This Week: The House passed legislation reauthorizing the Violence Against Women Act. The Senate tried, but failed, to pass a $13.5 billion disaster aid bill. It also approved changes to the nominations approval process (see below) and the nomination of Mark Calabria to serve as the head of the Federal Housing Finance Agency.
Next Week: The House will vote to lift budget spending caps for two years and on a bill to reinstate a "net neutrality" rule that governs the treatment of internet communications. The Senate will vote on a number of Trump administration nominees.
Financial Services Issues
Big Bank Hearing. The CEOs of the largest US banks will come to Washington next week for tough questions before the House Financial Services Committee. This hearing follows a grilling last month of the CEO of Wells Fargo (who subsequently resigned) on consumer abuses at that company. These company leaders will be questioned on a variety of issues, including their business practices, executive compensation and workforce diversity. Notably, they will be caught in the middle of a partisan divide on how views on certain social impact issues should influence lending and other business decisions. For example, some Democrats will push them to pare back their lending to gun manufacturers, while banks that have done so will be rebuked by some Republicans. Committee Chairwoman Maxine Waters (D-CA) will argue that these institutions are too big to manage and hold a vote later this year on her bill to break up large banks with repeat enforcement violations. Senator Elizabeth Warren (D-MA) separately introduced a bill this week that would establish criminal liability for senior executives in cases of corporate wrongdoing. While these bills won’t advance, they and these hard-hitting hearings are emblematic of a tough posture toward banks and corporate America more generally that will be on display during the Democratic primary and throughout this session of Congress.
Other Issues in Play
Mueller Report. Many congressional Democrats have largely acquiesced to the no-collusion conclusion from the Mueller report and are distancing themselves for now from efforts to impeach President Trump. However, investigation fever is still very high in some House committees, including the House Judiciary Committee, which this week authorized a subpoena to obtain the full and unredacted Mueller report along with written notes and files from the overall investigation. Such a subpoena is unlikely to be satisfied by Attorney General William Barr, who has already indicated legal constraints will oblige him to redact parts of the report that he will send to Congress. House Judiciary Democrats want the full report and other relevant material to be made available to all 41 members on the committee but generally expect the public to receive a redacted version of the report. House and Senate Democrats will ultimately declare any redactions to the report they receive to be unacceptable and a sign of a "cover-up." We expect a redacted report to be sent to Congress and made public next week.
Retirement. The House Ways and Means Committee this week advanced a bipartisan proposal to boost retirement savings. The legislation, known as the "SECURE Act," will likely pass the full House by this summer. This bill also has a strong base of support in the Senate and could pass in that chamber later this year. Below are a few highlights worth noting:
- Contributions. This bill repeals the prohibition on contributions to traditional IRAs by individuals over 70½ years old. This would allow people to continue to save as more continue to work beyond the traditional retirement age.
- RMDs. When individuals reach the age of 70½, they face a required minimum distribution (RMD) that they must withdraw from their retirement account (unless it is a Roth IRA). Reflecting longer life expectancies, the bill raises the RMD age to 72 to give people the opportunity to save longer and not be forced to make withdrawals from their retirement savings.
- Part-time Workers. The bill allows for long-term part-time workers to participate in 401(k) plans. Except in certain cases, employers that maintain a 401(k) plan will have a less restrictive eligibility test for the participation in such a retirement offering.
- MEPs. The bill will expand retirement opportunities by allowing all small businesses to use multiple employer plans (MEPs). These pooled employer plans will help small businesses overcome financial and administrative challenges in offering retirement savings options to employees.
- Stretch IRAs. As we have warned in previous years, the bill makes changes to "stretch IRAs." The bill requires that distributions from inherited accounts be completed within ten years, with an exception for accounts bequeathed to minor children, spouses or disabled beneficiaries.
Southwest Border Mess. Most people in Washington now will at least acknowledge that there is some form of crisis along the southwest border. US border security simply cannot accommodate the escalating influx of immigrants from Central America to seek asylum. So, what should be done with them?Congress isn't anywhere close to resolving broader immigration policy issues, but some lawmakers are discussing whether they can improve the asylum process that these immigrants are trying to use to gain entry into the US. One idea would be to require asylum seekers to apply in their home countries rather than at a US border port. Another proposal would focus on ensuring that asylum seekers can reliably be found if they are allowed entry into the US while awaiting their court dates (in lieu of being detained). While several ideas are on the table with lawmakers in the Senate, there is not yet a consensus behind any one. With Republicans continuing to focus on law and order issues and Democrats continuing to focus on the need to accommodate asylum seekers, lawmakers are still talking past each other.
US-China Trade. High–level US-China meetings continued this week in Washington, following a round of negotiations last week in Beijing. Various issues are under discussion and progress has been made on some but not on others. Rather than go into the details on these, we'll offer two general observations on a possible end game. First, the faster an agreement is complete, the less ambitious it will probably be. There are so many important issues that have been brought up in these negotiations, but they cannot all be resolved. Much will depend on fatigue and the desire by the Chinese and US presidents to call it a day and declare victory. Second, once Chinese President Xi and President Trump agree on a meeting date, which we think will be in May, that will signal that a deal is truly near.
Senate Confirmation Process. If you read our publication regularly, you have probably noticed that we often cite Senate action to confirm various Trump administration nominees. Approval of individuals nominated by President Trump for key federal positions and judgeships has dominated the Senate agenda for the last two years. The system has been delayed and led to a current backlog of 160 nominees waiting for a vote. Democrats have delayed the confirmation votes by triggering a Senate rule that allows for up to a 30-hour debate for each nominee. Historically, the Senate has waived this 30-hour requirement when non-controversial nominees are brought to a vote. By insisting that each nominee, regardless of whether they are controversial or not, be subject to a full 30-hour debate takes up significant time. On this basis, the Senate is only able to approve an average of three nominees per week. Senate Republicans moved to change that arrangement this week by voting to reduce the hours of debate from 30 to two for all federal judgeships (except Supreme Court and circuit court judges) and cabinet positions below the level of secretary. This change will speed the confirmation process up and allow federal agencies to be better staffed – not only now but in the future when Democrats may want to ensure prompt votes on their nominees.
The Final Word
Democratic Presidential Fundraising. With the first quarter of the 2020 presidential race cycle now completed, all eyes are on the fundraising results from the announced Democratic candidates. Candidates want to show strength and credibility through an ability to raise money from many sources. South Bend (IN) Mayor Pete Buttigieg was the first Democratic candidate to announce his fundraising haul -- $7 million -- which was widely perceived as exceeding expectations for a candidate who entered the race with little name identification and low odds of winning the nomination. Of the five candidates who have announced their fundraising totals for the quarter, Senator Bernie Sanders' (I-VT) $18.2 million is the biggest haul and likely will set the bar for the others. Senator Sanders announced his candidacy on February 19, so his average daily haul since that time has been $450,000. Some candidates have already begun to lower expectations, such as Senator Elizabeth Warren (D-MA), while other candidates will wait until next week to announce so they can distance themselves from the others. With the first debate still almost three months away, these fundraising numbers are the first real opportunity for voters to compare candidates and gauge the support they have generated to date.