Financial Services Report (3/1)March 1, 2021
Action on the reconciliation bill will turn to the Senate, which is expected to turn its attention to the measure before the end of this week. In addition, the Senate will continue to vote on the President’s nominees, with pending action expected on Monday to approve Miguel Cardona to lead the Department of Education. Later in the week the Senate is expected to approve Gov. Gina Raimondo to be the Secretary of Commerce, overcoming a hold that Senator Ted Cruz (R-TX) had placed over concerns about Huawei and Chinese state-run entities.
In the House, lawmakers are scheduled to consider two pieces of legislation that passed the chamber late last year that touch on key Democratic policy priorities. This includes a package of policing reforms that seek to overhaul use of force guidelines, promote more transparency within law enforcement entities, and reform qualified immunity and no-knock warrants, among other things. The House will will also take up the Democrats’ For The People Act, (H.R. 1) which would renew the Voting Rights Act along with a number of reforms that seek to reduce barriers to voting and strengthen ethics rules for public officials.
In notable committee activity next week, the Senate Banking Committee will hold a confirmation hearing for two of President Biden’s picks to lead key financial regulatory agencies. Gary Gensler and Rohit Chopra — the President’s choices to head the Securities and Exchange Commission (SEC) and Consumer Financial Protection Bureau (CFPB) respectively — will testify before the Committee on Tuesday.
Last Week in the House
The landmark Equality Act (HR. 5) passed the House on Thursday by a vote of 224-206. The legislation amends existing civil rights laws to explicitly include sexual orientation and gender identification as protected characteristics — extending to employment, housing, loan applications, education, public accommodations, and other areas.
The House has earmarked the week of March 8 to vote on the $1.9 trillion relief package again, given the fact Senators will need to make changes to the underlying bill, after the Senate Parliamentarian ruled Thursday that the proposed $15 minimum wage increase would violate budget reconciliation rules.
Semiannual Monetary Policy Report (2/24): On Wednesday, Federal Reserve Chairman Jerome Powell testified before the House Financial Services Committee to report on monetary policy and the state of the economy. Members discussed a broad range of economic issues, including unemployment, inflation, and climate risk, in addition to key financial issues overseen by the central bank.
Chairman Powell declined to weigh in on the American Rescue Plan but stated that getting the country vaccinated is the single most important economic recovery tool. He also maintained that the Fed is monitoring, and has the tools to address inflation, but does not see a risk of significant or persistent inflation resulting in the short term from continued Fed action or additional stimulus. While Chairman Powell spoke of the role the central bank has in ensuring that the financial systems monitor all forms of risk, he argued that the nation’s climate policy has to be decided by its elected officials. The February policy report outlines a new Fed goal of full employment, which Chairman Powell stated must account for people that have left the workforce over the last year — which was most notably women. Additionally, several Members questioned whether the Fed intends to extend supplemental leverage ratio (SLR) exclusions past the nearing deadline, and what the progress is on the digital dollar. Chairman Powell assured that a decision on extending SLR exclusions is forthcoming and announced that the central bank intends to engage with the public quite a bit this year about its digital dollar development process.
HFSC O&I Examines Lending Discrimination (2/24): On Wednesday, the House Financial Services Subcommittee on Oversight and Investigations held a hearing entitled “How Invidious Discrimination Works and Hurts: An Examination of Lending Discrimination and its Long-Term Economic Impacts on Borrowers of Color.” The discussion centered around the racial wealth and homeownership gap as well as the historic and recent contributors to lending and housing discrimination. Chairman Al Green (D-TX) recently introduced the Fair Lending Act (H.R. 166), which would establish an Office of Fair Lending Testing to test for compliance with the Equal Credit Opportunity Act, to strengthen the Equal Credit Opportunity Act and to provide for criminal penalties for violating such Act. In addition to this legislation, several policy proposals were discussed — namely the potential use of financial technology — to combat discrimination and create opportunities for wealth accumulation for both minority and rural low-income communities.
Judiciary Subcommittee Seeks to Expand Online Competition (2/25): On Thursday, the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law (ACAL) held its first hearing in a series of efforts to discuss proposals to limit anticompetitive and monopolistic behavior in the online marketplace. The discussion centered around potential antitrust concerns over action by major players in the technology sector, with policy proposals including: (1) the creation of a nondiscrimination tribunal under an existing federal agency such as the FTC; (2) imposing structural line-of-business separation restrictions; (3) creating interoperability and data portability laws; and (4) enabling more robust enforcement of antitrust laws in mergers and acquisitions. Several members also raised concerns about Section 230 of the Communications Decency Act in complaints of Big Tech silencing politic speech. Additionally, Members underscored the need to balance any new legislation or regulation with user data privacy issues.
Cap Markets Subcommittee Discusses Climate Change and Corporate Social Responsibility (2/25): On Friday, the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing entitled “Climate Change and Social Responsibility: Helping Corporate Boards and Investors Make Decisions for a Sustainable World.” The hearing discussed the potential implementation of corporate climate disclosure mandates on publicly traded companies — an issue that was met with partisan debate. Republicans maintained that many corporations are voluntarily disclosing environmental, social, and corporate governance (ESG) related information, and that imposing a government mandate would harm the country’s geopolitical competitiveness, overburden small corporations, and politicize information that, if material, is already required to be disclosed. Meanwhile, Democrats maintained that the risk climate change poses on the financial system — and on minority and low-income communities in particular — makes ESG-related corporate activity disclosures, and the standardization of them, critical to providing reliable, comparable data to all stakeholders.
H.R. 1200 (Khanna): To provide appropriations for the Internal Revenue Service to overhaul technology and strengthen enforcement, and for other purposes.
H.R. 1271 (Welch): To amend the Internal Revenue Code of 1986 to extend certain tax credits related to electric cars, and for other purposes.
H.R. 1277 (Meeks): To amend the Securities Exchange Act of 1934 to require the submission by issuers of data relating to diversity, and for other purposes.
H.R. 1345 (Hill): To require the Secretary of Commerce to conduct an assessment and analysis relating to the decline in the business formation rate in the United States.
H.R. 1360 (Meeks): To amend the Internal Revenue Code of 1986 to establish qualified down payment savings programs.
H.R. 1381 (Smith): To amend the Internal Revenue Code of 1986 to make permanent the deduction for qualified business income.
H.Res 142 (Lamborn): Condemning big tech’s partisan censorship practices.
H. Con Res 18 (Velázquez): Expressing the sense of Congress regarding the importance of including small business concerns, especially minority-owned small business concerns, in any efforts to leverage the Defense Production Act in response to the COVID-19 pandemic.
House Dems Call for Unemployment Tax Relief: On Thursday, a group of twelve House Democrats sent a letter to House Leadership, calling on them to include unemployment tax relief in the American Rescue Plan. Citing that over 18 million Americans are claiming some form of unemployment this year, the Members argue that the enhanced unemployment benefits extended in Congress’ pandemic response will lead to unexpected, higher tax bills this spring if action is not taken. “In a survey conducted last fall by Jackson Hewitt, 39% of respondents were unaware UI benefits are taxable…Reporting from outlets nationwide has chronicled stories of workers who claimed UI benefits last year now facing surprise tax bills of over $1,000,” the Members wrote. They urged the passage of the Coronavirus Unemployment Benefits Tax Relief Act, to waive federal income taxes on the first $10,200 of unemployment benefits received in 2020.
Maloney, Meeks Urge SEC to Adopt NASDAQ Diversity Rule: On Monday, House Financial Services Committee Members Carolyn Maloney (D-NY) and Greg Meeks (D-NY) sent a letter to SEC Acting Chair Allison Herren Lee, urging the agency to adopt the NASDAQ’s recent proposal to provide transparency in the board-level composition and diversity of listed companies. The Congressmen wrote: “As longtime champions of legislation aimed at improving corporate board diversity, we strongly believe that by requiring companies to analyze the makeup of their boards through public disclosure, we will create incentives and inspire change to ensure boards better reflect the American public at large.”
GAO Releases Fair Access Report: On Wednesday, the GAO released its “Fair Lending, Access, and Retirement Security” report. The report found persistent income and wealth disparities that disproportionately challenge minority and lower-income households’ access to credit and financial security in retirement. These groups were less likely to access traditional banking services and more likely to use costlier products and services, such as payday loans or loans against tax refunds. It also found that minority-owned small businesses generally had lower approval rates for credit sought and were approved for smaller shares of financing than they sought. Low-income and minority households were found to have lower participation in retirement savings plans and lower levels of other non-retirement assets such as home equity than White households. The report suggested that fintech could expand credit access for borrowers but noted the potential lending discrimination risks in fintech’s use of alternative data are still not fully understood.
Last Week in the Senate
Last week, the Senate confirmed Linda Thomas-Greenfield to serve as U.S. ambassador to the U.N, Tom Vilsack as Agriculture secretary, and Jennifer Granholm as Energy secretary. Wally Adeyemo also appears on track for a swift, uncontroversial Senate confirmation as the first Black deputy Treasury secretary.
The vote on Neera Tanden’s confirmation as OMB director was postponed after Sen. Joe Manchin (D-WV) and several moderate Republican Senators announced their opposition to her appointment. Sen. Lisa Murkowski (R-AK )— who is seen as a potential swing vote that could save Tanden’s nomination — is set to meet with her today.
Senate Banking Hears from Fed Chair on Monetary Policy (2/23): On Tuesday, Chairman Powell appeared before the Senate Banking Committee to deliver the Fed’s semi-annual monetary report to Congress. While Republicans pushed back on the partisan American Rescue Plan and voiced concern about the potential for inflation, Democrats echoed their notion that doing too much is less risky than doing too little to respond to the economic crisis. Chairman Powell reiterated the Fed’s long-term objective for inflation to remain below two percent and explained that the central bank will not tighten monetary policy solely in response to a strong labor market. He additionally committed to clearly communicate the Fed’s assessment of progress toward its goals well in advance of any change in the pace of the central bank’s purchases. Member discussion and questioning mirrored that of the House Financial Services Committee — with Chairman Powell dismissing any serious inflation concerns, announcing the central bank’s “FedNow” payment system is on track for 2023 completion, and assuring that updates around SLR exclusions and the Fed’s digital dollar are impending.
Deputy Treasury Secretary Sails Through Hearing (2/23): On Tuesday, former BlackRock executive Wally Adeyemo appeared to sail through his nomination hearing, earning bipartisan praise for his experience and commitment to addressing inequality in his roles in the Biden Administration. During his hearing he defended the size and scope of the Administration’s COVID-19 relief package while also committed reviewing the previous administration’s use of Treasury’s “entities list” to prevent certain Chinese companies from operating in the United States, noting “It is critical that we use the Treasury’s tools and our tools to hold China accountable for actions that they take that are not consistent with international law and that put our national security at risk …”
USTR Nomination Hearing (2/25): On Thursday, the Senate Finance Committee held ha nomination hearing for Katherine Tai to be the next United States Trade Representative (USTR). Ms. Tai’s nomination appeared to be met with broad bipartisan support, as Senators on both sides of the aisle praised her prior work on the House Ways and Means Committee staff. During the hearing, issues around the continued implementation of the U.S.-Mexico-Canada Agreement (USMCA), as well as competing with and combating China’s broad trade ambitions and illicit intellectual property (IP) theft were addressed by Senators on both sides of the aisle. Other issues that were discussed included bolstering domestic manufacturing and supply chain resilience, as well as digital services taxes, tariffs, IP protections, climate change, the Trans-Pacific Partnership, and Trade Promotion Authority (TPA), among others.
A committee vote is expected quickly, and could put her on track for confirmaiton in the next couple of weeks barring any last-minute surprises.
Improving Corporate Governance Through Diversity Act (Menendez): A bill to amend the Securities Exchange Act of 1934 to require public companies to disclose the racial, ethnic, gender and veteran composition of their corporate boards and senior management. The bill would also require the Treasury Department’s Director of the Office of Minority and Women Inclusion to publish a report to the SEC every three years, including best practices and compliance. Additionally, it would establish a Diversity Advisory Group to study the status of corporate diversity and to submit annual reports to Congress. This is the Senate companion to the Meeks bill.
S. 346 (Klobuchar): A bill to establish an advisory office within the Bureau of Consumer Protection of the Federal Trade Commission to prevent fraud targeting seniors, and for other purposes.
S. 380 (Rubio): A bill to amend the Internal Revenue Code of 1986 to improve access to health care through expanded health savings accounts, and for other purposes.
S. 384 (Cortez Masto): A bill to require the Administrator of the Small Business Administration to encourage entrepreneurship training in after school programs, and for other purposes.
S. 395 (Merkley): A bill to amend the Internal Revenue Code of 1986 to extend certain tax credits related to electric cars, and for other purposes.
S. 404 (Menendez): A bill to provide funding for the Neighborhood Reinvestment Corporation Act, and for other purposes.
S. 436 (Collins): A bill to provide Federal matching funding for State-level broadband programs.
S. 443 (Whitehouse): A bill to amend the Federal Election Campaign Act of 1971 to provide for additional disclosure requirements for corporations, labor organizations, Super PACs and other entities, and for other purposes.
S. 456 (Durbin): A bill to amend the Internal Revenue Code of 1986 to permanently extend the new markets tax credit, and for other purposes.
S. 474 (Braun): A bill to prohibit the Export-Import Bank of the United States from providing financing to persons with seriously delinquent tax debt.
S. 478 (Cotton): A bill to gradually raise the Federal minimum wage, to permanently establish the E-Verify employment eligibility verification system, to mandate the use of E-Verify by all employers, and for other purposes.
S. 479 (Wicker): A bill to amend the Internal Revenue Code of 1986 to reinstate advance refunding bonds.
S. 480 (Daines): A bill to amend the Internal Revenue Code of 1986 to make permanent the deduction for qualified business income.
Last Week in the Administration
Yellen Urges G-20 to Increase Global Vaccination Efforts
On Thursday, Treasury Secretary Janet Yellen issued an urgent call for global cooperation to defeat the coronavirus pandemic and bolster the global economic recovery. “No one nation alone can declare victory over these crises,” she said in a letter to her colleagues in the Group of 20 countries. Secretary Yellen urged the G-20 countries to increase their support for global vaccination programs, citing “the high, unmet needs of these initiatives,” and calling this a moment “made for action and for multilateralism.” She also emphasized the need for a coordinated response to the global crisis and urged G-20 countries “to continue to take significant fiscal and financial-policy actions and avoid withdrawing support too early.” Secretary Yellen raised particular concern for low-income countries, which she said could experience further deaths and a needless delay of their economic recoveries without access to vaccines.
SEC to Review Climate Disclosure Guidance
On Wednesday, Securities and Exchange Commission (SEC) Acting Chair Allison Herren Lee directed agency staff to begin work on revising its decade-old climate change disclosure guidance for public companies. The regulator seeks to update the guidance to build “a more comprehensive framework that produces consistent, comparable, and reliable climate-related disclosures.” Lee said in the statement that, “now more than ever, investors are considering climate-related issues when making their investment decisions. It is our responsibility to ensure that they have access to material information when planning for their financial future.” This marks the agency’s first move in the Biden era to address financial risks from global warming, and comes just before Gary Gensler’s SEC nomination hearing before the Senate Banking Committee this week.
Treasury’s Opens CDFI Fund
On Thursday, the Treasury Department’s Community Development Financial Institution Fund (CDFI Fund) announced the opening of its FY 2021 CDFI Rapid Response Program. The program intends to provide $1.25 billion to CDFIs to help their communities respond to the economic hardships created by the COVID-19 pandemic. The first tranche of $3 billion in total CDFI grant funding that was enacted into law in December, this historic investment in institutions is meant to reach communities that have traditionally been underserved by the financial sector. “Community Development Financial Institutions are critical for ensuring the flow of capital to households and neighborhoods that have historically been underserved in our nation’s financial services marketplace and that have been hard hit during the COVID pandemic,” said Treasury Secretary Janet Yellen. “The program we are launching will allow CDFIs across the country to significantly scale up their work and play their important role in ensuring an equitable economic recovery.”
Organizations Push Yellen to Act on Climate Post
On Thursday, a coalition of nearly 150 environmental, social justice, and consumer advocates, sent a letter to Treasury Secretary Janet Yellen, urging the Department to move quickly to put a senior-level person in charge of climate efforts. The letter warns that climate change poses a clear and immediate threat to the financial system and the economy. “Regulators must address not only the risk that climate change poses to financial institutions and the system, but also the risk financial institutions inject into the economy through their high-carbon financing,” the groups wrote. “They must address the disproportionate impact of reckless carbon-polluting finance on the largely low-income communities of color who bear the brunt of climate harms.” Sarah Bloom Raskin, a former deputy Treasury secretary and member of the Federal Reserve Board under President Barack Obama, is a front-runner for the job — which Yellen promised to create during her January confirmation hearing.
This Week’s Schedule
- Business Meeting: Senate Judiciary Committee – 1:00 PM – The Senate Judiciary Committee will hold a business meeting to vote on Judge Merrick Garland’s nomination to be U.S. Attorney General. Details here.
- Technology Policy Institute Webinar on Fintech – 1:00 PM – The Technology Policy Institute will host a webinar entitled “FinTech in the Biden Administration.” Details here.
- The Verge Webinar on Section 230 – 2:00 PM – The Verge will host a webinar discussion with Sen. Amy Klobuchar (D-MN) entitled “Fixing Section 230 Without Breaking the Internet.” Details here.
- Confirmation Hearing: Senate Banking Committee – 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hearing to consider the nominations of Gary Gensler to be Chairman of the Securities and Exchange Commission (SEC), as well as Rohit Chopra to be Director of the Consumer Financial Protection Bureau (CFPB). Details here.
- Confirmation Hearing: Senate Budget Committee – 11:00 AM – The Senate Budget Committee will hold a confirmation hearing to consider Shalanda Young’s nomination to be Deputy Director of the Office of Management and Budget (OMB) Details here.
- Center for Global Development Webinar on Tax Reform – 10:00 AM – The Center for Global Development will host a webinar entitled “Political Economy of Tax Reforms in Developing Countries.” Details here.
- Hearing: House Ways and Means Subc. on TAA – 10:00 AM – The House Ways and Means Subcommittee on Trade will hold a hearing entitled “Reauthorizing Trade Adjustment Assistance: Opportunities for Equitable Access and Modernization.” Details here.
- Hearing: Senate Banking Committee on the Racial Wealth Gap – 10:15 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “Wall Street vs. Workers: How the Financial System Hurts Workers and Widens the Racial Wealth Gap.” Details here.
- Confirmation Hearing: Senate Homeland Security Committee – 11:00 AM – The Senate Committee on Homeland Security and Government Affairs will hold a confirmation hearing to consider Shalanda Young’s nomination to be Deputy Director of the Office of Management and Budget (OMB), as well as Jason Miller to be Deputy Director for Management at OMB. Details here.
- Cato Webinar on the Federal Reserve – 12:00 PM – The Cato Institute will host a webinar entitled “Engine of Inequality: The Fed and the Future of Wealth in America.” Details here.
- WITA Webinar on the 2021 Trade Agenda – 9:00 AM – The Washington International Trade Association (WITA) will host a webinar entitled “2021 Congressional Trade Agenda. Details here.
- Confirmation Hearing: Senate Judiciary Committee – March 9 – The Senate Judiciary Committee will hold a confirmation hearing to consider the nominations of Lisa Monaco to be Deputy Attorney General, and Vanita Gupta to be Associate Attorney General. Details here.
- Hearing: House Financial Services Committee on Fair Access and Racial Equity – March 10 – The House Financial Services Committee will hold a hearing entitled “Justice for All: Achieving Racial Equity Through Fair Access to Housing and Financial Services.” Details here.
- Hearing: House Financial Services Sub. on Consumer Protection – March 11 – The House Financial Services Subcommittee on Consumer Protection and Financial Institutions will hold a hearing entitled “Slipping Through the Cracks: Policy Options to Help America’s Consumer During the Pandemic.” Details here.
- Hearing: House Financial Services Sub. on Housing during the Pandemic – March 16 – 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.
- Hearing: House Financial Services Committee on the Stock Market – March 17 – The House Financial Services Committee will hold a hearing entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, Part II.” Details here.
- Hearing: House Financial Services Sub. on Diversity and Inclusion – March 18 – The House Financial Services Subcommittee on Diversity and Inclusion will hold a hearing entitled “By the Numbers: How Diversity Data Can Measure Commitment to Diversity, Equity and Inclusion.” Details here.
- Hearing: House Financial Services Sub. on Human Trafficking – March 19 – 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: House Financial Services Committee on the Pandemic Response – March 23 – The House Financial Services Committee will hold an oversight hearing to examine the Treasury Department’s and Federal Reserve’s pandemic response. Details here.