatory blueprint.” FDIC Chair Jelena McWilliams defended the agency’s rulemaking efforts in response to the Madden decision, saying they would “take supervisory action that's appropriate if any state or federal laws are being violated.” Fed Vice Chairman Randal Quarles acknowledged that supervisory practices may have been a contributing factor in recent repo market turmoil.

• The Honorable Rodney Hood, Chairman, National Credit Union Administration

• The Honorable Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation

• The Honorable Randal Quarles, Vice Chairman of Supervision, Board of Governors of the Federal Reserve System

• The Honorable Joseph Otting, Comptroller, Office of the Comptroller of the Currency

Hearing on “Promoting Financial Stability? Reviewing the Administration’s Deregulatory Approach to Financial Stability”: On Thursday, the full Committee held a hearing to receive the testimony of Treasury Secretary Steven Mnuchin. Chairwoman Maxine Waters (D-CA) criticized Treasury for “rolling back many of the critical reforms Democrats made to prevent another financial crisis” and warned that “if these rollbacks continue, there will be grave consequences for financial stability and our economy.” Republicans on the Committee criticized proposed taxes on Wall Street, and Secretary Mnuchin agreed saying he was “very concerned that [the proposed taxes] would destroy our capital markets” and “disproportionately hurt pensions, 401(k)s and people who are saving for retirement.”

• The Honorable Steven Mnuchin, Secretary, U.S. Department of the Treasury, and Chairperson, Financial Stability Oversight Council (FSOC)

Hearing on “An Examination of the Federal Housing Administration and Its Impact on Homeownership in America”: On Thursday, the full Committee held a hearing to examine the role that the Federal Housing Administration plays in the nation’s housing finance system and to consider proposals to improve FHA’s ability to promote access to homeownership, particularly for underserved borrowers.

• The Honorable Brian Montgomery, Commissioner, Federal Housing Administration

Hearing on “Robots on Wall Street: The Impact of AI on Capital Markets and Jobs in the Financial Services Industry”: On Friday, the Task Force on Artificial Intelligence held a hearing to examine AI’s impact on capital markets and jobs in the financial services industry.

• Dr. Charlton McIlwain, Vice Provost for Faculty Engagement and Development and Professor of Media, Culture, and Communication at NYU

• Dr. Marcos Lopez de Prado, Professor of Practice, Engineering School, Cornell University and Chief Investment Officer, True Positive Technologies

• Ms. Rebecca Fender, CFA, Senior Director, Future of Finance, Chartered Financial Analyst Institute

• Ms. Kirsten Wegner, Chief Executive Officer, Modern Markets Initiative

• Ms. Martina Rejsjö, Head of Nasdaq Market Surveillance, Nasdaq Stock Market

Congressman Brad Sherman Elected as Chairman of Subcommittee on Investor Protection, Entrepreneurship and Capital Markets: Rep. Brad Sherman was elected by the Committee’s Democratic Caucus to serve as Chairman of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets. In a statement Sherman said, “I am committed to defending investor protections, improving access to capital and maintaining the Wall Street reforms that have helped fuel our economy. As a CPA, I also look forward to looking at accounting issues.”

SENATE BANKING COMMITTEE

Hearing on “Oversight of Financial Regulators”: On Thursday, the full Committee met to examine the current state of and recent activities related to the regulatory and supervisory activities of the Federal Reserve, FDIC, and NCUA. The panel focused on proposals to change the Volcker Rule, recent turmoil in the repo market, and ways to balance innovation with user protection and privacy as part of the regulatory framework. Comptroller of the Currency Joseph Otting was absent due to a scheduling conflict.

• The Honorable Randal Quarles, Vice Chairman for Supervision, Board of Governors of the Federal Reserve System

• The Honorable Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation

• The Honorable Rodney Hood, Chairman, National Credit Union Administration

ON THE FLOOR

House Passes Bill to Quash Robocalls: On Wednesday, the House voted 417-3 to pass a bill to crackdown on robocalls. The compromise measure, known as the Pallone-Thune TRACED Act, was the result of months of intensive negotiations between members of both Chambers. Sen. John Thune (R-SD) expressed optimism that the measure could clear the Senate by unanimous in the next couple of weeks.

House Passes Financial Services Bill to Explicitly Ban Insider Trading: On Thursday, the House voted 410-13 to pass H.R. 2534. The legislation, first introduced by Rep. Jim Himes (D-CT), would create a clear definition of illegal insider trading under securities laws so that there is a codified, consistent standard for courts and participants in financial markets and to better protect the hard-earned savings of millions of Americans.

LEGISLATION INTRODUCED AND PROPOSED

H.R. 5287: Rep. Al Lawson (D-FL) introduced H.R. 5287, which would amend the Fair Debt Collection Practices Act to prohibit debt collectors from collecting on certain Federal student loan debt when the borrower would not be required to make payments under an income-driven repayment plan.

S. 2968: Sen. Maria Cantwell (D-WA) introduced S. 2968, which would provide consumers with foundational data privacy rights, create strong oversight mechanisms, and establish meaningful enforcement.

Bank Merger Review Modernization Act: On Wednesday, Rep. Chuy García (D-IL) and Sen. Elizabeth Warren (D-MA) introduced the Bank Merger Review Modernization Act, bicameral legislation, which would require bank regulators to seriously consider how bank mergers affect consumers and communities and whether they present risks to financial stability. “When big banks get bigger, consumers and taxpayers usually lose. We must protect our financial system by slowing down bank consolidation. This bill will help address this, taking the Fed and FDIC off autopilot and giving consumers a voice in reviewing bank mergers,” said Rep García.

THIS WEEK ON THE HILL

Tuesday, December 10

Senate Banking Committee “Executive Session to Consider Nominations”: 10:00 AM in 538 Dirksen Senate Office Building.

Senate Banking Committee “Oversight of the Securities and Exchange Commission”: 10:00 AM in 538 Dirksen Senate Office Building.

House Financial Services Committee “Bill Markup”: 10:00 AM in 2128 Rayburn House Office Building.

THE REGULATORS

FSOC Issues Final Guidance on Nonbank Designations: On Wednesday, the Financial Stability Oversight Council voted unanimously to issue final guidance regarding nonbank financial company designations. The guidance implements an activities-based approach for identifying and addressing potential risks to financial stability. The guidance also enhances the analytical rigor and transparency of the Council’s process for designating nonbank financial companies. The guidance “enhances the Council’s ability to identify, assess, and respond to potential risks to U.S. financial stability,” said Treasury Secretary Steven Mnuchin. “These changes will help the Council achieve its mission by promoting careful analysis and creating a more streamlined process.”

Agencies Clarify Requirements for Providing Financial Services to Hemp-Related Businesses: On Tuesday, the Federal Reserve, FDIC, FinCEN, and OCC in conjunction with the state bank regulators issued a statement clarifying the legal status of hemp growth and production and the relevant requirements under the Bank Secrecy Act for banks providing services to hemp-related businesses. The statement emphasizes that banks are no longer required to file suspicious activity reports (SAR) for customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. For hemp-related customers, banks are expected to follow standard SAR procedures and file a SAR if suspicious activity warrants it. The statement also indicated that FinCEN would issue additional guidance after further reviewing and evaluating the USDA interim final rule.

CFTC’s Market Risk Advisory Committee to Meet December 11: On Monday, the CFTC announced that the Commission’s Market Risk Advisory Committee (MRAC) would hold a public meeting on December 11. At this meeting, the MRAC will receive status reports from its committees: Climate-related Market Risk; CCP Risk and Governance; Market Structure; and Interest Rate Benchmark Reform. The meeting will also include a discussion about the transition from the London Inter-bank Offered Rate (LIBOR) to alternative risk-free reference rates (RFRs), including the International Swaps and Derivatives Association’s (ISDA) recent consultation on the final parameters for the spread and term adjustments that will apply to RFRs if derivatives fallbacks are triggered.

Federal Regulators Issue Joint Statement on the Use of Alternative Data in Credit Underwriting: On Tuesday, the Federal Reserve, CFPB, FDIC, OCC, and NCUA issued a joint statement on the use of alternative data in underwriting by banks, credit unions, and non bank financial firms. The agencies noted the benefits that using alternative data may provide to consumers, such as expanding access to credit and enabling consumers to obtain additional products and more favorable pricing and terms. The statement also explained that a well designed compliance management program provides for a thorough analysis of relevant consumer protection laws and regulations to ensure firms understand the opportunities, risks, and compliance requirements before using alternative data.

SEC Commissioner Discusses Exchange Fee Data: Speaking at a conference, SEC Commissioner Robert Jackson expressed optimism that the agency would get exchange fee data saying, “I remain confident that we’re going to be able to get the data we need to do the right thing for the market.” He explained the importance saying, “understanding the degree to which competitive forces are driving these things is important to our obligations under the law. And whether it’s on a fee-by-fee basis or some other basis, I think understanding the competition model and the profitability of those businesses is just important to our task.”

CFTC to Hold an Open Commission Meeting on December 10: On Tuesday, the CFTC announced that it would hold an open meeting on Tuesday, December 10 to consider the following: (1) Proposed Rule: Capital Requirements for Swap Dealers and Major Swap Participants—Reopening the Comment Period and Requesting Additional Comment; (2) Proposed Rule: Amendments to the Swap Clearing Requirement Exemption for Inter-Affiliate Swaps; (3) Proposed Rule: Settlements in Administrative and Civil Proceedings; (4) Final Rule: Amendments to Part 13 of the Commission’s Regulations (Public Rulemaking Procedures).

CFPB Issues Notice of Proposed Rulemaking on Remittance Rule: On Tuesday, the CFPB issued a Notice of Proposed Rulemaking (NPRM) relating to the Remittance Rule (Rule). The NPRM proposes to allow certain banks and credit unions to continue to provide estimates under certain conditions where it could be economically infeasible for these institutions to provide exact disclosures. This could preserve consumers’ ability to send remittances from their bank accounts to certain destinations and reduce the compliance burden for banks and credit unions. In addition, the Bureau is proposing to increase the safe harbor threshold that determines whether a company makes remittance transfers in the normal course of its business and is subject to the Rule. Under the NPRM, companies making 500 or fewer transfers annually in the current and prior calendar years would not be subject to the Rule. This would reduce the burden on over 400 banks and almost 250 credit unions that send a relatively small number of remittances—less than .06 percent of all remittances.

CFPB Announces Panels for CFPB-FTC Workshop on Accuracy in Consumer Reporting: On Tuesday, the CFPB announced the panels for its December 10, 2019 workshop, cohosted with the FTC, to examine issues affecting the accuracy of traditional credit reports as well as employment and tenant background screening reports. The workshop will include four panel discussions examining: (1) the current practices of furnishers of information and compliance with accuracy requirements; (2) current accuracy topics for traditional credit reporting agencies; (3) accuracy considerations for background screening; and (4) navigating the dispute process.

COMINGS AND GOINGS AT THE AGENCIES

SEC Names Paul Munter as Deputy Chief Accountant: On Tuesday, the SEC announced the appointment of Paul Munter as a Deputy Chief Accountant (International) in the agency's Office of the Chief Accountant.

Kristina Littman Named Chief of the SEC’s Cyber Unit: On Monday, the SEC announced that Kristina Littman had been named Chief of the Division of Enforcement’s Cyber Unit, a national, specialized unit that focuses on protecting investors and markets from cyber-related misconduct.

OTHER NOTEWORTHY ITEMS

EU Takes Hard Line on Stablecoins: The European Council and Commission released a statement that warned that while “So-called ‘stablecoins’ may present opportunities in terms of cheap and fast payments, especially cross-border payments” they also “pose multifaceted challenges and risks related for example to consumer protection, privacy, taxation, cyber security and operational resilience, money laundering, terrorism financing, market integrity, governance and legal certainty.”

Warren and Brown Issue Warning to CFPB over Advisory Opinions: In a letter to CFPB, Director Kathy Kraninger, Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) warned about the consequences of a recent advisory opinion proposal saying, “We have serious concerns that issuing advisory opinions tailored to companies’ specific circumstances is not appropriate, especially if companies could use these opinions to circumvent consumer financial laws or as a defense in litigation by the bureau or other parties,” adding that “while agency guidance may be appropriate in certain situations, that guidance should be broadly applicable to industry, rather than tailored to specific companies.”