Insights

Financial Services Report (2/22)

February 22, 2021

After a pseduo-recess week Congress returns to really start cranking on moving the Biden administration’s key first 100 day priorities. For the Senate, this means moving nominations, starting with Linda Thomas-Greenfield’s nomination to be Ambassador to the United Nations, as well as Tom Vilsack’s nomination to be Secretary of Agriculture, and potentially Gina Raimondo to be Commerce Secretary if Ted Cruz relents.

It will also be a busy week for nominees at Senate Committees, starting with a two-day confirmation hearing in the Senate Judiciary Committee to consider Judge Merrick Garland’s nomination to be U.S. Attorney General on Monday and Tuesday. Meanwhile, the Senate Finance Committee will consider Adewale Adeyemo’s nomination to be Deputy Secretary of Treasury on Tuesday, followed by Katherine Tai’s nomination to be United States Trade Representative (USTR) Ambassador on Thursday.

Over in the House, the focus is on the President Biden’s “American Rescue Plan” for COVID-19 relief. The House Budget Committee will convene on Monday to piece together each committee’s legislation to comply with reconciliation instructions into the final $1.9 trillion virus aid package, which will also include continuing to scrub provisions for possible “Byrd Rule” violations. Once completed, the action turns to the House Rules Committee, who will also work to ensure the legislation stays under the $1.9 trillion threshold. Reports that the bill as passed by the various committees has swelled up to $1.95 trillion could complicate the timing for the floor vote, potentially pushing to the later part of the week.

Meanwhile, the House is also scheduled to take up a package of wilderness-related bills as well as pass the Equality Act (H.R. 5 116th), legislation to pass federal legal protections for LGBTQ people.

In other, “non-nominee” Committee action we will see Federal Reserve Chairman Jerome Powell appear before the Senate Banking and House Financial Services Committees to discuss the Semiannual Monetary Policy Report on Tuesday and Wednesday, respectively. Elsewhere, the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law will kick off its series of hearings on online competition next Thursday.

Last Week in the House

There was no floor activity last week, as the House was in a committee work week.

Hearings, etc.

HFSC Stock Market Hearing (2/18): On Thursday, the House Financial Services Committee held a hearing entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.” While the marathon hearing, which lasted nearly six hours, sought to dive deeper into the market volatility that unfolded in January, the only clear take-away was that the Chairwoman intended to hold two more hearings on the topic.

During the hearing, members raised a variety of issues including, (1) whether there should be limits or additional disclosures requirements on short sellers; (2) payment for order flow model (PFOF) and who it benefits most; (3) the timeline of the settlement process to clear the transfer of a security from a seller to a buyer; and, (4) whether apps like Robinhood “simplify” or “gamify” investing, among others. Ultimately, it felt like the hearing provided more questions than answers, but it did seem that any of the policy changes raised by those questions were bigger than just Robinhood, Citadel and Keith Gill.

Bills Introduced

H.R. 1040 (Burgess): To amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system.

H.R. 1041 (Boyle): To repeal the debt ceiling.

H.R. 1058 (Kinzinger): To amend the Middle Class Tax Relief and Job Creation Act of 2012 to amend the definition of eligible facilities request, to codify the 60-day time frame for certain eligible facilities requests, and for other purposes.

H.R. 1068 (Pascrell): To amend the Internal Revenue Code of 1986 to provide for the proper tax treatment of personal service income earned in pass-thru entities.

H.R. 1136 (Hastings): To establish a Government-wide initiative to promote diversity and inclusion in the Federal workforce, and for other purposes.

H.R. 1187 (Vargas): To provide for disclosure of additional material information about public companies and establish a Sustainable Finance Advisory Committee, and for other purposes.

H.R. 1116 (DeFazio): To provide for increased audits, improved technology infrastructure, and increased staff for the Internal Revenue Service for the purpose of reducing the tax gap, and for other purposes.

Other Activity

Dems Call for Tax Filing Extension: On Thursday, a group of Democrats on the House Ways and Means Committee sent a letter to the IRS, urging the extension of this year’s tax filing date beyond the current April 15 deadline. The Members argued that last year’s extended due date, from April 15 to July 15, provided valuable relief, and that an extension would again be helpful again this year. The letter stated that “health and safety concerns continue to keep taxpayer assistance sites closed and taxpayers homebound. As a result, taxpayers are having a much harder time receiving the crucial assistance they are accustomed to and require. These challenges are especially acute for low-income taxpayers with limited digital or English proficiency.” The lawmakers also noted that IRS is still processing millions of tax returns that were filed last year, and that as a result of last year’s extended deadline, this filing season is condensed.

Last Week in the Senate

There was no floor activity, as the Senate was not in session last week.

Other Activity

Brown Holds First Hearing as Chairman

On Thursday, Senator Sherrod Brown held his first hearing as Chairman of the Senate Banking Committee. The hearing, which entitled, The Coronavirus Crisis: Paving the Way to An Equitable Recovery, had a witness list that included the Mayor of Youngstown and the manger of a Brooklyn bakery.

Warren Also Questions Citadel: On Tuesday, Sen. Elizabeth Warren (D-MA) sent a letter to Citadel CEO Kenneth Griffin, questioning the company’s relationship with Robinhood and the role they played in the GameStop frenzy that unfolded last month. This letter to Citadel, came after the Senator made public the nearly nearly 200 page response she had received from an earlier inquiry to Robinhood.

The Senator’s missive offered further questioning on the issues of payment for order (PFOF) as well as seeking to better understand how the company resolves potential conflicts of interest between Citadel’s hedge-fund and its market-maker divisions.

Manchin Potentially Sinks Tanden Nomination: On Friday, Senator Joe Manchin (D-WV) announced that he intended to vote against Neera Tanden, the President’s choice to helm the Office of Management and Budget (OMB), apparently based on her past tweets. In a statement announcing his decision, the centrist Democratic Senator noted that “overtly partisan statements will have a toxic and detrimental impact on the important working relationship between members of Congress and the next director of the Office of Management and Budget.”  Assuming every other Democratic Senator were to vote for her, Tanden would need to secure at least one other Republican to vote for her in order for the Vice President to break the tie. As of this writing, the Administration has not indicated they are going to pull her name, though if her nomination was to fail, it had been rumored that Gene Sperling, another former Clinton alumni may be be put forward.

Last Week in the Administration

FDIC Appoints First Chief Innovation Officer

On Tuesday, the Federal Deposit Insurance Corporation (FDIC) named Sultan Meghji as the agency’s first Chief Innovation Officer. Meghji will be charged with leading the FDIC’s efforts to promote the adoption of innovative technologies across the financial services sector. “As a recognized expert in financial technology, Sultan brings years of technical knowledge and an entrepreneurial spirit to our FDiTech team,” said FDIC Chairman Jelena McWilliams. “Under his leadership, I am confident we will find innovative ways to utilize technology to modernize our bank supervision, enable community banks to adopt technological solutions, and bring more underserved people into the financial fabric of our nation.”

Fed’s Brainard Remarks on Climate Risk

On Thursday, Federal Reserve governor Lael Brainard gave a speech on the role of financial institutions in addressing climate change risk, arguing that the economy and financial system are already being affected by climate change. In light of this, said the central bank is ramping up work to ensure the financial system can deal with the risks that lay ahead of it. “Climate change is already imposing substantial economic costs and is projected to have a profound effect on the economy at home and abroad,” Ms. Brainard said in a text of a speech. She argued that financial firms should now begin a process of adapting to this reality, and that while the change needed by firms will vary by institution, putting off the transition will come at a higher price later. In terms of disclosures, Ms. Brainard stated that, “ultimately, moving toward standardized, reliable and mandatory disclosures could provide better access to the data required to appropriately manage risks.”

OHSA to Investigate Whistleblower Retaliation

On Friday, the Department of Labor announced that the Occupational Safety and Health Administration (OSHA) is now overseeing worker retaliation complaints filed under two new whistleblower statutes — the Criminal Antitrust Anti-Retaliation Act and the Anti-Money Laundering Act. Under the Criminal Antitrust Anti-Retaliation Act, OSHA will investigate individual whistleblower’s complaints of retaliation for reporting criminal antitrust violations to their superiors or the federal government; or for showing cause, testifying or participating in, or otherwise assisting an investigation or proceeding related to antitrust law violations. The administration will do the same for Anti-Money Laundering Act cases.

Tech Industry Sues Over Maryland Online Ad Tax

On Thursday, a coalition of trade organizations filed a lawsuit against the Maryland state government over a bill passed last month to impose a digital ad revenue tax. The plaintiffs include the Computer & Communications Industry Association (CCIA) — with members including Amazon, eBay, Facebook, Google and Uber — along with the U.S. Chamber of Commerce and the Internet Association. The suit challenges the state’s recently enacted gross receipts tax on digital advertising revenue as unconstitutional and illegal under a federal internet tax moratorium. The House of Delegates voted to pass the bill in January, overriding a prior veto by Gov. Larry Hogan (R) from 2020.The bill imposes a tax of up to 10 percent on a company with global revenue from digital advertising that exceeds $15 billion, with smaller percentages for companies with less revenue. The suit alleges the tax goes against the Internet Tax Freedom Act, a federal law that bars “multiple and discriminatory taxes on electronic commerce.” The suit also argues that Maryland’s new statute will lead to a rise in “junk” content and raise costs for consumers.

This Week’s Schedule

Mon. (2/22)

  • Confirmation Hearing: Senate Judiciary Committee – 9:30 AM – The Senate Judiciary Committee will hold a confirmation hearing to consider Judge Merrick Garland’s nomination to be U.S. Attorney General. Details here.
  • Markup: House Budget Committee – 1:00 PM – The House Budget Committee will convene a markup to compile reconciliation instructions for the $1.9 trillion virus relief measure. Details here.

Tues. (2/23)

  • Hearing: Senate Armed Services Committee on Emerging Technologies – 9:30 AM – The Senate Armed Services Committee will hold a hearing entitled “Emerging Technologies and Their Impact on National Security.” Details here.
  • Hearing: House Appropriations Sub. on IRS Oversight – 10:00 AM – The House Appropriations Subcommittee on Financial Services and General Government (FSGG) will hold an oversight hearing of the IRS, featuring testimony from Commissioner Charles Rettig. Details here.
  • Hearing: Senate Banking Committee on State of the Economy – 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing with Federal Reserve Chairman Jerome Powell to examine the Semiannual Monetary Policy Report to Congress. Details here.
  • Confirmation Hearing: Senate Finance Committee – 10:00 AM – The Senate Finance Committee will hold a confirmation hearing to consider Adewale Adeyemo’s nomination to be Deputy Secretary of Treasury. Details here.
  • Confirmation Hearing: Senate Judiciary Committee – 10:00 AM – The Senate Judiciary Committee will resume its confirmation hearing to consider Judge Merrick Garland’s nomination to be U.S. Attorney General. Details here.
  • NetChoice Webinar on Big Tech – 12:00 PM – NetChoice will host a webinar entitled “The Bad Side of Breaking Up Big Tech.” Details here.
  • WIA Policy Summit 2021 – 12:30 PM – The Wireless Infrastructure Association (WIA) will hold its 2021 policy summit entitled “Federal Policy Trends & Expectations for the Wireless Industry Under a New Administration.” Details here.
  • AT&T Webinar on Broadband – 3:00 PM – The AT&T Policy Forum will host a webinar discussion entitled “Closing the Digital Divide.” Details here.
  • Urban Institute Webinar on Credit Data – 3:30 PM – The Urban Institute will host a webinar entitled “Financial Inclusion: Lessons Learned and What’s Next for Innovations on Alternative Credit Data.” Details here.

Wed. (2/24)

  • Hearing: House Appropriations Sub. on the Judiciary Budget – 10:00 AM – The House Appropriations Subcommittee on Financial Services and General Government (FSGG) will hold a hearing to examine the Judiciary’s budget request for FY 2022. Details here.
  • Hearing: Senate EPW Committee on Infrastructure and Economic Growth – 10:00 AM – The Senate Committee on Environment and Public Works (EPW) will hold a hearing entitled “Building Back Better: Investing in Transportation while Addressing Climate Change, Improving Equity, and Fostering Economic Growth and Innovation.” Details here.
  • Hearing: House Financial Services Committee on State of the Economy – 10:00 AM – The House Financial Services Committee will hold a hearing with Federal Reserve Chairman Jerome Powell entitled “Monetary Policy and State of the Economy.” Details here.
  • Hearing: House Judiciary Sub. on Lower Courts – 10:00 AM – The House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet will hold a hearing entitled “The Need for New Lower Court Judgeships, 30 Years in the Making.” Details here.
  • Hearing: House Oversight Committee on the Postal Service – 10:00 AM – The House Oversight and Reform Committee will hold a hearing entitled “Legislative Proposals to Put the Postal Service on Sustainable Financial Footing.” Details here.
  • Hearing: House Energy and Commerce Sub. on Extremism and Disinformation – 12:30 PM – The House Energy and Commerce Subcommittee on Communications and Technology will hold a hearing entitled “Fanning the Flames: Disinformation and Extremism in the Media.” Details here.
  • WIA Policy Summit 2021 – 12:30 PM – The Wireless Infrastructure Association (WIA) will hold its 2021 policy summit entitled “Federal Policy Trends & Expectations for the Wireless Industry Under a New Administration.” Details here.
  • Business Meeting: Senate Small Business Committee – 2:30 PM – The Senate Committee on Small Business and Entrepreneurship will hold a business meeting to vote on Isabella Guzman’s nomination to be Administrator of the Small Business Administration (SBA). Details here.
  • Hearing: House Financial Services Sub. on Discrimination – 3:00 PM – The House Financial Services Subcommittee on Oversight and Investigations will hold a hearing entitled: “How Invidious Discrimination Works and Hurts: An Examination of Lending Discrimination and Its Long-term Economic Impacts on Borrowers of Color.” Details here.

Thu. (2/25)

  • Hearing: Senate Banking Committee on COVID-19 Recovery – 9:30 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “The Coronavirus Crisis: Next Steps for Rebuilding Main Street.” Details here.
  • Hearing: House Financial Services Sub. on Terrorist Financing – 10:00 AM – The House Financial Services Subcommittee on National Security, International Development, and Monetary Policy will hold a hearing entitled “Dollars against Democracy: Domestic Terrorist Financing in the Aftermath of Insurrection.” Details here.
  • Confirmation Hearing: Senate Finance Committee – 10:00 AM – The Senate Finance Committee will hold a confirmation hearing to consider Katherine Tai’s nomination to be USTR Ambassador. Details here.
  • Hearing: House Judiciary Sub. on Online Competition – 10:00 AM – The House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law (ACAL) will hold a hearing entitled “Reviving Competition, Part 1: Proposals to Address Gatekeeper Power and Lower Barriers to Entry Online.” Details here.
  • Hearing: Senate Budget Committee on Wages – 10:15 AM – The Senate Budget Committee will hold a hearing entitled “Hearing: Should Taxpayers Subsidize Poverty Wages at Large Profitable Corporations?” Details here.
  • WIA Policy Summit 2021 – 12:30 PM – The Wireless Infrastructure Association (WIA) will hold its 2021 policy summit entitled “Federal Policy Trends & Expectations for the Wireless Industry Under a New Administration.” Details here.
  • Hearing: House Financial Services Sub. on Climate Change – 2:00 PM – The House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will hold a hearing entitled “Climate Change and Social Responsibility: Helping Corporate Boards and Investors Make Decisions for a Sustainable World.” Details here.

Fri. (2/26)

  • No events scheduled.

Further Out

  • Technology Policy Institute Webinar on Fintech – Mar. 1 – The Technology Policy Institute will host a webinar entitled “FinTech in the Biden Administration.” Details here.
  • WITA Webinar on the 2021 Trade Agenda –Mar. 5 – The Washington International Trade Association (WITA) will host a webinar entitled “2021 Congressional Trade Agenda. Details here.