Financial Services Report

Our Take

The horrific events of last week drew poignant remarks from leaders on both sides of the aisle, who along with others, not only condemned the violence but urged participants on all sides to tone down the vitriol of the current state of political discourse.   Unfortunately, like all too many parents know, when petulant siblings are seen screaming that it was “the other one’s fault” and “they started it,” it is often impossible to adequately resolve the issue in the eyes of either aggrieved child.   Perhaps, instead of contributing the “weighing and measuring” aspect of modern political analysis, Members of Congress and the Senate can become the profiles in courage that will lead the way to the political compromises that used to make this country great.  Or…

Looking Ahead

Near Term

• Speaker Paul Ryan is expected to give a major speech on Tax Reform to the on Tuesday.   As each passing day appears to put a nail in BAT’s coffin, stakeholders are watching to see whether the Speaker will use this speech as an opportunity to pivot off the BAT and reframe the debate. 
• The Senate Banking Committee continues to hold hearings that serve as the foundation of its still nascent, but ever growing, effort to craft a compromise for a regulatory relief bill with a hearing on Thursday from the various banking regulators.  
• The House Financial Services Committee will continue is mark-up of the Flood Insurance proposal on Wednesday morning and then a Subcommittee will hold a hearing on Monetary Policy that afternoon.
• Trade policy will be front in center as both the Senate Finance and House Ways and Means Committee will get a crack at USTR Lighthizer this week.

Further Out

• Just 20 Legislative Days remain before the August Recess commences.  Will there be votes on Healthcare and the Debt Ceiling by then?

The Past Week

Legislative Branch
House
House Panel Passes First Part of Its Flood Insurance Reform on Party Line Vote
The House Financial Services Committee advanced its flood insurance reform bill to the House floor on a 30-26 party-line vote in a markup last week. The package would phase-out government-backed coverage for new buildings in high-risk areas and cap the compensation available in the National Flood Insurance Program (NFIP) “Write Your Own” initiative. A bipartisan bill to reauthorize the expiring NFIP has been proposed in the Senate by Sens. Bob Menendez (D-NJ) and John Kennedy (R-LA).
 
Meadows Says Freedom Caucus Want $1.5 Trillion Debt Hike
House Freedom Caucus Chairman Mark Meadows (R-NC) weighed in on discussions to raise the debt ceiling last week saying that the conservative group wants to increase the debt limit by $1.5 trillion, or about $1 trillion below what the Trump Administration is reportedly desiring. If the Freedom Caucus proposal is adopted, it would likely set up a new deadline for Congress to act on the ceiling again late in 2018, whereas the Administration’s request would likely push the issue out until the 2020 election.  Conservative members have frequently demanded spending concessions in return for any vote on a debt limit hike.
 
House Judiciary Subcommittee Holds Hearing on TCPA Abuse
On Tuesday, the House Judiciary Subcommittee on the Constitution and Civil Justice held a hearing entitled, “Lawsuit Abuse and the Telephone Consumer Protection Act,” focused on litigation practices related to communications from businesses to consumers without consent. Full Committee Chairman Bob Goodlatte (R-VA) spoke strongly in favor of TCPA reform at the hearing, saying that it “disturbs me that this law should be used to stop people trying to communicate for legitimate purposes.” However, Democrats did not share the view and their comments suggested that they were content with the status quo.
 
Senate
Russia Sanctions Added to Iran Sanctions Bill, Passes Senate Overwhelmingly
The Senate agreed to codify new sanctions against Russia last week in a bill (S. 722) originally drafted to place new restrictions on the Iranian regime. The revised bill, which also included language to curtail the ability of the White House to unanimously lift sanctions, passed 97-2. The bill is already being hailed as a bipartisan achievement in a year which has seen few bipartisan bills make it through the upper chamber. President Trump has yet to signal his stance on the bill, although White House National Economic Council Director Gary Cohn said that the Administration would not seek to weaken Russia sanctions, and that “if anything, we could probably look to get tougher.”
 
Warren  & Brown Hint at Path Forward for Community Bank Relief
On Wednesday, influential Democrat Sen. Elizabeth Warren (D-MA) suggested that Senate Democrats may be willing to pursue targeted changes to the Dodd-Frank financial reform law that would boost the community banking and credit union sectors. Sen. Warren has been one of the leading critics of Republican efforts to overhaul financial regulation, and reiterated that she would be opposed to any laws that would roll back consumer protections or benefit large institutions. Her remarks likely would leave out changes to the Consumer Financial Protection Bureau (CFPB), which was heavily weakened in the House-passed regulatory overhaul known as the Financial CHOICE Act.   Then at a hearing on potential relief for mid-sized firms, Ranking Member Brown expressed his belief in support for a narrow set of reforms (see more below).  
 
Finance Panel Advances Treasury Nominees to Senate Floor
The Senate Finance Committee held a series of votes last week to consider various nominees for the Treasury Department, with all being approved by significant bipartisan margins. Specifically, the Committee advanced David Malpass to be the undersecretary of international affairs 24-2, Andrew Maloney to serve as deputy undersecretary 25-1, and Brent McIntosh to be Treasury’s general counsel unanimously.
 
Senate Banking Panel Hears from Large Banks on Reg Reform
On Thursday, the Senate Banking Committee held its second hearing in a series on its regulatory reform effort, this one focused on the effect of reform mid-size and large banks. In contrast to their House counterparts, the Committee found some areas of bipartisan compromise, with Republican Sen. Thom Tillis (R-SD) arguing that a full repeal of Dodd-Frank is “just wrong” and Ranking Member Sen. Sherrod Brown (D-OH) saying he is “optimistic that there is room for agreement on a modified regime for overseeing regional banks."
 
Banking Committee Advances Two Nominees
On Wednesday, the Senate Banking Committee passed out the nominations of Kevin Hassett to be the Chair of the Council of Economic Advisers and Pamela Patenaude to be the Deputy Secretary of Housing and Urban Development.   Both nominations now need to pass the full Senate. 
 
Tester, Heller Introduce Bill to Oversee Fed on International Capital Standards
On Thursday, the bipartisan duo of Sens. Dean Heller (R-NV) and Jon Tester (D-MT) introduced legislation (S. 1360) to establish an Insurance Policy Advisory Committee on International Capital Standards within the Federal Reserve. The senators had introduced a similar bill in the 114^th Congress and a companion version is expected to be released in the House.  
 
Senate Banking Panel to Hear from Fed, FDIC, OCC Regulators in Hearing on Reg Relief
The Senate Banking Committee has scheduled a blockbuster hearing next week featuring Fed Governor Jerome Powell, Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, Acting Comptroller of the Currency Keith Noreika, National Credit Union Administration Acting Chairman Mark McWatters, and Conference of State Bank Supervisors representative Charles Cooper. The hearing is the third in a series dedicated to inform the Committee’s efforts towards a regulatory reform bill. The hearing is set for Thursday at 10:00 a.m.  
 
Senate to Vote on Treasury Nominations
This week the Senate will meet to consider three executive nominations, including two for the Treasury Department. Specifically, senators will vote on the nominations of Sigel Mandelker to be Under Secretary of Treasury for Terrorism and Financial Crimes and Marshall Billingslea to be Assistant Secretary of Treasury for Terrorist Financing. Democrats had opposed Mandelker over the Treasury Department’s Financial Crimes Enforcement Network slow response to senators on documents regarding Trump campaign officials’ business with Russian groups.
 
Select Highlights from the Administration
Treasury Department
Mnuchin Says U.S. Can Avoid Default Until September Without Debt Limit Hike
As the Administration and Congress consider how to address the nation fast-approaching its borrowing authority, Treasury Secretary Steven Mnuchin said last week that the government can continue its operations through the beginning of September without action from Congress. However, Mnuchin maintained his preference that Congress address the debt ceiling before leaving for the August recess, but said that his Department has plans to get through August if necessary. The debt deadline had originally been expected in late-September or October, but slower-than-expected tax receipts have pushed that deadline up by a number of weeks.
 
Treasury Releases First Report on Regulatory Relief Recommendations – Includes Significant Curbs to CFPB and Relaxing Dodd-Frank Regulations — Silent on Glass-Steagell
The Treasury Department released its first of four reports due to analyze the financial regulatory system in response to President Trump’s executive order on the issue earlier this year. As promised, the first report focuses mainly on the depository system and includes several recommendations to reform the Consumer Financial Protection Bureau (CFPB). Specifically, the report recommends transforming the agency into a bipartisan commission or making the Director removable at-will; clearly defining unfair, deceptive, and abusive acts or practices (UDAP); and mandating that the agency regularly review all of its promulgated rules.
 
In an interview on the report, Treasury Secretary Steven Mnuchin reiterated the report’s conclusions, saying that the CPFB “should be funded on Congress” and “subject to proper review.” Senate Banking Chairman Mike Crapo (R-ID) has said that the report will help inform his Committee’s work on a regulatory reform bill currently being discussed in the Committee.  However, not surprisingly, many on the left attacked the report and its findings as laying the groundwork for the next crisis.
 
The White House
Trump Taps Stump for Republican Seat on CFTC
On Monday, President Trump formally nominated Dawn Stump to fill the last Republican seat on the Commodity Futures Trading Commission (CFTC). Stump’s career includes stints as an aide at the Senate Agriculture Committee, the New York Stock Exchange, and the Futures Industry Association. Stump’s nomination leaves just one seat open at the Commission, saved for a Democrat.
 
Trump Intends to Name House Aide Clinger as FDIC Chairman
On Friday, President Trump announced he intends to nominate House staffer James Clinger to Federal Deposit Insurance Corporation Board, and become Chairman once Martin Gruenberg steps down later this year. Clinger has worked for the House Financial Services Committee for 20 years, most recently as its chief counsel. If confirmed, by the Senate, Clinger would serve a six-year term, with five as chairman. 
 
Supreme Court
In Gorsuch’s First Opinion, SCOTUS Limits FDCPA in Unanimous Decision  
On Monday, the Supreme Court issued its ruling in a case that charged to expand the applicability of the Fair Debt Collection Practices Act (FDCPA) to companies that buy defaulted loans from another lender. The case, Henson v. Santander Consumer, was decided unanimously in favor of the defendant, with new Associate Justice Neil Gorsuch writing his first majority opinion for the Court. In his writing, Gorsuch says that Santander didn’t qualify as a debt collector and that the FDCPA’s language “seems to focus our attention on third party collection agents working for a debt owner.”