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On November 17, President Trump announced his intention to nominate Brian P. Brooks as Comptroller of the Currency. Brooks has been serving as acting Comptroller since the end of May 2020. Prior to serving as acting Comptroller, Brooks served as Senior Deputy Comptroller and Chief Operating Officer of the OCC. Prior to joining the OCC, Brooks was Chief Legal Officer of a digital currency exchange, and prior to that, he served as Executive Vice President, General Counsel, and Corporate Secretary of Fannie Mae. In a statement, Brooks called the intent to nominate a “great honor” and stated he “will work ceaselessly to ensure the agency continues to fulfill its critical mission.”
President Trump issues Executive Order prohibiting securities investments that finance Chinese military companies
On November 12, President Trump issued an Executive Order (E.O.) on “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.” The E.O. generally prohibits “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Chinese military company. . .by any US person.” The E.O. establishes the deadlines for divestment of investments in companies currently listed as Chinese military companies as well as companies that later may be added to the list of Chinese military companies pursuant to Section 1237, or those that the Secretary of the Treasury publicly lists as meeting the criteria set forth in Section 1237(b).
Among other things, the prohibitions apply “except to the extent provided by statutes, or in regulations, order, directives, or licenses that may be issued pursuant to the order, and not withstanding any contract entered into or any license or permit granted before the date of the order.” The E.O. also prohibits any transactions by U.S. persons or within the United States that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate the provisions set forth in the order, as well as any conspiracy to violate any of these prohibitions. Additionally, the Secretary of Treasury—after consulting with heads of other executive departments as deemed appropriate—is authorized to take actions, including promulgating rules and regulations, to carry out the purposes of the E.O.
On August 21, the U.S. Department of Education announced the implementation of the presidential memorandum extending a forbearance plan on federal student loans through the end of the year. As previously covered by InfoBytes, the memorandum directed the Department of Education to take action to continue to provide “deferments to borrowers as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020.” According to the announcement, until December 31, in addition to suspended payments and the waiver of all interest, there will be (i) no collections on defaulted federal loans; and (ii) borrowers will receive a refund of any continued employer garnishment related to defaulted federal loans. Additionally, non-payments by borrowers working full-time for qualified Public Service Loan Forgiveness employers will continue to receive credit towards their 120 payments.
On August 8, President Trump issued an executive order to Secretary of Education Betsy DeVos extending a forbearance plan on student loans through the end of the year. The executive order directs the Department of Education to take action to continue to provide “deferments to borrowers as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020.” The current forbearance program provided under the CARES Act (covered by a Buckley Special Alert) ends September 30. While the executive order states that it applies to “student loans held by the Department of Education,” it does not specifically outline which kind of federal student loans are covered under the new forbearance order.
President Trump issues new Iran Executive Order targeting Iran's metal sector; OFAC publishes related FAQs
On May 8, President Trump issued Executive Order 13871 (E.O. 13871) authorizing the imposition of sanctions on persons determined to operate in Iran’s iron, steel, aluminum, and copper sectors. The order is intended to target sectors of the Iranian economy that OFAC has identified as providing “funding and support for the proliferation of weapons of mass destruction, terrorist groups and networks, campaigns of regional aggression, and military expansion.” Among other things, E.O. 13871 authorizes the Secretaries of Treasury and State to impose sanctions on a foreign financial institution if it is determined that it has knowingly conducted or facilitated any significant financial transactions in these sectors, or for or on behalf of a blocked person. These sanctions are intend to curtail such institutions’ access to the U.S. financial system by prohibiting the opening of, or impose strict conditions on maintaining, a correspondent account or payable-through account by such foreign financial institutions in the United States.
The same day, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a set of FAQs connected to the issuance of E.O. 13871, including a discussion of the relevant 90-day wind-down period for affected transactions as well as sanction exceptions.
Visit here for additional InfoBytes coverage of actions related to Iran.
On April 15, Mark Calabria was sworn in as the new Director of the FHFA and stressed the importance of mortgage finance reform in his first remarks in the role. Calabria warned that the current mortgage finance system remains “vulnerable,” noting that “[a]fter years of strong house price growth, too many remain locked out of housing, while others are dangerously leveraged. We must not let this opportunity for reform pass.” Calabria also acknowledged the March memo released by the White House, outlining the Administration’s plan for federal housing finance reform (covered by InfoBytes here) which, among other things, directs the Secretary of the Treasury to develop a plan to end the conservatorships of Fannie Mae and Freddie Mac (GSEs). Calabria stated that he looks forward to working with the Administration on such reforms.
On March 27, the White House released a Memorandum on Federal Housing Finance Reform, which directs the Secretary of the Treasury to develop a plan to end the conservatorships of Fannie Mae and Freddie Mac (GSEs). Specifically, the memo states that the U.S. housing finance system is “in urgent need of reform,” as taxpayers are “potentially exposed to future bailouts” and programs at HUD have outdated operations and are “potentially overexposed to risk.” The President directs the Treasury and HUD to create specific plans addressing a number of reforms “as soon as practical.” Among other things, the directives include:
- Treasury to reform GSEs. With the ultimate goal of ending the conservatorships, the memo directs Treasury to develop proposals to, among other things, (i) preserve access to 30 year fix-rate mortgages for qualified homebuyers; (ii) establish appropriate capital and liquidity requirements for the GSEs; (iii) increase private sector participation in the mortgage market; (iv) evaluate the “QM Patch” with the HUD Secretary and CFPB Director; and (v) set conditions necessary to end conservatorships.
- HUD to reform programs. In addition to outlining specific objectives, the memo directs HUD to achieve three goals: (i) ensure that the FHA and the Government National Mortgage Association (GNMA) assume the primary responsibility for providing housing finance support for low income or underserved families; (ii) improve risk management, program, and product design to reduce taxpayer exposure; and (iii) modernize the operations of the FHA and GNMA.
Similarly, on March 26 and 27, the Senate Banking Committee held a two-part hearing (here and here) on housing finance reform. The hearing reviewed the legislative plan released by Chairman Mike Crapo (R-ID) in February. As previously covered by InfoBytes, the plan would, among other things, end the GSEs conservatorships, make the GSEs private guarantors, and allow other nonbank private guarantors to enter the market. Additionally, the plan would (i) restructure FHFA as a bipartisan board of directors, which would charter, regulate, and supervise all private guarantors; (ii) place a percentage cap on all outstanding mortgages for guarantors; and (iii) replace current housing goals and duty-to-serve requirements with a fund intended to address housing needs of underserved communities. In his opening statement at the hearing, Crapo said that, “approximately 70 percent of all mortgages originated in this country are in some way touched by the federal government” and “the status quo is not a viable option” for the housing finance market. Ranking Member Sherrod Brown (D-Ohio) emphasized that “any changes we consider must strengthen, not weaken, our ability to address the housing challenges facing our nation and make the housing market work better for families.”
Over the two days, the Senators and witnesses discussed the positive objectives of Crapo’s plan while recognizing hurdles that exist in implementing housing finance reform. While many Senators and witnesses expressed support for a requirement that private guarantors serve a national market, others suggested that regionalized or specialized guarantors could have advantages, including reaching underserved markets. Many Democrats stressed the importance of keeping a catastrophic government guarantee in place, while Republicans emphasized the need for legislative reforms to be implemented as soon as possible. With respect to equal access for small lenders, Senators discussed the concern over credit unions being able to sell loans in a multiple guarantor market.
White House releases 2020 budget proposal; key areas include appropriations and efforts to combat terrorist financing
On March 11, the White House released its fiscal 2020 budget request, A Budget for a Better America. The budget was accompanied by texts entitled Major Savings and Reforms (MSR), which “contains detailed information on major savings and reform proposals”; Analytical Perspectives, which “contains analyses that are designed to highlight specified subject areas or provide other significant presentations of budget data that place the budget in perspective”; and an Appendix containing detailed supporting information. Funding through appropriations and efforts to combat terrorist financing remain key highlights carried over from last year. Notable takeaways of the 2020 budget proposal are as follows:
CFPB. In the MSR’s “Restructure the Consumer Financial Protection Bureau” section, the budget revives a call to restructure the Bureau, and proposes legislative action to implement a two-year restructuring period, subject the CFPB to the congressional appropriations process starting in 2021, and “bring accountability” to the Bureau. Among other things, the proposed budget would cap the Federal Reserve’s transfers to the Bureau at $485 million in 2020.
Financial Stability Oversight Council (FSOC). The 2020 budget proposal requests that Congress establish funding levels through annual appropriations bills for FSOC (which is comprised of the heads of the financial regulatory agencies and monitors risk to the U.S. financial system) and its independent research arm, the Office of Financial Research (OFR). Currently FSOC and OFR set their own budgets.
Flood Insurance. The Credit and Insurance chapter of the budget’s Analytical Perspectives section discusses FEMA initiatives such as modifying the National Flood Insurance Program (NFIP) to become a simpler, more customer-focused program, and “doubling the number of properties covered by flood insurance (either the NFIP or private insurance) by 2022.” Separately, the budget proposal emphasizes that the administration believes that “flood insurance rates should reflect the risk homeowners face by living in flood zones.”
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 2020 through 2021. The proposal is designed to help “level the playing field for private lenders seeking to compete with the GSEs” and would generate an additional $32 billion over the 10-year budget window.
HUD. The budget proposes to eliminate funding for the Community Development Block Grant program, stating that “[s]tate and local governments are better equipped to address local community and economic development needs.” The proposal would continue to preserve access to homeownership opportunities for creditworthy borrowers through FHA and Ginnie Mae credit guarantees. The budget also requests $20 million above last year’s estimated level to help modernize FHA’s information technology systems and includes legislative proposals to “align FHA authorities with the needs of its lender enforcement program and limit FHA’s exposure to down-payment assistance practices.”
SEC. As stated in both the budget proposal and the MSR, the budget again proposes to eliminate the SEC’s mandatory reserve fund and would require the SEC to request additional funds through the congressional appropriations process starting in 2021. 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 in the MSR, the budget revives a plan that 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 MSR, “Congress aligned the sunset of SIGTARP with the length of time that TARP funds or commitments are outstanding,” which, Treasury estimates, will be through 2023. The reduction reflects, among other things, that less than one percent of TARP investments remain outstanding. This will mark the final time payments are expected to be made under the Home Affordable Modification Program.
Student Loan Reform. As with the 2019 budget proposal, the 2020 proposed budget seeks to establish a single income-driven repayment plan 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 proposal would eliminate subsidized loans and the Public Service Loan Forgiveness program, auto-enroll “severely delinquent borrowers,” and create a process for borrowers to share income data for multiple years. With certain exceptions, these proposals will only apply to loans originated on or after July 1, 2020.
Treasury Department. The budget states that combating terrorist financing, proliferation financing, and other types of illicit financing are a top priority for the administration, and $167 million has been requested for Treasury’s Office of Terrorism and Financial Intelligence to “continue its work safeguarding the financial system from abuse and combating other national security threats using economic tools.” The proposed budget also requests $125 million for the Financial Crimes Enforcement Network to administer the Bank Secrecy Act and its work to prevent the financing of terrorism, money laundering, and other financial crimes. An additional $18 million was proposed for strengthening and protecting Treasury’s IT systems.
On January 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Venezuela’s state-owned oil company, PDVSA. As a result, all assets belonging to the company subject to U.S. jurisdiction are blocked, and U.S. persons generally are prohibited from dealing with the company. However, OFAC concurrently issued a number of licenses in order to authorize certain transactions with the company and its subsidiaries, including those necessary to wind down operations or existing contracts.
Visit here for additional InfoBytes coverage of Venezuela actions and E.O.s.
President Trump issues new Venezuela Executive Order targeting gold sector; OFAC publishes related FAQs
On November 1, President Trump issued Executive Order 13850 (E.O. 13850) authorizing the imposition of sanctions on persons who operate in Venezuela's gold sector “or in any other sector of the Venezuelan economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State.” The sanctions come in response to the actions of Venezuelan President Maduro’s regime and associated persons in allegedly “plunder[ing] Venezuela's wealth for their own corrupt purposes.” Among other things, the sanctions specifically block the acquisition or retention of property and interests in the United States by persons who “operate in the gold sector of the Venezuelan economy” or “have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity or transaction” involving deceptive practices or corruption in conjunction with the Venezuelan government.
The same day, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a set of FAQs connected to the issuance of E.O. 13850, stating that it “expects to use its discretion to target in particular those who operate corruptly in the gold or other identified sectors of the Venezuela economy, and not those who are operating legitimately in such sectors.”
- Hank Asbill to discuss "The federal fraud sentencing guidelines: It's time to stop the madness" at a New York Criminal Bar Association webinar
- Daniel P Stipano to moderate "Digital identity: The next gen of CIP" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference