Financial Services Report (3/22)

With the House in a “Committee Work” period next week there is no expectation of votes on the Floor of the House. Meanwhile, the Senate is in session for Floor votes, and has teed up consideration of a bipartisan deal to extend the Paycheck Protection Program (PPP) loan application date to May 31, while also allowing the Small Business Administration (SBA) to continue processing pending applications for up to 30 days after the new expiration date. This bill, which has already passed the House is expected to pass prior to the March 31 expiration date.

Beyond this legislation, the Senate is expected to continue approving Administration nominees, including (1) Marty Walsh to be Labor Secretary; (2) Vivek Murthy to be U.S. Surgeon General; (3) Rachel Levine to be Assistant Secretary at the Department of Health and Human Services (HHS); (4) Adewale Adeyemo to be Deputy Treasury Secretary; (5) Shalanda Young to be Deputy Director of the Office of Management and Budget (OMB); and (6) David Turk to be Deputy Energy Secretary.

In notable committee activity next week, Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell will make their first joint appearances together before the House Financial Services and Senate Banking Committees on Tuesday and Wednesday, respectively, to provide their statutorily required quarterly update on the central bank and Treasury Department’s pandemic response efforts as mandated by the CARES Act. On Thursday, Transportation Secretary Pete Buttigieg will appear before the House Transportation and Infrastructure Committee for the first time to discuss the Biden administration’s infrastructure priorities. Also on Thursday, the CEOs of Facebook, Google and Twitter will be before two Energy and Commerce Subcommittees for a blockbuster hearing on Social Media and Disinformation.

Keeping with the Thursday schedule, the Budget Committee in the Senate will hold a hearing on the tax code that may tip the Democrats hands on what areas of the Corporate Tax Code they are looking to modify as part of their infrastructure push. Finally, for those focused on the SBA, the Senate Committee on Small Business and Entrepreneurship will hold an oversight hearing of the Small Business Administration’s (SBA) COVID-19 response programs on Wednesday, featuring testimony from officials at SBA, the SBA Office of the Inspector General (OIG), and the Government Accountability Office (GAO).

Last Week in the House

Floor

On Tuesday, the House overwhelmingly passed (415-3) a bill extending the deadline for applying for a Paycheck Protection Program loan to May 31, sending the legislation to the Senate this week, as the current March 31 deadline looms.

On Thursday, the House passed two immigration-related bills. The Dream Act — which received nine Republican votes — seeks to provide a pathway to citizenship for recipients of the Deferred Action for Childhood Arrivals (DACA), Temporary Protected Status (TPS), and Deferred Enforced Departure (DED) programs. The Farm Workforce Modernization Act garnered more bipartisan support with 30 Republican yes votes. The bill seeks to provide legal status for migrant farmworkers and reform the H-2A agricultural visa program. 

On Friday, House lawmakers passed (246-175) a measure that would make sure the increase in deficit spending as a result of the American Rescue Plan (ARP) does not trigger statutorily-required across-the-board spending cuts. The bill that seeks to avert billions of dollars in automatic spending cuts — known as sequestration — to Social Security, Medicare, Medicaid, and other programs required under the 2010 pay-as-you-go (PAYGO) law. If Congress does not act on the PAYGO sequester prior to the end of this year’s session, the Congressional Budget Office (CBO) estimated that the increase in spending would trigger roughly $381 billion in funding cuts annually over five years, beginning in fiscal year (FY) 2022.

Hearings, etc.

HFSC Convenes Second GameStop Hearing (3/17): On Wednesday, the House Financial Services Committee held what has been billed as the second of three hearings, entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.”

This hearing didn’t have the fireworks of the first one, and instead was a mostly academic discussion about various market structure issues that may have contributed to the rise in retail investing. In brief, the discussion centered around: (1) the payment for order flow (PFOF) model and its potential conflicts of interest; (2) the definition and oversight of best executions; (3) the gamification and glorification of trading; (4) the transparency of securities lending; and (5) the potential impacts of an accelerated settlement cycle. While several Democrats expressed concern that PFOF perversely incentivizes the highest payments for brokers rather than the best execution for customers, Republicans were quick to point out that the SEC already regulates best interest obligations of brokers, and that the existing PFOF model has in no way canceled that. Additionally, former SEC Commissioner Michael Piwowar exchanged in several bipartisan dialogues advocating for the SEC to reevaluate the current settlement cycle. While he noted the industry could incur some costs in moving to a T+1 settlement time, he suggested the acceleration would allow consumers quicker access to cash or securities and would lower the margins that brokers are required to post with the DTCC. A third hearing with the regulators is expected in the future.

Select Coronavirus Subcommittee holds hearing on Economic Recovery Efforts (3/17): On Thursday, the Subcommittee convened its first hearing since October to assess the COVID-19 crisis and relief efforts. Democrats underscored the disproportionate harm the pandemic has caused on minorities. They praised American Rescue Plan Act and Chairman Clyburn stressed the importance of implementing it “effectively, efficiently, and equitably.” He, along with several colleagues, advocated for a robust infrastructure package to bring much needed broadband access, build housing and schools, modernize health care facilities and transition to a clean energy economy. Republicans condemned the partisan nature of the American Rescue Plan and pushed back on raising taxes or passing more massive spending measures. GOP Members also pushed for the reopening of schools. Former National Economic Council Director Larry Kudlow argued that raising the corporate rate, the capital gains rate, or individual income tax rate will reduce critical supply-side incentives and deprive American businesses of valuable resources. Meanwhile, AFL-CIO Chief Economist William Spriggs contended that the economy cannot afford workers earning less than $15 an hour and advocated for broad investments in infrastructure, as well as a more progressive tax system.

Judiciary Subcommittee Continues to probe Competition Policy(3/18): On Thursday, the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law (ACAL) held a hearing to discuss increasing competition and mitigating monopoly power. The witnesses advocated for more resources for antitrust enforcement, and explained why monopolies hurt consumers in the long run. Republicans raised concerns about free speech and content moderation, focusing on how monopoly power is used to curtail political opinions. Overall, both Republicans and Democrats seemed intent on helping the Federal Trade Commission (FTC) and Department of Justice (DOJ) increase regulations for monopolies, particularly within technology companies. There was broad bipartisan support for shifting the burden of proof more heavily on would-be merging firms to defend that the merger would not limit competition and ultimately harm consumers.

E & C Discusses the CLEAN Future Act (3/18): On Thursday, the Subcommittee on Environment and Climate Change convened a legislative hearing to discuss industrial climate policies, specifically focusing on the Climate Leadership and Environmental Action for our Nation’s (CLEAN) Future Act. Democrats championed this measure as a key step toward reducing U.S. emissions, supporting new infrastructure and resiliency investments, as well as creating and maintaining domestic job growth. Introduced earlier this month, the bill (H.R. 1512) seeks to achieve a 50 percent reduction in greenhouse gas pollution by 2030, as well as a 100 percent, net-zero emission rate by 2050. Republicans on the Subcommittee were highly critical of the legislation’s focus away from the traditional energy sectors, saying that banning fossil fuel development would cause major disruptions to state and local economies. GOP Members directed criticism to China and other countries for their role in contributing to global carbon emissions, citing data that suggests it is “virtually impossible” to reach net-zero emissions given the output of other countries. While they offered significant gripes with the CLEAN Act, there was an underlying agreement that more clean energy solutions, such as nuclear and biomass technologies, should be pursued as options.

D&I Sub Discusses Diversity Data (3/18): On Thursday, the House Financial Services Subcommittee on Diversity and Inclusion held a hearing to discuss how diversity data can measure commitment to diversity, equity, and inclusion. Republicans expressed some concern with using a one-size-fits-all approach to mandating DNI disclosures, while Democrats were supportive of using data collection to combat systematic racism. Overall, there was a consensus that better transparency of diversity data can create a more robust workforce and facilitate economic growth. One witness urged the implementation of Section 1071, which requires financial institutions to collect and report on credit applications from women and minority-owned small businesses. In a line of questioning with Chairwoman Beatty, witnesses highlighted that companies that have success with DNI metrics are also more likely to provide sustainable and profitable investment opportunities. Rep. John Rose (R-TN) voiced concerns about the potential for mandatory reporting to burden and harm small businesses. Rep. Stephen Lynch (D-MA) asked the witnesses if there is a way to prevent fintech companies from using biased algorithms. Mr. Garcia-Diaz highlighted the importance of diversity when creating algorithms and fair lending programs, stating that the potential impact of biased algorithms is still being explored. See more below on an document request announced at the hearing.

Bills Introduced

H.R. 1944 (Rice): To provide a tax credits for certain expenses associated with protecting employees from COVID-19.

H.R. 1936 (Neguse): To require the Comptroller General to evaluate and issue a report on the structural and economic impacts of climate resiliency at the Federal Emergency Management Agency, including recommendations on how to improve the building codes and standards that the Agency uses to prepare for climate change and address resiliency in housing, public buildings, and infrastructure such as roads and bridges.

H.R. 1964 (Foster): To assess the State by State impact of Federal taxation and spending.

H.Res. 249 (McHenry): Expressing the sense of the House of Representatives that the Congress should not impose a financial transaction tax on individuals or market intermediaries in connection with trades executed on the National Market System or alternative trading systems.

H.R. 2000 (Banks): To amend section 230 of the Communications Act of 1934 to clarify that such section does not prevent a provider or user of an interactive computer service from being treated as the distributor of information provided by another information content provider, and for other purposes.

H.R. 2001 (Beatty): To amend the Dodd-Frank Wall Street Reform and Consumer Protection Act to require regulated entities to provide information necessary for the Offices of Women and Minority Inclusion to carry out their duties, and for other purposes.

H.R. 2039 (Loudermilk): To prohibit the Securities and Exchange Commission from requiring that personally identifiable information be collected under consolidated audit trail reporting requirements, and for other purposes.

H.R. 2040 (Loudermilk): To update thresholds for certain currency transaction reports and suspicious activity reports, and for other purposes.

Other Activity

SAFE Banking Act Reintroduced: On Thursday, Rep. Ed Perlmutter (D-CO) reintroduced his landmark Secure and Fair Enforcement (SAFE) Banking Act of 2021 (H.R. 1196). The legislation is also led by Reps. Nydia M. Velázquez (D-NY), Steve Stivers (R-OH), and Warren Davidson (R-OH) and cosponsored by more than 100 members. The bill would allow marijuana-related businesses in states with some form of legalized marijuana and strict regulatory structures to access the banking system.

Forty-seven states, four U.S. territories, and the District of Columbia have legalized some form of recreational or medical marijuana, including CBD. Yet current law restricts legitimate licensed marijuana businesses from accessing banking services and products, such as depository and checking accounts, resulting in businesses operating in all cash — posing a serious public safety risk for communities. In announcing the bill, lead Democratic sponsor Ed Perlmutter said, “the genie is out of the bottle and has been for many years. Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long, and it is the responsibility of Congress to step up and take action to align federal and state laws for the safety of our constituents and communities. The public safety need is urgent, and a public health and economic need has also emerged with the pandemic further exacerbating the cash-only problem for the industry.” 

GOP Reverses Conference Rule Prohibiting Earmarks: House Republicans voted Wednesday to lift their decade-long ban on earmarks, giving members the power to direct federal agencies to spend specific amounts on projects in their home districts as Democrats look for ways to get Republicans on board with a major infrastructure package later this year. The House stopped using earmarks in 2011, following the GOP winning the majority in the Chamber. Concerns of fraud and abuse, along with a handful of high-profile scandals, had made earmarks politically toxic. However, following Democrats in the House and Senate moving forward to reinstate a limited version of earmarks, renamed “community project funding.” House Republicans passed the resolution during their conference meeting on Wednesday by a secret-ballot vote of 102-84.

HFSC Dems Seek D&I Data from Asset Managers: On Thursday, Chairwoman of the House Committee on Financial Services, Maxine Waters (D-CA), and Congresswoman Joyce Beatty (D-OH), Chair of the Subcommittee on Diversity and Inclusion, sent letters to the nation’s 31 largest investment firms — those with $400 billion or more of assets under management — for data on their diversity and inclusion. “We are making progress to ensure a comprehensive understanding of diversity and inclusion performance in the financial services industry,” the lawmakers wrote in the letter. The release explains that the requests are part of a longstanding effort to hold the financial services sector accountable and provide the American public with a complete picture of how financial firms are meeting their commitments to diversity and inclusion. The press release listing the 31 firms can be found here.

Last Week in the Senate

Floor

The Senate continued consideration of President Biden’s cabinet nominees last week, confirming the following four nominations:

  • Deb Haaland to lead Interior by a vote of 51-40 last Monday, making her the first Native American to be selected to lead a Cabinet agency in history;
  • Isabella Guzman to be Administrator of the Small Business Administration by a vote of 81-17 on Tuesday;
  • Katherine Tai to be United States Trade Representative with unanimous support — 98-0 — on Wednesday; and
  • Xavier Becerra to be Secretary of Health and Human Services by a narrow vote of 50-49 on Thursday.

Hearings, etc.

U.S. Tax Code and Domestic Manufacturing (3/16): On Tuesday, the Senate Committee on Finance held a hearing to discuss the effect of the U.S. tax code on domestic manufacturing. In highlighting current global shortages and U.S. supply chain issues, the Committee advocated on a bipartisan basis for stability and predictability in tax policy in order for manufacturers to be able to confidently act in ways that enable competition. Members outlined the reforms, impacts, and sunsetting provisions in the 2017 Tax Cuts and Jobs Act (TCJA) in a broader discussion on the need for tax laws to incentivize domestic manufacturing. Republicans praised the work of the TCJA and urged Congress to leave the corporate tax rate at 21 percent in order to remain globally competitive. There was bipartisan support, however, for the continuation of immediate research and development (R&D) deductibility beyond the current Dec. 31, 2021 expiration. Without such a change, companies will have to amortize their R&D costs over five years, which Senators warned would harm U.S. companies’ ability to compete globally.

Senate Banking Hearing on Housing Policy(3/16): The Senate Banking Committee convened Tuesday to discuss the state of housing in the U.S. There was widespread agreement on the deterioration of housing affordability, shortage of housing supply, and barriers to new housing construction. Democrats focused on the impact of the pandemic on consumers and expressed concern that many would face foreclosure and eviction as current relief measures expire, particularly households that have lost income and are unable to resume repayment. Sen. Brown talked about the need for borrowers to access small-dollar mortgages from lenders. Some Members also drew attention to residential segregation and homeownership rates along racial and income lines, pointing to discriminatory practices, a lack of affordable rental and housing options, and a failure to enforce the Fair Housing Act as factors. The need for GSE reform was raised by several Republicans during the hearing, including by Ranking Member Toomey amid discussions about his principles for housing finance reform legislation.

Senate Small Business Committee Discusses PPP (3/17): On Thursday, the Committee held a hearing to discuss the performance, impact, and next steps of the Paycheck Protection Program (PPP). Chairman Cardin voiced support for the extension of the PPP deadline from Mar. 31 to May 31 and praised the Biden Administration’s work to expand underserved communities’ access to the program. Ranking Member Paul contended that small businesses are “thriving” in states that have eased restrictions. He also pushed back on providing any more federal funding for the program, arguing that it would be wiser to “look at how the trillion dollars left in the pipeline can be spent, rather than adding more.” In a dialogue between Sen. Rosen (D-NV) and the CEO of the Opportunity Finance Network, Ms. Mensah pointed to streamlining the forgiveness process and increasing the loan cap as key ways to help struggling businesses. Sen. Ernst (R-IA) questioned whether Congress should allow both Schedule C and Schedule F files to retroactively apply to loans, to which Ms. Mensah urged Congress to both extend the program and to apply it retroactively.

Senate Foreign Relations Committee on China (3/17): On Wednesday, the Senate Foreign Relations Committee convened a hearing on U.S. policy for strategic competition with China. Chairman Menendez highlighted the need for both parties to work together to develop a comprehensive approach and strategy towards China, to reset U.S. strategy and diplomacy, to reinvest and replenish the sources of national strength and competitiveness at home, and to place U.S. partnerships and allies first. He advocated for adopting a comprehensive bipartisan bill that can provide a sustainable and durable framework for strategic policy for the years ahead. Ranking Member Risch reiterated that “no issue demands and commands bipartisanship more” than navigating the U.S. policy for strategic competition with China. The Committee underscored the need to treat China as the top foreign policy priority given the political, economic, military and technological competition at hand. Ranking Member Risch called for increased oversight of Chinese companies’ behavior in U.S. capital markets, and Chinese state-sponsored IP theft. Attention was also drawn to the importance of maintaining U.S. competitiveness in semiconductors and artificial intelligence. “While the United States and allies still enjoy the lead in semiconductors, China is investing at an unprecedented rate. If current trends continue, China will become the world’s largest semiconductor manufacturer, fundamentally altering the global economic and security landscape,” one witness warned.

Senate Banking Examines Climate Risk (3/18): On Thursday, the Senate Banking Committee held a hearing entitled “21st Century Economy: Protecting the Financial System from Risks Associated with Climate Change.” While all parties appeared willing to acknowledge that climate change is occurring and will shape industries across the globe, Republicans on the Committee raised questions about whose role it is to address this change. Some argued that incorporating climate risk would be an “abuse” of regulatory authority and would ultimately be used to punish politically disfavored industries. Others voiced concern that the data is not sufficient or clear enough to be able to effectively model. Democrats, however, urged congressional and regulatory action to advance climate-related disclosures to respond to investor demand and to ensure that companies are transparent and take responsibility for climate impacts.

For example, Sen. Bill Hagerty (R-TN) noted that property and casualty reinsurance markets underwrite hundreds of billions of premiums annually, and that there is already high sophistication for those who do model weather-related risk. Dr. Zycher reasoned that insurance companies have powerful incentives to model such risk and are much less subject to political pressure, litigation threats, and regulatory mandates than is the case for the Fed or the SEC. Chairman Brown asked what financial regulators should do to ensure banks meet their 2030 and 2050 low-carbon goals. Mr. Gelzinis, a witness from the Center for American Progress (CAP), called for stress-testing and risk management standards that include actionable transitional plans. Dr. Keohane advocated for transparency in how banks measure and report their own emissions as well as those from their investments.

Senate Finance Examines Forced Labor in Global Supply Chains (3/18): On Thursday, the Senate Finance Committee held a hearing to address forced labor. Chairman Wyden underscored that the U.S. must use its economic and political muscle to improve the lives of powerless people around the world. He highlighted that while Section 307 bans imports made with forced labor, a loophole in that federal ban that applied to products made outside the U.S. persisted for decades and was only closed in 2016.

While the Committee noted that enforcement actions have increased, they raised concerns for the rise in “glaring examples” of forced labor, most notably in China. Ranking Member Wyden stated that what the Chinese government is doing to the Uyghur people in the Xinjiang region in Western China constitutes genocide. The general consensus was that when American workers have to compete with forced labor, everybody loses. Ranking Member Crapo advocated for the use of modern technology to create transparency. This sentiment was supported by witnesses and echoed by Senators across the board. Sen. Cantwell highlighted the potential for technology to be utilized to enhance tracing of goods, and Sen. Cassidy suggested the use of a public ledger such as blockchain. Transparency was underscored throughout the hearing, with Sen. Warner emphasizing the need to increase the “opaqueness” of global supply chains.

Bills Introduced

S. 749 (Hassan): A bill to amend the Internal Revenue Code of 1986 to enhance tax benefits for research activities. During a hearing last week, Sen. Hassan cited that the bill would double the cap on the startup credit, preserve full R&D write-offs to secure U.S. supply chains, and increase competition with China.

S. 769 (Cortez Masto): A bill to authorize funds to prevent housing discrimination through the use of nationwide testing, to increase funds for the Fair Housing Initiatives Program, and for other purposes.

S. 743 (Crapo): A bill to amend title VI of the Social Security Act to remove the prohibition on States and territories against lowering their taxes. Companion bill by Rep. Bishop, H.R. 2002.

S. 794 (Sanders): A bill to amend the Internal Revenue Code of 1986 to impose a corporate tax rate increase on companies whose ratio of compensation of the CEO or other highest paid employee to median worker compensation is more than 50 to 1, and for other purposes. Companion bill by Rep. Lee, H.R. 1979.

S. 784 (Wyden): A bill to amend the Social Security Act to establish a new employment, training, and supportive services program for unemployed and underemployed individuals, including individuals with barriers to employment and those who are unemployed or underemployed as a result of COVID-19, and for other purposes.

S. 797 (Schatz): The PACT Act, a bill to require transparency, accountability, and protections for consumers online.

S. 808 (Reed): A bill to amend the Securities Exchange Act of 1934 to promote transparency in the oversight of cybersecurity risks at publicly traded companies.

S. 856 (Sinema): A bill to amend the Securities Exchange Act of 1934 to create an interdivisional task force at the Securities and Exchange Commission for senior investors, and for other purposes.

S. 873 (Durbin): A bill to establish the Climate Change Advisory Commission to develop recommendations, frameworks, and guidelines for projects to respond to the impacts of climate change, to issue Federal obligations, the proceeds of which shall be used to fund projects that aid in adaptation to climate change, and for other purposes. Companion bill by Rep. Deutch, H.R. 2013.

S. 862 (Menendez): A bill to create a safe harbor for insurers engaging in the business of insurance in connection with a cannabis-related legitimate business, and for other purposes. Companion bill by Rep. Velázquez, H.R. 2068.

S. 823 (Brown): A bill to amend the American Rescue Plan Act of 2021 to provide for protection of recovery rebates. Co-led by Sens. Ron Wyden (D-OR), Senate Finance Committee Chairman, Bob Menendez (D-NJ), and Chris Van Hollen (D-MD), this bill seeks to protect the stimulus checks provided in President Biden’s American Rescue Plan from garnishment by private debt collectors. “We passed the American Rescue Plan to put money in people’s pockets so they can pay their bills, not to line the pockets of predatory private debt collectors. Our bill would mean American workers and their families don’t have to worry their stimulus checks will be gobbled up by financial predators, and the House should pass it immediately,” said Senator Brown in a press release.

Other Activity

Senate Cybersecurity Caucus Co-Chairs Announced: Senators Mark Warner (D-VA) and Thom Tillis (R-NC) will co-chair the bipartisan Senate Cybersecurity Caucus in the 117th Congress. First launched in 2016, the Senate Cybersecurity Caucus provides a platform for Senators and their staffs to stay informed on major policy issues and developments in cybersecurity. “The Senate Cybersecurity Caucus is a platform for Senators and their staffs to keep up to date on cyber policy and engage in discussions about cybersecurity that cross Committee jurisdictions. I’m pleased to welcome Sen. Tillis as a co-chair of this effort and look forward to working with him to bring bipartisan attention to these critical issues,” Sen. Warner stated.

Sens. Warren and Brown Seek Answers from Goldman CEO: On March 12, Senate Banking Chairman Brown and Sen. Warren sent a letter to David Solomon, Chairman and CEO of Goldman Sachs, Inc. pressing for answers related to the bank’s support of weakened capital standards. “To our knowledge, Goldman Bank is the only depository institution that opted into these weakened capital requirements whose holding company continued to reduce its capital by paying dividends. We believe your organization has a unique perspective with regard to these rules,” wrote the lawmakers. They asked Goldman Sachs CEO David Solomon to respond to a series of questions on the effects of weakened capital requirements amid continued dividend payouts.

Banking Republicans Push Back on Fed Climate Action: On Thursday, Senate Banking Republicans sent a letter to Jerome Powell addressing the Federal Reserve’s involvement in climate change. All Republicans on the Committee signed onto the letter, led by Ranking Member Pat Toomey (R-PA), urging the Fed to stick with helping lower America’s unemployment rate and keeping prices stable. The lawmakers wrote that the Fed lacks “jurisdiction over and expertise in environmental matters,” questioning whether it had the authority to police climate risks. “We urge you to refrain from taking any additional actions with respect to climate-related risks that would impose certain costs for uncertain benefits.” Over the past few months, the Federal Reserve has joined an international group of central banks focused on climate risk, pointed to climate change as a threat to financial stability and established its own Supervision Climate Committee. The Fed’s increasing focus on how climate change can threaten the financial system is garnering praise from Democrats and scorn from Republicans.

Democratic Senators Reintroduce Financial Transaction Tax Bill: A group of Democratic Senators on Thursday reintroduced legislation (S. 817) to create a financial transaction tax, arguing that such a tax would help to reduce economic inequality. The bill would establish a tax of 0.1 percent on the sales of stocks, bonds and derivatives. Its reintroduction comes as stocks have seen record highs in recent weeks even as many families continue to face economic challenges as a result of the coronavirus pandemic. “During the pandemic, Wall Street has cashed in on high-risk trades that add no real value to our economy and leave working families behind. We need to curb this dangerous trading to reduce volatility in the markets and encourage investment that can actually help our economy grow,” Sen. Brian Schatz (D-Hawaii), the lead sponsor of the bill, said in a statement. “By raising the price of financial transactions, we can make our financial system work better while bringing in billions in new revenue that we can reinvest in our workers and our communities.”

Sen. Toomey Outlines Housing Finance Reform Principles: On Monday, U.S. Senate Banking Committee Ranking Member Pat Toomey (R-PA) released a set of guiding principles for housing finance reform. In his proposal, Senator Toomey set the framework for legislation to end the government sponsored enterprise (GSE) duopoly and foster a liquid secondary mortgage market while protecting taxpayers and promoting equitable access for all lenders. He called on Congress to:

  • Transition the GSE duopoly toward a competitive secondary market;
  • End the conservatorships of Fannie Mae and Freddie Mac;
  • Foster a liquid secondary mortgage market that promotes the continued availability of affordable 30-year and other long-term fixed-rate mortgage loans across the United States and throughout the economic cycle; and
  • Promote equitable access to the secondary mortgage market by mortgage lenders of all sizes, business models, charter types, and locations.

Last Week in the Administration

SEC Remarks at Climate Risk Event

In an event hosted by the Consumer Federation of America (CFA) last Monday, SEC Acting Chair Allison Herren Lee emphasized that there is no single issue more pressing for the SEC than confronting the risks and opportunities that climate and ESG pose for investors, financial markets, and the economy. On the same day, Acting Director Lee issued a public statement requesting input on the Commission’s climate disclosure framework. Lee underscored the need for consistent, comparable and reliable data, arguing that the question is no longer “if” but “how” to execute a comprehensive mandatory disclosure framework. Outside of climate risk, she spoke to the need for a broader range of ESG issues to be considered, including human capital disclosures such as workforce diversity, board room diversity rule-makings, and political spending. She also stressed the importance of the Commission examining voting and ensuring the transparency of fund voting, suggesting perhaps the reopening of the comment period on the Universal Proxy proposal. She underscored the need to clarify the importance of voting to fiduciary obligations, as well as to ensure transparency in examining credit rating agencies and accounting and auditing oversight. Additionally, Lee highlighted that the SEC should and will bring resources to bear on ensuring clear standards for broker dealers under REG BI, examining the impact of the continued flow of capital away from capital markets on retail investors, and confirming that retail investors receive best execution on trades.

CFPB Issues Statement to limit Garnishment, Debt Collection from EIP Funds

On Wednesday, CFPB Acting Director Dave Uejio issued a public statement encouraging financial institutions and debt collectors to allow stimulus payments to reach consumers. “The Consumer Financial Protection Bureau is squarely focused on addressing the impact of the COVID-19 pandemic on economically vulnerable consumers and is looking carefully at the stimulus payments that millions are now receiving through the American Rescue Plan. The Bureau is concerned that some of those desperately needed funds will not reach consumers and will instead be intercepted by financial institutions or debt collectors to cover overdraft fees, past-due debts, or other liabilities.” In his statement, he applauded the actions of state consumer protection agencies to protect stimulus funds and committed to staying “closely engaged on this issue as the COVID relief payment rollout continues.”

CFTC Creates Climate Risk Unit

On Wednesday, the Commodity Futures Trading Commission (CFTC) announced the establishment of a new unit to gauge the dangers posed by climate change to futures and options markets. This marks the latest move by a financial regulator related to climate change under the Biden administration. The derivatives regulator said Wednesday that its new Climate Risk Unit (CRU), which will be staffed from across the CFTC’s divisions, will help ensure that new products and markets fairly take into account climate-change risks, including factors such as severe weather, in their pricing and other activities. The CFTC’s new unit may also join domestic and international forums to help develop standards, practices and disclosures on climate finance.

IRS Delays Filing Deadline

The Internal Revenue Service announced on Wednesday that it will delay the April 15 tax-filing deadline until May 17. The move came after lawmakers and accountants pressed the government for more time to complete 2020 tax returns and adjust to tax-law changes during the pandemic. “We are gratified that the IRS has recognized the need and heeded our calls for additional time, and while we are pleased with this 30-day extension, we will continue to monitor developments during this hectic filing season,” said Reps. Richard Neal (D-MA) and Bill Pascrell (D-NJ) in a statement. This follows a bipartisan letter sent Tuesday, signed by more than 100 members of Congress urging the IRS to extend the deadline to July 15.

Treasury to Carry Out Internal Racial Equity Review

The Treasury Department is moving ahead with a formal racial equity review of the agency and its programs, putting in place an effort to ensure that economic fairness is prioritized throughout the Biden administration as it begins to disburse $1.9 trillion in relief money. The initiative is expected to be led by Adewale Adeyemo once he is confirmed as deputy Treasury secretary. It will be undertaken in close collaboration with Treasury Secretary Janet Yellen, who is making racial equity a centerpiece of her agenda as she oversees the disbursement of much of the stimulus package. The review follows an executive order that President Biden signed in January requiring federal agencies to pursue racial equity and to support underserved communities in their policies and programming. 

Banking Regulators Let SLR Relief Lapse

On Friday, the FDIC, OCC, and the Federal Reserve issued a joint press release declining to extend a pandemic-era rule that relaxed the amount of capital banks had to maintain against Treasury funds and other holdings, in a move that could upset Wall Street and the bond market. In a brief announcement, the Fed said it would allow a change to the supplementary leverage ratio (SLR) to expire as previously planned on March 31. The initial move, announced April 1, 2020, allowed banks to exclude Treasury funds and deposits with Fed banks from the calculation of the leverage ratio. The decision to relax the capital requirements has been widely viewed as key to calming what had been tumultuous Treasury markets in the early days of the Covid-19 pandemic. This move comes after fierce opposition from many Republicans, and vast support from Democrats. The central bank also said it will solicit public comment on how to adjust the SLR in the future.

DOJ Investigating Visa’s Debit-Card Practices

Late last week, the WSJ reported that the Department of Justice is reportedly considering whether Visa’s practices allow it to engage in anticompetitive practices to maintain a dominant market share. According to the article, the department’s antitrust division has been gathering information to assess whether Visa — the largest U.S. card network — has limited merchants’ ability to route debit-card transactions over card networks that are often less expensive. The probe highlights the important role of the so-called “network fees” that are invisible to consumers but lucrative for card companies. The fees are often passed on to merchants in the form of higher prices to customers. It also comes as DOJ antitrust enforcers across administrations have placed an emphasis on scrutinizing digital-marketplace activities, including in the financial sector, and on investigating the business practices of dominant firms. It comes following an announcement on Tuesday by Visa and Mastercard that both companies were delaying an increase in fees by at least a year.

This Week’s Schedule

Mon. (3/22)

  • Hearing: House Energy and Commerce Committee on LIFT America – 11:00 AM – The House Energy and Commerce Committee will hold a hearing entitled “LIFT America: Revitalizing our Nation’s Infrastructure and Economy.” Details here.

Tues. (3/23)

  • Hearing: House Budget Committee Member Day – 10:30 AM – The House Budget Committee will convene its Member Day for the 117th Congress to discuss lawmakers’ 2022 budget priorities. Details here.
  • Hearing: House Financial Services Committee on the Pandemic Response – 12:00 PM – The House Financial Services Committee will hold an oversight hearing to examine the Treasury Department’s and Federal Reserve’s pandemic response. Details here.
  • Hearing: House Small Business Sub. on PPP – 12:00 PM – The House Small Business Subcommittee on Contracting and Infrastructure will hold a hearing entitled “The Interaction Between the Paycheck Protection Program and Federal Acquisition Rules: What it Means for Government Contractors.” Details here.
  • Hearing: House Judiciary Sub. on Bankruptcy – 2:00 PM – The House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law will hold a hearing entitled “Oversight of the Bankruptcy Code: Ensuring Fair Treatment and a Fresh Start for All Americans.” Details here.

Wed. (3/24)

  • Hearing: Senate Banking Committee on the Pandemic Response – 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold an oversight hearing to examine the Treasury Department’s and Federal Reserve’s pandemic response. Details here.
  • Hearing: Senate Commerce Committee on Infrastructure – 10:00 AM – The Senate Committee on Commerce, Science, and Transportation will hold a hearing entitled “Driving the Road to Recovery: Rebuilding America’s Transportation Infrastructure.” Details here.
  • Hearing: House Financial Services Sub. on Housing During the Pandemic – 12:00 PM – The House Financial Services Subcommittee on Subcommittee on Housing, Community Development and Insurance will hold a hearing entitled “Preserving a Lifeline: Examining Public Housing in a Pandemic.” Details here.
  • BPC Webinar on Small Business Finance – 12:30 PM – The Bipartisan Policy Center will host a webinar entitled “Show Me the Money: What’s Next for Small Business Finance?” Details here.
  • Hearing: House Energy & Commerce Sub. on the CLEAN Future Act – 2:00 PM – The House Energy and Commerce Subcommittee on Energy will hold a hearing entitled “The CLEAN Future Act: Powering a Resilient and Prosperous America.” Details here.
  • Hearing: Senate Small Business Committee on Oversight of COVID-19 Relief – 2:30 PM – The Senate Committee on Small Business and Entrepreneurship will hold a an oversight hearing of SBA’s COVID-19 relief programs. Details here.

Thu. (3/25)

  • Hearing: Senate Finance Committee on the International Tax Code – 9:30 AM – The Senate Finance Committee will hold a hearing entitled How U.S. International Tax Policy Impacts American Workers, Jobs, and Investment.” Details here.
  • Hearing: Senate Banking Committee on the American Rescue Plan – 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “American Rescue Plan: Shots in Arms and Money in Pockets.” Details here.
  • Executive Session: Senate Judiciary Committee – 10:00 AM – The Senate Judiciary Committee will hold an executive session to consider the nominations of Lisa Monaco to be Deputy Attorney General, Vanita Gupta to be Associate Attorney General, as well as a pair of measures pertaining to copyright registration and patent inventors. Details here.
  • Hearing: Senate Budget Committee on the Tax Code – 11:00 AM – The Senate Budget Committee will hold a hearing entitled “Ending a Rigged Tax Code: The Need To Make the Wealthiest People and Largest Corporations Pay their Fair Share of Taxes.” Details here.
  • Hearing: House Transportation & Infrastructure Committee on Biden Infrastructure Priorities – 11:00 AM – The House Transportation and Infrastructure Committee will hold a hearing on the Biden administration’s infrastructure priorities, featuring testimony from Transportation Secretary Pete Buttigieg. Details here.
  • Hearing: House Energy & Commerce Subs. on Disinformation – 12:00 PM – The House Energy and Commerce Subcommittees on Communications & Technology and Consumer Protection & Commerce will hold a joint hearing entitled “Disinformation Nation: Social Media’s Role in Promoting Extremism and Misinformation.” Details here.
  • Hearing: House Financial Services Sub. on Human Trafficking – 12:00 PM – The House Financial Services Subcommittee on National Security, International Development and Monetary Policy will hold a hearing entitled “Ending Exploitation: How the Financial System Can Work to Dismantle the Business of Human Trafficking.” Details here.
  • Hearing: Select Coronavirus Sub. on Small Business Fraud – 12:00 PM – The Select Subcommittee on the Coronavirus Crisis will hold a hearing entitled “Rooting Out Fraud in Small Business Relief Programs.” Details here.
  • ITIF Webinar on March-In Rights – 1:00 PM – The Information Technology and Innovation Foundation will host a webinar entitled “March-In Rights for Federally Funded Inventions: A Primer.” Details here.

Fri. (3/26)

  • ITIF Webinar on Antitrust – 10:00 AM – The Information Technology and Innovation Foundation will host a webinar entitled “Innovation Matters.” Details here.