Financial Services Report (4/19)

Another busy week in both chambers. First, in the House, floor activity includes a pair of immigration-related measures, as well as a bill to make Washington, D.C. the 51st state. Additionally, now that Republican opposition to suspension bills has abated, the House is taking up a slew of suspension bills out of the House Financial Services Committee (HFSC) that were delayed last month, including the bipartisan SAFE Banking Act that would offer banking services to legal cannabis businesses.

On the Senate floor next week, Majority Leader Chuck Schumer (D-NY) has queued up a bill that seeks to address the rise an anti-Asian hate crimes, and potentially a water infrastructure bill. Additionally, the Senate will vote on a series of nominations, including for Gary Gensler to receive a full five year term as Chair of the SEC. 

In notable committee activity next week, the House Financial Services Committee will hold an in-person markup, and will consider, among other items: (1) a comprehensive package of debt collection legislation that seeks to enhance consumer, student, small business, and servicemember protections; (2) a bill would require public companies to disclose certain environmental, social, and governance (ESG) matters in annual filings with the Securities and Exchange Commission (SEC); and (3) a slate of bills (H.R. 1277, H.R. 2543; H.R. 2516; H.R. 2123) pertaining to diversity, inclusion, and economic equity.

Meanwhile, the Senate Commerce Committee will hold a hearing with all four Federal Trade Commission (FTC) Commissioners to discuss the FTC’s authority to protect consumers, before having a nomination hearing the following day on Lina Khan to replace Rohit Chopra at the FTC, which means his nomination vote to lead the CFPB is probably weeks away.

Last Week in the House

Floor
On Thursday, the House passed the Paycheck Fairness Act. This bill would, among other things: (1) require employers to disclose that pay disparities exist for “legitimate, job-related” reasons; (2) bolster the Department of Labor’s (DOL) enforcement mechanisms; (3) establish a new negotiation and skills training program at DOL; and (4) allow workers to participate in class action lawsuits against employers that violate paycheck equity statutes. Like other Congressional priorites (H.R. 1, H.R 2…. etc) the legislation isn’t likely to move though the Senate, absent filibuster reform.

Also on the floor Thursday, lawmakers passed a pair of Energy and Commerce suspension bills (H.R. 446; H.R. 1215) that seek to prevent fraud and scams against seniors. House lawmakers closed out their work week on Friday with the passage of a measure that seeks to prevent workplace violence in the health care and social services industries. Specifically, the Preventing Workplace Violence for Health Care and Social Service Workers Act would direct the Occupational Safety and Health Administration (OSHA) to issue a standard that requires employers to develop and implement workplace violence prevention plans to protect physicians, nurses, social workers, and emergency responders, among others. While the bill enjoys strong support from the Biden administration, as well as a handful of House Republicans, it is unclear whether H.R. 1195 has a path forward in the 50-50 Senate at this point.

Hearings, etc.

HFSC Build Back Better Hearing (4/14): On Wednesday, the House Financial Services Committee held a hearing entitled, “Build Back Better: Investing in Equitable and Affordable Housing Infrastructure.” The hearing largely focused on the housing provisions in President Biden’s infrastructure proposal, the American Jobs Plan, as well as some of the 17 bills attached to the hearing. GOP Members pushed back on the plan for its size, proposed tax increases, and lack of focus on traditional infrastructure verticals. A witness from the Manhattan Institute supported these criticisms, and cited a Penn Wharton Budget Model study estimating that there would be zero jobs created, and that wages and GDP would fall in the long term as a result of the plan. Meanwhile, Democrats underscored the need to fortify and expand affordable public housing to address the nation’s housing crisis through an environmental and equitable lens. Several Members underscored the need to boost public housing stock, rather than just retrofit existing units. Although not a major part of the discussion, it was notable that Ranking Member Patrick McHenry (R-NC) used the hearing as a forum to push back on Chairwoman Waters’ new draft five-year National Flood Insurance Program (NFIP) bill for stating that “catering to only some stakeholders while making the program far less sustainable[.]” and throwing cold water on the possibility of bipartisan flood insurance reform.

HFSC Sub Financial Institution Charters Hearing (4/15): On Thursday the House Financial Services Subcommittee on Consumer Protection and Financial Institutions held a hearing titled “Banking Innovation or Regulatory Evasion?” The hearing addressed multiple aspects of the financial technology (fintech) space, including charters, true lenders, and the role of cryptocurrency in banking- though lacked any fintech companies as witnesses. For the most part, Democratic members on the committee used the hearing to express their concerns about the various fintech charters as a potential opportunity for companies to manipulate loopholes and abuse consumers’ data privacy rights. For the most part, Republican members promoted fintech as a practical way to reach underbanked rural communities, although there was bipartisan concern expressed about the possibility of commerce giants — specifically Walmart and Amazon — using the ILC charter to enter (and if you were to believe some of the witnesses) destroy the traditional American banking industry. Subcommittee Chairman Ed Perlmutter (D-CO) advocated for a stable financial system that promotes innovation alongside strong consumer protection and diversity efforts. The push for greater regulation and supervision of unconventional charters was the focal point of most Democratic Members. Full Committee Chairwoman Maxine Waters (D-CA) suggested the OCC overstepped its authority by using outdated laws to grant charters to fintech companies. Rep. Ritchie Torres (D-NY) raised additional concerns about the absence of a federal framework for regulating fintech and blockchain technology. Ranking Member Blaine Luetkemeyer (R-MO), echoed by several GOP colleagues, praised fintech’s ability to serve underbanked people and improve access to credit. Former Acting Comptroller of the Currency Brian Brooks encouraged innovation and suggested that allowing innovators to become part of the chartered banking system the market can prevent stagnation and evolve to meet consumer preferences and needs. Brooks also attempted, though not always successfully, to encourage members to understand the difference between financial companies seeking these charters, and retail powers that may also seek to provide financial services.

Based on comments between Chair Perlmutter and Ranking Member Luetkemeyer, the subcommittee will continue to examine this issue over the the coming year.

HFSC Hearing on LIBOR (4/15): On Thursday afternoon, the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets held a hearing entitled “The End of LIBOR: Transitioning to an Alternative Interest Rate Calculation for Mortgages, Student Loans, Business Borrowing, and Other Financial Products.” Witnesses included Dan Coates from FHFA, SEC’s John Coates, Treasury’s Brian Smith, Mark Van Der Weide from the Federal Reserve, and the OCC’s Kevin Walsh. Members of both sides of the aisle agreed that federal legislation is needed to clarify legacy contracts based on LIBOR that lack fallback language and voiced concerns about the potential of mass litigation once LIBOR expires. Chairman Brad Sherman (D-CA), stressed the importance of legislation to deal with billions of dollars of financial products that are keyed to LIBOR. The discussion underscored the systemic economic risk of inaction, maintaining that since some products are subject to different laws in different states — federal legislation is the only workable solution.

Bills Introduced

H.R. 2450 (Newman): To amend the Internal Revenue Code of 1986 to except certain individuals from the 80 percent taxable income limitation on net operating loss carryovers.

H.R. 2357 (Tlaib): To amend the Fair Debt Collection Practices Act to provide a timetable for the collection of medical debt by debt collectors, to amend the Fair Credit Reporting Act to prohibit consumer reporting agencies from issuing consumer reports containing information about debts related to medically necessary procedures, and for other purposes. 

H.R. 2513 (García): To authorize the Secretary of Housing and Urban Development to make grants to public housing agencies and owners of other federally assisted housing to cover the costs of removing and replacing lead-based water service pipes for federally assisted housing projects, and for other purposes. 

H.R. 2526 (McHenry): To enhance oversight of the implementation of subtitles B and C of title III of the American Rescue Plan Act of 2021 by the Secretary of the Treasury and the Secretary of Housing and Urban Development, and for other purposes. 

H.R. 2516 (Green): To amend the Dodd-Frank Wall Street Reform and Consumer Protection Act to require Federal banking regulators to include a diversity and inclusion component in the Uniform Financial Institutions Rating System, and for other purposes.

H.R. 2543 (Waters): To amend the Federal Reserve Act to add additional demographic reporting requirements, to modify the goals of the Federal Reserve System, and for other purposes.

Real Estate Valuation Fairness and Improvement Act of 2021, H.R. 2553 (Cleaver): To establish an interagency Task Force to analyze Federal collateral underwriting standards and guidance, and for other purposes. 

H.R. 2561 (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. 

Comprehensive Debt Collection Improvement Act, H.R. 2547 (Waters): To expand and enhance consumer, student, servicemember, and small business protections with respect to debt collection practices, and for other purposes. This bill is likely to be considered in the House Financial Services Committee’s markup this week.

H.R. 2572 (Cleaver): To amend the Fair Debt Collection Practices Act to restrict the debt collection practices of certain debt collectors. 

Climate Risk Disclosure Act, H.R. 2570 (Casten): The bill, reintroduced in the Senate as well by Sen. Elizabeth Warren (D-MA), directs the SEC to require that publicly listed companies detail their direct and indirect greenhouse gas emissions, the fossil fuel assets they own or manage, risk management strategies for dealing with climate change and how companies’ valuations would fare if the world warmed 1.5 degrees Celsius or if lawmakers passed policies to avert that mark. This bill is likely to be considered in the House Financial Services Committee’s markup later this week.

Other Activity

Waters Urges FinCEN Funding: On Monday, House Financial Services Chairwoman Maxine Waters (D-CA) sent a letter to senior Members of the House Committee on Appropriations, Subcommittee on Financial Services and General Government, urging them to support supplemental funding to the Financial Crimes Enforcement Network (FinCEN). Chair Waters underscored the importance of this funding in carrying out the landmark reforms codified in the bipartisan Anti-Money Laundering Act of 2020 (AMLA) and the Corporate Transparency Act (CTA) — both of which were enacted in the FY2021 National Defense Authorization Act.

Task Forces Are Back. On Friday, the House Financial Services Committee released a memo detailing the legislation that will be considered at the mark-up on Tuesday. In addition to renewing both the FinTech and the Artificial Intelligence (AI) task forces – to be chaired again by Rep. Lynch and Rep. Foster respectively, the Committee will vote on eight bills. These include a couple of ESG type of bills, as well as a comprehensive debt collection measure that is expected to be on the House floor during this work period.

Last Week in the Senate

Floor

On Wednesday, Gary Gensler was confirmed by a vote of 53-45 to lead the Securities and Exchange Commission for the remainder of former Chairman Clayton’s term, which ends in June. A vote for a full five year term is expected this week. Gensler is expected to lead work on sweeping new federal regulations that would require companies to disclose their contributions and exposure to climate change.

Hearings, etc.

Senate Banking Housing Hearing (4/13): On Tuesday, the Senate Banking Committee held a hearing entitled, “Separate and Unequal: The Legacy of Racial Discrimination in Housing.” The discussion centered around federal housing policy and its impact on racial inequalities throughout the U.S. Senators were in agreement that the history of housing in the U.S. is one built on discrimination and exclusionary policy, but they differed on how best to remedy the lasting effects of this. Several GOP Senators questioned making large investments in federal programs that they believe have not proven to be effective in addressing housing discrimination. The Committee agreed that expanding housing opportunities and enabling homeownership for all would raise GDP and be in the collective best interest of the economy as a whole. The panel stressed the need to address both the supply and demand side of housing. Sens. Scott (R-SC) and Warner (D-VA) raised the need to reform credit scoring models to collect more relevant data and expand access to homeownership.

Senate Finance Committee on the Tax Filing Season (4/13): The Senate Finance Committee held a hearing on Tuesday entitled “The 2021 Filing Season and 21st Century IRS,” featuring testimony from IRS Commissioner Charles Rettig.” Chairman Ron Wyden (D-OR) raised concerns that more and more wealth is building up in the hands of the “fortunate few” and big corporations — citing that even the most conservative estimates of the annual tax gap put it in the hundreds of billions of dollars a year. He highlighted that closing “even a portion” of the tax gap would enable more funding for senior care, assistance to needy children, and affordable housing. While some praised the IRS’ work to distribute three rounds of direct aid to Americans through economic-impact payments this year, many voiced concerns for the backlog of payment distribution and the confusion around tax filing dates. Sen. Maria Cantwell (D-WA) probed Mr. Rettig on why the IRS wasn’t extending the due date for quarterly estimated taxes until May 17. “A deadline that’s May 17 but really requires people to do something beforehand is, at least for this segment of the population, confusing,” she pressed. Mr. Rettig announced the IRS’ plans to begin distributing the new $3,000 child tax credit authorized under President Biden’s $1.9 trillion stimulus plan, and in coordination with the Treasury Department, in July. He suggested that the 2021 filing season is going smoothly in terms of tax return processing and the operation of its information technology (IT) systems — but underscored the importance of fully funding the IRS in order to address many of the issues raised by the Committee.

Senate Banking FAST Act Hearing (4/15): On Thursday the Senate Banking Committee held a hearing entitled, “21st Century Communities: Public Transportation Infrastructure Investment and FAST Act Reauthorization.” The hearing centered around transportation infrastructure, particularly the nation’s transit systems. Senators discussed President Biden’s American Jobs Plan, as well as the reauthorization of the Fixing America’s Surface Transportation (FAST) Act. Democratic Members highlighted the importance of public transportation in promoting equity, enabling upward mobility, and mitigating climate change. Ranking Member Toomey and Mr. Ditch, of the Heritage Foundation, asserted that the Highway Trust Fund funding for transit is not held accountable or appropriated responsibly given the limited transit utilization and lack of financial recovery of costs by riders. Additionally, they highlighted the increase in remote work as a caution for investing more money, or more taxpayer subsidies, on what may be an even further declining public transportation system. 

Bills Introduced

S. 1074 (Hawley): To amend the Sherman Act, the Clayton Act, and the Federal Trade Commission Act to promote competition in the United States. This bill seeks to crack down on mergers and acquisitions by mega-corporations and strengthen antitrust enforcement to pursue the breakup of dominant, anticompetitive firms. 

S. 1088 (Cruz): A bill to provide requirements for the appropriate Federal banking agencies when requesting or ordering a depository institution to terminate a specific customer account, to provide for additional requirements related to subpoenas issued under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and for other purposes. 

S. 1090 (Cruz): A bill to eliminate the Bureau of Consumer Financial Protection.

S. 1161 (Thune): A bill to promote focused research and innovation in quantum communications and quantum network infrastructure to bolster internet security, and for other purposes. 

S. 1171 (Merkley): A bill to amend the Securities Exchange Act of 1934 to prohibit mandatory pre-dispute arbitration agreements, and for other purposes. Rep. Foster sponsored the House companion bill.

S. 1136 (Cantwell): A bill to amend the Internal Revenue Code of 1986 to reform the low-income housing credit, and for other purposes. Rep. DelBene sponsored the House companion, H.R. 2573.

Small Business Lending Fairness Act, S. 1119 (Brown): A bill to amend the Truth in Lending Act to prohibit certain unfair credit practices, and for other purposes. Senate Banking Chairman Sherrod Brown (D-OH), and Sen. Marco Rubio (R-FL) re-introduced legislation to protect small businesses from predatory lenders. The Small Business Lending Fairness Act codifies the FTC’s 1985 ban on confessions of judgment in law in consumer loan contracts and expands the ban to provide these protections to business borrowers as well. The House companion is sponsored by Rep. Velazquez, H.R. 2540.

Other Activity

Plan for Personalized Fed Accounts Draws Criticism: On Wednesday it was reported that Senator Jon Tester (D-MT), while speaking at a Consumer Bankers Association event, expressed concerns about the viability of proposals to have the Federal Reserve create consumer bank accounts for every American.  The “FedAccounts” proposal by Senate Banking Chair Sherrod Brown (D-OH) would have the Federal Reserve create a new system of consumer checking accounts in an effort to help the estimated seven million unbanked Americans. Sen. Tester voiced concern that the proposal would gain little traction in Congress and advocated for finding other ways to address the un-and-underbanked.

Last Week in the Administration

Treasury Establishes COVID-19 Recovery Office

On Wednesday, the Treasury Department announced the establishment of the Office of Recovery Programs to lead the Department’s implementation of economic relief and recovery efforts, including nearly $420 billion in programs from the American Rescue Plan. The office will be led by the new Chief Recovery Officer Jacob Leibenluft. The office will report to Treasury’s Deputy Secretary and will be principally focused on efficiently establishing and administering Treasury’s programs to support an equitable and swift recovery from the economic challenges precipitated by the COVID-19 pandemic. 

DOL Investment Advice Guidance Released

On Tuesday, the Department of Labor’s Employee Benefits Security Administration issued guidance on fiduciary investment advice for retirement investors, employee benefit plans and investment advice providers. The guidance relates to the department’s “Improving Investment Advice for Workers & Retirees” exemption. The department issued two documents, the first includes questions a retirement investor can ask when interviewing potential advice providers, background information to help them understand the purpose of each question, and investor-focused frequently asked questions about the exemption. The second is a set of compliance-focused FAQs that provide guidance for investment advice providers who are relying, or planning to rely, on the exemption. 

Biden Prepares Sweeping Order on Climate-Related Risks

Several news outlets reported that President Joe Biden is preparing to instruct federal agencies to take sweeping action to combat climate-related financial risks to government and the economy, including moves that could impose new regulations on businesses. The order, reportedly titled “Climate-Related Financial Risk,” directs White House economic and climate advisers to work with the Office of Management and Budget on a government-wide strategy to measure, mitigate and disclose climate risks facing federal agencies. Banking, housing and agriculture regulators are among those that will be asked to incorporate climate risk into their supervision of major industries and the lending of federal funds.

This Week’s Schedule

Mon. (4/19)

• No events scheduled.

Tues. (4/20)

• Markup: House Financial Services Committee – 10:00 AM – The House Financial Services Committee will convene a markup to consider pending legislative items. Details here.
• Hearing: House Agriculture Committee on Rural Broadband – 10:00 AM – The House Agriculture Committee will hold a hearing entitled “Rural Broadband – Examining Internet Connectivity Needs and Opportunities in Rural America.” Details here.
• Hearing: House Small Business Committee on Pandemic Response – 10:00 AM – The House Small Business Committee will hold a hearing entitled “Update on SBA’s Pandemic Response Programs.” Details here.
• Hearing: Senate Banking Committee on Rural Communities – 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “An Economy that Works For Everyone: Investing in Rural Communities.” Details here.
• Hearing: Senate Commerce Committee on FTC Authority – 10:00 AM – The Senate Committee on Commerce, Science, and Transportation will hold a hearing entitled Strengthening the Federal Trade Commission’s Authority to Protect Consumers,” featuring testimony from all four FTC Commissioners. Details here.
• Hearing: Senate Finance Committee on the Tax Code – 10:00 AM – The Senate Finance Committee will hold a hearing entitled “Combatting Inequality: The Tax Code and Racial, Ethnic, and Gender Disparities.” Details here.
• Hearing: Senate HELP Committee on COVID-19 Recovery – 10:00 AM – The Senate Committee on Health, Education, Labor, and Pensions (HELP) will hold a hearing entitled “COVID-19 Recovery: Supporting Workers and Modernizing the Workforce Through Quality Education, Training, and Employment Opportunities.” Details here.
• Hearing: Senate Appropriations Committee on the American Jobs Plan – 10:30 AM – The Senate Appropriations Committee will hold a hearing entitled “The American Jobs Plan: Infrastructure, Climate Change, and Investing in Our Nation’s Future.” Details here.
• Hearing: House Energy and Commerce Sub. on Clean Energy – 10:30 AM – The House Energy and Commerce Subcommittee on Energy will hold a hearing entitled “Generating Equity: Deploying a Just and Clean Energy Future.” Details here.
• Hearing: Select Committee on the Climate Crisis on Economic Growth – 12:00 PM – The Select Committee on the Climate Crisis will hold a hearing entitled “Making the Case for Climate Action: Creating New Jobs and Catalyzing Economic Growth.” Details here.

Wed. (4/21)

• Confirmation Hearing: Senate Commerce Committee – 10:00 AM – The Senate Committee on Commerce, Science, and Transportation will hold a confirmation hearing to consider the nominations of Lina Khan to be Commissioner of the FTC, and former Sen. Bill Nelson (D-FL) to be Administrator of the National Aeronautics and Space Administration (NASA). Details here.
• Hearing: House Appropriations Sub. on EDA Oversight – 10:00 AM – The House Appropriations Subcommittee on Commerce, Science, Justice and Related Agencies will hold an oversight hearing of the Economic Development Administration’s pandemic response activities. Details here.
• Hearing: Senate Judiciary Sub. on Patents – 10:00 AM – The Senate Judiciary Subcommittee on Intellectual Property will hold a hearing entitled “Improving Access and Inclusivity in the Patent System: Unleashing America’s Economic Engine.” Details here.
• Hearing: House Energy and Commerce Sub. on Wireless Technology – 10:30 AM – The House Energy and Commerce Subcommittee on Communications and Technology will hold a hearing entitled “Leading the Wireless Future: Securing American Network Technology.” Details here.
• Hearing: Senate Judiciary Sub. on App Stores – 2:30 PM – The Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights will hold a hearing entitled “Antitrust Applied: Examining Competition in App Stores.” Details here.

Thu. (4/22)

• Hearing: Senate Banking Committee on Clean Energy – 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “21st Century Communities: Capitalizing on Opportunities in the Clean Energy Economy.” Details here.
• Hearing: Senate Finance Committee on U.S.-China Relations – 10:00 AM – The Senate Finance Committee will hold a hearing entitled “U.S.-China Relations: Improving U.S. Competitiveness Through Trade.” Details here.
• BPC Webinar on Public-Private Partnerships – 2:00 PM – The Bipartisan Policy Center (BPC) will host a webinar entitled “Entrepreneurship at the Endless Frontier: Catalyzing Competitiveness Through Innovation and Invention.” Details here.

Fri. (4/23)

• No events scheduled.

Further Out

• Hearing: House Financial Services Committee Member Day – April 27 – The House Financial Services Committee will convene its Member Day hearing for the 117th Congress. Details here.
• Hearing: House Financial Services Sub. on Municipal Bonds – April 28 – The House Financial Services Subcommittee on Oversight and Investigations will hold a hearing entitled “Examining the Role of Municipal Bond Markets in Advancing – and Undermining – Economic, Racial and Social Justice.” Details here.
• Hearing: House Financial Services Sub. on Compensation Equity – April 29 – The House Financial Services Subcommittee on Diversity and Inclusion will hold a hearing entitled “Closing the Racial and Gender Wealth Gap Through Compensation Equity.” Details here.
• Hearing: Senate Banking Committee on Employment – April 29 – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “Dignity of Work.” Details not yet available.
• Hearing: Senate Banking Committee with Bank CEOs – May 26 – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing with the CEOs of JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. Details here.
• Hearing: House Financial Services Committee with Bank CEOs – May 27 – The House Financial Services Committee will hold a hearing with the CEOs of JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. Details here.