Financial Services Report

October 18, 2017

Our Take

With just under a month of scheduled legislative days remaining before funding for the Federal Government runs out, we are now fully ensconced in the high drama of the calendar.  Loyal readers may recall that we initially encouraged people to look at this year as a play in four parts.   Perhaps a soap opera would have been more appropriate.  Regardless, all of the drama, failure and inactions of the past year weigh heavily on the cast of Congress as it looks to tie up those loose ends. This weekend, I heard a report that, among other things, noted that Congress has two speeds – lightning fast and glacially slow.  Without faulting the reporter, this is what things may appear to the outside observer.  But for those of us who can see inside the gears, we know that those things that seem to spring out of nowhere usually have been carefully constructed in a time intensive way.  

As we enter the final months of the first session of the 115th Congress, the finale draws near.   And it is shaping up to be a great cliffhanger, with the viewer unclear how all the bits and pieces will fit together.  Will it conclude with in a culmination where the government does not shut down, the debt limit is not breached and some type of comprehensive tax reform is enacted?  Or will the whole thing collapse on itself?   To find out, keep tuning in every day.  But what is clear, is that Congress and the Administration are hurtling through these remaining legislative days at a frantic pace.

Looking Ahead

Near Term

  • Flipping schedules, the House is out this week, while the Senate returns and is expected to bring up their budget resolution for floor consideration.   This means there will be a second vote-a-rama this year.
  • The Senate Finance Committee will hold a hearing on Business Tax Reform as it continues to work to produce tax reform (though probably not by the end of the year).  The Senate Banking Committee continues its examination of data breach and how consumers can protect themselves with another hearing on Tuesday. 
  • The Senate is also working towards passing its version of the Disaster Relief bill passed by the House last week. 
  • On Tuesday, much of the business community will tune in to learn where things stand with the NAFTA negotiation (spoiler alert – it doesn’t look good)

Further Out

  • Funding for the Government Expires on December 8th.
  • The Debt Ceiling needs to be extended by December 8th (though extraordinary measures may prevent a complete breach of the limit until 2018).
  • The voters in Alabama go to the polls on December 13th where Bannon-endorsed ultra conservative Republican Roy Moore is expected to win.  If Moore defeats Democrat Doug Jones as is widely expected, he is expected to oppose Senate Leader Mitch McConnell every chance he gets.  (Editor’s Note – it is simply amazing that the national Chamber of Commerce is willing to cede the election rather than support a Democrat who would likely be a solid vote for Leader McConnel’s agenda.)
  • Finally, at the moment there are just 27 legislative days left, though it seems like most staff shouldn’t book those plane tickets just yet

The Past Week

Legislative Branch
House Passes $36.5 Billion Disaster Relief Package
In a 353-69 vote under suspension of the rules, House lawmakers advanced a $36.5 billion disaster relief package that marks the second installment of aid since a series of natural disasters struck southeast Texas, Florida, and Puerto Rico, among other areas. The breakdown of funds includes $18.7 billion for the Federal Emergency Management Agency’s disaster relief fund, $576.5 million for wildfire recovery, and $16 billion to keep the National Flood Insurance program (NFIP) afloat. The Senate is expected to pass the bill soon, with the NFIP due to run out of funds as soon as Oct. 23. All 69 no votes came from conservative lawmakers who question the role of the federal government in disaster relief, which may become more important as future aid packages are likely necessary for effected areas.  
House Financial Services Committee Marks-Up  22 Bills, most already included in CHOICE ACT
The Financial Services Committee met on Wednesday and Thursday to approve 22 individual pieces of legislation.  While most of the measures were bipartisan and largely aimed at helping smaller banks, credit unions, and emerging growth companies, they also shared in the fact that many had previously been included in Chairman Hensarling’s CHOICE Act.   Once again, members retreated to their respective partisan corners during the debate on Rep. Ann Wagner’s Protecting Advice for Small Savers (PASS) bill (H.R. 3857), which would repeal and replace the Labor Department’s so-called Fiduciary Rule. Democrats took the defensive by touting the rule’s popularity and overall benefit to seniors, while Republicans emphasized the bill’s effect on brokerage based retirement advice. A full list of the legislation can be found here.
Carson Appears Before Financial Services Committee for First Oversight Hearing
On Wednesday, Housing and Urban Development Secretary Ben Carson appeared before the House Financial Services Committee for his first oversight hearing in the post. Policy-focused conversations featured Sec. Carson’s assertion that changes to the Department’s reverse mortgage program would reduce defaults and his suggestion that the Department is still considering whether to cut Federal Housing Administration premiums. However, headlines out of the hearing focused on his exchange with Ranking Member Maxine Waters (D-CA), in which Sec. Carson said that Puerto Rico “should not be abandoned,” apparently contradicting remarks from President Trump early last week.
Equifax Hack Drives GOP Bill to Overhaul Credit Bureaus
Rep. Patrick McHenry of North Carolina introduced a bill on Thursday that is expected to require the companies to submit to regular federal cybersecurity reviews. The bill also would require each of the three major credit firms —Equifax, Experian PLC and TransUnion — to phase out their use of Social Security numbers to verify consumers’ identities by 2020. This legislation leaves it up to the companies to formulate a more-modern method of identification, in an effort to spur the companies to innovate, but does not specify which federal agency will inspect cybersecurity at the companies.
Select Highlights from the Administration
The White House
White House to Nominate Finance Committee staffer for EBSA secretary
On Tuesday, the White House nominated Senate Finance staffer Preston Rutledge as assistant secretary for the Employee Benefits Security Administration. Rutledge has been the committee's senior tax and benefits counsel since 2011. Prior to that, he was for ten years a tax law specialist at the IRS. As EBSA secretary, Rutledge would oversee changes to the fiduciary rule, which requires that broker dealers consider only their client's best interest — and not commissions or fees.
President Continues to Interview Candidates for Fed Chair
Last week it was reported that the President had interviewed Stanford University economist John Taylor for the position of Fed Chair.  This interview follows on reports of previous interviews with former Fed Governor Kevin Warsh and current Fed Governor Jerome Powell last month.  In addition, the President has reportedly met with current Fed Chair Janet Yellen and NEC Chairman Gary Cohn about the position as well.  Chair Yellen’s term is set to expire in early February. 
Consumer Financial Protection Bureau (CFPB)
CFPB Sues Debt-Relief Companies Illegally Posing as Federal Government
On Thursday, the CFPB filed suit in federal court against two companies operating under the name “FDAA,” a service provider, and their owners for falsely presenting FDAA as being affiliated with the federal government. The CFPB also alleges that FDAA’s so-called “debt validation” programs violated the law by falsely promising to eliminate consumers’ debts and improve their credit scores in exchange for thousands of dollars in advance fees. Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions and individuals violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s complaint is not a finding or ruling that the companies or individuals have actually violated the law.
Internal Revenue Service (IRS)
After Media Attention, IRS Temporarily Delays Extension of Equifax Contract
On Thursday, Politico reported that the IRS had  temporarily suspended the $7.2 million contract it had decided to continue to allow Equifax to carry out while the contract went through the bid protest process.   Current users of the service will not be affected though individuals wishing to verify their identity with the IRS.