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Representative Tom Emmer (R-Minn) has reintroduced the Financial Stability Oversight Council Reform Act (H.R. 1459), which is intended to increase oversight, transparency, and accountability by subjecting the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) to the regular congressional appropriations process. The proposed legislation—which has been referred to the Committee on Financial Services—would also provide for certain quarterly reporting requirements for the OFR, including an “annual work plan” subject to public notice and comment.
President Trump Releases Budget Plan Proposal; HUD and Treasury Among Many Who Would Face Significant Cuts
On March 16, the White House released its budget blueprint America First: A Budget Blueprint to Make America Great Again, which sets forth the President’s discretionary funding proposals in advance of the “full Budget”—scheduled for release later this spring. Among the many agencies and programs that would experience substantial cuts under the President’s budget are both the Department of Housing and Urban Development and the Department of the Treasury.
Department of Housing and Urban Development (“HUD”). For HUD, the President’s 2018 budget requests $40.7 billion in gross discretionary funding for HUD, which is a $6.2 billion or 13.2 percent decrease from the 2017 annualized continuing resolution level. The White House budget also proposes that: (i) funding be eliminated or redirected to the State and Local level for the Community Development Block Grant program, which the White House estimates would save $3 billion from 2017 levels; (ii) funding be eliminated for “lower priority programs,” which the White House says include “the HOME Investment Partnerships Program, Choice Neighborhoods, and the Self-help Homeownership Opportunity Program”; (iii) funding be eliminated or redirected to the State and Local level for Section 4 Capacity Building for Community Development and Affordable Housing (at an estimated savings of $35 million from 2017 levels); (iv) support be provided for “homeownership through provision of Federal Housing Administration mortgage insurance programs.”
Dept. of the Treasury. And, as for Treasury, the White House is proposing that the Department be granted $12.1 billion in discretionary resources. This proposal represents a $519 million or 4.1 percent decrease from the 2017 levels. Specifically, the White House’s budget proposes to, among other things: (i) preserve key operations of the Internal Revenue Service (“IRS”) to ensure that “the IRS can continue to combat identity theft, prevent fraud, and reduce the deficit through the effective enforcement and administration of tax laws,” while diverting resources away from “antiquated operations” that still rely on paper-based reviews; (ii) “strengthen cybersecurity in a Department-wide plan to strategically enhance existing security systems and preempt fragmentation of information technology management across the bureaus”; (iii) “prioritize funding for Treasury’s array of economic enforcement tools”; (iv) “eliminate funding for Community Development Financial Institutions Fund grants”; (v) “empower the Treasury Secretary, as Chairperson of the Financial Stability Oversight Council, to ‘end taxpayer bailouts and foster economic growth by advancing financial regulatory reforms that promote market discipline and ensure the accountability of financial regulators;’” and (vi) “shrink the Federal workforce” while increasing its efficiency by redirecting resources away from "duplicative" policy offices.
In response to the proposed budget, Treasury Secretary Steven T. Mnuchin released the following statement:
"President Trump’s discretionary budget plan released today focuses Treasury on our core missions of collecting revenue, managing the nation’s debt, protecting the financial system from threats, and combating financial crime and terrorism financing. It will ensure that we have the resources we need to enforce the nation’s tax laws, while investing in cybersecurity and prioritizing resources on initiatives that promote technology, efficiency and modernization across the agency."
On March 5, Credit Union National Association (CUNA) President Jim Nussle submitted a letter to Rep. Roger Williams (R-Texas), supporting his introduction of H.R. 1264—the Community Financial Institution Exemption Act. The bill, referred to the House Financial Services Committee on February 28, provides an exemption from rules and regulations of the CFPB for community financial institutions with under $50 billion in assets. “The rules are, in large part, implemented to address abuses perpetrated by the large institutions and other previously nonregulated providers, and not small institutions like credit unions and small banks,” Nussle wrote. “While we believe that the statute presently provides the CFPB authority to exempt credit unions under $50 billion from its rulemaking, the bureau has been unwilling to effectively use the exemption authority.”
In February, Rep. Mia Love (R-Utah) introduced the Stop Debt Collection Abuse Act of 2017 (H.R. 864)—legislation seeking to extend the scope of the Fair Debt Collection Practices Act (“FDCPA”) to cover the activities of private debt collectors working on behalf of federal government agencies. Specifically, the proposed bill expands the definition of debt subject to the FDCPA to cover obligations—including loans, overpayments, fines, past-due penalties, and late fees—owed to a federal agency. Under the proposed new law, a debt collector includes any person who regularly collects debts currently or originally owed or allegedly owed to a federal agency. Moreover, the bill also requires that any fees charged by private debt collectors seeking to collect debt owed to a federal agency are limited to: (i) reasonable amounts in relation to the actual costs of the collection; (ii) fees authorized by a contract between the debt collector and the federal agency; and (iii) amounts not greater than 10 percent of the amount collected by the debt collector. H.R. 864, which is currently pending before the House committee on Financial Services, is co-sponsored by Keith Ellison (D-Minn.), French Hill (R-Ark.), and Emanuel Cleaver II (D-Mo.).
On March 7, President Trump announced his intent to nominate Ajit V. Pai for a second five-year term as Chairman of the Federal Communications Commission (FCC). The five-year appointment would span from July 1, 2016, when Pai’s first term officially ended, to 2021. FCC commissioners are able to stay on at the agency for an additional year, but Pai would have to secure confirmation from the Senate to continue beyond that time. At present, two spots still remain left to be filled in order for the Commission to get it back to full capacity. Democratic Commissioner Mignon Clyburn and Republican Commissioner Michael O’Rielly are the other two current commissioners.
Mr. Pai was designated acting Chairman of the FCC by President Trump in January 2017. He had previously served as Commissioner at the FCC, appointed by then-President Barack Obama and confirmed unanimously by the Senate in May 2012. Before this, Mr. Pai was a Partner at Jenner & Block, LLP from 2011 until 2012, and Deputy General Counsel, Associate General Counsel, and Special Advisor to the General Counsel at the FCC from 2007 until 2011. In a statement released by the FCC, Pai affirmed his commitment to “work[ing] with [his] colleagues to connect all Americans with digital opportunity, foster innovation, protect consumers, promote public safety, and make the FCC more open and transparent to the American people.” In a separate statement, Chairman Pai also announced the appointment of two staff members to the Office of the Chairman—Nathan Leamer, who will serve as the Chairman’s Policy Advisor, and Carlos Minnix, who will serve as a Staff Assistant.
Chairman Pai’s FCC website bio can be accessed here.
On March 2, Treasury Secretary Steven T. Mnuchin, convened an executive session meeting of the Financial Stability Oversight Council (FSOC), to receive updates on global economic and market developments and initial staff work on the Council’s 2017 annual report. The agenda also included discussions on the “ongoing annual reevaluation of [the Council’s] designation of a nonbank financial company, including the review of materials submitted by the company and engagement with the company.”
President Trump Hosts “National Economic Council” Listening Session with CEOs of Small and Community Banks
On March 9, President Trump met with 11 community bank CEOs at the White House seeking the bankers’ input on which regulations may be crimping their ability to lend to consumers and small businesses. The meeting included representatives from the Independent Community Bankers of America (ICBA), and the American Bankers Association (ABA), as well as nine bank executives from across the country. Treasury Secretary Steven Mnuchin, National Economic Council Chairman Gary Cohn, and White House Chief of Staff Reince Priebus also were present.
The President started the meeting by noting that “[n]early half of all private-sector workers are employed by small businesses” and that “[c]ommunity banks are the backbone of small business in America” before announcing his commitment to “preserving our community banks.” Following the President’s brief opening remarks, the attendees had the opportunity to introduce themselves and share specific examples of how excessive regulatory burdens affect their ability to serve their customers, make loans and create jobs at the local level. Proposals, such as the ICBA’s Plan for Prosperity, also were discussed.
Following the meeting, ABA President and CEO Rob Nichols released a statement “commend[ing] President Trump for meeting with community bankers to hear the challenges they face serving their clients.” He described the meeting as “an important step” toward re-examining the “highly prescriptive rules” that have created a “regulatory environment” in which “mortgages don’t get made, small businesses don’t get created and banks find it more difficult to make the loans that drive job creation.” The ICBA also issued a post-meeting Press Release, in which their Chairman, Rebeca Romero Rainey, explained that among the items discussed at the meeting was the ICBA’s “Plan for Prosperity”—a “pro-growth platform to eliminate onerous regulatory burdens on community banks” that “includes provisions to cut regulatory red tape, improve access to capital, strengthen accountability in bank exams, incentivize credit in rural America and more.” The ICBA Chairman also confirmed that the Association “looks forward to continuing to work with President Trump, his administration and Congress to advance common-sense regulatory relief that will support communities nationwide.”
Also weighing in was House Financial Services Committee Chairman Jeb Hensarling (R-TX), who issued a press release praising the President for “listening to the concerns of community bankers who have been buried under an avalanche of burdensome regulations as a result of Dodd-Frank.” Chairman Hensarling also took the opportunity to tout the Financial CHOICE Act, his bill that would make sweeping amendments to the Dodd-Frank Act. According to Chairman Hensarling, GOP members on the Financial Services Committee are “eager to work with the President and his administration this year to fulfill the pledge to dismantle Dodd-Frank and unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs.”
On March 9, the Housing and Insurance Subcommittee held a hearing to examine the National Flood Insurance Program (NFIP) and, according to a memo released by the Subcommittee, “provide an opportunity to review the current government flood insurance model, the technological changes since 1968 that could improve the NFIP, and how the private sector could develop a private flood insurance market that compliments the current NFIP model.” With the current NFIP program set to expire on September 30, the hearing comes as Congress is in the process of drafting a proposal to reauthorize and overhaul the program.
Roy Wright—a top FEMA official and the only witness slated to testify at the hour-long hearing—answered questions and, according to the written statement submitted prior to his appearance, discussed “a number of opportunities [that] should be explored that could provide for the growth of the private market for flood insurance.” Wright stated, among other things, that “improving the nation’s overall flood resiliency will depend on finding an appropriate balance between reducing risk to the taxpayer through a greater private sector role while sustaining a robust and affordable federal program.”
Following the hearing, the Financial Services Committee issued a press release highlighting key takeaways, including:
- “The National Flood Insurance Program is in need of significant reform. The program runs an estimated annual deficit as high as $1.5 billion and already is $24.6 billion in the red to taxpayers, with no foreseeable way to ever repay them.”
- “Instead of reducing taxpayer risk to deadly floods, the federal government has spent more than $200 billion on flood recoveries since 2000 in addition to the NFIP. Meanwhile, customer dissatisfaction with how the NFIP operates, approves flood maps, and pays claims has remained high and keeps on growing with each new storm.”
- “The private sector can and should play a more meaningful role in flood insurance.”
Flood Insurance Market Parity and Modernization Act. Earlier in the week, on March 8, legislation intended to accelerate development of the private flood instance market was introduced in both Houses of Congress. In the Senate, Sens. Dean Heller (R-NV) and John Tester (D-MT) reintroduced the Flood Insurance Market Parity and Modernization Act (S. 563), which has been referred to the Committee on Banking, Housing and Urban Affairs. Meanwhile, in the House, Rep. Dennis Ross (R-FL.) and Rep. Kathy Castor (D-FL) announced the introduction of H.R. 1422–the House version of the Flood Insurance Market Parity and Modernization Act.
Flood Insurance Fairness Act. On March 7, Reps. Carlos Curbelo (R-Fla) and Charlie Crist (D-Fla) introduced the Flood Insurance Fairness Act (H.R.1401), a bill intended to “ensure fairness in premium rates for coverage under the National Flood Insurance Program for residences and business properties.” The bill has been referred to the House Committee on Financial Services. As explained by Rep. Crist in a press release, “[b]y extending relief to more Florida properties–including rentals and businesses–we can better protect the financial well-being of middle class families across the state.” A June 2015 version of the bill was previously introduced by Rep. Curbelo during the 114th Congress.
On March 3, FHFA Director Melvin Watt issued orders directing FHFA regulated government-sponsored enterprises (GSEs)—Fannie Mae (Order No. 2017-OR-FNMA-01), Freddie Mac (Order No. 2017-OR-FHLMC-01), and the 11 Federal Home Loan Banks collectively (Order No. 2017-OR-B-01)—to report the results of their stress tests so that the financial regulators may determine whether the GSEs “have the capital necessary to absorb losses as a result of adverse economic conditions.” The orders were issued pursuant to the requirement under the Dodd-Frank Act that covered financial institutions with total consolidated assets of more than $10 billion conduct an annual stress test to determine whether they have sufficient capital to support operations in adverse economic conditions. Accompanying each order was a copy of the “2017 Report Cycle Dodd-Frank Stress Tests Summary Instructions and Guidance.”
In February, Representative Bob Goodlatte (R-Va.) introduced a new bill (H.R. 985) designed to “assure fairer, more efficient outcomes for claimants and defendants” in class-action and multi-district litigation. Dubbed the “Fairness in Class Action Litigation Act of 2017,” the proposed legislation would add a number of new hurdles and disclosure requirements that must be satisfied in connection with any case seeking class certification in federal court.
Among other things, the proposed law would: (i) provide for mandatory disclosures designed to prevent the approval of class actions in which the lawyer representing the class is a relative of a party in the class action suit; (ii) require that “any third-party funding agreement be disclosed to the district court”; and (iii) require federal circuit courts to accept any appeals of district court orders granting or denying class certification. In addition, for plaintiffs seeking “monetary relief,” the law would add an express requirement that the plaintiff “affirmatively demonstrate that each proposed class member suffered the same type and scope of injury as the named class representative.” Moreover, the bill also seeks to address disproportionately large attorney’s fee awards by, among other things, limiting class counsel’s fees to a “reasonable percentage” of the total amount of payments both “distributed to and received by class members,” and, similarly capping the total fee award to no more than that “received by all class members.”
Rep. Goodlatte—who is currently serving as Chairman of the House Judiciary Committee—also authored the Class Action Fairness Act of 2005 and was also behind another class action reform bill introduced in 2015 that failed to clear the Senate . As explained by the Chairman, the proposed legislation “seeks to maximize recoveries by deserving victims, and weed out unmeritorious claims that would otherwise siphon resources away from innocent parties.”