Money Matters: This Week in Washington

This Week in Washington for June 15, 2020

June 16, 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 two million last week, as some states begin to see a spike in infection rates and hospitalizations as they relax restrictions. The main locus of activity has shifted from the Northeast to 21 states across the South and West. CDC Director Robert Redfield urged Americans to remember “this situation is unprecedented and that the pandemic has not ended” and strongly encouraged the wearing of masks in large gatherings. The President, however, expressed optimism that a vaccine or successful therapeutic will lead to a return to normalcy and a strong economic recovery in 2021.

In the wake of mass demonstrations against police violence, a number of legislative proposals have been circulating at the both the state and federal level. Senate Majority Leader Mitch McConnell indicated the Senate planned to take up a serious measure that included smart, targeted reforms for law enforcement. On Wednesday, at a House committee hearing, Philonise Floyd, the brother of George Floyd, made an emotional plea to Congress to deliver justice for his brother and urged the passage of use of force restrictions. Reflecting a new social awareness of the detrimental effects of systemic racism, the Senate Armed Services Committee passed an amendment to a defense bill that would require the Pentagon to rename bases named after Confederate leaders.

The President is keen to hit the campaign trail and is planning to hold a rally Friday in Tulsa, Oklahoma. RNC Chairwoman Ronna McDaniel announced that Jacksonville, Florida had been selected as the new location for the Republican National Convention’s keynote speeches after disagreements with North Carolina’s Democratic Governor Roy Cooper over the scope of the event forced the committee to scout a new location. Lower-profile aspects of the convention are still slotted to take place in Charlotte.

Other highlights of last week include:

• An additional 1.5 million Americans filed for unemployment last week, as the economic hardship caused by the pandemic persists.

LAST WEEK ON THE HILL

Bicameral Group Call for an Investigation into HUD’s DACA Policy Changes: On Tuesday, a bicameral group of legislators requested the HUD Inspector General open an investigation into whether the agency violated the Administrative Procedure Act in its decision to change the agency’s policy to deny FHA insured loans to DACA recipients. “As an internal matter, HUD decided to exclude DACA recipients from FHA loans. In the summer and fall of 2018, several internal communications reflect that HUD’s existing requirement that FHA loan applicants have ‘lawful residency’ was being reinterpreted to exclude DACA recipients. [W]e believe [this] was a change of policy without sound and unambiguous legal reasoning, without an opportunity for public input under Section 553 of the APA, and without communication to FHA-approved lenders and Congress,” the lawmakers wrote, adding that “HUD also failed to disclose and misrepresented to Congress that a change in policy had occurred in Congressional hearings, letter responses, and briefings to Congressional staff.”

Judiciary Committee Authorizes Subpoenas Related to Oversight of FISA Process, Crossfire Hurricane Investigation: On Thursday, the Senate Judiciary Committee voted on party lines to authorize dozens of subpoenas to former Obama administration officials who were involved in the origins of the Russia probe. Committee Chair Lindsay Graham (R-SC) said in a statement, “I want to know why all these counterintelligence investigations were opened to begin with. I think we need to look long and hard at how these investigations got off the rails,” adding that the Committee “is not going to sit on the sidelines and simply move on.”

Bipartisan Group of Senators Urge the Administration to Provide PPP Paperwork Relief for Small Businesses: On Friday, Sen. Mike Rounds (R-SD) led a bipartisan group of 44 Senators in sending a letter to Treasury Secretary Steve Mnuchin and Small Business Administration Administrator Jovita Carranza urging the administration to ease paperwork requirements for small businesses seeking loan forgiveness under the Paycheck Protection Program (PPP). The letter specifically requests that the loan forgiveness application for loans under $250,000 to be no longer than one page in length. “As small businesses begin to reopen their doors, the last thing they should be worried about is burdensome, unnecessary paperwork,” said Rounds. “These businesses have enough on their plate as they seek to recover from the COVID-19 pandemic. They shouldn’t be saddled with excessive red tape—they should be focused on helping re-start the economy.”

HOUSE FINANCIAL SERVICES COMMITTEE

Hearing on “The Rent Is Still Due: America's Renters, COVID-19 and an Unprecedented Eviction Crisis”: On Wednesday, the Subcommittee on Housing, Community Development, and Insurance held a hearing to examine the impact of COVID-19 on renters and consider several draft pieces of legislation intended to support American families.

• Cashauna Hill, Executive Director, Louisiana Fair Housing Action Center

• Mike Kingsella, Executive Director, Up for Growth

• Ann Oliva, Visiting Senior Fellow, Center on Budget and Policy Priorities

• Jenny Schuetz, Fellow, The Brookings Institution

Hearing on “Inclusive Banking During a Pandemic: Using FedAccounts and Digital Tools to Improve Delivery of Stimulus Payments”: On Thursday, the Task Force on Financial Technology held a hearing to explore low- or no-cost public banking options, like FedAccounts, to utilize technology and digital methods to deliver stimulus payments from the government more efficiently in a time of crisis, especially to underbanked and unbanked populations.

• Mehrsa Baradaran, Professor of Law, University of California, Irvine School of Law

• Chris Giancarlo, Senior Counsel, Willkie Farr & Gallagher and former Chairman, U.S. Commodity Futures Trading Commission

• Jodie Kelley, CEO, Electronic Transactions Association

• Morgan Ricks, Professor of Law, Vanderbilt University Law School

SENATE BANKING COMMITTEE

Hearing on “Oversight of Housing Regulators”: On Tuesday, the full Committee held a hearing to receive testimony on HUD and the FHFA’s recent activities, operations, and ongoing efforts to promote access to quality, affordable housing while also ensuring the safety and soundness of the housing finance market. The panel grilled FHFA Director Calabria over potential racial bias in housing policy. In response to questioning, he signaled an openness to extending the current eviction moratorium for single-family homes, which is currently set to expire at the end of the month.

• Benjamin Carson, M.D., Secretary, U.S. Department of Housing and Urban Development

• Mark Calabria, Ph.D., Director, Federal Housing Finance Agency

OTHER COMMITTEES

Senate Small Business Committee Hearing on “Implementation of Title I of the CARES Act”: On Wednesday, the Senate Small Business Committee held a hearing to conduct oversight on implementation of Title I of the CARES Act. Treasury Secretary Mnuchin told the panel he supported additional relief legislation but cautioned it must be targeted “particularly to the industries and small businesses that are having the most difficulty in reopening as a result of COVID-19.” He noted he was “pleasantly surprised” at the unexpectedly positive May jobs numbers, as he had anticipated “we were actually going to bottom in June.” Mnuchin also projected that there will be roughly US$130B in PPP funds leftover and signaled an openness to using those funds to support businesses who sustained looting damage during recent protests.

• Steven Mnuchin, Secretary of the Treasury, U.S. Department of the Treasury

• Jovita Carranza, Administrator, U.S. Small Business Administration

Senate Budget Committee Business Meeting on “Nominations”: On Thursday, the Committee held a business meeting to consider the nomination of Russell Vought to be director of the White House Office of Management and Budget. The Committee voted on party lines to approve the nomination, sending it to the full Senate for consideration.

ON THE FLOOR

Senate Confirms First African-American Service Chief: On Tuesday, the Senate voted 98-0 to confirm Gen. Charles “C.Q.” Brown as the Air Force’s next chief of staff. The vote was presided over by Vice President Mike Pence.

LEGISLATION INTRODUCED AND PROPOSED

H.R. 7121: Rep. Alma Adams (D-NC) introduced H.R. 7121, which would authorize appropriations for the Community Development Financial Institutions Fund providing financial assistance and technical assistance for the benefit of certain minority communities.

H.R. 7132: Rep. Brian Fitzpatrick (R-PA) introduced H.R. 7132, which would provide accountability with respect to international reporting and monitoring of outbreaks of novel viruses and diseases.

Confederate Monument Removal Act: Representatives Barbara Lee (D-CA) and Bennie Thompson (D-MS) introduced a bill to remove Confederate statues from the U.S. Capitol. The bill, the Confederate Monument Removal Act, originally introduced by Rep. Lee in 2017 in the wake of the white nationalist rally in Charlottesville, would remove all statues of people who voluntarily served the Confederate State of America from the National Statuary Hall Collection within 120 days.

CRA Resolution: Rep. Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, and Rep. Gregory Meeks (D-NY), Chair of the Subcommittee on Consumer Protection and Financial Institutions, introduced a Congressional Review Act resolution to reverse the harmful CRA rule recently finalized by the Office of the Comptroller of the Currency. Rep. Waters said in a statement that “it [was] completely unacceptable for the OCC to use the cover of a pandemic to rush out a rule that will be harmful to communities that are already suffering during this crisis. This resolution we introduced today will right that wrong.”

Prioritized Paycheck Protection Program (P4) Act: Senators Ben Cardin (D-MD), Chris Coons (DE.) and Jeanne Shaheen (D-NH), announced their intention to introduce the Prioritized Paycheck Protection Program (P4) Act. The bill authorizes new lending under the Paycheck Protection Program (PPP) to small businesses with 100 employees or less, including sole proprietorships and self-employed individuals. Eligible businesses must have already expended an initial PPP loan, or be on pace to exhaust the funding, and must demonstrate a revenue loss of 50% or more due to the COVID-19 pandemic.

THIS WEEK ON THE HILL

Tuesday, June 16

Senate Banking Committee Hearing on “The Semiannual Monetary Policy Report to the Congress”: 10:00 AM via WebEx.

House Financial Services Committee (Subcommittee on National Security, International Development, and Monetary Policy) Hearing on “Cybercriminals and Fraudsters: How Bad Actors Are Exploiting the Financial System During the COVID-19 Pandemic”: 12:00 PM via WebEx.

Wednesday, June 17

House Financial Services Committee Hearing on “Monetary Policy and the State of the Economy”: 12:00 PM via WebEx.

THE REGULATORS

Federal Reserve Board Expands Its Main Street Lending Program: On Monday, the Federal Reserve Board expanded its Main Street Lending Program to allow more small- and medium‑sized businesses to be able to receive support. The Board lowered the minimum loan amount, raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term to five years, providing borrowers with greater flexibility in repaying the loans. The Board expects the Main Street program to be open for lender registration soon and to be actively buying loans shortly afterwards. “Supporting small- and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery," Fed Chair Jerome Powell said, "I am confident the changes we are making will improve the ability of the Main Street Lending Program to support employment during this difficult period."

Federal Reserve Board Announces Stress Test Result Release Date: On Tuesday, the Federal Reserve Board announced that results from both its Dodd-Frank Act stress tests and the related Comprehensive Capital Analysis and Review (CCAR) will be released on Thursday, June 25, at 4:30 p.m. EDT. This year, 34 banks, each with more than US$100B in total consolidated assets, were subject to stress tests.

Federal Reserve Has No Plans to Raise Interest Rates: During a video conference on Wednesday, Fed Chairman Jerome Powell indicated the Board has no plans to raise interest rates from their near zero level through 2022, saying, “We’re not even thinking about raising rates,” adding, “We are strongly committed to using our tools to do whatever we can for as long as it takes.” During the call, Powell expressed concern over the outsized proportion of job losses among women and workers of color, saying they have “borne a notable share of the burden beyond their percentage in the workforce. That’s really, really, really unfortunate.”

CFTC Assumes Key Role on IOSCO Board Leadership: On Tuesday, the International Organization of Securities Commissions (IOSCO) announced the election and immediate appointment of CFTC Chairman Heath Tarbert as IOSCO Board Vice Chair for the term 2020 – 2022. IOSCO is the leading international policy forum for securities regulators and is recognized as the global standard setter for securities regulation. Chairman Tarbert is the first CFTC Chairman to be elected to join the leadership of the IOSCO Board since the international standard setting body was established in 1983.

CFTC Extends No-Action Relief to Market Participants in Response to COVID-19: On Wednesday, the CFTC announced it has extended through September 30, 2020, certain elements of the no-action relief issued in response to the COVID-19 pandemic that was set to expire on June 30, 2020. On March 17, 2020, the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) and Division of Market Oversight (DMO) granted targeted, temporary relief to a broad spectrum of market participants to support orderly trading and liquidity as they implemented social distancing measures. “This time-limited extension recognizes the reality that work-from-home arrangements are likely going to be commonplace for the foreseeable future,” said DSIO Director Joshua Sterling and DMO Director Dorothy DeWitt. “During this extended period, however, we expect that registrants will take the necessary steps to come into full compliance with CFTC regulations, such as those related to voice recordings and time-stamps.”

SEC’s FinHub to Host Virtual Meet-Ups: On Thursday, the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub) announced the launch of virtual peer-to-peer meet-ups (P2Ps). FinHub staff acknowledged the present challenges and difficulties with in‑person meetings and travel posed by COVID-19, but nonetheless continue to be highly interested in meeting with FinTech industry participants to help inform regulatory approaches and engage on particular projects and issues. To facilitate ongoing communications, FinHub will host a series of thematically-based virtual P2P meet-ups over the next few months. During each series, FinHub staff will meet virtually with innovators, entrepreneurs, or firms that wish to discuss issues related to that series’ theme. The first theme is regulatory technology (RegTech).

FHFA Extends COVID-Related Loan Processing Flexibilities for Fannie Mae and Freddie Mac Customers Through July: On Wednesday, the FHFA announced that it was extending several loan origination flexibilities currently offered by Fannie Mae and Freddie Mac (the Enterprises) designed to help borrowers during the COVID-19 national emergency. Flexibilities extended until at least July 31st include: alternative appraisals on purchase and rate term refinance loans; alternative methods for verifying employment before loan closing; expanding the use of power of attorney and remote online notarizations to assist with loan closings; and authority to purchase mortgages in forbearance.

FDIC Issues Annual Report on Efforts to Preserve and Promote Minority Depository Institutions: On Wednesday, the FDIC released a report submitted to Congress that chronicles the efforts the agency made to preserve and promote Minority Depository Institutions (MDIs) in 2019. In 2019, the FDIC took significant measures to help grow MDIs and improve their operations, including: (1) published Minority Depository Institutions: Structure, Performance, and Social Impact, a research study that looked at the demographics, structural change, geography, financial performance, and social impact of MDIs over a 17-year period ending December 31, 2018; (2) hosted three roundtable discussions among MDI and large bank executives to facilitate greater lending and community development activities in low‑income neighborhoods and how such collaborations could receive favorable consideration under the Community Reinvestment Act; and (3) established a new MDI Subcommittee of the Advisory Committee on Community Banking. There are nine executives serving as members of the MDI Subcommittee representing African American, Native American, Hispanic American, and Asian American MDIs across the country.

CFPB Issues TRID Factsheet and FAQs: On Tuesday, the CFPB published guidance related to the TILA-RESPA Integrated Disclosure (TRID) Rule. First, the Bureau published a Factsheet on how to disclose title insurance on the Loan Estimate and Closing Disclosure, including when a negative owner’s title insurance cost disclosure is appropriate. Second, the Bureau updated the TRID FAQs to include guidance on the total of payments disclosure, using the optional signature line on the Loan Estimate and Closing Disclosure, and the requirement to include seller information on the consumer’s disclosures if providing separate Closing Disclosures.

CFPB Releases Tool to Help Communities Prevent and Respond to Elder Fraud: On Wednesday, the CFPB released an online resource to help communities form networks to increase their capacity to prevent and respond to elder financial abuse. The Elder Fraud Prevention and Response Networks Development Guide offers planning tools, templates, and exercises to help communities create a collaborative network to fight elder fraud or refresh or expand an existing network. In a statement, CFPB Director Kathleen Kraninger said, “The CFPB is focused on stopping financial exploitation of older Americans. We hope this resource will help launch networks in fighting elder financial exploitation in communities where networks don’t currently exist.”

SBA and Treasury Announce New and Revised Guidance Regarding the Paycheck Protection Program: On Friday, the Small Business Administration (SBA), in consultation with the Department of the Treasury, issued new and revised guidance for the Paycheck Protection Program (PPP). This guidance implements the Paycheck Protection Program Flexibility Act (PPPFA), signed into law by President Trump on June 5, 2020, and expands eligibility for businesses with owners who have past felony convictions.

IRS Provides Guidance on Employer Leave-Based Donation Programs: On Thursday, the IRS provided guidance for employers whose employees forgo sick, vacation, or personal leave because of the COVID-19 pandemic. The guidance provides that cash payments employers make to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation, or personal leave, which their employees forgo will not be treated as compensation. Similarly, the employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the leave that they donated to their employer.

HUD Provides Remaining $2.96 Billion in CARES Act Funding for Homeless Populations Amid Coronavirus Recovery: On Tuesday, HUD Secretary Ben Carson announced the allocation of US$2.96B in Emergency Solutions Grants (ESG) funding to support homeless Americans and individuals at risk of becoming homeless because of hardships such as job loss, wage reduction, or illness due to COVID-19. Congress has provided US$4B for HUD’s ESG program for local governments to prevent, prepare for, and respond to coronavirus among individuals and families who are homeless, receiving homeless assistance, or are at risk of becoming homeless. In total, HUD has allocated US$3.96B in ESG, and the remaining US$40M is being utilized to provide technical assistance to build capacity of grantees in those communities receiving ESG funding.

EXIM Revises Short-Term Insurance Products to Provide Small Businesses with Enhanced Financing Flexibility: On Tuesday, the Export-Import Bank of the United States (EXIM) announced that it has revised key features of two short-term export credit insurance products that will provide U.S. exporters and financial institutions additional options designed to streamline the application process and enhance the customer experience. The changes include a new short‑term credit standard to increase credit limit thresholds. Additionally, the short-term insurance product formerly known as Reasonable Spread of Risk (RSOR) will now be known as Multi‑Buyer Select Risk (MBSR) to more clearly reflect the purpose of this insurance policy.

OTHER NOTEWORTHY ITEMS

NYDFS Announces Program to Drive Innovative Financial Services and Products: On Monday, the New York Department of Financial Services launched DFS FastForward, a new program to support innovators seeking to deliver new solutions in financial services, Fintech, InsurTech, and HealthTech for New Yorkers in the COVID-19 era. “As New York begins re‑opening, new cutting-edge and innovative solutions will be needed to adapt the New York marketplace to a new normal due to COVID-19,” said Superintendent Lacewell. “DFS FastForward will help to build New York back better by supporting tomorrow’s innovators for the benefit of New York’s economy and consumers.”

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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.