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Your Weekly Report on the Discord from Washington, D.C.

In Partnership with the Eris Group

Did you feel that? Some of us got a jolt that was more than metaphorical late Thursday afternoon. A 4.1-magnitude earthquake hit Dover, Delaware, just before 5:00 p.m., and people felt it as far north as Maine. Earlier generations might have seen an event like that as some kind of sign. Fortunately, we’re all enlightened modern people around here.

Senate Judiciary starts work on anti-money laundering bill — The Senate Judiciary Committee heard testimony on Tuesday from public- and private-sector witnesses on Tuesday about S. 1241, the bipartisan “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017.” The bill includes new criminal penalties for lying about beneficial ownership information, which witnesses agreed is an area of critical vulnerability. S. 1241 would also clarify the Department of Justice’s authority to obtain foreign bank records. Committee Chairman Charles Grassley (R-IA) noted that the bill has broad support from law enforcement organizations.

House panel discusses its own AML bills — A day later, the House Financial Services Subcommittee on Terrorism and Illicit Finance held a hearing on two measures designed to prevent illegal financial activity. H.R. 2219, the “End Banking for Human Traffickers Act,” would add the Secretary of the Treasury to the President’s Interagency Task Force to Monitor and Combat Trafficking, and would require FFIEC to review and enhance its procedures for identifying and reporting potential human trafficking cases. The other bill, the “Counter Terrorism and Illicit Finance Act,” would address the question of beneficial ownership as well as raising the threshold for currency transaction reports from $10,000 to $30,000. Witnesses called for better information sharing and a regulatory regime that focuses on effectiveness rather than compliance.

House panel discusses GSE reform with Ginnie Mae executive — Michael Bright, Acting President of the Government National Mortgage Association, appeared before the House Financial Services Subcommittee on Housing and Insurance on Wednesday to talk about the agency’s role in housing finance. Bright is the co-author (with former Fannie and Freddie conservator Ed DeMarco) of a proposal for broad reforms of the secondary market, but told the Subcommittee that Ginnie Mae currently needs some modernization, but no major changes. He noted that Ginnie Mae’s “fourth loss” position protects the taxpayer, despite Ginnie Mae’s explicit government guarantee, and that Ginnie Mae could serve as a model for a government backstop as part of housing finance reform.

Is the consolidated audit trail secure enough? — The CEO responsible for developing the consolidated audit trail appeared before the House Financial Services Subcommittee on Capital Markets, Securities, and Investment Thursday to talk about the security measures built into the system. Mike Beller, CEO of Thesis Technologies, said that the system had been built with security in mind, following best practices such as two-factor authentication and an early-detection system to identify breaches. Chris Concannon, president of the Chicago Board of Options Exchange, said that he has concerns about the collection of personally identifying information (PII). Lisa Dolly, testifying on behalf of the Securities Industry and Financial Markets Association (SIFMA), noted that Thesis has yet to hire a Chief Information Security Officer. Beller said they would conclude their search for one soon; Rep. Carolyn Maloney (D-NY), the Subcommittee’s ranking member, suggested monthly hearings until a security officer is appointed.

Too much data, KBA increase risk of identity theft — Knowledge-based authentication (KBA) is no longer adequate to protect identities online, witnesses told the House Energy and Commerce Subcommittee on Oversight and Investigations at a hearing Thursday. Passwords and Social Security Numbers have become obsolete, said Jeremy Grant, Managing Director for Technology Business Strategy at Venable, LLP. Beyond that, witnesses said, companies are collecting far more information than necessary from customers, often without informed consent. Ed Mierzwinski, Consumer Program Director for U.S. PIRG, called credit bureaus such as Equifax “data brokers,” and urged the committee to regulate their activities.

DOL extends transition period for fiduciary rule — The Department of Labor announced on last Monday that it is extending by 18 months the special transition period for the Best Interest Contract Exemption and the Principal Transactions Exemption from the agency’s fiduciary rule. The exemptions’ conditions were originally scheduled to apply on January 1, 2018; they will now take effect on July 1, 2019, pending the Department’s review of the regulation and any proposal of further changes.

Mulvaney is Acting Director at CFPB — The U.S. District Court for the District of Columbia denied the request for a restraining order on Tuesday, upholding President Trump’s decision to name OMB Director Mick Mulvaney as Acting Director of the Consumer Financial Protection Bureau. Departing Director Richard Cordray had designated his deputy, Leandra English, as his successor, and English filed for a restraining order last Sunday to block Mulvaney’s appointment. Mulvaney took office last Monday, and announced a 30-day hiring freeze and moratorium on new regulations. He will continue to serve as OMB Director in addition to his new responsibilities, and several senior OMB staff will spend part of their time at CFPB as well. Late Friday, the White House announced that Brian Johnson, senior counsel to the House Financial Services Committee, would join the CFPB as a top aide to Mulvaney.

Otting takes office as Comptroller — Treasury Secretary Stephen T. Mnuchin swore in Joseph M. Otting as 31st Comptroller of the Currency last Monday. Otting said that he “look[s] forward to enhancing the value of national bank and federal savings association charters, reducing unnecessary burden, and promoting economic opportunity while maintaining the safety and soundness of the federal banking system.” A career banker, Otting most recently served as President of CIT Bank and Co-President of CIT Group.

Goodfriend named to Federal Reserve Board — The President announced Wednesday that he will name Marvin Goodfriend to serve an unexpired term as Governor of the Federal Reserve System, ending on January 31, 2030. Goodfriend currently teaches economics at Carnegie Mellon University’s Tepper School of Business. He spent 27 years with the Federal Reserve Bank of Richmond, where he served as director of research and policy advisor from 1993 to 2005. He was also a senior staff economic for President Reagan’s Council of Economic Advisors from 1984 to 1985.

Workman named to insurance seat on FSOC — Last week the White House also announced the appointment of Thomas Workman to the Financial Stability Oversight Council, to fill the seat designated for an independent insurance expert. Workman was President and CEO of the Life Insurance Council of New York from 1999 to 2016.

FHFA raises loan limits for 2018 — The Federal Housing Finance Agency announced last Tuesday that that the maximum conforming loan limit for mortgages to be acquired by Fannie Mae and Freddie Mac will rise from $424,100 in 2017 to $453,100 in 2018. This reflects the agency’s third-quarter House Price Index (HPI) report, which found that house prices increased, on average, 6.8 percent between the third quarter of 2016 and the third quarter of 2017.

This Week in Washington:

December 5
Senate Committee on Banking, Housing, and Urban Affairs meets to consider the nomination of the Honorable Jerome H. Powell to serve as Chairman of the Federal Reserve Board, and S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. 10:00 a.m., SD-538 Dirksen Senate Office Building.

December 6
House Financial Services Subcommittee on Housing and Insurance holds a hearing on “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform, Part IV.” 10:00 a.m., 2128 Rayburn House Office Building.

December 7
House Financial Services Subcommittee on Oversight and Investigations holds a hearing on “Examining the Office of Financial Research.” 10:00 a.m., 2128 Rayburn House Office Building.

December 7
House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on “Legislative Proposals for a More Efficient Regulatory Regime: Part II.” 2:00 p.m., 2128 Rayburn House Office Building.