The House passed legislation placing new limits on certain US military activities in Iran. The Senate continued its impeachment trial of President Trump (see below).
The House will pass legislation to strengthen rights relating to union organization and collective bargaining and legislation to fund disaster relief in Puerto Rico. The Senate will return to a legislative agenda, including the approval of executive and judicial nominations.
Financial Services Issues
In 1977, Congress passed the Community Reinvestment Act (CRA), which requires banks to serve the credit needs of low and moderate income communities in which they operate. Last month, two banking regulators (the OCC and FDIC) proposed the first major update to the CRA rules in decades. Among other things, the proposal would expand and provide more certainty regarding what activities receive CRA credit and would give banks greater flexibility in where and how they conduct CRA activities. One banking regulator, the Federal Reserve, did not sign on to the proposal, and it remains to be seen when it may issue its own version. One Fed governor recently gave a speech criticizing the proposal, though another Fed governor noted at a Congressional hearing last month that the plan is for all three agencies to ultimately agree on a final rule. The reaction in Congress has been split on partisan lines. Democrats grilled Comptroller Joseph Otting on the proposal at a hearing this week, charging that the proposal would weaken existing CRA regulation. Despite the pushback, the regulators seem determined to issue a final rule later this year, although its durability will be determined in large part by the results of the November elections.
Other Issues in Play
Senate Impeachment Trial.
After debating the rules for the trial for a day, hearing from the prosecution and defense teams over six days and then quizzing them both over two days, the Senate appears to be ready for a final vote on impeachment. As was the case before the start of the trial, the vote is still very likely to result in the President's acquittal. Below are some key issues to note in the trial:
Former Vice President Joe Biden is a big winner in the Senate's likely decision to not have witnesses at the trial. He will no longer be deluged with questions about his possible testimony, which had been distracting from his preferred campaign messages in Iowa. And for at least the time being, he will be asked fewer questions about his son's (Hunter Biden) activities in Ukraine. We don't know the full story behind Hunter Biden's three-year stint on the board of Burisma. But, at a minimum, it creates an appearance of poor judgment for him to have accepted the board position while his father was Vice President and was the designated point person on Ukraine policy at the White House. While this particular story may take a media back seat for the time being, we expect Senate Republicans to explore these issues in greater detail in a committee investigation as the year evolves.
Impact on Iowa.
The trial has largely kept the presidential candidates who have day jobs as US senators off the campaign trail in Iowa over the past two weeks, including Senators Bernie Sanders (I-VT), Elizabeth Warren (D-MA), Amy Klobuchar (D-MN) and Michael Bennet (D-CO). Yes, Senator Bennet is still in the race. They can now return to Iowa as the only candidates in the race who officially voted to accomplish what all the Democratic candidates want – President Trump's removal from office. We haven't seen any evidence that their absence has made much of a difference on the ground in Iowa, although it has likely hurt those candidates who desperately need a good showing in the state to show longer-term viability (Senator Klobuchar) or those who need to be there to reverse falling poll numbers (Senator Warren).
While the formal process of impeachment is about to close, many of the issues that shaped it are far from resolved. Of course, they will continue to be discussed by both parties for their own political purposes, especially as the presidential election nears. More importantly, though, many of these issues will continue to be formally investigated. House Democrats and Senate Republicans who control the committees in their chambers will use these positions to subpoena, hold hearings with controversial witnesses and opine on many issues related to impeachment that weren't fully resolved. Congressman Adam Schiff (D-CA), the lead House impeachment manager, and Senator Lindsay Graham (R-SC), Chairman of the Senate Judiciary Committee, will continue to generate news relating to many of these issues and could uncover new issues that may prolong the impeachment debate and impact this year's elections.
Coronavirus and US-China Trade.
The official implementation of phase one of the US-China trade agreement is scheduled to begin on February 14, but we expect some parts of the deal to slip due to the ongoing challenges associated with the coronavirus. Some Chinese purchases of US products specifically may be delayed as China focuses on the larger public health problem. Media coverage of the coronavirus and China's focus on the problem will further push the trade issues into the background for at least the next few weeks, including any phase two talks, which we aren't enthusiastic about anyway.
While the impeachment trial was getting all the press attention, House Democrats began their push to advance a comprehensive infrastructure bill. This week kicked off with House Democrats' release of a proposal to spend $760 billion over five years on roads, bridges, rail, broadband and other forms of infrastructure. House Democrats on the tax-writing committee also held a hearing to discuss how to finance such an initiative. No conclusions were reached at this hearing, but several potential funding sources were cited, including Private Activity Bonds, Build America Bonds, private-public partnerships, an increase in the gas tax, and many others. However, the funding component is the most critical and controversial piece of any infrastructure bill. We continue to think it is unrealistic that any bipartisan funding compromise can be made in this election-year environment, and no such plan will emerge. Nonetheless, House Democrats will continue to push forward a bill, without a suggested funding source, as a way of advancing the debate and adding the bill to their resume of accomplishments this year.
Return to Earmarks?
Ever since earmarks (dedicated federal spending for specific projects in congressional districts/states) were banned by House Republicans in 2011, there have been discussions among some lawmakers about whether to bring them back. House Democratic leaders are considering now whether to allow them to be a part of this year's government spending bills, which they are in the early stages of writing. Retiring House Appropriations Chairwoman Nita Lowey (D-NY) met this week with a group of freshman Democrats from swing districts who are concerned that the resurrection of earmarks could hurt their re-election chances. Opponents of earmarks continue to argue that they too often lead to wasteful and politically-motivated spending, while proponents argue that members of Congress know how federal spending can best be utilized in the communities they represent. Earmarks may return to the House, but we do not believe the Senate will accept them. In fact, Senate Republicans voted last year to ban earmarks permanently, though (like the House Republicans' action in 2011) this action only binds those in the party, not the other party.
The Final Word
Super Bowl and Politics.
Earlier this month, it was announced that President Trump's campaign would be spending $10 million for a 60-second Super Bowl advertisement, an unprecedented ad buy during the Super Bowl. It was announced shortly afterwards that Democratic presidential candidate Michael Bloomberg was planning the same sized ad buy during the game highlighting his efforts to combat gun violence. While political ads during the Super Bowl are uncommon, they aren't unheard of. During the 2016 Republican primary, super PACs supporting Senator Marco Rubio (R-FL), Senator Ted Cruz (R-TX) and former Florida Governor Jeb Bush aired targeted ads for voters in South Carolina and New Hampshire. However, the scale of this Sunday's ads by the Trump and Bloomberg teams dwarf them since they will reach all 100+ million Super Bowl viewers. Both the President and Bloomberg hope their ads have more success than that experienced by the three Republican candidates in 2016.