Financial Services Report

Looking Ahead

Near Term

  • The Tax bill comes to the full House on Thursday (at Rules on Wednesday)
  • Senate Finance starts its mark-up of the tax reform bill on Monday.
  • The House Rules Committee is schedule d to meet on Monday to try again at bringing the Flood Insurance bill to the Floor.
  • The House Financial Services Committee will mark-up over 20 bills starting on Tuesday.
  • DOL Secretary Acosta will be before the House Ed and Workforce Committee on Wednesday.

Further Out

  • Both Houses of Congress will collect their collective breath for the Thanksgiving Week recess.
  • Funding for the Government expires on December 8th
  • The election for the next Senator from Alabama will take place on December 12th.

The Past Week

Legislative Branch
House
Ways and Means Approves Tax Reform Bill on Party Line Vote
Following a contentious four-day markup, the House Ways and Means Committee advanced H.R. 1 ­– The Tax Cuts and Jobs Act (TCJA) (text) out of committee on Thursday by  a 24-16 party line vote, setting up House floor consideration next week. While the multi-day markup saw plenty of partisan exchanges on the merits of the tax code overhaul, Republicans refrained from offering amendments and all Democratic proposals were voted down. However, the bill did undergo significant changes through two manager’s amendments as Committee Chair Kevin Brady (R-TX) sought to make the bill more palatable for his Republican colleagues. Among the more notable changers are a hike in the tax rate on repatriated foreign earnings, a 9 percent tax rate on pass-through entity income up to $75,000, and a 9 percent surtax on life insurance company taxable income. The bill is now set to be considered on the House floor this week.
 
Financial Services Panel Talks Foreign Threats, Cryptocurrency in Hearing
On Wednesday, the House Financial Services Subcommittee on Terrorism and Illicit Finance held a hearing entitled “Financial Intelligence and Enforcement: Treasury’s Role in Safeguarding the American Financial System.” The hearing — which featured testimony from Sigal Mandelker, Under Secretary for the Department of the Treasury’s Office of Terrorism and Financial Intelligence (TFI) — examined TFI’s policy enforcement and regulatory functions to combat terrorist financing, money laundering, and other financial crimes. Lawmakers probed Ms. Mandelker about the various steps that TFI is taking to curb bad actors such as Hezbollah, Hamas, Iran, and Russia. Members on the panel also discussed the importance of bolstering security for new fintech companies and cryptocurrency.
 
Senate
Senate Releases Version of Tax Reform Legislation
Senate Republicans unveiled their vision for an overhaul of the nation’s tax code (details attached) as part of the party’s major legislative initiative for the remainder of the calendar year. Electing to forgo releasing legislative text, the Senate’s summary outlines a package that will overlap in principle with the House proposal that was approved by the House Ways and Means Committee today, but differ from the House version in some key areas. Specifically, the Senate proposal breaks from the House on provisions such as: (1) the level of top individual tax rates; (2) the number of individual tax brackets; (3) the timing of a corporate tax-rate cut and; (4) the particulars of estate tax changes. A markup of the package is set to begin today.
 
Cloture Filed on Comptroller Nominee Otting
Senate Majority Leader Mitch McConnell (R-KY) filed cloture on President Trump’s nominee to become permanent Comptroller of the Currency, Joseph Otting. Otting would replace Acting Comptroller Keith Noreika, who has come under fire for being too active in his temporary role. The nomination is likely to see significant Democratic opposition on the Senate floor as only Sen. Heidi Heitkamp (D-ND) joined Republicans in supporting his nomination in a Senate Banking Committee vote in September, though it only needs 51 votes to pass.
 
Senate Judiciary Lawsuit Abuse Hearing Features Partisan Split on Arbitration
On Wednesday, the Senate Judiciary Committee held a hearing focused on lawsuit abuse and proposed legislation geared towards reform. The session took a highly partisan tone as Democrats aired their grievances over the recent repeal of the Consumer Financial Protection Bureau’s (CFPB) rule barring the use of mandatory arbitration in consumer contracts, and Republicans took aim at the trial lawyer industry. The two pieces of legislation discussed, the Fairness in Class Action Lawsuits Act (FICALA) (H.R. 985) and Lawsuit Abuse Reduction Act (LARA) (S. 237), were also debated along partisan lines, with Democrats charging that the legislation would undermine existing legal protections.  
 
Donnelly, Heller Introduce Bill to Raise Asset Threshold on Bank Exams
On Thursday, the bipartisan Banking Committee duo of Sens. Joe Donnelly (D-IN) and Dean Heller (R-NV) introduced a bill that would move the current $1 billion qualifying asset threshold for 18-month bank exams to $3 billion. Banking Committee Chair Mike Crapo (R-ID) is reportedly working with the committee’s moderates on a broader regulatory reform package that would reduce other thresholds that subject certain banks to stricter oversight.
 
Select Highlights from the Administration
Department of Treasury
OFR Director to Step Down Dec. 31
On Monday, the Director of the Treasury’s Office of Financial Research (OFR), Richard Berner, announced that he intends to leave the agency on Dec. 31. Berner joined Treasury as OFR’s Director when the office was created in 2013 per the provisions of the Dodd-Frank financial reform law. The agency is primarily tasked with conducting long-term threats to the U.S. economy and advises regulators on economy-wide risks. However, Republicans have attacked the office as a redundant regulator and it remains to be seen how President Trump will approach filling the office’s top post.
 
FSOC to Meet Nov.16 to Discuss Annual Report
Treasury Secretary Steven Mnuchin announced last week that the conglomerate of financial regulators known as the Financial Stability Oversight Council will be meeting on Thursday. The agenda outlines discussions of the Council’s regulations under the Freedom of Information Act, an update on the Alternative Reference Rates Committee, and a discussion of the Council’s 2017 annual report.
 
Department of Labor
DOL Looking to Finalize Fiduciary Rule Delay in Three Weeks
The Department of Labor (DOL) signaled last week that it is expecting to finalize a delay of the full implementation of the fiduciary rule within the next three weeks. The proposal to delay the rule is currently being reviewed by the Office of Management and Budget and will be published once that review is completed. The proposed delay will push back implementation of the rule 18 months to July 1, 2019.
 
Federal Judge Issues Injunction Against Fiduciary Rule, Grants Stay
Stemming from a decision on Nov. 3, a U.S. district judge in Minnesota ruled that Thrivent Financial had demonstrated that it would be irreparably harmed by the implementation of the Labor Department’s fiduciary rule, specifically the provision allowing for class-action lawsuits by investors. While siding with the plaintiffs on that point, the judge also provided a stay in the case to “allow the administrative process to fully develop, possibly resolving this dispute.” The DOL signaled last August that it would no longer defend the class-action provision of the rule in court challenges.