July 25, 2017

House Financial Services Committee – Markup of H.R. 2864, H.R. 1624, H.R. 3110, H.R. 3326, H. Res. 442, and H.R. 3321

Key Topics & Takeaways

  • H.R. 1624, the Municipal Finance Support Act of 2017, was reported favorably to the full House of Representatives by a vote of 60-0.

Bill Considered

  • H.R. 2864, the Improving Access to Capital Act
  • H.R. 1624, the Municipal Finance Support Act of 2017
  • H.R. 3110, the Financial Stability Oversight Council Insurance Member Continuity Act
  • H.R. 3326, the World Bank Accountability Act of 2017
  • H. Res. 442, directing the Secretary of the Treasury to provide certain documents in the Secretary’s possession to the House of Representatives relating to President Trump’s financial connections to Russia, certain illegal financial schemes, and related information.

Opening Statements

In his opening statement, Chairman Jeb Hensarling (R-Texas) briefly introduced the legislation under consideration and said that many of the bills had bipartisan support and would help the economy. Hensarling criticized a resolution introduced by Ranking Member Maxine Waters (D-Calif.) that would direct the Treasury to turn over documentation about the President’s financial ties.

Ranking Member Waters praised the bipartisan approach used to craft the legislation under consideration at the markup. Waters then pivoted to criticizing the Administration for “hiding” information about the President’s finances and called on the House Financial Services Committee to launch its own investigation into the President’s finances.

H.R. 2864 offered by Rep. Sinema

Amendment in the Nature of a Substitute, offered by Sinema

Rep. Kyrsten Sinema (D-Ariz.) introduced the legislation, which would allow public companies that report to the Securities and Exchange Commission (SEC) to take advantage of the Regulation A+ offering rules promulgated by the SEC under the JOBS Act. Sinema said that Regulation A+ is an “efficient and transparent” way for small companies to raise capital. Rep. Trey Hollingsworth (R-Ind.), the lead Republican sponsor of the bill, spoke briefly in support of the measure as well.

Waters spoke in favor of the bill, saying that narrowly expanding the eligibility for Regulation A+ will not harm investors, as SEC-reporting companies already comply with bad actor and public disclosure rules, among other requirements. Rep. Bill Huizenga (R-Mich.) described the SEC’s rules for Regulation A+ as “unfinished” because they failed to include SEC-reporting companies. Huizenga noted that small companies, who often have limited cash flow, debt, and assets for collateral, need access to capital markets to make investments and grow. Hensarling also praised the legislation, saying the SEC’s current are inconsistent with the JOBS Act and that H.R. 2864 would correct that problem.

Sinema’s amendment was adopted by voice vote, and H.R. 2864 was reported favorably to the full House by a vote of 60-0.

H.R. 1624, offered by Rep. Messer

Amendment in the Nature of a Substitute, offered by Messer

Rep. Luke Messer (R-Ind.) opened the debate by discussing the 2014 Liquidity Coverage Ratio (LCR) rules placed on banks by the Federal Reserve, Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). Messer noted that those rules treated some foreign municipal bonds as high-quality liquid asset (HQLA)-eligible but did not accord the same treatment to U.S. municipal bonds. Messer said that the rule discouraged financial institutions from holding U.S. municipal debt, which pushed up borrowing costs for municipalities and states trying to finance infrastructure investments. Messer said his bill would rectify this by requiring the Federal Reserve, OCC, and FDIC to classify investment grade municipal securities as HQLA, while still preserving regulators’ flexibility to set standards for municipal securities held on bank balance sheets. Messer’s original bill would require investment-grade municipal securities as Level 2A assets, though his amendment changed this to Level 2B.

Rep. Carolyn Maloney (D-N.Y.), the lead Democratic cosponsor, spoke in favor of the legislation and said it would lower the cost of infrastructure development for states and municipalities. Maloney said that investment-grade municipal bonds are as safe and liquid as corporate debt, and criticized regulators for including corporate debt in the HQLA while not including municipal bonds.

Reps. Randy Hultgren (R-Ill.), Nydia Velazquez (D-N.Y.), Bruce Poliquin (R-Maine) Stephen Lynch (D-Mass.), Gwen Moore (D-Wis.), Hensarling, and Huizenga all spoke in favor of the bill as amended. Waters was slightly critical of the bill, noting she supported it in the past, but said she was unclear how the bill would help municipalities given the limited role large banks play in the municipal securities market.

Messer’s amendment was adopted by voice vote, and H.R. 1624 was reported favorably to the full House by a vote of 60-0.

H.R. 3110, offered by Rep. Hultgren

Hultgren introduced H.R. 3110, which would extend the term of the independent member of the Financial Stability Oversight Council (FSOC) responsible for insurance if a successor has not been appointed and confirmed to replace them. Hultgren said that this bill, which only makes a minor adjustment to the FSOC, would ensure the FSOC always has a member with insurance expertise. Waters, Maloney, and Rep. Sean Duffy (R-Wis.) also spoke in favor of the bill.

H.R. 3110 was reported favorably to the full House by a vote of 60-0.

H.R. 3326, offered by Rep. Barr

Amendment in the Nature of a Substitute, offered by Barr

Rep. Andy Barr (R-Ky.) introduced his bill, which would tie U.S. financial contributions to the World Bank’s International Development Association (IDA) to the World Bank reforming its management and lending activity. Barr’s bill would hold up 15 percent of the U.S.’s 2018 IDA contribution until the Treasury could certify changes to IDA’s lending program, IDA’s management of contractors, and the World Bank’s management of its trust funds. The bill would also hold up an additional 15 percent of the U.S.’s IDA contribution until the World Bank can show its lending is also tied to property right preservation and economic freedom objectives. Barr criticized the bank for lending to “dictators that deprive their citizens of basic human rights,” countries that support militancy around the world (specifically Iran) and countries that fail to implement sanctions on North Korea.

Reps. French Hill (R-Ark.), Scott Tipton (R-Colo.), Mia Love (R-Utah) and Huizenga all expressed support for the bill.

H.R. 3326 was reported favorably to the full House by a vote of 60-0.

Res 442, offered by Rep. Waters

This resolution, filed by Ranking Member Waters, but discussed first by Rep. Earl Perlmutter (D-Colo.), would direct the Secretary of the Treasury to provide the House of Representatives with documents detailing any of President Trump’s financial connections with Russia. The resolution would also direct the Treasury to turn over any documents detailing financial relationships between Trump’s family members and associates and various Russian banks. Several Democratic Representatives spoke in favor of the resolution, including Reps. Perlmutter, Waters, Moore, Kildee, Brad Sherman (D-Calif.) and Bill Foster (D-Ill.). Chairman Hensarling and Rep. Steve Pearce (R-N.M.) opposed the measure.

H. Res 442 was reported unfavorably by a vote of 34-26.

For more information on this markup, please click here.