Financial Services Report

July 30, 2018


Looking Ahead

Near Term

The House is in Recess until September. The Senate is in session this week and is expected to finish up its work on its mini-bus of the T-HUD, Ag, Interior and FSGG spending bills. 

After that, the Senate could vote on any of the following:

  • A short-term funding reauthorization for the National Flood Insurance Program (NFIP);
  • Approving the FY19 National Defense Authorization Act (NDAA) conference report (H.R. 5515); and
  • A vote on the nomination of Britt Cagle Grant to be United States Circuit Judge for the Eleventh Circuit.

Further Out

  • Senate Banking Committee is expected to hold as many as three hearings on Russian Sanctions August
  • Conversations (negotiations?) surrounding the JOBS 3.0 Act will continue to take place.
  • The House Financial Services Committee may hold another mark-up on September 13th.

The Past Week

Legislative Branch
House Passes Flood Insurance Reauthorization
The House voted 366-52 on Wednesday in favor of a short-term extension for the National Flood Insurance Program (S. 1182), which is due to expire on July 31. The Senate is expected to vote on the short-term extension this week, with Senate Majority Leader Mitch McConnell (R-KY) saying “the Senate will pass it before our next State Work Period to ensure that the program does not expire. Senators will continue their work over the next four months on a long-term reauthorization that reforms the program.”
House Financial Services Committee Considers Seven Bills
The House Financial Services Committee held a markup of seven bills aimed at homelessness, mortgages, and fintech on Tuesday. In his opening statement, Chairman Jeb Hensarling (R-TX) expressed support for all of the bills and congratulated the Committee for reporting 130 bills during this Congress. Ranking Member Maxine Waters (D-CA) praised the recently passed JOBS Act 3.0 and criticized the housing bills being considered at the markup. The Committee voted to favorably report all of the bills, four of which passed easily with bipartisan support. Members engaged in prolonged and heated debate over funding for the Department of Housing and Urban Development (HUD) while considering a bill to expand the Department’s definition of homelessness to include homeless youths (H.R. 1511) that did not include extra funding for relevant programs. Democrats also criticized a bill to change the calculation of the Qualified Mortgage point cap (H.R. 2570).
Ways and Means Chairman Brady Reveals Tax Reform 2.0 Plan
House Ways and Means Committee Chairman Kevin Brady (R-TX) revealed his “tax cuts 2.0” outline on Tuesday. In addition to making the individual cuts from last winter’s Tax Cuts and Jobs Act (TCJA) permanent, Chairman Brady’s outline would create Universal Savings Accounts intended to be a more flexible saving tool for families and allow new businesses to write off more of their start-up expenses. The package is not likely to pass this Congress, as it would need 60 votes to pass the Senate.  
Hensarling Identifies Housing Finance as Fall Priority
In an interview with Politico Morning Money published Friday, House Financial Services Chairman Jeb Hensarling (R-TX) said that he plans to release a bipartisan housing finance reform bill when legislators return from recess in September. Although it is highly unlikely that any substantial housing finance reform becomes law during the little time left in the Congress, Hensarling, who is retiring, said that he would circulate the bill and hold hearings on government sponsored housing finance entities including Fannie Mae and Freddie Mac. He also said that the Committee would consider a long-term flood insurance reform and reauthorization bill. Separately, Senate Banking Committee Ranking Member Sherrod Brown (D-OH) has indicated that he hopes the Banking Committee will improve Hensarling’s bipartisan JOBS Act 3.0, saying “the idea is I’d like to negotiate a better bill.”
House Judiciary Committee Holds Hearing on Online Taxation Ruling
On Tuesday, the House Judiciary Committee held a hearing that examined the recent Supreme Court decision in South Dakota v. Wayfair, which reversed the long-standing physical presence rule established in the Quill Corp. v. North Dakota decision. The Committee heard from a panel of eight stakeholders who offered varying opinions — ranging from a moratorium on sales tax collection by states to more Congressional inaction on the issue — about the direction Congress should take in the aftermath of the Wayfair decision. Members on both sides of the aisle found bipartisan agreement when it came to protecting small businesses from unfair taxation and compliance burdens, but disagreed as to what the scope of Congress’ action should be.
Hoyer Unveils "Make It In America" Plan
House Minority Whip Steny Hoyer (D-MD), unveiled House Democrats’ “Make It In America” economic plan on Monday amid a push to help the party win back the House. The plan focuses on education, entrepreneurship, and infrastructure, issues that Whip Hoyer said Democrats should prioritize as they attempt to pick up 23 seats in November. For instance, the plan will allow Pell grants to cover job-training programs. Notably, Whip Hoyer’s plan does address the Administration’s trade policies, but he reiterated its commitment to help students, build skills, and train workers in skills-based, non-degree programs. The plan comes at the culmination of House Democrats’ year-long “listening tour” of the country.
Sens. Portman and Cardin Introduce IRS Reform Legislation
On Thursday, Sens. Rob Portman (R-OH) and Ben Cardin (D-MD) introduced the Protecting Taxpayers Act. The bill would reform Internal Revenue Service (IRS) structure and operations in six key areas: 1) organizational structure and management; 2) taxpayer protections and enforcement modernization; 3) improved small business and retirement tax administration; 4) better serving low-income taxpayers; 5) overhauling the appeals process; and 6) improving IT infrastructure. At a Finance Oversight Subcommittee hearing on Thursday, Sen. Portman, who is the Subcomittee's Chairman, promoted the legislation and identified reform of the IRS Oversight Board and increased access to the appeals process as key provisions. Sens. Portman and Cardin have indicated that the bill is intended to complement IRS reform legislation introduced last week by Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), the Taxpayer First Act (S. 3246).
Senate Banking Committee Hears From Four Nominees
On Tuesday, the Senate Banking Committee held a confirmation hearing for four executive nominees: 1) Elad Roisman to join the Securities and Exchange Commission (SEC); 2) Michael Bright to be President of the Government National Mortgage Association (Ginnie Mae); 3) Rae Oliver to be Inspector General for the Department of Housing and Urban Development (HUD); and, 4) Dino Falaschetti to be Director of the Office of Financial Research (OFR) at the Department of the Treasury. The hearing primarily focused on Roisman’s nomination to take Michael Piwowar’s seat at the SEC, and the nominee was pressed for his views on the SEC’s best interest standard, among other issues. However, partisan fireworks were kept to a minimum, particularly for the Ginnie Mae and HUD nominees. While Chairman Mike Crapo (R-ID) backed the credentials of each nominee, he did not provide a timeline for when a committee vote may be held on their nominations. 
Senate Amends and then Passes Miscellaneous Tariff Measure
The Senate unanimously approved the Miscellaneous Tariff Bill (MTB) (H.R. 4318) on Thursday, providing tariff relief through 2020 to thousands of products not readily available in the United States. Given that manufacturers sometimes need inputs not made by U.S. firms, MTB exempts listed products from U.S. tariffs. In order to be included in MTB, products are subjected to rigorous analysis by the independent International Trade Commission (ITC) to ensure that they cannot be obtained from a U.S. firm. For these reasons, industry has lobbied aggressively for a new bill. Although the House passed its own MTB package in January, the legislation was amended in the Senate and will have to be passed again by the House before it heads to President Trump’s desk.
Select Highlights from the Administration
The White House
Trump Steps up NAFTA Pressure
In a letter to Mexican President-Elect Andres Manuel Lopez Obrador published Tuesday, President Donald Trump called for an acceleration of NAFTA negotiations. In the letter, President Trump praised the benefits for both countries of a renegotiated NAFTA while stipulating ““but only if it can go quickly, because otherwise I must go a much different route.” Trump also used the letter to highlight similarities with Lopez Obrador, saying that both of them had managed to “displace the establishment.” While talks have generally been stalled for the past several months due to Mexico’s July 1 Presidential election, a Mexican delegation including representatives of the incoming government visited Washington this week to discuss the negotiations. On Thursday, United States Trade Representative Robert Lighthizer told the Senate Appropriations Committee that the U.S. hoped to reach an agreement in principal during August in order to have a deal signed before President-Elect Lopez Obrador takes office on December 1.
EU President Juncker Visits Washington
European Commission President Jean-Claude Juncker visited Washington last week amid escalating trade tensions between the United States and Europe. After meeting on Wednesday, Presidents Juncker and Trump held a joint press conference announcing the two side’s agreement to work towards “zero tariffs, zero non-tariff barriers, and zero subsidies.” As part of the deal, President Juncker agreed to increase European imports of U.S. liquified natural gas and soybeans, while President Trump agreed to hold off on proposed automobile tariffs and eventually resolve the Section 232 steel and aluminum tariffs. While the move marks a de-escalation of trade tensions, numerous outstanding questions remain. For instance, while President Trump agreed to “resolve” the metal tariffs as they relate to Europe, he did not definitely say that he would suspend them and the specifics on EU soybean and liquified natural gas imports are still unclear.
Administration Announces $12 Billion in Relief for Farmers
The Trump Administration announced Tuesday that it will provide $12 billion in emergency relief to farmers hurt by retaliation against U.S. exports. Amid the Administration’s Section 232 steel and aluminum and Section 301 tariffs, U.S. trading partners have imposed billions of dollars in retaliatory tariffs on U.S. exports, with agriculture being hit the hardest. To alleviate the impacts of this retaliation, the relief plan will rely primarily on trade promotion funding from the Commodity Credit Corporation (CCC) and will not require Congressional approval. Lawmakers from both parties have criticized the program, arguing that it is a short-term solution to a bigger problem. For instance, Sen. Ben Sasse (R-NE) tweeted:  “If tariffs punish farmers, the answer is not welfare for farmers. The answer is remove the tariffs.”
Economic Growth Hits 4.1%
The Bureau of Economic Analysis announced Friday that the economy grew by 4.1% during the second quarter, the highest level in four years. Notably, the figure raises the possibility of three percent growth in 2018, a number the White House has targeted despite 2.3 percent growth during the first year of the Trump Presidency. Congressional Republicans have been quick to point to tax reform as a catalyst for the favorable numbers. For his part, President Trump expressed excitement at the high level of growth, saying "we're going to go a lot higher than these numbers, and these are great numbers."
In The States
New Hampshire
New Hampshire Legislature Rejects Online Tax Bill
Rank and file members of the New Hampshire House of Representatives shocked the State Senate and Governor Chris Sununu by stripping language from a bill (SB 1) that would impede the ability of other states to collect sales tax in New Hampshire. The bill is largely seen as a response by New Hampshire, which has no sales tax, to the South Dakota v. Wayfair ruling in which the U.S. Supreme Court ruled that states are allowed to charge sales tax on online purchases made from out-of-state sellers. Given that New Hampshire does not collect a sales tax on any business, its leaders have argued that allowing other states to impose sales tax on its businesses puts it at a competitive disadvantage. The bill would have imposed procedural barriers on other states trying to collect sales tax from New Hampshire companies, including by banning companies from giving information to out-of-state tax collectors and creating a multi-step process that would require out-of-state companies to give 40 days notice before they collect sales tax. Senate President Chuck Morse (R-Salem) indicated the possibility of the Senate taking up the measure again in August in order have another attempt at passage in the House.