Financial Services Report (12/7)

While the House and Senate were in session last week, the lame duck is now going to begin in earnest. First up this week will be the NDAA, which the House will take up on Tuesday. With the President continuing to threaten to veto the bill over non-defense related technology issues, the first threshold will be whether the measure passes House with a veto proof margin.

Next on the agenda are continued negotiations to try to find a path forward on government funding, which is currently scheduled to run out on December 11th. As of last week, it appeared that a one-week short term patch may be necessary, as a few hundred policy issues still needed to resolved. Additionally, for the first time since late July it appears as if Congress may pass some type of COVID-19 stimulus bill – as a bipartisan negotiations in the Senate have ramped up. Whether this time is different, or Congress continues to be Charlie Brown running at Lucy’s football remains to be seen.

As Congress once again races to complete its work before the winter solstice, the next two weeks will be full of news, rumors and hard politics as the proverbial sausage gets made. As always, if you have any questions or if our team at Thorn Run can be of any additional assistance, please just reach out.

Have a great (and safe) week!

Last Week in the House

Of note, the following bills were passed in the House last week:

  • The Holding Foreign Companies Accountable Act passed on Wednesday, which would require the companies to disclose more information about any ties to foreign governments and the Chinese Communist Party, and would remove them from the U.S. exchanges after three years if they did not provide U.S. regulators access to their audit information. With its Senate companion passed in May, President Trump is expected to sign it into law.
  • The Marijuana Opportunity Reinvestment and Expungement (MORE) Act passed the House on Friday by a vote of 228-164 — largely along party lines. The bill would decriminalize cannabis at the federal level while also expunging nonviolent cannabis convictions from criminal records. 
  • H.R. 7903, which establishes through FY2025 a Community Advantage Loan Program under which the Small Business Administration may guarantee loans made by covered institutions to small business concerns in underserved markets.
  • The 504 Credit Risk Management Improvement Act of 2020 passed on Thursday, which revises the duties of the Office of Credit Risk Management to include oversight of a certified development company (CDC) that participates in the 504 Loan Program of the Small Business Administration

Hearings

HFSC CARES Oversight (12/02): On Wednesday, the House Financial Services Committee held a hearing to convene its fourth quarter CARES Act oversight with Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin. There was broad bipartisan agreement on the need for further aid to see the country through the remainder of the pandemic, particularly by way of support for the reauthorization of the Paycheck Protection Program (PPP), extended unemployment benefits, and additional state and local aid. Rep. Andy Barr (R-KY) additionally urged Congress to extend Troubled Debt Restructuring (TDR) relief. In response to concerns about the transition from LIBOR to SOFR, Chair Powell stated that there is a proposal forthcoming to implement a “hard tail” for publications in which LIBOR will cease to exist on June 30, 2023, aside from the remaining contracts. Also of note, in an exchange with regarding the capitalization of the Enterprises, Secretary Mnuchin stated that there could be some point between “basically the zero capital that they have now, and the full capital requirement, in which there would be a consent order and they would be released” but emphasized that would require significant capital.

Bills Introduced

H.R. 8827 (Tlaib): To amend the Federal Deposit Insurance Act to provide for the classification and regulation of stablecoins, and for other purposes.

H.R. 8841 (Sherman): To amend the Securities Exchange Act of 1934 to require that certain issuers make disclosures regarding general ledger accounts reconciliation, and for other purposes.

H.R. 5306 (Larson): To amend title XI of the Social Security Act to clarify the mailing requirement relating to social security account statements.

Other Activity

NDAA moves forward despite Veto Threat: The House schedule for this week indicates that it will vote on the conference report for National Defense Authorization Act on Tuesday, despite the President’s threat to veto it over a technology policy change he would like included. While this bill is primarily focused on defense and military policy there are other provisions of interest to the financial services, including a section that significantly alters the beneficial ownership rules to limit money laundering and other criminal activity. This language appears to be more like the Illicit Cash Act than the amendment that was offered to the House version of the NDAA earlier this year. Among other things, the language requires a federal registry to maintain beneficial ownership information, and other provisions designed to improve the ability to identify money laundering and criminal networks.

Chair Waters Recommendations to Biden: Chairwoman Waters sent a letter on Friday to President-elect Biden, offering her suggestions for financial services-related regulatory and administrative actions by the Trump Administration that she argues the Biden team should prioritize the elimination of “on day one.” The lengthy missive, which clocked in at 14 pages of text and 30 pages of an addendum, outlined the specific rule changes the Chair would like to see the new Administration execute. The letter also offers a clear view of the issues that the Chair intends to have the Committee raise over the next two years, especially in areas of housing, consumer protection, investor protection and climate change.

Chair Waters Letter to FHFA Director: House Financial Services Committee Chairwoman Maxine Waters (D-CA) penned a letter on Thursday to Federal Housing Finance Agency Director Mark Calabria, urging him to halt efforts to release the Enterprises from conservatorship amid the pandemic. Arguing that to continue efforts to raise capital requirements for Fannie Mae and Freddie Mac would put already vulnerable renters and homeowners at risk, she called for Director Calabria immediately stop efforts and to testify before Congress on the issue.

Dem Leadership Elections Finalized: Last week, House Democratic Leadership elections were finalized, with two other members of the House Financial Services Committee being elected to Chair other Committees. First, Rep. Greg Meeks (NY) was elected to serve Chairman of the Foreign Affairs Committee, and then David Scott (GA) was elected to serve as the Chairman of the House Agriculture Committee. Both Meeks and Scott become the first African American member of Congress to chair their respective Committees. In the other contested Chairmanship race, Rosa DeLauro (CT) easily bested a challenge from two other members to assume the Chairmanship of the Appropriations Committee. In the final leadership race, Rep. Sean Patrick Maloney (NY) was elected to serve as the first openly gay leader of the party’s campaign arm as DCCC Chair.

New Dem New Leadership and Members: On Tuesday, the New Democrat Coalition elected a new leadership team and inducted five members-elect to join the coalition in the 117th Congress. The Coalition elected Rep. Suzan DelBene (WA) to be the next Chair; Reps. Ami Bera (CA), Sharice Davids (KS), Annie Kuster (NH), and Scott Peters (CA) to be the next Vice Chairs; and Rep.-elect Kathy Manning (NC) to be the Freshman Leadership Representative.

Last Week in the Senate

The Floor

On Thursday, Christopher Waller, nominated by President Trump to the Federal Reserve’s seven-member Board of Governors, was confirmed by a narrow margin of 48-47.

Hearings

Senate Banking CARES Oversight (12/01): On Tuesday, the Senate Banking Committee held its CARES Act oversight hearing with Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin. Much of the discussion centered around the state of economic recovery, the spike in COVID-19 cases, and the recent announcement by Secretary Mnuchin to terminate several emergency lending programs at year-end. Secretary Mnuchin maintained that it was his legal requirement, per Section 4029 of the CARES Act, that the programs be terminated. While Democratic Senators largely pushed back on this notion, their Republican colleagues expressed support for this decision and praised the “success of the programs in stabilizing the credit markets.” With a focus on seeing the country through the remainder of the pandemic, Members expressed the need for another relief package to provide further aid to small businesses — including calls for streamlining the PPP forgiveness process — and underscored the need to address prevalent racial inequality that the pandemic has shed light on.

Bills Introduced

S. 4935 (Wyden): A bill to provide continued assistance to unemployed workers.

S. 4941 (Warren): A bill making emergency supplemental appropriations for the fiscal year ending September 30, 2020, and for other purposes.

S. 4927 (King): A bill to exclude EIDL advance amounts from the calculation of loan forgiveness under the paycheck protection program, and for other purposes.

S. 4953 (Cassidy): A bill to prohibit data brokers from selling, trading, licensing, or otherwise provide for consideration lists of vulnerable populations to any individual or commercial entity.

Other Activity

Sens. Oppose USTR Proposed Tax Increase: Sen. John Cornyn (R-TX) led a letter to U.S. Trade Representative Robert Lighthizer opposing a proposed provision that would unfairly disadvantage U.S.-based job creators who employ Americans in Foreign Trade Zones (FTZs) by re-imposing a $2 billion NAFTA-era tax increase through a “technical correction.” The letter argued that supporting such a tax increase during a global pandemic and economic recession would harm American manufacturers across a wide range of industries, including the energy, electronics, automobile, and pharmaceutical sectors, among others. Sen. Cornyn was joined by colleagues Tom Carper (D-DE), Chris Coons (D-DE), Cindy Hyde-Smith (R-MS), Jerry Moran (R-KS), and Ben Sasse (R-NE).

Last Week in the Administration

NASDAQ Petitions SEC for Board-Diversity Rule

On Tuesday, the Nasdaq filed a proposal with the Securities and Exchange Commission that would require listed companies to have at least one female board member, plus one board member from an underrepresented minority or who is Lesbian, Gay, Bisexual or Transgender. Companies that don’t disclose diversity information face potential delisting, while those that report their data but don’t meet the standards will have to publicly explain why. Over the past six months, Nasdaq found that more than 75 percent of its 3, 249 listed companies did not meet its proposed diversity requirements.

LIBOR Proposed Plan

On Monday, regulators in the United States and United Kingdom, along with the benchmark administrator for LIBOR, released a proposed path forward in which banks should stop writing new U.S. Dollar LIBOR contracts by the end of 2021, while most legacy contracts will be able to mature before LIBOR stops.

SEC Panel Urges ESG Disclosure Standards

The SEC’s Asset Management Advisory Committee on Tuesday discussed a draft recommendation urging the agency to establish standards for the disclosure of material ESG risks by companies. The committee stated that improved corporate disclosures on sustainability would make it easier to evaluate investment funds claiming an environmental, social and governance focus.

CFPB Advisory Opinion Policy

On Monday, the Consumer Financial Protection Bureau (Bureau) issued its final Advisory Opinions Policy (Policy) to publicly address regulatory uncertainty in the Bureau’s existing regulations and provide guidance to entities on outstanding regulatory uncertainty. Under the final Policy, entities seeking to comply with regulatory requirements can submit a request to the Bureau where uncertainty exists. The Bureau’s Advisory Opinion program provides written guidance to assist regulated entities to better understand their legal and regulatory obligations through advisory opinions.

CFPB Military Lending Act Lawsuit

On Friday, the Bureau filed a lawsuit against LendUp Loans, LLC, alleging that the company violated the Military Lending Act (MLA) in connection with its extensions of credit. The action is part of a broader sweep by the Bureau to investigate lenders potentially in violation of the MLA, whether by exceeding the 36 percent Military Annual Percentage Rate (MAPR) cap, failing to comply with required loan disclosures, and extending loans that require arbitration.

Fed and Treasury Extended Certain CARES Act Lending Facilities

On Monday, Treasury Secretary Steven T. Mnuchin sent a letter to Chairman of the Federal Reserve Board of Governors Jerome Powell approving the extension of four of its credit facilities until March 31, 2021. The extensions apply to the Commercial Paper Funding Facility and Money Market Mutual Fund Liquidity Facility, to which Treasury has provided funding drawn from the pre-existing Exchange Stabilization Fund balance, and the Primary Dealer Credit Facility and Paycheck Protection Program Liquidity Facility, which did not require Treasury funding. 

Looking Ahead

Mon. (12/7)

  • Bipartisan Policy Center 2020 Solutions Summit – 2:00 PM – The Bipartisan Center will hold its 2020 Solutions Summit: Blueprint to Restore Economic Security for Working Families. Details here.

Tues. (12/8)

  • AEI Webinar on Biden Trade Policy – 2:00 PM – The American Enterprise Institute will host a webinar entitled “Joe Biden’s Trade Policy Challenge.” Details here.
  • Bipartisan Policy Center 2020 Solutions Summit – 2:00 PM – The Bipartisan Center will hold its 2020 Solutions Summit: Blueprint to Restore Economic Security for Working Families. Details here.
  • Tax Policy Center Webinar on Biden Tax Agenda – 2:00 PM – The Tax Policy Center will host a webinar entitled “A Look at President-Elect Biden’s Tax Agenda.” Details here.

Wed. (12/9)

  • Hearing: Senate Commerce Committee on the EU-US Privacy Shield – 10:00 AM – The Senate Committee on Commerce, Science, and Transportation will hold a hearing entitled “The Invalidation of the EU-US Privacy Shield and the Future of Transatlantic Data Flows.” Details here.
  • Hearing: Senate Finance Sub. on Retirement Security – 10:00 AM – The Senate Finance Subcommittee on Social Security, Pensions, and Family Policy will hold a hearing entitled “Investigating Challenges to American Retirement Security.” Details here.
  • Bipartisan Policy Center 2020 Solutions Summit – 2:00 PM – The Bipartisan Center will hold its 2020 Solutions Summit: Blueprint to Restore Economic Security for Working Families. Details here.

Thu. (12/10)

  • Hearing: Senate Small Business Committee on PPP – 10:00 AM – The Senate Committee on Small Business and Entrepreneurship will hold a hearing entitled “Small Business in Crisis: The 2020 Paycheck Protection Program and its Future.” Details here.
  • Bipartisan Policy Center 2020 Solutions Summit – 2:00 PM – The Bipartisan Center will hold its 2020 Solutions Summit: Blueprint to Restore Economic Security for Working Families. Details here.

Fri. (12/11)

  • Bipartisan Policy Center 2020 Solutions Summit – 2:00 PM – The Bipartisan Center will hold its 2020 Solutions Summit: Blueprint to Restore Economic Security for Working Families. Details here.