TRP's Jason Rosenstock offered his insight on Congress' financial services agenda this fall in yesterday's "Finance 202" newsletter — a leading financial services beat by The Washington Post. The newsletter forecasts action on several key financial services deadlines that must be addressed this fall, namely funding the government for fiscal year (FY) 2020 and extensions for the Export-Import Bank and National Flood Insurance Program (NFIP). Rosenstock astutely points out that while lawmakers tentatively agreed to avoid "poison pill" policy riders on certain spending bills, it remains to be seen if the current political climate stymies controversial issues. “Their agreement said no controversial riders, but that’s in the eye of the beholder," said Rosenstock.
Wall Street will have to navigate some rocky shoals on Capitol Hill this fall, as the industry confronts few opportunities to score new wins and some perilous oversight.
Here’s a look at what the industry will be pushing for the hardest — and what threats it will be guarding against — in what is shaping up to be a potentially busy season.
1. Deadlines. Topping the financial sector's priority list will be a series of deadlines Congress must meet on expiring measures. Government funding runs out at the end of September, and that debate will pit President Trump’s demands for new border wall money against hardened Democratic opposition to the initiative. "With just over three weeks to strike a deal, leaders are already eyeing a short-term measure to buy themselves more time to negotiate," my colleagues Rachael Bade and Mike DeBonis reported yesterday.
Financial services lawmakers will also be focused on extending the Export-Import Bank and the National Flood Insurance Program by the end of the month.
“Stop me if you’ve heard this one before: lawmakers are returning from their recess with a lengthy to-do list and not much time to act,” Compass Point’s Isaac Botlansky says in an email. “The base case at this point is a short-term punt that pushes some, if not all, of the September deadlines into either November or December. Notably, I haven’t had a single client question on the federal funding deadline. With the debt ceiling risk off the table, investors are looking past this particular funding fight and instead focusing on trade policy and preparing for election season.”
And a series of smaller spending bills may become vehicles for policy riders that could take aim at the industry. “Their agreement said no controversial riders, but that’s in the eye of the beholder,” says Jason Rosenstock, a financial services lobbyist at Thorn Run Partners.
2. Housing finance restructuring. Arguably the biggest-ticket item with the potential to advance this season, the Trump administration’s plan to overhaul mortgage finance giants Fannie Mae and Freddie Mac could largely end-run the Hill. Eleven years after the firms backing half the nation’s mortgages were placed into government conservatorship, the Trump administration last week released a sweeping plan to address their long-term structure. The proposal, which would turn Fannie and Freddie back into private companies, doesn’t need congressional approval, and the administration said it would ignore lawmakers if necessary.
But top congressional Democrats have blasted the Trump plan for pushing changes they argue will diminish homeownership while jacking up housing costs. “The proposal raises serious concerns about the future of housing in this country, particularly affordable housing,” House Financial Services Chair Maxine Waters (D-Calif.) said in a statement. She and others will want to weigh in. Senators will get the opportunity first, this Tuesday, when Treasury Secretary Steven Mnuchin, Federal Housing Agency Director Mark Calabria and House and Urban Development Secretary Ben Carson defend the plan before the Senate Banking Committee.
“While pushback from Hill liberals is hardly unexpected, and not necessarily a show stopper, given no need for Congress to act, the delicate balance sought [by] the administration (placating conservatives and neutralizing liberals) still points to how such plans could easily become delayed, depending on how the next six-nine months of capital-setting and other administrative reforms play out,” Capital Alpha President Charles Gabriel said in a note to clients.
3. A tweaked North American free trade deal. The Trump administration has named getting Congress to ratify the United States-Mexico-Canada Agreement (USMCA) as its top legislative priority. And while House Democratic leaders have been in talks with the administration, they have yet to forge a breakthrough. Moderate House Democrats meanwhile are starting to agitate for a vote, potentially putting a squeeze on leaders trying to navigate between them and the demands of trade-skeptical progressives. “Once the House reconvenes Sept. 9, lawmakers will have just 13 legislative days on Capitol Hill before taking another two-week break — meaning the next several weeks could prove crucial to the pact's fate,” Politico’s Megan Cassella wrote last week.
Boltansky wrote in a recent client note that its prospects are looking brighter. “We continue to believe that the odds still favor the USMCA being cleared by this Congress, but the exact timing remains unclear,” he wrote.
4. Oversight. Waters has made clear she has a long list of targets for the committee’s attention this fall. Her panel has scheduled 11 hearings this month to probe everything from abusive debt collection to the macroeconomic effects of climate change. She released an agenda on Aug. 23 highlighting other high-priority topics, including stock buybacks; Libra, Facebook’s proposed cryptocurrency; new loan instruments; real-time payments; and the finance industry’s use of artificial intelligence. The industry could face more heat as Democratic presidential candidates serving in Congress come back to town potentially looking to make a splash with new legislative rollouts.
And the campaign season will increasingly impinge on lawmaking. “There is always some tension between partisan posturing and policy writing, but it seems especially acute right now,” the lobbyists at the Smith-Free Group wrote in a recent note to clients. “Can a zig-zagging White House agree to the bottom line of legislative deals amid the daily whir of social media? How both sides can balance their political needs with policy goals will determine what bills run the legislative gauntlet in the coming months.”