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  • Trump issues Executive Order removing ALJs from competitive service

    Federal Issues

    On July 10, President Trump issued an Executive Order (EO) excepting Administrative Law Judges (ALJs) from the federal government’s competitive hiring service. The EO is in response to the recent Supreme Court decision in Lucia v. SEC, which held that ALJs are “inferior officers” subject to the Appointments Clause of the Constitution. (Previously covered by InfoBytes here.) The EO allows federal agencies to hire ALJs without going through the Office of Personnel Management (OPM) competitive selection process, which will give agencies the ability to select candidates who meet the agency’s specific needs— providing greater “flexibility and responsibility for ALJ appointments,” according to the White House announcement. The announcement emphasizes that the EO “reduces the legal uncertainty” over new ALJ appointments under the Appointments Clause in order to safeguard agencies’ enforcement of federal laws.

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  • Agencies issue statement on the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act

    Federal Issues

    On July 6, the Federal Reserve Board, FDIC, and OCC issued an interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), S.2155/P.L. 115-174, which was signed into law by President Trump on May 24. The joint statement describes the interim positions the federal agencies will take with regard to amendments within the Act, including, among other things, (i) extending the deadline to November 25 for all regulatory requirements related to company-run stress testing for depository institutions with less than $100 billion in total consolidated assets; (ii) enforcing the Volcker Rule consistently with the Act’s narrowed definition of banking entity; and (iii) increasing the total asset threshold for well-capitalized insured depository institutions to be eligible for an 18-month examination cycle. The agencies intend to engage in rulemakings to implement certain provisions at a later date. The accompanying OCC and the FDIC releases are available here and here.

    The Federal Reserve Board also issued a separate statement describing how, in accordance with the Act, the Board will no longer subject certain smaller, less complex banking organizations to specified regulations, including stress test and liquidity coverage ratio rules. The Act raised the threshold from $50 billion to $100 billion in total consolidated assets for bank holding companies to be subject to Dodd-Frank enhanced prudential standards. The Board intends to collect assessments from all assessed companies for 2017 but will not collect assessments from newly exempt companies for 2018 and going forward. Additionally, the statement provides guidance on implementation of certain other changes in the Act, including reporting high volatility commercial real estate exposures.

    Federal Issues Federal Reserve FDIC OCC S. 2155 Volcker Rule Stress Test Trump

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  • CFPB, OCC, and FDIC release statement on HMDA exemption in regulatory relief act

    Federal Issues

    On July 5, the CFPB issued a statement regarding the implementation of the partial HMDA exemptions in the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), S.2155/ P.L. 115-174, which was signed into law by President Trump on May 24. As previously covered by InfoBytes, the Act provides an exemption from HMDA’s expanded data reporting requirements for banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages (the provision would not apply to nonbanks and would not exempt institutions from HMDA reporting altogether). Although the statement emphasizes that the Act will not affect the format of the Loan/Application Register (LAR) for HMDA data collected in 2018—which should still be formatted in accordance with the Filing Instructions Guide issued in February (covered by InfoBytes here)—the Bureau stated that it intends to provide guidance later this summer on the Act, including an exemption code for institutions that are not reporting a particular field due to the Act’s partial exemptions.

    Additionally, the statement reiterated the Bureau’s December 2017 announcement that it will not require resubmissions for 2018 HMDA data, unless there are material errors; and penalties will not be assessed with respect to errors in the 2018 data. The CFPB notes that institutions should focus the 2018 data collection on identifying areas for improvement in their HMDA compliance management systems for future years. The Bureau further advised that it expects that supervisory examinations of 2018 HMDA data will be “diagnostic” to help “identify compliance weaknesses, and will credit good-faith compliance efforts.”

    The OCC issued a similar announcement with OCC Bulletin 2018-19. The FDIC issued a similar announcement with FIL-36-2018.

    Federal Issues CFPB CFPB Succession HMDA S. 2155 OCC Trump Mortgages

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  • White House proposes to fully privatize GSEs in broad government reorganization plan

    Federal Issues

    On June 21, the White House announced a government reorganization plan titled, “Delivering Government Solutions in the 21st Century: Reform Plan and Reorganization Recommendations.” The plan covers a wide-range of government reorganization proposals, including several related to the federal government’s involvement in mortgage finance. Among other things, the White House is proposing to end the conservatorship of Fannie Mae and Freddie Mac (GSEs) and fully privatize the companies. The plan notes that a “[f]ederal entity with secondary mortgage market experience would be charged with regulatory oversight” of the GSEs, but does not state whether this would be done by the Federal Housing Finance Agency (FHFA), the GSEs current primary regulator. According to the proposal, this structure would ensure the government’s role “is more transparent and accountable to taxpayers,” as HUD would assume the primary responsibility for affordable housing, and the GSEs would solely focus on secondary market liquidity.

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  • Trump intends to nominate Kathleen Kraninger to be director of the CFPB

    Federal Issues

    On June 18, the White House announced President Trump’s selection of Kathleen Kraninger to be the director of the CFPB for a five-year term. Kraninger currently serves as the associate director for general government at the Office of Management and Budget (OMB). Prior to OMB, Kraninger worked at the Department of Homeland Security and in Congress on the House and Senate Committees on Appropriations. Mick Mulvaney, the acting director of the Bureau and director of OMB, supervises Kraninger in her current role. In a statement commending the selection, Mulvaney emphasized that Kraninger is likely to follow his example, “I have never worked with a more qualified individual than Kathy… I know that my efforts to rein in the bureaucracy at the [Bureau] to make it more accountable, effective, and efficient will be continued under her able stewardship.” While the Federal Vacancies Reform Act (FVRA) required the president to nominate a new director prior to June 22nd, Mulvaney is likely to remain the acting Bureau director for the foreseeable future, as FVRA allows Mulvaney to continue in the acting capacity until the Senate confirms or denies Kraninger’s nomination. If Kranginger’s nomination fails, FVRA would allow Mulvaney to restart a new 210-day period as acting director of the Bureau and to continue serving if the president makes another nomination before that period ends.

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  • President Trump issues new Executive Order prohibiting the purchase of debt from the Venezuelan government

    Financial Crimes

    On May 21, President Trump issued an Executive Order (E.O.) prohibiting U.S. companies or individuals from buying debt or accounts receivable from the Venezuelan government “in light of the recent activities of the Maduro regime, including endemic economic mismanagement and public corruption at the expense of the Venezuelan people and their prosperity.” The sanctions specifically prohibit transactions related to the following: (i) “the purchase of debt owed to the Venezualan government, including accounts receivable;” (ii) debt pledged as collateral after May 21, including accounts receivable; and (iii) “the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government of Venezuela has a 50 percent or greater ownership interest.”

    The E.O., issued in conjunction with E.O. 13692, follows two prior E.O.s, which also targeted the Maduro regime—E.O. 13827, which prohibits U.S. persons from engaging in transactions that involve digital currency issued by, for, or on behalf of the Venezuelan government, and E.O. 13808, which prohibits transactions related to new debt, bonds, and dividend payments in conjunction with the Venezuelan government and the state-owned oil company. (See previous InfoBytes coverage here and here.). The E.O. took effect on May 21 at 12:30 p.m. EDT.

    See here for continuing InfoBytes coverage of actions related to Venezuela.

    Financial Crimes OFAC Department of Treasury Executive Order Trump Venezuela Sanctions International Cryptocurrency

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  • OFAC sanctions Russian oligarchs and government officials; releases new general licenses and updated FAQs

    Financial Crimes

    On April 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction seven Russian oligarchs along with 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its Russian bank subsidiary, pursuant to the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA) and Executive Orders 13661, 13662, and 13582. In a foreign policy statement released the same day, President Trump explained that the identified persons placed on the Specially Designated Nationals (SDNs) and Blocked Persons List engaged in actions that have reportedly contributed to “advancing Russia’s malign activities,” including (i) profiting from “Russia's destabilizing activities”; (ii) election meddling; (iii) undermining U.S. cybersecurity; (iv) engaging in weapons proliferation; (v) continuing to occupy Crimea; (vi) instigating violence in eastern Ukraine; and (vii) providing military equipment and support for the Government of Syria's continued attacks against Syrian citizens. Pursuant to OFAC’s sanctions, all property or interests in property of the designated persons along with any other entity owned 50 percent or more by one or more designated persons that is within U.S. jurisdiction are blocked, and U.S. persons are “generally prohibited” from participating in transactions with these individuals and entities. Additionally, “non-U.S. persons could face sanctions for knowingly facilitating significant transactions for or on behalf of the individuals or entities blocked today.”

    The same day, OFAC issued two Ukraine-/Russia-related general licenses to “minimize immediate disruptions to U.S. persons, partners, and allies.” General License 12 authorizes through June 5 certain activities necessary to “wind down” operations, contracts, or agreements in effect prior to April 6 involving specified blocked persons. General License 13 authorizes through May 7 divestiture transactions with certain blocked persons to a non-U.S. person, as well as the facilitation of transfers of debt, equity, or other holdings involving listed blocked persons by a non-U.S. person to another non-U.S. person. OFAC also released eight new FAQs related to this action and published one updated FAQ related to CAATSA.

    Visit here for additional InfoBytes coverage on Ukraine/Russian sanctions.

    Financial Crimes OFAC Department of Treasury Sanctions CAATSA Russia Ukraine Trump

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  • President Trump issues Executive Order prohibiting Venezuelan cryptocurrency transactions; OFAC sanctions additional Venezuelan officials

    Financial Crimes

    On March 19, President Trump issued an Executive Order (E.O.) prohibiting transactions within the U.S. that involve any digital currency issued by, for, or on behalf of the Venezuelan government since January 9, and authorizing the U.S. Treasury Department to “employ all powers” necessary to carry out the E.O.’s provisions. President Trump issued the E.O. in conjunction with E.O. 13692 and E.O. 13808 and because of recent steps taken by Venezuelan President Maduro to “circumvent U.S. sanctions” by issuing a digital currency that the Venezuelan legislature “denounced as unlawful.” The E.O. took effect on March 19 at 12:15 p.m. EDT.

    On the same day, the Treasury’s Office of Foreign Assets Control (OFAC) announced additional sanctions pursuant to E.O. 13692 against four current or former Venezuelan government officials as part of “ongoing efforts to highlight the economic mismanagement and endemic corruption that have been the defining features of the Maduro regime.” Pursuant to OFAC’s sanctions, all assets belonging to the designated persons within U.S. jurisdiction are blocked, and U.S. persons are “generally prohibited” from participating in transactions with these individuals. OFAC also published answers to several related FAQs concerning President Trump’s E.O., as well as new FAQs related to virtual currency.

    Visit here for additional InfoBytes coverage on Venezuelan sanctions.

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  • Treasury releases Orderly Liquidation Authority report

    Federal Issues

    On February 21, the U.S. Department of the Treasury released a report on the Orderly Liquidation Authority (OLA) and Bankruptcy Reform. The report is in response to the April 2017 Presidential Memorandum requiring the Treasury Department to review and provide recommendations for improving the OLA under the Dodd-Frank Act, previously covered by InfoBytes here. According to the Treasury Department’s announcement, the recommendations outlined in the report “ensure that taxpayers are protected by strengthening the bankruptcy procedure for a failed financial company and retaining OLA in very limited circumstances with significant reforms.” In addition to recommending a new Chapter 14 of the Bankruptcy Code for distressed financial companies, the report recommends significant reforms to the OLA process, such as (i) creating clear rules administered with impartiality, including restricting the FDIC’s ability to treat similarly situated creditors differently; (ii) ensuring market discipline and strengthening protection for taxpayers by, among other things, only allowing the FDIC to lend on a secured basis; and (iii) strengthening judicial review to provide a stronger check on the decision to invoke OLA.

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  • President Trump releases 2019 budget proposal; key areas of reform include appropriation shifts, cybersecurity, and financial crimes

    Federal Issues

    On February 12, the White House released its fiscal 2019 budget request, Efficient, Effective, Accountable, an American Budget (2019 budget proposal), along with Major Savings and Reforms (MSR) and an Appendix. The mission of the President’s budget sets forth priorities, including imposing fiscal responsibility, reducing wasteful spending, and prioritizing effective programs. However, the 2019 budget proposal has little chance of being enacted as written and does not take into account a two-year budget agreement Congress passed that the President signed into law on February 9. Notable takeaways of the 2019 budget are as follows:

    CFPB. Under the MSR’s “Restructure the Consumer Financial Protection Bureau” section, Congress and the current administration would implement a broad restructuring of the Bureau to “prevent actions that unduly burden the financial industry” by restricting its enforcement authority over federal consumer law. Among other things, the proposed budget would cap the Federal Reserve’s (Fed) transfers this year at $485 million (an amount equivalent to its 2015 budget) and eliminate all transfers by 2020, at which point the Bureau’s appropriations process would shift to Congress.

    Commodity Futures Trading Commission (CFTC). As stipulated in the Appendix, the budget proposes legislation, which would authorize the CFTC to collect $31.5 million in user fees to fund certain activities and would bring the Commission’s budget to $281.5 million for 2019. According to the administration, if the authorizing legislation is enacted, it would be “in line with nearly all other Federal financial and banking regulators.”

    Cybersecurity. The 2019 budget proposal requests funding for the Department of Homeland Security (DHS) and the Department of Defense (DOD) to execute efforts to counter cybercrime. The DOD funds would go towards efforts to sustain the Cyber Command’s 133 Cyber Mission Force Teams, which “are on track to be fully operational by the end of 2018.” Furthermore, the administration states it “will improve its ability to identify and combat cybersecurity risks to agencies’ data, systems, and networks.”

    Financial Stability Oversight Council (FSOC). Currently FSOC (which is comprised of the heads of the financial regulatory agencies and monitors risk to the U.S. financial system) and the Office of Financial Research (OFR) (FSOC’s independent research arm) receive funding through fees assessed on certain bank holding companies with assets of at least $50 billion as well as nonbanks supervised by the Fed. However, the 2019 budget proposal would require FSOC and OFR to receive their funding through the normal congressional appropriations process. 

    Flood Insurance. Outlined in the MSR is a budget request that would reduce appropriations for the National Flood Insurance Program's flood hazard mapping program by $78 million. The funding reduction is designed to “preserve resources for [DHS]’s core missions”; however, the administration plans to work to “improve efficiency in the flood mapping program, including incentivizing increased State and local government investments in updating flood maps to inform land use decisions and reduce risk.” Additionally, contained within the Appendix is a proposal for a “means-tested affordability program” that would determine assistance for flood insurance premium payments based on a policyholder's income or ability to repay, rather than a home's location or date of construction.

    Government Sponsored Enterprises. Noted within the MSR, the budget proposes doubling the guarantee fee charged by Fannie Mae and Freddie Mac to loan originators from 0.10 to 0.20 percentage points from 2019 through 2021. The proposal is designed to help “level the playing field for private lenders seeking to compete with the GSEs” and would “generate approximately $26 billion over the 10-year Budget window.” 

    HUD. The 2019 budget proposal eliminates funding for the following: (i) the CHOICE Neighborhoods program (a savings of $138 million),  on the basis that state and local governments should fund strategies for neighborhood revitalization; (ii) the Community Development Block Grant (a savings of $3 billion), over claims that it “has not demonstrated a measurable impact on communities”; (iii) the HOME Investment Partnerships Program (a savings of $950 million); and (iv) the Self-Help and Assisted Homeownership Opportunity Program Account (a savings of $54 million). The budget also proposes reductions to grants provided to the Native American Housing Block Grant and plans to reduce costs across HUD’s rental assistance programs through legislative reforms. Rental assistance programs generally comprise about 80 percent of HUD’s total funding.

    SEC. As stipulated in the MSR, the budget proposes eliminating the SEC’s mandatory reserve fund and would require the SEC to request additional funds through the congressional appropriations process starting in 2020. According to the Appendix, the reserve fund is currently funded by collected registration fees and is not subject to appropriation or apportionment. Under the proposed budget, the registration fees would be deposited in the Treasury’s general fund.

    SIGTARP. As proposed under MSR, the 2019 budget would reduce funding for the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) “commensurate with the wind-down of TARP programs.” According to the proposal, “Congress aligned the sunset of SIGTARP with the length of time that TARP funds or commitments are outstanding,” which, Treasury estimates, will be in 2023. This will mark the final time payments are expected to be made under the Home Affordable Modification Program (HAMP). As previously covered in InfoBytes, SIGTARP delivered a report to Congress last month, which identified unlawful conduct by certain of the 130 financial institutions in TARP’s Making Home Affordable Program as the top threat to TARP and, thus, the agency’s top investigative priority.

    Student Loan Reform. Under the 2019 budget proposal, a single income-driven repayment plan (IDR) would be created that caps monthly payments at 12.5 percent of discretionary income. Furthermore, balances would be forgiven after a specific number of repayment years—15 for undergraduate debt, 30 for graduate. In doing so, the Public Service Loan Forgiveness program and subsidized loans will be eliminated, and reforms will be established to “guarantee that all borrowers in IDR pay an equitable share of their income.” These proposals will only apply to loans originated on or after July 1, 2019, with the exception of loans provided to borrowers in order to finish their “current course of study.”

    Treasury Department. Under the 2019 budget proposal, safeguarding markets and protecting financial data are a top priority for the administration, and $159 million has been requested for Treasury’s Office of Terrorism and Financial Intelligence to “continue its critical work safeguarding the financial system from abuse and combatting other national security threats using non-kinetic economic tools. These additional resources would be used to economically isolate North Korea, complete the Terrorist Financing Targeting Center in Saudi Arabia, and increase sanctions pressure on Iran, including through the implementation of the Countering America’s Adversaries Through Sanctions Act.” The budget also requests a $3 million increase from 2017 to be applied to the Financial Crimes Enforcement Network’s authority to administer the Bank Secrecy Act and its work to prevent the financing of terrorism, money laundering, and other financial crimes.  

    Federal Issues Budget Trump CFPB CFTC FSOC Privacy/Cyber Risk & Data Security Flood Insurance HUD SEC Student Lending Department of Treasury

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