Financial Services Report (9/23)

September 23, 2019
This weeks marks the final leg of the three week spring that Congress has been in since returning from the August recess. If all goes according to plan the Senate should pass a short-term continuing resolution (CR) by the end of the week to punt the serious spending and budget questions until Thanksgiving.
In the House, proponents of the SAFE Act will see their bill come to the Floor. Interestingly, the measure is coming up under the Suspension Calendar, which while normally reserved for non-controversial legislation, can from time to time be used for other bills, though it requires a 2/3rds majority, rather than 218 votes for passage. With that in maind, it could come down to a handful of folks if this measure passes or fails – though often in these situations defeat is not fatal and the bill can come by under a rule requiring a simply 218 vote majority.
It is also an incredibly busy week in Committee, with both the House and the Senate holding hearings to examine the issue of Real Time Payments, while the House will have another five hearings on top of that, including a hearing featuring all five SEC Commissioners.

Last Week in the House
The Floor
On Thursday, the House passed a continuing resolution funding the government at current levels until November 21 and extending authorization for a slate of expiring programs, including the National Flood Insurance Program and the Export-Import Bank.
The CR passed by a vote of 301-123, with 76 Republicans joining nearly all Democrats in supporting the stopgap. Consideration of the legislation was delayed slightly as Congressional leaders worked through issues in the Caucus, including the length of health care extenders and relief money to farmers affected by the trade dispute with China. The Senate is expected to take up the measure next week with the intention of averting a lapse in funding ahead of the end of the Fiscal Year on September 30th.
Also Thursday, the full House passed nine bills that were under the jurisdiction out of the Financial Services Committee. In addition to bills providing for commemorative coinage and the awarding of Congressional Gold medals, the following legislation passed by voice votes:
  • The PCAOB Whistle Blower Protection Act. Sponsored by Rep. Sylvia Garcia (D-TX), the legislation establishes a PCAOB whistleblower program similar to that run by the SEC. 

  • The Appraisal Fee Reform Act. Sponsored by Rep. Lacy Clay (D-MO), the legislation allows the Appraisal Subcommittee (ASC) to modify annual registry fees for appraisal management companies, maintain a registry of trainees, and charge a lower trainee registry fee.

  • The Shutdown Guidance for Financial Institutions Act. Sponsored by Rep. Jennifer Wexton (D-VA), the legislation requires federal financial regulators to issue guidance encouraging financial institutions to work with consumers and businesses affected by a government shutdown.

  • The Advancing Innovation to Assist Law Enforcement Act. Sponsored by Rep. Anthony Gonzalez (R-OH), the legislation would require the Financial Crimes Enforcement Network (FinCEN) to carry out a study on its uses of emerging technologies.

On Friday, the House passed the Forced Arbitration Injustice Repeal (FAIR) Act (HR 1423) which would prohibit mandatory pre-dispute arbitration clauses in contracts. The vote was essentially on party lines, with all but two Democrats voted in favor of, and all but two Republicans against. Despite speculation that Senate Judiciary Chairman Graham is open to the measure, the legislation is not expected to gain traction in that chamber. The measure also faces a veto threat from the White House, who expressed concern that the elimination of these arbitration clauses would overwhelm the legal system and invite nuisance litigation.
Hearings and Markups
Financial Services Mark Up (9/18): Starting on Wednesday and stretching through the remainder of the week, the Financial Services Committee held a mark up where committee members advanced 12 bills. While legislation addressing topics such as the "8-k" trading gap, homelessness, and financial inclusion passed unanimously, other bills, including those dealing with liability of corporate executives, ESG disclosures, and pay disparity passed in either party-line votes or with significant Republican opposition. A complete summary of the bills can be found here, as well the results of the hearing's roll call votes.
Bills Introduced
Yes in My Backyard Act (Heck and Hollingsworth): Requires local governments applying for Community Development Block Grants to report whether they have enacted policies to reduce regulations that undermine housing affordability. Intended to incentivize communities to streamline their housing regulations, the legislation is the House companion to a Senate bill sponsored by Sens. Todd Young (R-IN) and Brian Schatz (D-HI).
Community Bank Deposit Access Act (Crist and Hill): Codifies existing FDIC policy that under certain circumstances, well-capitalized banks can accept custodial deposit without facing heightened regulatory scrutiny. The legislation is intended to provide regulatory certainty as to the acceptance of custody deposits by banks in rural and lower-income communities, where deposits are scarcer.
Overseas Americans Financial Access Act (Maloney): Excludes financial accounts held by American citizens in countries of which they are bona fide residents from Foreign Account Tax Compliance Act (FATCA) reporting.
Fight Illicit Finance Through Technical Assistance Act (Rose): Directs US representatives at the International Monetary Fund to support the increased use of the IMF's administrative budget for technical assistance to fund members to prevent money laundering and terrorist finance.
Other Activity
SAFE Banking Act Amended: According to published news reports, House Democrats agreed to incorporate two amendments intended to attract Republican support for the SAFE Banking Act (HR 1595), which is scheduled to be on the House Floor this Wednesday. That legislation provides a safe harbor for banks doing business with state-legal marijuana businesses. Reportedly, the amendments would: (1) expand the bill's safe harbor to include hemp businesses; and (2) prohibit the revival of programs targeting industries including firearms retailers and payday lenders. The SAFE Banking Act previously cleared the Financial Services Committee in June, when 11 Republicans joined all committee Democrats in supporting the legislation, as described above it is coming to the floor on the Suspension Calendar which necessitates a 2/3rds margin for victory.
Last Week in the Senate
The Floor

While the Senate failed to invoke cloture on its first effort to move an appropriations minibus, the Senate was successful in continuing to clear the presidential nominations queue. On Wednesday, Senators confirmed Brent McIntosh to be Under Secretary of the Treasury for International Affairs by a vote of 54-38, and Brian Callahan to be the Department's General Counsel by a vote of 55-39.
On Thursday, the Senate was expected to take up the nomination of former Mitch McConnell Chef of Staff Brian McGuire to be Treasury's Deputy Under Secretary for Legislative Affairs. That vote, however, has been postponed amid objections from Sen. Rand Paul (R-KY).
Hearings and Markups
FSGG Markup (9/19): On Thursday, the Appropriations Committee unanimously advanced its FY20 Financial Services and General Government Appropriations bill, which provides funding for the Treasury Department, Executive Office of the President, and numerous independent regulators. The $24 billion measure increases funding by $773 million above FY19 levels, including targeted funding increases for Treasury Department anti-money laundering programs, IRS enforcement, and the SEC and CFTC. The bill also includes several policy riders, including anti-waste measures such as prohibiting the funding of portraits of federal officials.
The committee on Thursday also cleared the Agriculture and Transportation-Housing Urban Development appropriations bills, the latter of which provides a $2.3 billion increase in HUD funding. Following Thursday's market, the committee has cleared five of its twelve annual appropriations bills, none of which have cleared the upper chamber. The Senate is expected to take up the House-passed CR this week, punting its funding deadline through November 21.
Bills Introduced
Stop Debt Collection Abuse Act (Booker and Lee): Eliminates the Fair Debt Collection-Practices Act's carveout of government-hired debt collectors and clarifies that FDCPA's consumer protections also apply to the collection of government debts. The legislation also limits the fees that private debt collectors can collect and treats debt buyers as debt collectors for the purposes of FDCPA. Reps. Emanuel Cleaver (D-MO) and French Hill (R-AR) introduced a House companion to the bill, which was previously introduced last Congress.
Prevent Evictions Act (Hassan): Directs HUD to establish a landlord-tenant mediation grant program, which would support state and local mediation programs intended to find mutually agreeable solutions to keep tenants in their homes.
Other Activity
Brown Mortgage Regulation Letter: On Tuesday, Ranking Member Sherrod Brown (D-OH) led Banking Committee Democrats on a letter to the Consumer Financial Protection Bureau (CFPB) calling for the bureau to emphasize strong consumer protections and access to credit as it revises its Qualified Mortgage (QM) and Ability to Repay (ATR) rules, which were implemented to ensure proper mortgage underwriting following the financial crisis. To this end, the members make several recommendations for potential rulemaking on the standards, including: (1) recognizing that allowing the QM patch—which provides liability protection to government backed mortgages—to sunset as CFPB has indicated could restrict access to properly underwritten credit for lower-income borrowers; (2) maintaining prohibitions against features included in predatory mortgages including negative amortization, excessive points and fees; and balloon payments; and (3) continuing to require lenders to establish that they have verified an individual borrower’s ability to repay their loan. 
Warren Equifax Settlement Letter: On Wednesday, Sen. Elizabeth Warren (D-MA) sent a letter to the Federal Trade Commission (FTC) expressing concern at reports that the administrator of Equifax’s settlement for its 2017 databreach is attempting to “throttle” payments to consumers affected by the data breach. While consumers under the settlement are allowed the option of four years of credit monitoring or $125 in cash, the letter alleges that the settlement administrator has increased barriers to claiming the cash option and sent suspicious and unclear emails “presumably designed to discourage many victims from opening the email.” The letter additionally requests a response to several inquiries relating to FTC’s awareness of the actions and its plans to allow consumers to collect the cash form of the settlement payment. 
Last Week in the Administration
CFPB Director Announces CFPB Structure to be Unconstitutional
On Tuesday, Consumer Financial Protection Bureau Director Kathleen Kraninger sent letters to Congressional leadership indicating that she believes the single-director structure of CFPB to be unconstitutional and that the Bureau would support a DOJ lawsuit targeting that structure. The move is a reversal for Director Kraninger, who previously said that the question of the Bureau's structure "is one for Congress or the courts to resolve." and for the Bureau, which until the announcement had continued to defend its leadership structure in court. The bureau's single-director structure, combined with the fact that its director can only be fired for cause, has long been cited by critics who argue that CFPB is too powerful and unaccountable to voters.
Kraninger: Complaint Database to Remain Public
On Wednesday, Consumer Financial Protection Bureau Director Kathleen Kraninger announced that the Bureau would keep its consumer complaint database public, a year after acting Director Mick Mulvaney first floated eliminating it. While calling the database a tool that "empowers consumers and informs the public," Director Kraninger indicated that several changes would be made to improve the database, including emphasizing that complaint data is not not necessarily statistically representative and exploring ways to put data in context. The potential elimination of the public database has one of many policies criticized by Congressional Democrats over its the Bureau's last two years of Republican leadership.
CEA Targets Housing Regulations; Lax Policing as Drivers of Homelessness
On Monday, the White House Council of Economic Advisers published a report pointing to local housing regulations as a primary driver of homelessness in the United States. Key findings from the report "The State of Homelessness in America" include: (1) regulated housing markets have led to increased housing prices and deregulation would decrease homelessness by 31 percent in major metropolitan areas; and (2) "more tolerable conditions for sleeping on the streets" and right-to-shelter laws increase homelessness. The report's release last week coincides with President Trump's trip to California, the housing policies of which Administration officials have particularly singled out as contributing to housing scarcity and homelessness.
Trump Bashes China as Negotiators Leave Washington Early
On Friday, Chinese trade negotiators cut their visit to the United States short, returning to Beijing without attending planned meetings with US farmers affected by the ongoing US-China trade dispute. The backtracking on the goodwill gesture dashed optimism of further progress on a resolution to the dispute and come after two days of negotiations in Washington, the first in months. After making de-escalatory moves in recent weeks, including lifting tariffs on 400 Chinese products last week, President Trump on Friday called China a "threat to the world" and said that he is not in any rush to cut a deal before the 2020 Presidential elections.
Fed Steps in to Steady Repo Markets
On Tuesday, interest rates on repurchase agreements (repo) spiked to as much as 10 percent. The startling spike prompted the Fed to, for the first time in a decade, inject money into repo markets, culminating with a Friday announcement that it would add $75 billion daily into the financial system through October 10 in order to ease the crunch for cash. While repo rates stabilized following the Fed's action, some have pointed to the unexpected volatility as a potential bad omen of broader instability in the economy. Repo agreements allow financial institutions seeking liquidity to borrow at low rates by collateralizing small, short term loans with securities.
Fed Cuts Rates Again
On Wednesday, the Federal Open Market Commission voted to lower its interest rate benchmark one quarter of a percentage point to 1.75-2 percent amid trade uncertainty and slowing business investment. While the widely anticipated mood marks FOMC's second consecutive interest rate cut, the vote was the commission's most divided decision in nearly five years, with two regional bank presidents opposing the cuts and St. Louis Fred President James Bullard advocating for a larger, 50 basis point reduction. The internal dissent charts an uncertain path to how the Fed will attempt to thwart a potential future recession moving forward. Despite his long-time advocacy for rate cuts, President Trump responded negatively to the announcement, accusing Fed Chairman Jerome Powell of having "no guts" for not issuing a larger cut.
Treasury Proposes CFIUS Changes required by FIRRMA
On Tuesday, the Treasury Department issued proposed regulations making reforms to the Committee on Foreign Investment in the United States (CFIUS). The much anticipated rulemaking would implement a number of provisions from last Congress's landmark foreign investment controls modernization legislation, the Foreign Investment Risk Review and Modernization Act (FIRRMA), including: (1) new CFIUS jurisdiction over certain non-controlling investments such as in businesses involved in critical technology, critical infrastructure, or sensitive personal data; (2) new jurisdiction over real estate transactions; and (3) process reforms. Treasury's fact sheet on the regulations can be found here.
FDIC Eliminates Inter-Affiliate Swap Initial Margin Requirements
On Tuesday, the Federal Deposit Insurance Commission proposed eliminating the requirement for covered swap entities to collect initial margin from affiliates. The move has been long requested from banks and Congressional Republicans, who have argued that inter-affiliate swaps allow banks to centralize risk management and bring the US in line with international regulatory frameworks. The proposal has elicited a strong response from some Congressional Democrats, including House Financial Services Committee Chairwoman Maxine Waters (D-CA), who called the move a "rollback of [an] important safeguard."
NCUA Finalizes New Alternative Payday Loan Option; Democrats Push Back on Loan Limit Hike
On Thursday, the National Credit Union Administration approved a final rule intended to allow credit unions more flexibility to offer payday alternative loans (PAL) that serve as an alternative to potentially predatory financial products. Under the so-called PAL II framework, which will not replace the existing PAL option, federal credit unions will be be allowed to offer PAL II loans up to $2000 for terms of one to twelve months. The proposal passed the NCUA board in a 2-1 vote, with Democratic Commissioner Todd Harper expressing concern that its fails to "strike the balance between flexibility and consumer protection." He in particular questioned PAL II's $2000 limit, which is double the limit allowed under the current PAL program. On the Hill, Senate Banking Committee Ranking Member Sherrod Brown (D-OH) argued that the proposal "drops important consumer safeguards, resulting in higher cost loans that could trap credit union members in a cycle of debt."
This Week's Schedule
Mon. (9/23)
  • Open Meeting: Federal Advisory Committee on Insurance – 1:30 PM – The Treasury Department's Federal Advisory Committee on Insurance will hold a public meeting. Details here.
Tues. (9/24)
  • Hearing: House Financial Services Committee on SEC Oversight – 10:00 AM – The House Financial Services Committee will hold an oversight hearing of the Securities and Exchange Commission (SEC). Details here.
  • Hearing: FSGG Sub. on IRS Oversight – 10:00 AM – The House Appropriations Subcommittee on Financial Services and General Government (FSGG) will hold an oversight hearing of the Internal Revenue Service, featuring testimony from Treasury Inspector General for Tax Administration J. Russell George. Details here.
  • Hearing: House Financial Services Sub. on the Wealth Gap – 2:00 PM – The House Financial Services Subcommittee on Diversity and Inclusion will hold a hearing entitled "Examining the Racial and Gender Wealth Gap in America." Details here.
  • Hearing: Senate Judiciary Sub. on Digital Platforms – 2:30 PM – The Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights will hold a hearing entitled "Competition in Digital Technology Markets: Examining Acquisitions of Nascent or Potential Competitors by Digital Platforms." Details here.
Wed. (9/25)
  • Hearing: Senate Banking Committee on Faster Payments – 10:00 AM – The Senate Committee on Banking, Housing, and Urban Affairs hill hold a hearing entitled "Facilitating Faster Payments in the U.S." Details here.
  • Hearing: FSGG Sub. on the Federal Trade Commission – 10:00 AM – The House Appropriations Subcommittee on Financial Services and General Government (FSGG) will hold a hearing entitled "Federal Trade Commission: Protecting Consumers and Fostering Competition in the 21st Century," featuring testimony from FTC Chairman Joseph Simons and Commissioner Rohit Chopra. Details here.
  • Hearing: House Financial Services Sub. on Financial Stability – 10:00 AM – The House Financial Services Subcommittee on Consumer Protection and Financial Institutions will hold a hearing entitled "Promoting Financial Stability: Assessing Threats to the U.S. Financial System." Details here.
  • Open Meeting: Securities and Exchange Commission – 1:00 PM – The Securities and Exchange Commission (SEC) will hold a public meeting. Details here.
  • Hearing: House Financial Services Sub. on the HECM Program – 2:00 PM – The House Financial Services Subcommittee on Housing, Community Development, and Insurance will hold a hearing entitled "Protecting Seniors: A Review of the FHA’s Home Equity Conversion Mortgage (HECM) Program." Details here.
Thurs. (9/26)
  • Hearing: House Financial Services Committee on Debt Collection Practices – 10:00 AM – 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 Small Business Committee on the SBA's Small Business Investment Company Program – 10:00 AM – The House Small Business Committee will hold a hearing entitled “SBA Management Review: Small Business Investment Company Program.” Details here.
  • Hearing: House Financial Services Taskforce on Financial Technology – 2:00 PM –The House Financial Services Taskforce on Financial Technology will hold a hearing entitled "The Future of Real-Time Payments." Details here.
Fri. (9/27)
  • No events scheduled.