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The Look Ahead: Policy & Politics for February, 2019

With the federal government fully functioning for the moment, Congress appears to be pointing towards “go.” As work continues to avoid that scenario, we will see the President give his rescheduled State of the Union speech on Feb. 5, 2019, and Congress will be in town for a fairly limited February run. With a recess week scheduled after Presidents’ Day, there aren’t many days available for hearings, at least in the House. While the Senate will be in for most of the month except Presidents’ Day week, we still expect the majority of time on the Floor to be devoted to judicial nominees, with still some discussion of limiting the debate on those efforts. We preview what we believe will be the banking-related focus in Washington in the shortest month of the year, subject as always to external or unexpected events that could disrupt the schedule.

Government Funding/Border Wall Debate

Congress has less than two weeks to come to agreement on a funding deal before another lapse in appropriations, and the parties do not seem to be any closer to a deal now than they were before the holidays. President Trump and Speaker Nancy Pelosi (D-Ca.) are still firmly on opposite sides of the border wall debate, and without one of them backing down it is unlikely a deal will be reached. Up until this point, Trump has been able to hold Republicans in line with him, and Speaker Pelosi has been able to hold Democrats. If support from either caucus erodes, it is possible a deal could come together.

Senate Banking Committee (SBC)
In January, Chairman Mike Crapo (R-Idaho) outlined his key priorities for the upcoming Congress. While he identified several issues covering the waterfront of financial services, we believe housing finance reform (discussed in depth below), privacy/data security, capital formation, BSA/AML, and reauthorizations will see the most activity. In the near term, housing finance reform and privacy will be the two issues that receive the most attention at Senate Banking. It is our expectation that housing finance reform will receive negotiating and legislative drafting attention, but given SBC’s extensive history of hearings on this topic, we expect hearing activity on this issue to be relatively light. Privacy on the other hand sets up for a thorough hearing process to lay the foundation for legislative activity. While many stakeholders are often focused on the security or breach side of data, our expectation is that the Chairman will approach this issue in a more comprehensive manner looking at collection, sharing and usage of data.

The Committee also needs to begin to tackle three reauthorizations within its jurisdiction: TRIA, flood insurance, and the Export-Import Bank. We expect SBC to begin outreach to stakeholders in February and March, and then begin the hearing process on Ex-Im and TRIA to kick-start reauthorization (flood insurance reauthorization has received considerable Committee hearing attention already).

In February, we expect the following potential hearings – the confirmation hearing mentioned above for Calabria, along with Patel, Rodney Hood [National Credit Union Association (NCUA) Commissioner], and Todd Harper (NCUA Commissioner); Humphrey/Hawkins with Federal Reserve Chairman Jay Powell and a CFPB Semi-Annual Hearing with CFPB Director Kathy Kraninger.

House Financial Services Committee (HFSC)
After formally organizing last week, we likely will see the first official HFSC hearings this month. The first full HFSC hearing is expected to be the widely reported one regarding credit bureaus, potentially on February 26. Fed Chair Powell is also expected to appear in front of HFSC that week for his Humphrey-Hawkins hearing in the House. A legislative hearing on marijuana banking is possible the week of February 11 in the Consumer Protection and Financial Institutions Subcommittee. Other potential upcoming full committee hearings involve an appearance by SEC Chairman Jay Clayton and one focused on the CFPB with Director Kraninger [and/or former Director (and current acting White House Chief of Staff) Mick Mulvaney].

There could be additional subcommittee hearings this month as well, and we also could see the official creation of HFSC’s fintech task force.

Housing Finance Reform
Housing finance issues likely will see increased regulatory and congressional attention over the first half of 2019. Issues to be debated include comprehensive reform, single security initiative, credit scoring models, and the confirmation and first few months of a new FHFA director.


As noted earlier, SBC will be front and center for several of the most high-profile issues. Chairman Crapo released a housing finance reform outline last week, which, while not novel, kick-starts discussions on the Hill and lays out a credible marker for discussion. The prospects of achieving comprehensive reform will require bipartisanship, which may be complicated by higher political aspirations by some Democrats on SBC. Additionally, the effort will need to work well with the Trump Administration’s plans (discussed below). We believe that the Chairman and the Administration will largely be on the same page.

Bipartisan action, on the other hand, is complicated with the loss or retirement of key voices in previous housing finance debates. Oversight in the Senate will remain a priority for both Republicans and Democrats. The Committee is likely to pick up where it tried to start last year on oversight of Fannie Mae and Freddie Mac pilot programs – Members on both sides of the aisle have expressed some concern with the use of these programs. Democrats will also aggressively evaluate and question Otting/Calabria on any administrative action.

In the House, the retirement of Chairman Jeb Hensarling (R-Texas) and rise of Chair Maxine Waters (D-Calif.) place housing finance plans in a bit of flux. In some ways, the environment for reform may be easier as the strong conservative voice (which has derailed plans before) is no longer present. As a result, it may be easier to find a moderate sweet spot with HFSC Ranking Member Patrick McHenry (R-N.C.). Chair Waters has identified housing as a top priority of her chairmanship, yet we believe at least her initial focus will be on affordable housing. We believe that if serious headway is made in the Senate then more robust discussions could develop in the House.


The Administration is likely to play a pivotal role in housing finance in the near term. For the first time since the start of the Trump presidency, the Administration will have control of the FHFA and its significant regulatory and conservatorship authorities, which may lead to some reform. In January, there was some news made when FHFA Acting Director Joseph Otting told staff to expect administrative action on reform in early 2019. Based on our conversations, we expect the Administration to roll out a public plan this week. We believe this could be a multi-step roll out. First, it is our expectation that housing finance will be included in the President’s State of the Union address tomorrow. This is likely to be only high level and call on Congress to act and for relevant agencies to study or risk more aggressive administrative action. Second, based on previous Administration initiatives, we believe an Executive Order or Presidential Memorandum will be released this week, which would outline key principles for reform, direct Treasury and HUD to study administrative options, and finally to work with Congress. We view these public steps as positive for the chances of reform. The Trump Administration is a key player from a technical and public pressure standpoint. Further, the Administration has the ultimate stick – the ability to act unilaterally if Congress can’t reach consensus.

Retirement Savings
Retirement security is an important policy priority for the House Ways and Means and Senate Finance Committees and given bipartisan interest, this could be the year the stars align to finally pass legislation. Senate Finance Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) still plan to move a RESA package (e.g., open MEPs and lifetime income safe harbor), similar to the bipartisan Retirement Enhancement and Savings Act considered last Congress, before moving to a more comprehensive retirement security bill.

House Ways and Means Chair Richard Neal (D-Mass.) is committed to strengthening retirement security and expanding access and enrollment. This week (Wednesday, February 6) he will hold the first of potentially several hearings focused on this issue. We also believe Neal will reintroduce bills he submitted in the 115th Congress, such as his Retirement Plan Simplification Act, which would modify the auto-enrollment safe harbor legislation, and his Automatic Retirement Plan Act to require certain employers to maintain auto-contribution plans for their employees. Modest updates to the bills are likely such as providing the ability for employees to opt to a lower percentage of contributions from the starting point of 6 percent and lowering the age requirement of covered employees. Republicans will continue their opposition to mandates for small businesses, meaning they will likely endorse “auto-escalation” over Neal’s “auto-enrollment.”

Sens. Rob Portman (R-Ohio) and Ben Cardin (D-Md.) continue to lead on retirement policy and will reintroduce legislation to provide improved coverage in the small employer market and for part-time workers. A few changes related to lifetime income disclosure and portability, adjusting the age requirement for the Saver’s Credit and expanding tax credits to SIMPLE IRAs are possible before the bill is reintroduced. Simultaneously, Treasury is working on its study per the President’s request on modernizing the RMD (required minimum distribution), which was also in the Portman-Cardin bill.

The White House and the Senate would support including RESA in the next government funding bill; however, Chairman Neal may seek some changes before that happens. We expect a legitimate push for RESA to be on the table over the next few weeks.