Money Matters: This Week in Washington

This Week in Washington for January 20, 2020

January 21, 2020

Dina Ellis

THE BIG PICTURE

The impeachment trial is set to begin on Tuesday, after the Senate formally received the articles of impeachment from the House. On Wednesday, Speaker Nancy Pelosi named the seven impeachment managers who will serve as prosecutors, including Intelligence Committee Chairman Adam Schiff and Judiciary Committee Chairman Jerry Nadler. The President bolstered his defense, adding Kenneth Starr, Alan Dershowitz, and Robert Ray to his legal team. On Thursday, Chief Justice John Roberts was sworn in, and then administered the oath to the Senators. Later that day the GAO issued its finding that the White House had violated the law when it froze military aid to Ukraine last July, undercutting one of the President’s lines of defense.

The final Democratic debate before the Iowa Caucuses was held on Tuesday; just a day after Senator Cory Booker (D-NJ) ended his bid for the nomination. Six candidates qualified to appear on stage and sparred on a number of issues including foreign affairs, trade, climate change, and healthcare policy. Tension between Senators Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) was evident, as a dispute over their differing recollection of a private conversation on the electability of women took center stage.

The President signed “Phase One” of a trade agreement with China on Wednesday. As part of the deal, the United States will reverse its designation of China as a currency manipulator, and China will purchase US$200B in goods and services over the next two years. The next day, the Senate voted 89-10 to pass the U.S.-Mexico-Canada Agreement (USMCA), delivering another win to the President and his trade agenda. While Mexico has already passed the deal, it will not go into effect until Canada’s House of Commons approves the measure, which they are expected to do in the coming weeks.

Other highlights of last week include:

• Former Congressman Chris Collins (R-NY) was sentenced to 26 months in prison after pleading guilty last year to conspiracy to commit securities fraud and lying to federal investigators.

• Rep. Liz Cheney, who is the only woman in the House Republican leadership, announced that she would not run for the open Senate seat in Wyoming.

• House Foreign Affairs Committee Chairman Eliot Engel requested Secretary of State Mike Pompeo appear for a hearing on Iran and Iraq, saying he would “issue a subpoena if necessary to secure” the Secretary’s testimony.

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Hearing on “On the Brink of Homelessness: How the Affordable Housing Crisis and the Gentrification of America Is Leaving Families Vulnerable”: On Tuesday, the full Committee held a hearing to consider the current housing crisis, including the issues of lack of investment in affordable housing, gentrification, and displacement, as well as the impact of the rental housing crisis on evictions and homelessness. The Committee also considered several pieces of legislation: (1) H.R.1856, the Ending Homelessness Act of 2019; (2) H.R.5187, the Housing is Infrastructure Act of 2019; (3) H.R.__, the Stable Families Act of 2020; and (4) H.R. __, the Housing Emergencies Lifeline Program (HELP) Act of 2019.

• Karen Chapple, Professor and Chair of the Department of City and Regional Planning, University of California, Berkley

• Matthew Desmond, Maurice P. During Professor of Sociology & Director of the Eviction Lab, Princeton University

• Priya Jayachandran, President, National Housing Trust

• Jeffrey Williams, Tenant Advocate

• Mr. Michael Hendrix, Director of State and Local Policy, Manhattan Institute

Hearing on “The Community Reinvestment Act: Reviewing Who Wins and Who Loses with Comptroller Ottings Proposal”: On Tuesday, the Subcommittee on Consumer Protection and Financial Institutions held a hearing to consider Comptroller of the Currency Joseph Otting’s proposal to overhaul the Community Reinvestment Act. In advance of the hearing, Committee Chairwoman Maxine Waters (D-CA) announced the launch of an investigation into potential astroturfing efforts to influence rulemaking, and demanded the OCC and FDIC explain efforts to ensure legitimacy of proposed CRA rule.

• Ms. Gerron Levi, Director, Policy & Government Affairs, National Community Reinvestment Coalition

• Mr. Eric Rodriguez, Senior Vice President, Policy and Advocacy, UnidosUS

• Ms. Paulina Gonzalez-Brito, Executive Director of California Reinvestment Coalition Institute

• Ms. Hope Knight, President & CEO, Greater Jamaica Development Corporation

• Ms. Faith Bautista, President & CEO, National Diversity Coalition

Hearing on “A Persistent and Evolving Threat: An Examination of the Financing of Domestic Terrorism and Extremism”: On Wednesday, the Subcommittee on National Security, International Development, and Monetary Policy held a hearing to examine domestic terrorism and how financial institutions and law enforcement officials track the financing of domestic terrorist groups and individual terrorists today; the challenges posed in achieving a more robust financial tracking regime for this purpose; and the models and approaches that might be useful to countering domestic terrorist financing. The Subcommittee also considered the following legislation: (1) H.R. 5132, the Gun Violence Prevention Through Financial Intelligence Act; (2) H.R. __, the Freezing Assets of Suspected Terrorists and Enemy Recruits Act; and (3) H.R. __, to require the Comptroller General of the United States to carry out a study on the funding of domestic terrorism, and for other purposes.

• The Honorable Jared Maples, Director, Office of Homeland Security and Preparedness, State of New Jersey

• Rena Miller, Specialist in Financial Economics, Congressional Research Service

• George Selim, Senior Vice President for Programs, Anti-Defamation League

• Lecia Brooks, Chief Workplace Transformation Officer, Southern Poverty Law Center

• Mary B. McCord, Legal Director, Institute for Constitutional Advocacy and Protection, Georgetown Law

Hearing on “An Examination of the Financial Accounting Standards Board and the Public Company Accounting Oversight Board”: On Wednesday, the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets held a hearing to examine the FASB and PCAOB. The Subcommittee expressed concern that Chinese companies were ignoring requests from the watchdog agencies, with PCAOB Chairman saying “at this point, it’s a buyer-beware situation.”

• Russell G. Golden, Chairman, Financial Accounting Standards Board

• William D. Duhnke III, Chairman, Public Company Accounting Oversight Board

Committee Democrats Request Information on the Role of Alternative Data in Expanding Access to Credit: On Thursday, Chairwoman Maxine Waters (D-CA) led Committee Democrats in sending a letter to the Government Accountability Office requesting information about the benefits and drawbacks of alternative data in mortgage lending and the role of the federal government in overseeing the use of alternative data by credit reporting agencies and lenders. The lawmakers argued that “alternative data can help lenders identify creditworthy potential borrowers that lenders would otherwise miss.”

Waters and Beatty Blast Lack of Diversity on SEC Advisory Committees: On Tuesday, Committee Chairwoman Maxine Waters (D-CA) and Chair of the Subcommittee on Diversity and Inclusion Joyce Beatty (D-OH) sent a letter to SEC Chairman Jay Clayton expressing concerns about the ongoing lack of ethnic and racial diversity on the agency’s four advisory committees, including the newest 23-member Asset Management Advisory Committee, which includes no black committee members. The lawmakers wrote that, “to most effectively articulate industry concerns to the SEC, these committees should represent the diversity of the issue areas as well as reflect the demographic diversity of the businesses and consumers under SEC authority and purview.”

SENATE BANKING COMMITTEE

No hearings held.

ON THE FLOOR

House Passes Financial Services Bills: On Monday, the House passed several financial services bills to support veterans, benefit investors, provide housing opportunities, hold regulators accountable, promote Minority Depository Institutions (MDIs), and improve cybersecurity.

• H.R. 4302, the Homeless Assistance Act of 2019, which was introduced by Rep. Brad Sherman, (D-CA), passed by a voice vote.

• H.R. 4335, the 8-K Trading Gap Act of 2019, which was introduced by Rep. Carolyn Maloney (D-NY), passed by a vote of 384-7.

• H.R. 4841, the Prudential Regulators Oversight Act, which was introduced by Rep. Dean Phillips (D-MN), passed by a voice vote.

• H.R. 5315, the Expanding Opportunities for MDIs Act, which was introduced by Rep. Joyce Beatty (D-OH), passed by a voice vote.

• H.R. 2398, the Veteran HOUSE Act of 2020, which was introduced by Rep. Scott Peters (D-CA), passed by a vote of 362-31.

• • H.R. 4458, the Cybersecurity and Financial System Resilience Act of 2019, which was introduced by Rep. Patrick McHenry (R-NC), passed by a voice vote.

LEGISLATION INTRODUCED AND PROPOSED

H.R. 5612: Rep. Tulsi Gabbard introduced H.R. 5612, the Small Business and Community Investments Expansion Act of 2020, which would amend the Federal Home Loan Bank Act to allow for advances to certain community development financial institutions and credit unions.

H.R. 5635: Reps. Susan DelBene (D-WA) and David Schweikert (R-AZ) introduced H.R. 5635, the Virtual Currency Tax Fairness Act, which would amend the Internal Revenue Code of 1986 to exclude from gross income gain from disposition of virtual currency in a personal transaction.

THIS WEEK ON THE HILL

No financial services hearings scheduled.

THE REGULATORS

IRS and Treasury Issue Guidance for Students with Discharged Student Loans and Their Creditors: On Wednesday, the IRS and Treasury Department issued guidance that establishes a safe harbor extending relief to additional taxpayers who took out federal or private student loans to finance attendance at a nonprofit or for-profit school. Relief will also be extended to any creditor that would otherwise be required to file information returns and furnish payee statements for the discharge of any indebtedness within the scope of this revenue procedure.

Treasury Releases Final Regulations to Reform National Security Reviews for Certain Foreign Investments and Other Transactions in the United States: On Monday, Treasury issued two final regulations in order to comprehensively implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and to provide the Committee on Foreign Investment in the United States (CFIUS) with the ability to better address national security concerns arising from certain investments and real estate transactions. “These regulations strengthen our national security and modernize the investment review process,” said Treasury Secretary Steven Mnuchin. “They also maintain our nation’s open investment policy by encouraging investment in American businesses and workers, and by providing clarity and certainty regarding the types of transactions that are covered.”

Treasury to Issue New 20-Year Bond in First Half of 2020: On Thursday, Treasury announced it plans to issue a 20-year nominal coupon bond in the first half of calendar year 2020. Over the past several years, Treasury has explored a range of potential new debt products, including 20-year, 50-year, and 100-year bonds, as well as floating-rate notes linked to the Secured Overnight Financing Rate—all with the goal of expanding borrowing capacity to finance the federal government at the least cost over time. In a statement Secretary Steven Mnuchin lauded the input of “market participants, including the Treasury Borrowing Advisory Committee and primary dealers, for their contributions to [the] decision to launch a 20-year bond.”

Federal Reserve’s Bowman Discusses Housing Outlook: Federal Reserve Governor Michelle Bowman expressed optimism in the housing sector, despite challenges in finding skilled workers and the retreat of community banks from the consumer real estate market. She noted that “I expect construction to continue advancing to meet the underlying expansion in housing demand from population growth and the strong economy. In addition, low interest rates will continue to be a key factor supporting growth in housing activity.”

FDIC Updates Money Smart for Small Business Credit and Banking Modules: As part of their ongoing commitment to strengthening bank-community partnerships, on Thursday the FDIC and U.S. Small Business Administration released two updates to the popular Money Smart for Small Business curriculum. The updated modules focus on banking and credit, and are now available for banks and small business development organizations to use to help small business owners succeed.

SEC to Report on State of Small Business Capital Formation During First Ever Capital Call: On Friday, the SEC announced that the Commission’s Office of the Advocate for Small Business Capital Formation would report on its findings regarding the state of capital formation for small businesses and its latest recommendations to the Commission during a virtual conference call event on January 23. This first ever “Capital Call”—styled after public companies’ earnings release calls—will also provide the public with opportunities to ask questions and engage directly with the office.

COMINGS AND GOINGS AT THE AGENCIES

President Trump Announces Federal Reserve Board Nominees: On Thursday, the President announced his nomination of Dr. Judy Shelton and Dr. Christopher Waller to serve as Members of the Board of Governors of the Federal Reserve System. Dr. Shelton most recently served as United States Executive Director of the European Bank for Reconstruction and Development. Dr. Waller has served as Executive Vice President and Director of Research at the Federal Reserve Bank of St. Louis since 2009.

SEC Names Chief Data Officer: On Thursday, the SEC announced that it had named Austin Gerig as its Chief Data Officer, effective February 3. Dr. Gerig currently serves as Assistant Director of the Office of Data Science in the Division of Economic and Risk Analysis.

FDIC Names New Chief Information Officer: On Thursday, the FDIC named Sylvia Burns as the agency’s Chief Information Officer and Chief Privacy Officer. Ms. Burns joined the FDIC in September 2018 as a Deputy.

SEC Commissioner Robert Jackson to Depart in February: On Thursday, SEC Commissioner Robert Jackson announced that he would leave the agency on February 14 and will teach at NYU’s School of Law. Jackson joined the SEC in January 2018, and while his term officially expired in June, he had the option to serve an additional 18 months.

NYDFS Hires Former CFPB Deputy Director Leandra English: On Tuesday, the New York Department of Financial Services announced that Leandra English, the former Deputy Director of the CFPB, had joined the executive team as Special Policy Advisor. Ms. English will report directly to the Superintendent and manage and develop the Department’s portfolio of policy initiatives involving consumers, financial services, and other issues.

THE COURTS

SEC Argues in Favor of Maintaining Disgorgement Powers: In a brief filed on Wednesday with the Supreme Court, the SEC defended its disgorgement powers, saying “forbidding courts to order disgorgement in SEC suits would make it easier for wrongdoers to keep their ill-gotten gains, thereby reducing the deterrent effect of the current remedial scheme.”

OTHER NOTEWORTHY ITEMS

Former FinCEN Staffer Pleads Guilty to Leaking Information: On Monday, a former senior adviser at the U.S. Department of the Treasury’s Financial Crimes Enforcement Network plead guilty in federal court to leaking suspicious activity reports related to the Russia probe to the media. Judge Berman affirmed that “maintaining the confidentiality of SARs, which are filed by banks and other financial institutions to alert law enforcement to potentially illegal transactions, is essential to permit them to serve their statutory function, and the defendant's conduct violated the integrity of that critical system and the law.”

Senate Democrats Call for Inspector General to Investigate CFPB Director’s Failure to Provide Relief for Defrauded Consumers: On Monday, a group of Senate Democrats, led by Sherrod Brown (D-OH) and Catherine Cortez Masto (D-NV), called on the Inspector General of the Federal Reserve to open an investigation into four recent consumer fraud cases where CFPB Director Kathleen Kraninger provided no or inadequate restitution to harmed consumers. “Under Director Kathleen Kraninger, the Bureau appears to be ignoring existing legal authority for calculating restitution in order to reduce the amount of restitution returned to harmed consumers or undercount the consumers who should receive restitution,” the senators argued, adding, “The Bureau’s approach to restitution under Director Kraninger also creates a perverse incentive for companies to violate the law by allowing them to retain all or nearly all of the funds they illegally obtain from consumers.”

Warren Outlines Plan to Cancel Student Debt Via Executive Action: On Tuesday, Senator and presidential contender Elizabeth Warren (D-MA) outlined a plan to cancel the majority of student loans via executive action on her first day in office, should she become president. In an online post she explained that the Education department “already has broad legal authority to cancel student debt,” adding that “we can’t afford to wait for Congress to act.”

Texas Regulators Lists Crypto as Among Top Threat to Investors in 2020: On Monday, the Texas State Securities Board released their list of top threats to investors, highlighting cryptocurrency offerings which it described as “extraordinarily volatile—meaning risky—and almost impossible for a layperson to understand.” They cautioned investors to “not invest in cryptocurrency offerings unless [they] can determine some basic facts about the company” and warned investors have “little or no recourse if … money is stolen.”