While the House was scheduled to be in recess – albeit subject to a 24-hours notice to return for a vote if a deal on COVID relief gets made – the Senate was scheduled to be in town to continue to vote on Judges. Then three Senators tested positive for COVID and Senate Majority Leader Mitch McConnell (R-KY) announced that votes for next week would be cancelled. Leader McConnell then attempted to seek a consent agreement to meet in pro forma sessions until October 26th but Minority Leader Chuck Schumer (D-NY) objected. Leader McConnell will now try to reach that agreement again on Monday, though this time seeking pro forma sessions until October 19. While the difference between a pro forma session and adjournment is minimal, the latter does offer the minority protection against recess appointments by the President.
With both sides likely out of town, it means that the Senate Judiciary Committee will hold the spotlight when it begins the confirmation hearings to fill the Supreme Court vacancy – assuming the Committee can obtain a quorum on October 12th. This requires that 12 out of the 22 Senators on the Committee are present. While that seems plausible today, the situation remains fluid depending on the number and severity of any future cases. Other notable events this week include the Vice Presidential Debate this Wednesday. Unlike last week’s debate, this one is expected to be more civil and include more policy discussions.
Last Week in the House
After talks broke down, and a little later than originally anticipated, House Democrats voted on Thursday evening for their “skinnier” pandemic releif bill (HEROES 2.0). This measure, clocking in at $1.2 trillion less than the bill that passed the House in May, (text; summary; one-pager) largely reflects many of the same policies that were presented in the original version, including: (1) another round of $1,200 stimulus checks and $600 per week unemployment benefits; (2) support for COVID-19 testing, treatment, and health care providers; (3) emergency paid family and medical leave; and (4) support for child care services, among other provisions. The legislation passed by a mostly party-line vote of 214 to 207 on Thursday night, but is unlikely to become law in its current form, as it has almost no chance of being taken up by he Republican-led Senate and is opposed by the White House.
The House additionally passed the Uyghur Forced Labor Disclosure Act of 2020 (Wexton), which requires issuers of securities to publicly disclose their activities related to China’s Xinjiang Uyghur Autonomous Region.
Hearings and Markups
HFSC Task Force on Bank Licensing (9/29): On Tuesday, the House Financial Services Task Force on Financial Technology held a poorly attended hearing to examine the legal framework governing bank licensure. Focusing on the future of the bank partnership model, the Office of the Comptroller of the Currency (OCC)’s proposed Special Purpose National Bank Charters for Fintech Companies, and the potential for FinTechs to operate their own banks as industrial loan companies (ILCs), the witnesses primarily urged caution for any regulatory innovation and instead suggested that regulators should continue to use anachronistic models to meet consumer demand for new models of delivery. As most members of the Task Force were on their way back to Washington for the week’s voting schedule, the lack of attendance deprived the hearing of a substantive debate on issues that will continue as the rise of nonbank financial institutions continues to change the financial services industry.
Small Business PPP Hearing (10/1): On Thursday, the House Small Business Subcommittee on Investigations, Oversight, and Regulations held a hearing with the Small Business Administration (SBA) Office of Inspector General (OIG) and the Government Accountability Office (GAO) to review issues pertaining to fraud in the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program. The Subcommittee discussed a Management Report from the SBA OIG and the COVID-19 reports from the GAO detailing a lack of internal controls and the potential for fraud within PPP and EIDL. The witnesses were candid about both the EIDL program and the PPP’s downfalls in adequately protecting against fraud and expressed frustration at what they characterized as a lack of cooperation from the SBA in order to access necessary data and establish adequate safeguards against fraud. Members praised the critical aid provided by these programs to thousands of struggling small businesses but condemned the fraudulent activity that “wasted” taxpayer dollars at the expense of deserving small businesses.
House Judiciary Antitrust Hearing (10/1): On Thursday, the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law held a hearing to examine proposals to strengthen antitrust laws and restore online competition. With a particular focus on Amazon, Apple, Facebook, and Google, the Subcommittee sought to determine whether current laws are sufficient in negating anticompetitive behavior and monopolistic power. While there was a general agreement that congressional action is needed, the discussion diverged on whether greater enforcement of existing antitrust laws alone goes far enough to curb antitrust issues. Key suggestions from the hearing included: (1) a change of presumptions in statutory interpretations of mergers and acquisitions; (2) a structural separation of lines of business that companies can operate in; (3) more rigorous enforcement of existing laws; (4) the reversal of court decisions that have misinterpreted or changed antitrust policy and precedent; and (5) passing further legislative provisions that explicitly dismiss anticompetitive behavior.
H.R. 8410 (Barr): To require the appropriate Federal banking agencies to establish a 3-year phase-in period for de novo financial institutions to comply with Federal capital standards, to provide relief for de novo rural community banks, and for other purposes.
H.R. 8434 (Rice): To require the Secretary of the Treasury to establish a Restaurant Reimbursement Program, and for other purposes.
H.R. 8411 (Blumenauer): To amend the Internal Revenue Code of 1986 to repeal fossil fuel subsidies for oil companies, and for other purposes.
H.R. 8407 (Reschenthaler): To require the Securities and Exchange Commission to assess whether the disclosure of information related to investments in certain entities is necessary or appropriate for the purposes of certain reports under the securities laws, to establish the Entities of the People’s Republic of China that Threaten United States National Security List, and for other purposes.
H.R. 8512 (Foster): To require the Securities and Exchange Commission to promulgate regulations relating to the disclosure of certain commercial data, and for other purposes.
H.R. 8497 (Smith): To prohibit certain business concerns from receiving assistance from the Small Business Administration, and for other purposes.
Bipartisan Letter to Treasury on International ICS: On Friday, a bipartisan group of eight Members, lead by Reps. Heck, Budd, and Zeldin sent a letter to Treasury Secretary Mnuchin commending Treasury and the Federal Insurance Office (FIO) for their work with the Federal Reserve Board of Governors and the state insurance regulators (NAIC) for protecting the U.S. state-based insurance regulation in international negotiations to set capital standards for internationally active insurance companies. The letter make clear that that the position for these international agreements must not only reflect and protect the U.S. state-based system, but also remain consistent with U.S. federal and state insurance laws and regulations. Additionally, the letter urges Treasury to extend the ICS monitoring period by one year due to concerns about the impact of the industry by COVID-19.
House Republican China Task Force Issues Report: On Wednesday, Republican Leader Kevin McCarthy (CA-23), Republican Whip Steve Scalise (LA-01), Conference Chair Liz Cheney (WY-AL), China Task Force Chairman and House Committee on Foreign Affairs Lead Republican Michael McCaul (TX-10) and other members of the China Task Force held a press conference to unveil the China Task Force’s extensive report. The report outlines 400 recommendations, nearly 200 of which are legislative and two-thirds of which are bipartisan, with a focus on providing incentives to strengthen America’s economy and global competitiveness.
Waters Urges SEC to Rescind Recent Rulemaking: On Friday, Congresswoman Maxine Waters (D-CA) sent a letter to Securities and Exchange Commission (SEC) Chairman Jay Clayton, urging the SEC to rescind “harmful proposed amendments” to rule 13-F and rule 13f-1 of the of the Securities and Exchange Act which she argued would reduce transparency in capital markets. The SEC finalized its shareholder proposed rule on Sept. 23 in an attempt to modernize disclosure frameworks, but has been meant with significant criticism — particularly from Democrats — who contend that the ruling would limit shareholder engagement and transparency of market information. Senate Banking Committee Ranking Member Sherrod Brown sent a similar letter last week, potentially foreshadowing pressure on the SEC in 2021 should there be a change in Administration.
Last Week in the Senate
On Wednesday, Senators overwhelmingly passed the bipartisan continuing resolution (CR) (text; summary) ahead of the Sept. 30 government funding deadline. The measure — which includes extensions for the surface transportation law, National Flood Insurance Program (NFIP), and expiring health care programs — punted the funding deadline into the “lame duck” session on Friday, Dec. 11.
Senate Commerce Committee Executive Session (9/30): On Thursday, the Senate Commerce Committee voted on a bipartisan basis to subpoena the CEOs of Facebook, Google and Twitter to testify before the panel about concerns over the tech industry’s key legal shield, Section 230 of the Communications Decency Act.
S. 4755 (Booker): the “Prohibit Auto Insurance Discrimination (PAID) Act,” which is a companion bill to H.R. 3693 previously introduced by Representatives Bonnie Watson Coleman and Rashida Tlaib and would eliminate the use of income, education level, employment status, home ownership status, credit score, gender, zip code, census tract, and marital status from insurance underwriting.
S. 4754 (Perdue): A bill to amend the Internal Revenue Code of 1986 to establish COVID Recovery Bonds, and for other purposes.
S. 4771 (Wyden): A bill to provide continued assistance to unemployed workers.
Last Week in the Administration
Fed extends shareholder payout restrictions for big banks
The Federal Reserve announced Wednesday that it is extending for an additional quarter several measures to ensure large banks maintain a high level of capital resilience. Banks with more than $100 billion in total assets will be prohibited from making share repurchases for the fourth quarter of this year, with additional dividend payment caps tied to recent income.
Banking Agencies Finalize Rule on COVID-19 Facilities
Federal banking agencies finalized a rule aimed at facilitating banks’ participation in the Paycheck Protection Program and Money Market Mutual Fund Liquidity Facilities. The final rule formally adopts three interim final rules issued earlier this year that allows banks to neutralize the effects of their participation for purposes of the liquidity coverage ratio.
FIO 2020 Report
On Thursday the Federal Insurance Office (FIO) of the Treasury Department released its annual report on the insurance industry and FIOs role in it. The report, which is required by Section 502(a) of the Dodd-Frank Act offers a comprehensive overview of the state of insurance , including how COVID-19 has impacted the life and property casualty arms of the industry.
This Week’s Schedule
The House is not in session this week and the Senate announced it will not be in session until October 19th. As of the writing of this newsletter the Senate Judiciary Committee is still scheduled to hold a nominations hearing for the Supreme Court the week of October 12th.