{"id":2044,"date":"2021-03-22T15:10:37","date_gmt":"2021-03-22T15:10:37","guid":{"rendered":"https:\/\/thornrun.com\/financial-services-report-3-22\/"},"modified":"2023-08-08T21:25:31","modified_gmt":"2023-08-08T21:25:31","slug":"financial-services-report-3-22","status":"publish","type":"post","link":"https:\/\/thornrun.com\/financial-services-report-3-22\/","title":{"rendered":"Financial Services Report (3\/22)"},"content":{"rendered":"\n

With the House in a “Committee Work” period next week there is no expectation of votes on the Floor of the House. Meanwhile, the Senate is in session for Floor votes, and has teed up consideration of a bipartisan deal<\/a> to extend the Paycheck Protection Program (PPP) loan application date to May 31, while also allowing the Small Business Administration (SBA) to continue processing pending applications for up to 30 days after the new expiration date. This bill, which has already passed the House is expected to pass prior to the March 31 expiration date. <\/p>\n\n\n\n\n\n\n\n

Beyond this\nlegislation, the Senate is expected to continue approving Administration\nnominees, including (1) Marty Walsh to be Labor Secretary; (2) Vivek Murthy to\nbe U.S. Surgeon General; (3) Rachel Levine to be Assistant Secretary at the\nDepartment of Health and Human Services (HHS); (4) Adewale Adeyemo to be Deputy\nTreasury Secretary; (5) Shalanda Young to be Deputy Director of the Office of\nManagement and Budget (OMB); and (6) David Turk to be Deputy Energy Secretary. <\/p>\n\n\n\n

In notable committee\nactivity next week, Treasury Secretary Janet Yellen and Federal Reserve\nChairman Jerome Powell will make their first joint appearances together before\nthe House Financial Services and Senate Banking Committees on Tuesday and\nWednesday, respectively, to provide their statutorily required quarterly update\non the central bank and Treasury Department’s pandemic response efforts as\nmandated by the CARES Act. On Thursday, Transportation Secretary Pete Buttigieg\nwill appear before the House Transportation and Infrastructure Committee for\nthe first time to discuss the Biden administration’s infrastructure priorities.\nAlso on Thursday, the CEOs of Facebook, Google and Twitter will be before two\nEnergy and Commerce Subcommittees for a blockbuster hearing on Social Media and\nDisinformation.<\/p>\n\n\n\n

Keeping with the Thursday schedule, the Budget Committee in the Senate will hold a hearing on the tax code that may tip the Democrats hands on what areas of the Corporate Tax Code they are looking to modify as part of their infrastructure push. Finally, for those focused on the SBA, the Senate Committee on Small Business and Entrepreneurship will hold an oversight hearing of the Small Business Administration’s (SBA) COVID-19 response programs on Wednesday, featuring testimony from officials at SBA, the SBA Office of the Inspector General (OIG), and the Government Accountability Office (GAO).<\/p>\n\n\n\n

Last Week in the House<\/strong><\/p>\n\n\n\n

Floor<\/em><\/p>\n\n\n\n

On Tuesday, the House\noverwhelmingly passed (415-3) a bill<\/a> extending the deadline for applying for a\nPaycheck Protection Program loan to May 31, sending the legislation to the\nSenate this week, as the current March 31 deadline looms. <\/p>\n\n\n\n

On Thursday, the\nHouse passed two immigration-related bills. The Dream Act<\/a> \u2014 which received nine Republican votes \u2014 seeks to\nprovide a pathway to citizenship for recipients of the Deferred Action for\nChildhood Arrivals (DACA), Temporary Protected Status (TPS), and Deferred\nEnforced Departure (DED) programs. The Farm Workforce Modernization Act<\/a>\ngarnered more bipartisan support\nwith 30 Republican yes votes. The bill seeks to provide legal status for\nmigrant farmworkers and reform the H-2A agricultural visa program.  <\/p>\n\n\n\n

On Friday, House\nlawmakers passed (246-175<\/a>) a measure that would make sure the increase in\ndeficit spending as a result of the American Rescue Plan (ARP) does not trigger\nstatutorily-required across-the-board spending cuts. The bill<\/a> that seeks to avert billions of dollars in\nautomatic spending cuts \u2014 known as sequestration \u2014 to Social Security,\nMedicare, Medicaid, and other programs required under the 2010 pay-as-you-go\n(PAYGO) law. If Congress does not act on the PAYGO sequester prior to the end\nof this year’s session, the Congressional Budget Office (CBO) estimated<\/a> that the increase in spending would\ntrigger roughly $381 billion in funding cuts annually over five years,\nbeginning in fiscal year (FY) 2022. <\/p>\n\n\n\n

Hearings, etc.<\/em><\/p>\n\n\n\n

HFSC Convenes Second GameStop Hearing (3\/17):<\/strong> On Wednesday, the House Financial Services\nCommittee held what has been billed as the second of three hearings, entitled\n\u201cGame Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail\nInvestors Collide.\u201d <\/p>\n\n\n\n

This hearing didn’t have the fireworks of the first one, and\ninstead was a mostly academic discussion about various market structure issues\nthat may have contributed to the rise in retail investing. In brief, the\ndiscussion centered around: (1) the payment for order flow (PFOF) model and its\npotential conflicts of interest; (2) the definition and oversight of best\nexecutions; (3) the gamification and glorification of trading; (4) the\ntransparency of securities lending; and (5) the potential impacts of an\naccelerated settlement cycle. While several Democrats expressed concern that\nPFOF perversely incentivizes the highest payments for brokers rather than the\nbest execution for customers, Republicans were quick to point out that the SEC\nalready regulates best interest obligations of brokers, and that the existing\nPFOF model has in no way canceled that. Additionally, former SEC Commissioner\nMichael Piwowar exchanged in several bipartisan dialogues advocating for the\nSEC to reevaluate the current settlement cycle. While he noted the industry\ncould incur some costs in moving to a T+1 settlement time, he suggested the\nacceleration would allow consumers quicker access to cash or securities and\nwould lower the margins that brokers are required to post with the DTCC. A\nthird hearing with the regulators is expected in the future.<\/p>\n\n\n\n

Select Coronavirus Subcommittee holds hearing on Economic Recovery\nEfforts (3\/17): <\/strong>On Thursday, the\nSubcommittee convened its first hearing since October to assess the COVID-19\ncrisis and relief efforts. Democrats underscored the disproportionate harm the\npandemic has caused on minorities. They praised American Rescue Plan Act and\nChairman Clyburn stressed the importance of implementing it \u201ceffectively,\nefficiently, and equitably.\u201d He, along with several colleagues, advocated for a\nrobust infrastructure package to bring much needed broadband access, build\nhousing and schools, modernize health care facilities and transition to a clean\nenergy economy. Republicans condemned the partisan nature of the American Rescue\nPlan and pushed back on raising taxes or passing more massive spending\nmeasures. GOP Members also pushed for the reopening of schools. Former National\nEconomic Council Director Larry Kudlow argued that raising the corporate rate,\nthe capital gains rate, or individual income tax rate will reduce critical\nsupply-side incentives and deprive American businesses of valuable resources.\nMeanwhile, AFL-CIO Chief Economist William Spriggs contended that the economy\ncannot afford workers earning less than $15 an hour and advocated for broad\ninvestments in infrastructure, as well as a more progressive tax system. <\/p>\n\n\n\n

Judiciary Subcommittee Continues to probe Competition\nPolicy(3\/18):<\/strong> On Thursday, the House\nJudiciary Subcommittee on Antitrust, Commercial, and Administrative Law (ACAL)\nheld a hearing to discuss increasing competition and mitigating monopoly power.\nThe witnesses advocated for more resources for antitrust enforcement, and\nexplained why monopolies hurt consumers in the long run. Republicans raised\nconcerns about free speech and content moderation, focusing on how monopoly\npower is used to curtail political opinions. Overall, both Republicans and\nDemocrats seemed intent on helping the Federal Trade Commission (FTC) and\nDepartment of Justice (DOJ) increase regulations for monopolies, particularly\nwithin technology companies. There was broad bipartisan support for shifting\nthe burden of proof more heavily on would-be merging firms to defend that the\nmerger would not limit competition and ultimately harm consumers. <\/p>\n\n\n\n

E & C Discusses the CLEAN Future Act (3\/18):<\/strong> On Thursday, the Subcommittee on Environment\nand Climate Change convened a legislative hearing to discuss industrial climate\npolicies, specifically focusing on the Climate Leadership and Environmental\nAction for our Nation\u2019s (CLEAN) Future Act. Democrats championed this measure\nas a key step toward reducing U.S. emissions, supporting new infrastructure and\nresiliency investments, as well as creating and maintaining domestic job\ngrowth. Introduced earlier this month, the bill (H.R. 1512<\/a>) seeks to achieve a 50 percent reduction in\ngreenhouse gas pollution by 2030, as well as a 100 percent, net-zero emission\nrate by 2050. Republicans on the Subcommittee were highly critical of the\nlegislation\u2019s focus away from the traditional energy sectors, saying that\nbanning fossil fuel development would cause major disruptions to state and\nlocal economies. GOP Members directed criticism to China and other countries\nfor their role in contributing to global carbon emissions, citing data that\nsuggests it is \u201cvirtually impossible\u201d to reach net-zero emissions given the\noutput of other countries. While they offered significant gripes with the CLEAN\nAct, there was an underlying agreement that more clean energy solutions, such\nas nuclear and biomass technologies, should be pursued as options. <\/p>\n\n\n\n

D&I Sub Discusses\nDiversity Data (3\/18):<\/strong> On\nThursday, the House Financial Services Subcommittee on Diversity and Inclusion\nheld a hearing to discuss how diversity data can measure commitment to\ndiversity, equity, and inclusion. Republicans expressed some concern with using\na one-size-fits-all approach to mandating DNI disclosures, while Democrats were\nsupportive of using data collection to combat systematic racism. Overall, there\nwas a consensus that better transparency of diversity data can create a more\nrobust workforce and facilitate economic growth. One witness urged the\nimplementation of Section 1071, which requires financial institutions to\ncollect and report on credit applications from women and minority-owned small\nbusinesses. In a line of questioning with Chairwoman Beatty, witnesses\nhighlighted that companies that have success with DNI metrics are also more\nlikely to provide sustainable and profitable investment opportunities. Rep.\nJohn Rose (R-TN) voiced concerns about the potential for mandatory reporting to\nburden and harm small businesses. Rep. Stephen Lynch (D-MA) asked the witnesses\nif there is a way to prevent fintech companies from using biased algorithms.\nMr. Garcia-Diaz highlighted the importance of diversity when creating\nalgorithms and fair lending programs, stating that the potential impact of\nbiased algorithms is still being explored. See <\/em>more below on an document\nrequest announced at the hearing. <\/p>\n\n\n\n

Bills Introduced<\/em><\/p>\n\n\n\n

H.R. 1944<\/strong><\/a> <\/strong>(Rice): To provide a tax credits for certain expenses associated\nwith protecting employees from COVID-19. <\/p>\n\n\n\n

H.R. 1936<\/strong><\/a> <\/strong>(Neguse): To require the Comptroller General to evaluate and issue\na report on the structural and economic impacts of climate resiliency at the\nFederal Emergency Management Agency, including recommendations on how to\nimprove the building codes and standards that the Agency uses to prepare for\nclimate change and address resiliency in housing, public buildings, and\ninfrastructure such as roads and bridges. <\/p>\n\n\n\n

H.R. 1964<\/strong><\/a> <\/strong>(Foster): To assess the State by State impact of Federal taxation\nand spending. <\/p>\n\n\n\n

H.Res. 249<\/strong><\/a> <\/strong>(McHenry): Expressing the sense of the House of Representatives\nthat the Congress should not impose a financial transaction tax on individuals\nor market intermediaries in connection with trades executed on the National\nMarket System or alternative trading systems. <\/p>\n\n\n\n

H.R. 2000<\/strong><\/a> <\/strong>(Banks): To amend section 230 of the Communications Act of 1934 to\nclarify that such section does not prevent a provider or user of an interactive\ncomputer service from being treated as the distributor of information provided\nby another information content provider, and for other purposes. <\/p>\n\n\n\n

H.R. 2001<\/strong><\/a> <\/strong>(Beatty): To amend the Dodd-Frank Wall Street Reform and Consumer\nProtection Act to require regulated entities to provide information necessary\nfor the Offices of Women and Minority Inclusion to carry out their duties, and\nfor other purposes. <\/p>\n\n\n\n

H.R. 2039<\/strong><\/a> <\/strong>(Loudermilk): To prohibit the Securities and Exchange Commission\nfrom requiring that personally identifiable information be collected under\nconsolidated audit trail reporting requirements, and for other purposes. <\/p>\n\n\n\n

H.R. 2040<\/strong><\/a> <\/strong>(Loudermilk): To update thresholds for certain currency\ntransaction reports and suspicious activity reports, and for other purposes. <\/p>\n\n\n\n

Other Activity<\/em><\/p>\n\n\n\n

SAFE Banking Act Reintroduced:<\/strong> On Thursday, Rep. Ed Perlmutter (D-CO) reintroduced his landmark Secure\nand Fair Enforcement (SAFE) Banking Act of 2021<\/em> (H.R. 1196<\/a>). The legislation is also led by Reps. Nydia M.\nVel\u00e1zquez (D-NY), Steve Stivers (R-OH), and Warren Davidson (R-OH) and\ncosponsored by more than 100 members. The bill would allow marijuana-related\nbusinesses in states with some form of legalized marijuana and strict\nregulatory structures to access the banking system. <\/p>\n\n\n\n

Forty-seven states, four U.S. territories, and the District of\nColumbia have legalized some form of recreational or medical marijuana,\nincluding CBD. Yet current law restricts legitimate licensed marijuana\nbusinesses from accessing banking services and products, such as depository and\nchecking accounts, resulting in businesses operating in all cash \u2014 posing a\nserious public safety risk for communities. In announcing the bill, lead\nDemocratic sponsor Ed Perlmutter said, \u201cthe genie is out of the bottle and has\nbeen for many years. Thousands of employees and businesses across this country\nhave been forced to deal in piles of cash for far too long, and it is the\nresponsibility of Congress to step up and take action to align federal and\nstate laws for the safety of our constituents and communities. The public\nsafety need is urgent, and a public health and economic need has also emerged\nwith the pandemic further exacerbating the cash-only problem for the\nindustry.\u201d <\/p>\n\n\n\n

GOP Reverses Conference Rule Prohibiting Earmarks:<\/strong> House Republicans voted Wednesday to lift their decade-long ban on earmarks, giving members the power to direct federal agencies to spend specific amounts on projects in their home districts as Democrats look for ways to get Republicans on board with a major infrastructure package later this year. The House stopped using earmarks in 2011, following the GOP winning the majority in the Chamber. Concerns of fraud and abuse, along with a handful of high-profile scandals, had made earmarks politically toxic. However, following Democrats in the House and Senate moving forward to reinstate a limited version of earmarks, renamed “community project funding.” House Republicans passed the resolution during their conference meeting on Wednesday by a secret-ballot vote of 102-84. <\/p>\n\n\n\n

HFSC Dems Seek D&I Data from Asset Managers<\/strong>: On Thursday, Chairwoman of the House Committee on Financial Services, Maxine Waters (D-CA), and Congresswoman Joyce Beatty (D-OH), Chair of the Subcommittee on Diversity and Inclusion, sent letters to the nation\u2019s 31 largest investment firms \u2014 those with $400 billion or more of assets under management \u2014 for data on their diversity and inclusion. \u201cWe are making progress to ensure a comprehensive understanding of diversity and inclusion performance in the financial services industry,\u201d the lawmakers wrote in the letter. The release explains that the requests are part of a longstanding effort to hold the financial services sector accountable and provide the American public with a complete picture of how financial firms are meeting their commitments to diversity and inclusion. The press release listing the 31 firms can be found here<\/a>. <\/p>\n\n\n\n

Last Week in the Senate<\/strong> <\/p>\n\n\n\n

Floor<\/em><\/p>\n\n\n\n

The Senate continued\nconsideration of President Biden\u2019s cabinet nominees last week, confirming the\nfollowing four nominations:<\/p>\n\n\n\n