Appropriations deadlines loom while rules change
Things were already a little frantic on Capitol Hill this week, even before House Appropriations Committee Chairwoman Kay Granger announced deadlines for member requests for fiscal year 2024. Requests are due by the following dates:
March 24: Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; Financial Services and General Government; Interior, Environment, and Related Agencies; Labor, Health and Human Services, Education, and Related Agencies; Legislative Branch; State, Foreign Operations, and Related Programs
March 29: Defense and Homeland Security
March 31: Commerce, Justice, Science, and Related Agencies; Energy and Water Development and Related Agencies; Military Construction, Veterans Affairs, and Related Agencies; Transportation and Housing and Urban Development and Related Agencies
The House’s rules for Community Project Development Funding requests, more commonly known as earmarks, have changed. Members may no longer request funding for anything that could be named for an individual or an entity, and every project must have a “federal nexus” — that is, must be tied to a federal authorization law. Earmarks will no longer be allowed for the Labor-HHS-Education or Financial Services bills (they already hadn’t been allowed for Defense). GrayRobinson’s Blair Hancock has put together an explainer about these changes, if you need more details.
China, China, China
Did we say China? It was top of mind on both sides of Capitol Hill and both sides of the aisle this week, with bipartisan agreement that the United States should be doing more to enforce trade sanctions against the People’s Republic of China and to strengthen alliances with other countries in support of our economy and national security.
Tuesday’s Senate Banking Committee hearing was a good introduction to the current system of export controls and sanctions, with questions about how the Committee on Foreign Investment in the United States (CFIUS) is using its expanded authorities under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and President Biden’s September 2022 executive order on foreign investment in sensitive technology sectors. While some policymakers have proposed a “reverse CFIUS” that would monitor US investments in adversarial countries, none of the Senators at Tuesday’s hearing seemed enthusiastic about the idea.
Simultaneously with the Senate Banking Committee hearing, a panel of high-ranking State and Commerce Department officials answered questions from the House Foreign Affairs Committee about how best to deter “the generational challenge of Chinese Communist Party (CCP) aggression.”
And Tuesday night, the Select Committee on the CCP held a prime-time hearing about the Chinese Communist Party’s Threat to America. Witnesses at the prime-time hearing, including former National Security Adviser H.R. McMaster, said that both public policy and private industry activity over the last decades had systemically weakened the US’s competitive position against China, and that it was imperative to end American dependence on China for manufacturing and supply chains. Committee members expressed concern about Chinese state-owned or state-affiliated businesses purchasing agricultural land in the United States, especially close to military installations. They also noted that many Americans are unaware that they hold investments in Chinese state-owned or state-affiliated businesses through US-managed mutual funds and pension plans, and warned fund managers not to put profits above national security concerns.
We covered all these hearings in detail, so if you have questions about anything specific, let us know.
Supreme Court will consider CFPB’s constitutionality
The Supreme Court agreed this week to hear arguments in Consumer Financial Protection Bureau, et al., v. Community Financial Services Association of America Ltd., et al, responding to a request from the Biden administration to determine whether the CFPB’s funding mechanism violates the Constitution’s Appropriations Clause. The US Court of Appeals for the Fifth Circuit ruled last fall that the “unprecedented arrangement” through which the Federal Reserve System funds the Bureau is unconstitutional. If the Supreme Court upholds that finding — which conflicts with an earlier ruling by the District of Columbia Circuit Court — every action the CFPB has taken since its establishment in 2010 may be invalid. The Supreme Court will hear arguments in its next term, which starts in October.
SEC’s Investor Advisory Council recommends account statement changes
The Securities and Exchange Commission’s Investor Advisory Council’s day-long meeting yesterday included in-depth discussions of the balance between public and private markets, how the SEC should address its examination obligations for the growing number of investment advisers, and the controversial SEC proposal on open-end fund liquidity management and swing pricing. At the end of the meeting, the panel unanimously approved a set of nine recommendations for improving customer account statements.
Council members noted that while the SEC and FINRA had made updates to other disclosure requirements, account statements may be the most important of all communications with investors, and those statements “have remained largely unchanged for almost 30 years.” The Council’s first recommendation was that the SEC and/or FINRA should survey investors to get a better sense of how investors use these statements and what information they want/need/expect from them. They said the SEC and/or FINRA should consider standardizing certain core terminology and develop model account statement templates. Finally, they recommended that paper statements remain the default delivery method for these statements, a recommendation SEC Commissioner Hester Pearce said she could not support.
Liang reports progress on CBDC recommendations
In remarks at a workshop on money and payments this week, Under Secretary of the Treasury for Domestic Finance Nellie Liang said that the working group on a central bank digital currency (CBDC) was developing a set of findings and recommendations for Treasury, Federal Reserve, and White House leaders to consider on development of a CBDC and other payment innovations. Liang said that regular meetings of this policy group would start “in the coming months,” and that both the Working Group and the Federal Reserve would provide periodic updates. The Working Group is trying to balance objectives related to global financial leadership, national security, and privacy, illicit finance, and financial inclusion. “CBDC design choices are likely to involve trade-offs,” she said. They are engaging with other countries that are developing CBDCs of their own, particularly the United Kingdom; the US is determined to contribute to international standard setting and share its technical expertise. A House subcommittee hearing on “The Administration’s Attack on the Digital Asset Ecosystem” scheduled for next week suggests that any CBDC proposal will meet vocal opposition.
Confirmations, Nominations, Departures
President Biden announced that he will nominate Deputy Secretary of Labor Julie Su to succeed Marty Walsh as head of the Department. Su was Labor Secretary for the State of California, and is the recipient of a MacArthur “genius grant.”
The Week Ahead
We’ll hear a lot about the economy next week, and a lot about the debt limit: Federal Reserve Board Chair Jerome Powell will testify on Capitol Hill on Tuesday and Wednesday. President Biden will unveil his budget proposal on Thursday, and Secretary Janet Yellen will present it to the House Ways & Means Committee on Friday. We will be paying specific attention to both of next week’s Ways & Means hearings, the House Small Business hearing on WOTUS on Wednesday, all three House Financial Services subcommittee hearings on Thursday, and of course to Chairman Powell’s remarks.
March 7 at 9:00 a.m. House Committee on Ways & Means holds a field hearing on “The State of the American Economy: The Heartland” in Yukon, OK.
March 7 at 10:00 a.m. Senate Committee on Finance holds a hearing on “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.”
March 7 at 10:00 a.m. Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on the Federal Reserve’s semi-annual monetary report.
March 7 at 2:30 p.m. Senate Banking Subcommittee on Economic Policy holds a hearing on “The Federal Debt Limit and its Economic and Financial Consequences.”
March 7 at 2:30 p.m. Senate Environment and Public Works Subcommittee on Clean Air, Climate, and Nuclear Safety holds a hearing to examine the air, climate, and environmental impacts of crypto-asset mining, including an original bill entitled, “The Crypto-Asset Environmental Transparency Act.”
March 7 at 3:00 p.m. Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights holds a hearing on “Reining in Dominant Digital Platforms: Restoring Competition to Our Digital Markets.”
March 8 on 10:00 a.m. House Committee on Financial Services holds a hearing on the Federal Reserve’s semi-annual monetary report.
March 8 at 10:00 a.m. Senate Committee on Agriculture, Nutrition, and Forestry holds an oversight hearing on the Commodity Futures Trading Commission.
March 8 at 2:00 p.m. House Financial Services Subcommittee on Oversight and Investigations holds a hearing on “Holding the Biden Administration Accountable for Wasteful Spending and Regulatory Overreach.”
March 8 at 2:00 p.m. House Committee on Small Business holds a hearing on “Small Business Perspectives on the Impacts of the Biden Administration’s Waters of the United States (WOTUS) Rule.”
March 8 at 2:00 p.m. Senate Judiciary Subcommittee on Privacy, Technology, and the Law holds a hearing on “Platform Accountability: Gonzalez and Reform.”
March 8 at 2:30 p.m. House Banking Subcommittee on Housing, Transportation, and Community Development holds a hearing on “The Federal Strategic Plan to Prevent and End Homelessness.”
March 9 at 10:00 a.m. House Financial Services Subcommittee on Financial Institutions and Monetary Policy holds a hearing on “Consumer Financial Protection Bureau: Ripe for Reform.”
March 9 at 10:00 a.m. House Financial Services Subcommittee on Capital Markets holds a hearing on “US Public Markets Built for the 21st Century: Exploring Reforms to Make Our Public Markets Attractive for Small and Emerging Markets Raising Capital.”
March 9 at 2:00 p.m. House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion holds a hearing on “Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem.”
March 10 at 9:00 a.m. Secretary of the Treasury Janet Yellen testifies before the House Committee on Ways & Means on President Biden’s FY2024 budget request.