Financial Services Report (6/17)

June 17, 2019

Perhaps for the first time all year both Chambers will be legislating, as the House continues to press through the spending bills – wrapping up its first "mini-bus" and starting on the second one – while the Senate will start the process for considering the Defense bill.

Additionally, at the Committee level there will be considerable attention focused on the Administration's trade agenda, with United States Trade Representative (USTR) Ambassador Robert Lighthizer appearing before the Senate Finance Committee on Tuesday and then the House Ways and Means Committee on Wednesday. While the House Financial Services Subcommittee on National Security, International Development, and Trade will also examine the impact of the Trump administration's trade and tax policies at a hearing next Tuesday.

The Senate Banking Committee will hold a hearing on Terrorism Risk Insurance (TRIA) on Tuesday, which is the public start of a process for reauthorizing that program which is set to expire at the end of 2020.

Last Week in the House

The Floor

The House on Monday passed by a voice vote a revised version of the Taxpayer First Act (HR 3151) IRS reform and modernization package, this time dropping a provision making the IRS's embattled Free File program permanent. A version of the bill including the provision—which has come under fire following allegations that program participants misdirected eligible users to paid products—previously passed the House in April. The Senate passed the legislation on Thursday. The measure also contained a section of interest to FinTechs that would require the IRS to modernize its API application programming interface (API) and automated processing service for instantaneous delivery of data.

Following the passage of a resolution on Tuesday that would allow the Judiciary Committee to enforce its subpoenas in court, the House spent the rest of the week working through the a four-bill appropriations "minibus" comprised of the Labor-HHS, Energy and Water, Defense, and State-Foreign Operations appropriations bills. This process, however, is expected to stretch into this week after GOP conservatives moved to force role call votes on the bill's 200-plus amendments

Hearings and Markups

Student Loans (6/11): On Thursday, the Financial Services Subcommittee on Oversight and Investigations held a hearing on state efforts to oversee student loan servicing featuring testimony from state regulators, consumer advocates, and the student loan servicing industry. In his opening statement, Subcommittee Chairman Al Green (D-TX) criticized the Consumer Financial Protection Bureau's supervision of the student loan servicing industry, including the prolonged vacancy of the Bureau's student loan ombudsman office. For his part, Ranking Member Andy Barr (R-KY) noted that student loans have accelerated since the Obama Administration "nationalized" the student loan market. Throughout the hearing, Members on both sides of the aisle raised concerns about the long-term macroeconomic impact of rising student loan figures.

HFSC Markup (6/11-6//12): On Wednesday and Thursday, the Financial Services Committee advanced eight bills relating to flood insurance, housing, and beneficial ownership.

Most notably, the Committee unanimously advanced the The National Flood Insurance Program Reauthorization Act, bipartisan legislation to reauthorize the National Flood Insurance Program for five years. Sponsored by Committee Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC), the legislation also includes a number of reforms intended to increase affordability, improve mapping, enhance mitigation, and modernize the NFIP. A one-pager on the legislation can be found here, as well as a section-by-section summary.

Unveiled earlier the this month, the bipartisan compromise represents a significant step forward for the program, which has been kept afloat through a series of short-term extensions for the past two years. Despite this and buy-in from stakeholder groups however, the deal still faces skepticism in the Senate, with Sen. Bill Cassidy (R-LA) calling the proposal "a genuine effort to solve a serious problem" that "lacks the reforms needed to ensure the program is sustainable and that families won't be hit with drastic premium increases." NFIP is currently set to expire October 1. Following passage of the bill, Reps. Frank Pallone (D-NJ) and Bill Pascrell (D-NJ) released a statement calling the package "insufficient to meet our priorities," a sign that expeditious passage through the House will not happen. However, we continue to anticipate that the Flood bill will be on the House floor as soon as July.

Also at the markup, the Committee advanced the following bills:

The Housing Financial Literacy Act, which passed by a vote of 53-6 with six Republicans voting against. Sponsored by Rep. Joyce Beatty (D-OH), the legislation would provide a 25-basis point discount in upfront FHA premiums for first-time home buyers who complete a housing counseling program.
The Corporate Transparency Act, which passed 43-16 with 16 Republicans voting against. Sponsored by Rep. Carolyn Maloney (D-NY), the bill would require corporations and LLC's to disclose their beneficial owners with the intention of cracking down on the use of anonymous shell corporations for money laundering and criminal activity.
The Keeping Families Together Act, which passed on a 32-26 party-line vote. Sponsored by Rep. Sylvia Garcia (D-TX), the legislation would prevent HUD from implementing a recently announced policy denying housing benefits to mixed immigration status families.
The Ensuring Equal Access to Shelter Act, which passed on a 33-26 party-line vote. Sponsored by Rep. Jennifer Wexton (D-VA), the legislation would prevent HUD from implementing a proposed rule allowing shelter providers to deny shelter to transgender and gender non-conforming people.
The National Flood Insurance Program Administration Reform Act, which passed unanimously. Sponsored by Rep. Nydia Velazquez (D-NY), the bill would make reforms to NFIP's appeals and litigation process following numerous concerns identified in the program following Hurricane Sandy.
The FHA Loan Affordability Act, which passed by a vote of 34 to 25 with all Republicans except Rep Bill Posey (R-FL) voting against. Sponsored by Rep. Dean Phillips (D-MN), the legislation ends the requirement that borrowers with FHA loans pay mortgage insurance premiums for the full life of the mortgage, and reinstates FHA’s previous policy of requiring FHA borrowers to pay premiums only until the outstanding principal balance of the loan reaches 78 percent of the original home value.
The Homeownership for DREAMers Act, which passed by a vote of 33-25, with all Republicans except Rep. Anthony Gonalez (R-OH) voting against. Sponsored by Rep. Juan Vargas (D-CA), the legislation would clarify that DACA recipients cannot be denied government-backed mortgage loans solely on the basis of their immigration status.

Bills Introduced

CECL Consumer Impact and Study Bill (Gonzalez and Budd): Delays the implementation of the Current Expected Credit Loss (CECL) accounting standard until a study is done on its impact on certain kinds of businesses. Similar legislation was introduced in the Senate in May.

Comprehensive Regulatory Review Act (Loudermilk and Gottheimer): Expands the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) to further encourage the elimination of outdated, duplicative, or irrelevant financial regulations. Among other provisions, the bill increases the frequency EGRPRA reviews from every ten to every seven years, expands reviews to include all regulated institutions rather than solely depository institutions, and adds CFPB to the agencies under the law's jurisdiction.

Public Retirement Plan Pickup (Roe): Eliminates IRS regulations prohibiting government employers from "picking up" employee retirement contributions when the employee is given the option to choose between two plans with different contribution rates. In particular, the legislation is intended to provided to provide relief to Tennessee's two-retirement plan system, under which legacy plan participants are unable to switch to newer "hybrid plans" as a result of the IRS pick up limitation.

Flood Insurance Premiums (Bilirakis): Provides for periodic GAO review of NFIP rates and mapping.

Board Diversity (Maloney): Requires publicly traded companies to publish diversity data and establishes an SEC Diversity Advisory Group to make recommendations on increasing corporate board diversity.

Other Activity

HMDA Letter: On Tuesday, Rep. Nydia Velazquez (D-NY), Financial Services Committee Chairwoman Maxine Waters (D-CA), and 63 Democratic Representatives sent a letter to the Consumer Financial Protection Bureau Director Kathleen Kraninger calling on her to immediately rescind proposals they allege would limit the collection of important lending information under the Home Mortgage Disclosure Act. The letter criticizes several recent CFPB actions affecting HMDA, including: (1) a proposed rule raising the HMDA reporting threshold; (2) an advanced notice of proposed rulemaking considering the reevaluation of certain reporting under HMDA; and (3) the decision to close the HMDA Explorer tool and Public Data Platform Application Programming Interface (API). "By putting much of this information back in the shadows, the Consumer Bureau is abandoning its mission and giving a free pass to those that would discriminate against otherwise creditworthy borrowers," the letter's authors argued.

Following the House's letter, Senate Banking Committee Ranking Member Sherrod Brown (D-OH) Thursday led 18 colleagues on a letter raising similar concerns.

Last Week in the Senate

The Floor

On Thursday, the Senate unanimously passed the Taxpayers First Act by a voice vote, following the Houses's dropping of IRS Free File permanence earlier in the week.

With the rest of the Senate's week spent confirming judicial nominees, the Upper Chamber did not otherwise consider any legislation directly relevant to financial services this week.

Hearings and Markups

Data Brokers (6/11): On Tuesday, the Banking Committee held a hearing examining data brokers and their impact on financial privacy, access to credit, and other financial services issues. During the hearing, both Democrats and Republicans voiced concerns about the implications of the broad collection of consumer and financial data, in particular the potential for unregulated “consumer scores” to impact consumers’ access to financial services. In this vein, several lines of questioning dealt with updating the Fair Credit Reporting Act (FCRA) to account for these new metrics. Additionally, several members promoted their priorities for ongoing efforts to develop a federal consumer data privacy standard, an endeavor primarily under the jurisdiction of the Commerce Committee.

Following the hearing, Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) sent a letter to Association of National Advertisers CEO Bob Liodice inquiring into the use of credit bureau data for assessments of creditworthiness. The letter echoes many of the concerns raised at the hearing pertaining to the potential for consumer data to be used for opaque and unregulated assessments of creditworthiness.

Bills Introduced

Task Force on the Impact of the Affordable Housing Crisis Act (Young, King, and Cantwell): establishes an Affordable Housing Task Force to study the affordable housing crisis and make recommendations to Congress to increase affordable housing options. Reps. Scott Peters (D-CA), Jaime Herrera Beutler (R-WA), and Ro Khanna (D-CA) introduced companion legislation in the House.

HUD Manufactured Housing Modernization Act (Cortez Masto, Scott, Smith, Cramer, and Young): Requires HUD to issue guidelines for including manufactured housing in state and local governments’ Consolidated Plans, which outline their housing and community development priorities, when applying for HUD funding.

United States Call Center Worker and Consumer Protection Act (Casey): Includes several provisions aimed at preventing companies from moving call centers overseas including: (1) making companies that offshore call centers ineligible for federal grants and guaranteed loans; (2) requires that call center work performed on federal contracts be done in the US and that the federal government give preference to companies that do not off-shore jobs when awarding contracts; and (3) requires that US callers be told the locations of the call center with which they are speaking and be offered the option of being transferred to a US-based call center. The bill was previously introduced last Congress and companion legislation in the House is sponsored by Reps. Mark Pocan (D-WI) and David McKinley (R-WV).

Student Loan Forgiveness (Warren): Forgives up to $50,000 in student debt for borrowers with household incomes under $100,000, and decreasing forgiveness for income levels between $100,000 and $250,000. The legislation will also include policies intended to help borrowers with additional loans after cancellation, including "meaningful student loan bankruptcy relief." Sen. Warren jointly announced her intention to introduce the bill with House Majority Whip Jim Clyburn (D-SC).

Outsourcing Accountability Act (Peters, Stabenow, Feinstein, Brown, and Reed): Requires publicly traded companies to report their number of employees by location, including at the state and country level. The legislation was previously introduced last Congress.

Credit Access and Inclusion Act (Scott and Manchin): Allows landlords, telecommunications companies, and utility providers to report on-time payment data to credit bureaus with the intention of allowing the 26 million "credit invisible" Americans to build a credit history.

ILLICIT CASH Act (DRAFT) (Warner, Cotton, Jones, and Rounds): Requires shell companies to disclose their true owners for the purpose of cracking down on the use of anonymous corporations to conceal illicit financial activity.

Other Activity

Automated Lending Bias Letter: On Monday, Sens. Elizabeth Warren (D-MA) and Doug Jones (D-AL) sent a letter to federal banking regulators and CFPB inquiring into the agencies' efforts to scrutinize machine-learning bias in automated lending. Noting recent research indicating that algorithmic decision-making may yield a similar level of discrimination as traditional underwriting, the letter requests that the agencies answer several inquiries so that the Senators can better "understand the role that [the agencies] can play in addressing Fintech discrimination."

Wyden Hold on Treasury Nominees: On Wednesday, Finance Committee Ranking Member Ron Wyden (D-OR) announced his intention to place a hold on nominees to the Treasury Department over the Department's handling of House Democrats' request for President Trump's tax returns. “In letters to Secretary Mnuchin and Commissioner Rettig, I asked a number of questions about compliance with congressional requests for tax return information," Chairman Wyden said, adding that "I have received non-answers or no response at all, which is completely unacceptable." In particular, the hold will delay the nomination of Brent McIntosh to be Undersecretary for International Affairs. As the Department's current general counsel, Mr. McIntosh has been highly involved in Treasury's response to the inquiry.

First American Data Breach Letter: On Thursday, Banking Committee Chairman Crapo and Ranking Member Brown sent a letter to First American expressing concern at May reports that an error in one of its products created the potential for unauthorized access to 885 million sensitive records relating to the title insurance company's customers. The letter seeks information on the incident and First American's plans for remediation.

Freddie Mac-Kushner Loans Letter: On Thursday, Sens. Elizabeth Warren (D-MA) and Tom Carper (D-DE) sent a letter to Freddie Mac raising concern at recent media reports that Freddie Mac backed an $800 million loan for Kushner Companies, the family business of White House advisor and Presidential son-in-law Jared Kushner. While recognizing that there is "no specific indication of any wrongoing by Freddie," the letter's authors say that the pattern of facts suggest that Mr. Kushner may have "inappropriately intervened in the loan approval process."

Knowledge-Based Verification Report: On Friday, Sens. Ron Wyden (D-OR) and Elizabeth Warren (D-MA) and House Oversight Committee Chairman Elijah Cummings (D-MD) released a GAO report finding that "data stolen in recent breaches, such as the 2017 Equifax breach, could be used fraudulently" by individuals seeking to commit identity fraud against citizens that use the online services provided by key federal government agencies. In light of increased disclosures of personal information, the report criticizes four of the six examined federal agencies' continued use of knowledge-based identity verification—which relies on questions generated from a consumers credit history. Accompanying the report's release, the lawmakers also sent letters to the Department of Veterans' Affairs, Social Security Administration, Center for Medicare and Medicaid Services, and Postal Service questioning their continued use of knowledge-based verification.

HUD Discrimination Letter: On Friday, HELP Committee Ranking Member Patty Murray (D-WA) and Banking Committee Ranking Member Sherrod Brown (D-OH) led 10 Senators on a letter criticizing the Department of Housing and Urban Development's proposed rule that would allow shelters to admit individuals based on assigned sex at birth, rather than in accordance with gender identity as required under current rules. Raising concerns that the proposal would "give HUD's backing to shelters that willfully discriminate against transgender individuals," the letter requests a response to several inquiries relating to circumstances around the proposal's development, as well as a staff briefing on the matter.

Last Week in the Administration

Ueland Tapped as White House Legislative Affairs Chief

On Thursday, the White House announced the selection of Domestic Policy Council official Eric Ueland as White House Director of Legislative Affairs. Mr. Ueland—a former chief of staff to Majority Leader Bill Frist, budget and process expert, and advisor to the Trump Transition team—will replace Shahira Knight as the Administration's top liaison to Capitol Hill.

Trump Walks Back China Ultimatum

On Friday, President Trump downplayed speculation that the continuation of flailing trade talks with China depend on Chinese President Xi Jinping's attendance at this month's G20 summit. Calling into Fox & Friends, the President said that "it doesn't matter" if President Xi fails to attend the June 28-29 summit in Osaka, Japan—reversing his Monday warning that the US would immediately impose threatened levies on an additional $300 billion in Chinese goods if he does not attend.

Last week marked a period of continued tension for the President's under-fire trade agenda, which also included: (1) Senate Finance Committee Chairman Chuck Grassley (R-IA) saying he would push ahead with legislation reigning in the President's tariff powers (2) Sens. Mark Warner (D-VA) and Marco Rubio (R-FL) penning a letter warning the White House against using national security restrictions on Chinese telecom giant Huawei as a bargaining chip in trade negotiations; and (3) 600 companies signing on to a letter warning that increasing tariffs on China would damage the US economy.

Anticipation of Interest Rate Cut Jumps

On Thursday, the Wall Street Journal published a poll which found that more than three-quarters of economists surveyed expect the Fed to cut interest rates in the coming months—up from only half of surveyed economists a month ago. Notably, however, few participants anticipated that a rate cute in response to lukewarm jobs numbers would come at this week's FOMC meeting. Rather, 40% anticipated the cute would come in July, while 30% predicted it would occur in August.

Throughout the week, the President continued to criticize the Fed for raising rates over the last two years, predicting on Friday that the stock market would be "10,000 points higher" had the central bank not raised rates.

Calabria Calls for FHFA Chartering Authority in Report to Congress

On Tuesday, Federal Housing Finance Agency Director Mark Calabria sent his first annual Report to Congress, which outlines his plan to release government sponsored housing entities from government conservatorship. Most notably, the report includes several recommendation for legislative action intended to increase competition in the housing market, including by providing FHFA with the authority to charter new GSE's to compete with Fannie Mae and Freedie Mac—which Director Calabria called "a duopoly undercutting competition in the market." Additionally, the plan calls for greater FHFA authority to examine financial utilities doing business with GSE's, which he argues is in line with authority provided to other financial regulators. The Treasury Department is also expected to release its own blueprint for an elusive answer to housing finance reform as soon as this month.

SEC's Jackson Promotes Guidance on Social Media Usage

On Thursday, Securities and Exchange Commission Commissioner Robert Jackson called for the Commission to consider publishing guidance governing senior executives' use of social media. “Without prejudging a particular matter, it might be time for us to come forward and say, here are some principles of this game,” Commissioner Jackson said at a conference. Such a guidance would attempt to address situations like SEC's September settlement with Elon Musk after the Tesla CEO falsely claimed via Twitter to have secured funding to take the company public. Commissioner Jackson was the only commissioner to dissent on that settlement.

CFTC Climate Meeting Earns Support of Senate Democrats

On Tuesday, the Commodity Futures Trading Commissions Market Risk Advisory Committee held a public meeting heavily focused on climate-related risk. "Assessing climate-related market risk must be a priority – and it must start now," said CFTC Commissioner and MRAC sponsor Rostin Behnam in his opening statement, which also noted that failure to mitigate climate risk would most adversely affect rural areas. The meeting was well received by some Hill Democrats who have been critical of regulators' perceived lack of attention to climate risk. Sens. Sherrod Brown (D-OH) and Brian Schatz (D-HI), for instance, sent a letter commending CFTC for the step.

This Week's Schedule

Mon. (6/17)

No events scheduled.

Tues. (6/18)

Hearing: Senate Finance Committee on Trade – 10:15 AM– The Senate Finance Committee will hold a hearing with USTR Ambassador Robert Lighthizer entitled "The President’s 2019 Trade Policy Agenda and the United States-Mexico-Canada Agreement." Details here.
Executive Session: Senate Banking Committee – 10:30 AM– The Senate Committee on Banking, Housing, and Urban Affairs will hold an executive session to consider six nominations, including the nominations of Michelle Bowman to be a Member of the Board of Governors of the Federal Reserve System, and Allison Herren Lee to be a Member of the Securities and Exchange Commission. Details here.
Hearing: Senate Banking Committee on TRIP – 10:30 AM– The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing to discuss reauthorization of the Terrorism Risk Insurance Program (TRIP). Details here.

Wed. (6/19)

Hearing: House Financial Services Sub. on Trade and Tax Policies –10:00 AM – The House Financial Services Subcommittee on National Security, International Development, and Trade will hold a hearing entitled "Slowing Economic Growth: The Impact of Recent Trade and Tax Policies on the U.S. Economy." Details here.
Hearing: House Ways and Means Committee on Trade Policy –10:00 AM – The House Ways and Means Committee will hold a hearing with USTR Ambassador Robert Lighthizer entitled "The 2019 Trade Policy Agenda: Negotiations with China, Japan, the EU, and UK; new NAFTA/USMCA; U.S. Participation in the WTO; and other matters." Details here.
Hearing: Senate Judiciary Committee on Beneficial Ownership –10:00 AM – The Senate Judiciary Committee will hold a hearing entitled "Combating Kleptocracy: Beneficial Ownership, Money Laundering, and Other Reforms." Details here.
Hearing: House Small Business Committee on Cannabis Businesses – 11:30 AM – The House Small Business Committee will hold a hearing entitled “Unlocked Potential? Small Businesses in the Cannabis Industry.” Details here.
Hearing: House Financial Services Sub. on Securities Laws –2:00 PM –The House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets will hold a hearing entitled "Putting Investors First: Examining Proposals to Strengthen Enforcement Against Securities Law Violators." Details here.
Hearing: House Judiciary Sub. on Bankruptcy Law – 2:00 PM – The House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law will hold a hearing entitled "Oversight of Bankruptcy Law and Legislative Proposals." Details here.
Hearing: Senate Budget Committee on the Spending Process – 2:30 PM – The Senate Budget Committee will hold a hearing entitled "Fixing a Broken Budget and Spending Process: Lessons from States." Details here.
Hearing: Senate Small Business Committee on SBA Disaster Response – 2:30 PM – The Senate Small Business Committee will hold a hearing entitled "Examining SBA’s Office of Disaster Assistance and the Response to Recent Catastrophic Floods." Details here.
Hearing: House Ways and Means Sub. on TCJA Provisions – 2:30 PM – The House Ways and Means Subcommittee on Oversight will hold a hearing entitled "Ending the TCJA Tax on Houses of Worship, Charities, and Nonprofits." Details here.

Thurs. (6/20)

AEI Event on Patents – 8:30 AM – The American Enterprise Institute (AEI) will host an event entitled "Patent reform in 2019: A conversation with Rep. Steve Stivers (R-OH)." Details here.
Hearing: Senate Banking Committee on Beneficial Ownership– 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “Outside Perspectives on the Collection of Beneficial Ownership Information.” Details here.
Hearing: House Financial Services Committee on Diversity –10:00 AM – The House Financial Services Committee will hold a hearing entitled "Diversity in the Boardroom: Examining Proposals to Increase the Diversity of America’s Boards." Details here.
Hearing: Senate Commerce Committee on CPSC Oversight –10:00 AM – The House Senate Committee on Commerce, Science, and Transportation will hold an oversight hearing of the Consumer Product Safety Commission (CSPC), featuring testimony from all five CPSC Commissioners. Details here.
Hearing: House Financial Services Sub. on Appraisals –2:00 PM – The House Financial Services Subcommittee on Housing, Community Development, and Insurance will hold a hearing entitled "What's Your Worth? A Review of the Appraisal Industry." Details here.

Fri. (6/21)

No events scheduled.

Further Out

Hearing: Senate Banking Committee on Fannie and Freddie – June 25 – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “Should Fannie Mae and Freddie Mac be Designated as Systemically Important Financial Institutions?" Details not yet available.
Hearing: House Financial Services Committee on Debt Collection – June 25 – The House Financial Services Committee will hold a hearing entitled "Examining Legislation to Protect Consumers and Small Business Owners from Abusive Debt Collection Practices." Details here.
Hearing: House Financial Services Financial Technology Taskforce – June 25 – The House Financial Services Task Force on Financial Technology will hold a hearing entitled "Overseeing the Fintech Revolution: Domestic and International Perspectives on Fintech Regulation." Details here.
Hearing: Senate Banking Committee on the Ex-Im Bank – June 27 – The Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing to discuss reauthorization and oversight of the Export-Import (Ex-Im) bank. Details not yet available.