Money Matters: This Week in Washington

This Week in Washington for June 17, 2019

June 17, 2019

Dina Ellis

THE BIG PICTURE

The oversight standoff between the White House and Congress escalated last week on several fronts. While on Monday the House Judiciary Committee reached an agreement with the Justice Department to view some of the underlying evidence from the Mueller report, the House still moved forward with a vote to pass a resolution empowering Committee Chairman Jerry Nadler to pursue civil enforcement of subpoenas. On Wednesday, the President claimed executive privilege in a move to block House Democrats from accessing documents related to why a citizenship question was added to the 2020 census. Meanwhile, the House Intelligence Committee issued subpoenas to former national security advisor Michael Flynn and deputy campaign chairman Rick Gates, with Chairman Adam Schiff citing their “failure to fully cooperate” with Congress. On Friday, the Justice Department released an opinion that backed up Treasury Secretary Mnuchin’s refusal to comply with the House Ways and Means Committee’s subpoena for the President’s tax returns, claiming its “true aim” was to publicize the documents.

The President announced that White House Press Secretary Sarah Huckabee Sanders would be resigning her position at the end of the month to return to her home state of Arkansas. In a tweet, he expressed his appreciation for a “job well done” and added he “hope[s] she decides to run for Governor.” In an emotional appearance, Ms. Sanders, who often had a contentious relationship with some members of the press corps, said that she had “loved every minute, even the hard minutes.”

On Friday, NBC announced the line-up for the first two Democratic debates, which are set to take place June 26th and 27th. Only 20 of the 24 presidential contenders met the criteria to appear onstage, and a random drawing was held to evenly divide the slate of candidates between the two evenings. On night one, Elizabeth Warren will face off against Cory Booker, Julián Castro, Bill de Blasio, John Delaney, Tulsi Gabbard, Jay Inslee, Amy Klobuchar, Beto O'Rourke, and Tim Ryan. On the second evening, current front-runner Joe Biden will appear alongside Pete Buttigieg, Kirsten Gillibrand, Kamala Harris, John Hickenlooper, Bernie Sanders, Michael Bennet, Eric Swalwell, Marianne Williamson, and Andrew Yang.

Text in Italics

Other highlights of last week include:

• Congresswoman Susan Brooks (R-IN) announced that she would not seek reelection, after serving four terms in the House.

• Following a report by the Office of Special Counsel that recommended White House counselor Kellyanne Conway be fired for repeated violations of the Hatch Act, the President came to her defense her by calling her “terrific” and expressed the view that “they’re trying to take away her right from free speech.”

LAST WEEK ON THE HILL

HOUSE FINANCIAL SERVICES COMMITTEE

Hearing on “An Examination of State Efforts to Oversee the $1.5 Trillion Student Loan Servicing Market”:On Tuesday, the Subcommittee on Oversight and Investigations held a hearing to consider oversight efforts of the student loan servicing market, including state-level efforts and failures, the Consumer Bureau’s mandate for supervision and oversight of student loan services, and the Education Department’s refusal to provide relevant information.

• Joe Sanders, Student Loan Ombudsman and Supervising Attorney, Consumer Fraud Bureau, Illinois Attorney General’s Office

• Nicholas Smyth, Assistant Director for Consumer Financial Protection, Senior Deputy Attorney General, Pennsylvania Office of Attorney General

• Arwen Thoman, Director, Student Loan Assistance Unit and Investigations Supervisor, Massachusetts Attorney General’s Office

• Joanna Darcus, Massachusetts Legal Assistance Corporation Racial Justice Fellow, National Consumer Law Center

• Scott Buchanan, Executive Director, Student Loan Servicing Alliance

Full Committee “Markup”: On Tuesday, the Committee met to mark up the following pieces of legislation, ultimately advancing eight to the full House for consideration.

• H.R. 2162, the “Housing Financial Literacy Act of 2019,” which would require HUD to provide a 25-basis-point discount in upfront Federal Housing Administration (FHA) single-family mortgage insurance premiums for first-time-homebuyers who complete a housing counseling program to help them sustain homeownership, was advanced to the House, as amended, by a vote of 53-6.

• H.R. 2513, the “Corporate Transparency Act of 2019,” which would require corporations and LLCs to disclose their beneficial owners to the Financial Crimes Enforcement Network, ending criminals’ ability to use anonymous shell companies to hide their money and illicit activities, was advanced to the House, as amended, by a vote of 43-16.

• H.R. 2763, the “Keeping Families Together Act of 2019,” which would block HUD from implementing a proposed rule that would terminate housing benefits for families with mixed-immigration status, was advanced to the House, as amended, by a vote of 32-26.

• H.R. 3018, the “Ensuring Equal Access to Shelter Act of 2019,” which would block HUD from implementing a proposed rule that would allow shelter providers to deny transgender and gender non-conforming people equal access to homeless shelters, was advanced to the House, as amended, by a vote of 33-26.

• H.R. 3111, the “National Flood Insurance Program Administration Reform Act of 2019,” which would make improvements to the National Flood Insurance Program’s appeals and litigation process, was advanced to the House, as amended, by a vote of 58-0.

• H.R. 3141, the “FHA Loan Affordability Act of 2019,” which would make homeownership more affordable for FHA borrowers by repealing the requirement that borrowers with FHA loans pay mortgage insurance premiums for the full life of the mortgage, and reinstate FHA’s previous policy of requiring FHA borrowers to pay premiums only until the outstanding principal balance of the loan reaches 78 percent of the original home value, was advanced to the House, as amended, by a vote of 34-25.

• H.R. 3154, the “Homeownership for Dreamers Act,” which would clarify that DACA recipients cannot be denied mortgage loans backed by FHA, Fannie Mae, Freddie Mac, or USDA solely on the basis of their DACA status, was advanced to the House, as amended, by a vote of 33-25.

• H.R. 3167, the “National Flood Insurance Program Reauthorization Act of 2019,” which would reauthorize the NFIP for five years and also includes a number of reforms to increase affordability, improve mapping, enhance mitigation, and modernize the NFIP, was advanced to the House, as amended, by a vote 59-0.

SENATE BANKING COMMITTEE

Hearing on “Data Brokers and the Impact on Financial Data Privacy, Credit, Insurance, Employment and Housing”: On Tuesday, the full Committee met to learn more about the structure and practices of the data broker industry and technology companies; how the data broker industry has evolved with the development of new technologies and its interaction with technology companies; what information these entities collect, with whom it is shared, and for what purposes; what gaps exist in federal privacy law; and what changes to federal law, including the Fair Credit Reporting Act, should be considered to give individuals real control over their data.

• Dr. Alicia P. Cackley, Director, Financial Markets and Community Investment, Government Accountability Office

• Ms. Pam Dixon, Executive Director, World Privacy Forum

OTHER COMMITTEES

House Appropriations Committee “Markup of FY2020 Financial Services and General Government Appropriations Bill”: On Tuesday, the Committee voted on the FY20 Financial Services and General Government bill, ultimately approving the measure by a vote of 30-21. In total, the bill includes US$24.55B in discretionary funding, an increase of US$1.4B over the 2019-enacted level, and US$355.5M over the President’s 2020 budget request. House Appropriations Committee Chairwoman Nita Lowey said in a statement that, “with this bill’s investments in our financial regulators and small businesses, we can help improve the financial security of every family. And with funding for election security, we can safeguard our democracy.”

LEGISLATION INTRODUCED AND PROPOSED

H.R. 3167: Rep. Maxine Waters (D-CA) introduced H.R. 3167, the “National Flood Insurance Program Reauthorization Act of 2019,” which would reform and reauthorize the National Flood Insurance Program.

H.R. 3182: Rep. Vicente Gonzalez (D-TX) introduced H.R. 3182, the “CECL Consumer Impact and Study Bill of 2019,” which would require the SEC and certain Federal agencies to carry out a study relating to accounting standards.

H.R. 3198: Congressmen Barry Loudermilk (R-GA) and Josh Gottheimer (D-NJ) introduced the “Comprehensive Regulatory Review Act,” which would amend the Economic Growth and Regulatory Paperwork Reduction Act of 1996 to ensure that Federal financial regulators perform a comprehensive review of regulations to identify outdated or otherwise unnecessary regulatory requirements imposed on covered persons. “A smart, pragmatic process requiring regular review will keep consumers and businesses on track and create jobs, instead of burying them in paperwork and hamstrung by red tape,” said Rep. Gottheimer

H.R. 3211: Rep. Scott Peters (D-CA) introduced H.R. 3211, which would establish a Task Force on the Impact of the Affordable Housing Crisis.

S. 1749: Sen. Kyrsten Sinema (D-AZ) introduced S. 1749, the “Protecting Affordable Mortgages for Veterans Act of 2019,” which would clarify seasoning requirements for certain refinanced mortgage loans.

THIS WEEK ON THE HILL

Tuesday, June 18

Senate Banking Committee Hearing on “The Reauthorization of the Terrorism Risk Insurance Program”: 10:30 AM in 538 Dirksen Senate Office Building.

Senate Banking Committee “Executive Session” to consider the following nominations:

• Mr. Thomas Peter Feddo to be an Assistant Secretary of the Treasury for Investment Security

• Mr. Ian Paul Steff to be Assistant Secretary of Commerce and Director General of the United States and Foreign Commercial Service

• The Honorable Michelle Bowman, to be a Member of the Board of Governors of the Federal Reserve System

• Mr. Paul Shmotolokha to be First Vice President of the Export-Import Bank of the United States

• Ms. Allison Herren Lee to be a Member of the Securities and Exchange Commission

Wednesday, June 19

House Financial Services Committee (Subcommittee on National Security, International Development, and Monetary Policy) Hearing on “Promoting Economic Growth: Exploring the Impact of Recent Trade Policies on the U.S. Economy”: 10:00 AM in 2128 Rayburn House Office Building.

House Financial Services Committee (Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets) Hearing on “Putting Investors First: Examining Proposals to Strengthen Enforcement Against Securities Law Violators”: 2:00 PM in 2128 Rayburn House Office Building.

Thursday, June 20

Senate Banking Committee Hearing on “Outside Perspectives on the Collection of Beneficial Ownership Information”: 10:00 AM in 538 Dirksen Senate Office Building.

House Financial Services Committee Hearing on “Diversity in the Boardroom: Examining Proposals to Increase the Diversity of America’s Boards”: 10:00 AM in 2128 Rayburn House Office Building.

House Financial Services Committee (Subcommittee on Housing, Community Development and Insurance) Hearing on “What’s Your Home Worth? A Review of the Appraisal Industry”: 2:00 PM in 2128 Rayburn House Office.

THE REGULATORS

FDIC Cautions Customers that FDIConnect.com Is Not Affiliated with a Government Agency: On Thursday, the FDIC issued an advisory warning bank customers of the potential for confusion between FDIConnect.com and the FDIC-run website, FDICconnect.gov. The FDIC noted that it is aware of the website FDIConnect.com, which advertises itself as a consumer-focused provider of FDIC pass-through insurance for bank deposits, and advised the public that FDIConnect.com is not affiliated with the FDIC.

SEC Commissioner Discusses Cryptocurrency Markets: Speaking at a fintech conference in New York on Thursday, SEC Commissioner Robert Jackson indicated that, as cryptocurrency markets continue to mature and increase liquidity and transparency, the agency will view related proposals more favorably. He also described the agency’s internal efforts to grapple with classification, saying “we have to take principles that are 80 years old and 90 years old and apply them to [brand new] technology, and we often disagree about exactly how to do that.”

CFPB to Hold First Symposium on June 25: On Tuesday, the CFPB announced that it will hold its first symposium on June 25. The symposium, part of a series announced earlier this year, will focus on the Dodd-Frank Act’s prohibition on abusive acts or practices and will be webcast on the Bureau’s website.

Fannie and Freddie Shares Drop After Mnuchin Interview: Fannie Mae and Freddie Mac shares faced their largest single day drop this year on Monday, on the heels of comments by Secretary Treasury Steven Mnuchin in which he seemed to suggest any major revamp of the GSEs would need to include housing reform, saying “what we’re not going to do is business as usual with no changes, just re-capitalize them and float them.”

Treasury Designates Syrian Oligarch Samer Foz and His Luxury Reconstruction Business Empire: On Tuesday, Treasury’s OFAC designated 16 individuals and entities associated with an international network benefiting the Assad regime. These designations are meant to cut off critical supplies and financiers for the regime’s luxury reconstruction and investment efforts, and reinforce the administration’s commitment to imposing a financial toll on those supporting Assad’s authoritarian rule, including Syrian oligarch Samer Foz.

Treasury Targets IRGC-Qods Force Financial Conduit in Iraq for Trafficking Weapons Worth Hundreds of Millions of Dollars: On Wednesday, Treasury’s OFAC imposed sanctions on an Iraq-based Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) financial conduit, South Wealth Resources Company (SWRC), which has trafficked hundreds of millions of dollars’ worth of weapons to IRGC-QF-backed Iraqi militias. “Treasury is taking action to shut down Iranian weapons smuggling networks that have been used to arm regional proxies of the IRGC Qods Force in Iraq, while personally enriching regime insiders,” said Treasury Secretary Steven Mnuchin.

FHFA Discusses Guarantee for Fannie and Freddie: Speaking at a conference on Thursday, FHFA Director Mark Calabria said that any U.S. guarantee for Fannie Mae and Freddie Mac’s US$4.7T of mortgage bonds should be “limited, clearly defined and paid for.” He also noted that he is in the “very early stages” of contemplating how the GSEs should go about building up their capital buffers.

FHFA Releases 2018 Report to Congress: On Wednesday, the FHFA released its 2018 Report to Congress. In the report, FHFA Director Mark Calabria encouraged Congress to act on housing finance reform while also requesting chartering authority similar to the Office of the Comptroller of the Currency, saying “There is urgent need for Congress to act on housing finance reform. To promote competition in the marketplace, I encourage Congress to authorize additional competitors and provide FHFA the same powers as other federal financial regulators.”

Senators Call on HUD to Protect Housing Rights for Transgender Individuals: In a letter to HUD Secretary Ben Carson, eight Democratic Senators, including Patty Murray (D-WA)—who serves as Ranking Member of the HELP Committee—and Sherrod Brown (D-OH), Ranking Member of the Banking Committee, urged the agency to rescind a proposal they felt would weaken discrimination protections in HUD-funded emergency and temporary homeless shelters. They argued the proposal “puts homeless transgender people, a population already facing enormous stigma, at risk of further discrimination” and called the “effort to reverse the Equal Access Rule and its enforcement mechanisms is cruel and unacceptable.”

Lawmakers Oppose CFPB Proposal to Reduce Reporting Requirements: On Thursday, 18 Democratic Senators, including Sherrod Brown (D-OH)—Ranking Member of the Banking Committee—called on the CFPB to rescind its proposal to further reduce reporting under the Home Mortgage Disclosure Act (HMDA). The Senators expressed concern that the Bureau had “once again put the interests of the financial industry above those of the consumers it is charged to protect” and argued that by “reducing HMDA data collection, [the] CFPB risks undermining fair lending enforcement and monitoring at the national, local, and institutional level—an outcome contrary to HMDA’s stated purposes.”

Similarly, 63 Democratic Members led by Rep. Maxine Waters (D-CA) and Nydia Velazquez (D-NY) wrote to Director Kraninger demanding she rescind the proposal, saying “to promote fair lending, homeownership, and stronger communities, the Consumer Bureau must ensure there is easy access to lending data. By putting much of this information back in the shadows, the Consumer Bureau is abandoning its mission and giving a free pass to those that would discriminate against otherwise creditworthy borrowers.”

Jones and Warren Raise Concerns about Agency Oversight of Fintech: In a letter to the Federal Reserve, FDIC, OCC, and CFPB, Senators Elizabeth Warren (D-MA) and Doug Jones (D-AL) asked for an explanation of how potentially discriminatory lending by fintech companies is being policed, saying, “[w]hile some fintech products have the potential to expand access to financial services for underserved populations, we believe these new business models and products also present new challenges for regulators.” They added: “recent research highlights this tension, demonstrating both the opportunity of algorithmic underwriting’s potential to reduce discrimination, while also emphasizing the technologies’ current shortcomings.”

COMINGS AND GOINGS AT THE AGENCIES

Ken Cuccinelli Named Acting Director of USCIS: On Monday, it was announced that Ken Cuccinelli will serve as the new acting director of U.S. Citizenship and Immigration Services (USCIS), effective immediately. Cuccinelli previously served as Virginia’s attorney general from 2010 to 2014.

OTHER NOTEWORTHY ITEMS

Rhode Island Issues Request for Proposals Involving Blockchain: The Rhode Island Department of Administration is soliciting proposals for the use of blockchain technology to further the State’s goal of becoming more efficient, transparent, accurate, secure, and business-friendly.

GAO Issues Report Identifying Weaknesses Resulting from Equifax Breach: In a report titled “Federal Agencies Need to Strengthen Online Identity Verification Processes,” the GAO warned that the USPS, Department of Veterans Affairs, Social Security Administration, and Centers for Medicare and Medicaid Services’ continued use of “Knowledge-Based Verification” questions to verify benefit eligibility is putting the agencies at risk of fraud following the 2017 Equifax hack, which led to the release of millions of Americans’ personal information.