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House Financial Services Committee Markup

House Financial Services Committee

Markup

Wednesday, September 18 – Friday, September 20, 2019

Bills Considered

Opening Statements

Chairwoman Maxine Waters (D-Calif.)

In her opening statement, Waters noted that the Committee has marked up 40 bills, 24 of which have passed the House and two of which have been signed into law. She said the bills under consideration in this markup would address housing and consumer protection issues, noting that a number of bills are bipartisan.

Ranking Member Patrick McHenry (R-N.C.)

In his opening statement, McHenry said that the Committee has reached bipartisan agreements where they were able, including on H.R. 4335, H.R. 4067, H.R. 4344, as well as on a number of housing bills that will assist the “most vulnerable.” He critiqued bills under consideration concerning disclosures, saying they are more focused on “naming and shaming” companies rather than “getting real results.”

 Bills Considered

H.R. 123, the “FHA Additional Credit Pilot Program Reauthorization Act.” 

Rep. Al Green (D-Texas) introduced his bill and his Amendment in the Nature of a Substitute, which would authorize a pilot program to establish an automated process for providing additional credit rating information for mortgage borrowers, allowing “alternative credit” to be added to traditional credit scores. Reps. Lacy Clay (D-Mo.), Carolyn Maloney (D-N.Y.) and Waters spoke in support of the bill. McHenry said that although he agrees the use of alternative data should be studied and deployed, he opposed the bill.

Amendment Offered by Rep. Roger Williams (R-Texas)

Williams introduced his amendment, which would put a two percent cap on the number of individuals who can opt into the use of the proposed alternative data model when trying to obtain a mortgage. McHenry spoke in favor of the amendment, saying there are concerns about the size of the proposed pilot program. Reps. French Hill (R-Ark.) and Blaine Luetkemeyer (R-Mo.) also spoke in favor of the amendment. Reps. Michael San Nicolas (D-Guam), Green and Waters spoke against the amendment. The amendment was rejected by a vote of 21-30.

Amendment Offered by Rep. Scott Tipton (R-Colo.)

Tipton introduced his amendment, which would add additional reporting requirements to assess whether the program has an impact on the Mutual Mortgage Insurance Fund, specifically whether it has an impact on the economic net worth ratio of the fund, whether or not there is sufficient income from the pilot program to offset the risk posed, and whether the program has an impact on the ability of other borrowers not participating in the program to obtain products and services from the Federal Housing Administration (FHA). Green and Waters spoke in favor of the amendment. The amendment was agreed to in a voice vote.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 32-22.

 H.R. 132, the “North America Development Bank Improvement Act of 2019.”

Rep. Juan Vargas (D-Calif.) introduced his Amendment in the Nature of a Substitute to the bill originally proposed by Rep. Henry Cuellar (D-Texas), which would authorize the United States to participate in the North American Development Bank’s (NADB) first capital increase request in its 25-year history. McHenry argued against the bill, noting that the NADB’s projects are all in Mexico and that the substitute amendment removes provisions regarding natural gas and ports of entry, which would discourage Republican support. Waters spoke in support of the bill.

Amendment Offered by Rep. Ayanna Pressley (D-Mass.)

Pressley introduced an amendment to explicitly prohibit the NADB from financing infrastructure in support of a barrier on the U.S.-Mexico border. Reps. Sean Duffy (R-Wis.), Andy Barr (R-Ky.) and Barry Loudermilk (R-Ga.) voiced their opposition to the amendment, while Reps. Vicente Gonzalez (D-Texas), Sylvia Garcia (D-Texas), Vargas and Waters spoke in support. The amendment was approved in a 32-22 vote.

Amendment Offered by Rep. Alexandria Ocasio-Cortez (D-N.Y.)

Ocasio-Cortez introduced an amendment would explicitly prohibit the NADB from financing any fossil fuel electricity generation or detention facilities on either side of the border. Vargas spoke in support, and Reps. Ann Wagner (R-Mo.), John Rose (R-Tenn.) and Tipton spoke in opposition to the amendment. The amendment was approved in a 32-22 vote.

 Amendment Offered by Rep. Ann Wagner (R-Mo.)

Wagner offered an amendment that would tie the NADB’s capital increase to a certification from the Administration that Mexico is coordinating with the U.S. to combat human trafficking. Vargas made a point of order that the amendment was not germane to the original bill, which was sustained, then appealed by Wagner. The motion to appeal was tabled in a 25-18 vote.

Amendment #1 Offered by Rep. Andy Barr (R-Ky.)

Barr introduced his amendment, which would restore the original substance of Cuellar’s bill, which he said was “stripped” in the Amendment of the Nature of a Substitute. Vargas and San Nicolas spoke against the amendment. McHenry spoke in favor of the amendment. The amendment was rejected in a vote of 23-31.

Amendment #2 Offered by Rep. Andy Barr (R-Ky.)

Barr introduced an amendment that would strip U.S. support of the NADB if Mexico is deemed by the Administration to not be cooperating in fighting the opioid epidemic. Vargas then offered an amendment to Barr’s amendment that would direct U.S. representatives in the NADB’s leadership to oppose funding for any project that could facilitate trafficking across the border. Barr spoke against the Vargas amendment. Vargas’ amendment was approved in a 32-22 vote, and the amended Barr amendment was approved in a 55-0 vote.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 32-23.

 H.R. 4029, the “Tribal Eligibility for Homeless Assistance Grants Act of 2019.”

Rep. Denny Heck (D-Wash.) introduced his bill and his Amendment in the Nature of a Substitute, which would improve Native American tribes’ ability to combat homelessness by making tribes eligible to receive homelessness assistance grants under the Continuum of Care Program of the Department of Housing and Urban Development (HUD). Heck said it could potentially help tens of thousands of homeless Native Americans living on tribal lands. Reps. Brad Sherman (D-Calif.), David Scott (D-Ga.), Emanuel Cleaver (D-Mo.), Waters and McHenry spoke in support of the bill.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a voice vote.

 H.R. 4067, the “Financial Inclusion in Banking Act of 2019.”

Scott introduced his bill and his Amendment in the Nature of a Substitute, which would direct the Consumer Financial Protection Bureau (CFPB) to: identify hurdles that the unbanked and underbanked face in securing good relationships with traditional banking; lead a coordinated effort with banking trade associations, consumer groups, civil rights groups and other federal agencies to assess those findings; identify strategies to increase financial education; and submit a report to Congress every two years on legislative and regulatory recommendations to promote participation in the financial system. Scott noted that as of 2017, 8.4 million U.S. households were unbanked and 24.2 million households were underbanked. Reps. Al Lawson (D-Fla.), Barr and Vargas spoke in favor of the bill.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 55-0.

 H.R. 4242, the “Greater Accountability in Pay Act of 2019.” 

Rep. Nydia Velázquez (D-N.Y.) introduced her bill and her Amendment in the Nature of a Substitute, which would require publicly traded companies to disclose the pay raise percentage of both its executives and its median employee and compare each to the rate of inflation, as well as require companies to disclose the ratio between the two pay raise percentages. Rep. Bill Huizenga (R-Mich.) spoke against the bill, saying that the proposal is “redundant” as companies are already required to disclose these ratios, adding that the bill would provide “no quantifiable benefit” to investors but will cost public companies billions of dollars in ongoing compliance expenses. San Nicolas spoke in support of the bill, saying it would provide “incredibly valuable data” for investors.

Amendment Offered by Rep. Anthony Gonzalez (R-Ohio)

Huizenga discussed an amendment offered by Gonzalez introduced his amendment, which states that any company that is subject to the underlying legislation would not be required to make such disclosures required under the bill unless those disclosures are “actually material to the average investor of the company.” Velázquez and Waters spoke against the amendment. The amendment was rejected by a vote of 22-32.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 32-21.

 H.R. 4300, the “Fostering Stable Housing Opportunities Act of 2019.”

Rep. Madeleine Dean (D-Pa.) introduced her bill and her Amendment in the Nature of a Substitute, which would reform and extend the current HUD housing voucher system to provide vouchers on demand to youth aging out of the foster care system at risk of homelessness, explaining that between one-fifth and one-third of the approximately 20,000 youth aging out of the foster care system every year suffer homelessness during the transition. Dean explained that the bill also incentivizes foster youth to participate in self-sufficiency activities including pursuing education, workforce development programs, or employment. Reps. Steve Stivers (R-Ohio), Alma Adams (D-N.C.), Joyce Beatty (D-Ohio), Sean Casten (D-Ill.), Waters and McHenry spoke in support of the bill.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 47-0.

 H.R. 4302, the “Facilitating Access to Homeless Assistance Act of 2019.”

Rep. Brad Sherman (D-Calif.) introduced his bill and his Amendment in the Nature of a Substitute, which would make a tailored exemption to the Federal Privacy Act to allow public housing authorities to share certain client data with local government agencies and nonprofits participating in the Continuum of Care program to better coordinate assistance for the homeless. Sherman said the bill would empower those on the front lines by allowing them to effectively coordinate with other local entities working to provide necessary services. Pressley, Barr and Vargas spoke in support of the bill.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 49-0.

 H.R. 4328, the “Protecting Innocent Consumers Affected by a Shutdown Act.”

Waters introduced her bill and her Amendment in the Nature of a Substitute, which would provide assistance to federal employees, contractors and other consumers negatively affected by a federal government shutdown by establishing a mechanism to identify affected consumers and help prevent credit reporting agencies from including any adverse financial information that occurs during the shutdown or within 90 days thereafter. McHenry commented that the bill would have negative unintended consequences for consumers affected by a shutdown by creating a new database of federal employees’, contractors’ and consumers’ names that could be exposed in a data breach. He also expressed reservations over the short period of time given to the CFPB to implement the bill’s provisions. Reps. Gregory Meeks (D-N.Y.) and San Nicolas spoke in support of the bill, while Reps. Bryan Steil (R-Wis.) Bill Posey (R-Fla.) and Rose voiced opposition.

Amendment Offered by Rep. Denver Riggleman (R-Va.)

Riggleman expressed concerns over the reliance on self-certification and offered an amendment that would substitute the text of the bill and require the federal financial regulators to issue guidance encouraging financial institutions to work with consumers impacted by the shutdown and to provide Congress with a report analyzing the effectiveness of that guidance. Rep. Jennifer Wexton (D-Va.) said the provisions in the amendment would work as a complement, rather than as a substitute, to the original bill. Waters and San Nicolas spoke in opposition to the amendment. Rep. Cindy Axne (D-Iowa) agreed with concerns raised by Republicans about the need to allow consumers to opt-out of having their information shared with the database. The amendment was rejected in a vote of 21-33.

Amendment Offered by Rep. Scott Tipton (R-Colo.)

Tipton offered an amendment that he said would ensure the protections of the bill would be afforded only to those directly impacted by the shutdown. He commented that the original legislation would allow any individual to self-certify as having been harmed by a shutdown and lacks a process for verification. Waters opposed the amendment, arguing that it would strip assistance from individuals who are not federal employees or contractors but who are nonetheless impacted by a shutdown, such as restaurant employees. The amendment was rejected in a vote of 22-32.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 32-22.

 H.R. 4329, the “ESG Disclosure Simplification Act of 2019.”

Vargas introduced his bill and his Amendment in the Nature of a Substitute, which would: require public companies to disclose certain environmental, social and governance (ESG) metrics that the SEC would establish in a rule; require companies to disclose a description of their views on the links between ESG metrics and long-term performance; establish a Sustainable Finance Advisory Committee within the SEC; and include a sense of Congress that such metrics are automatically deemed material to investors. Waters, Casten and Rep. Katie Porter (D-Calif.) spoke in support of the bill, with Porter highlighting that the Business Roundtable announced a new Statement on the Purpose of a Corporation that moves away from shareholder primacy and includes commitments to all stakeholders as a part of corporate responsibility, as well as statements from several major companies espousing the importance of corporate responsibility and sustainability.

Huizenga, Barr, McHenry, Hill and Stivers spoke in opposition, arguing that public companies are already required to disclose material information. Barr argued that the only purpose of a corporation is to maximize shareholder value and that this bill would stray from that and diminish the purpose of the free enterprise system. McHenry and Hill commented that ESG metrics are subjective, while Stivers said the bill could lead to an “avalanche of disclosures” where information investors actually deem material would be buried in metrics they do not consider.

Amendment Offered by Rep. Bryan Steil (R-Wis.)

Steil offered an amendment that he said would clarify that public companies must only make ESG disclosures if they are “actually material to their average investor.” He said this would save compliance costs and avoid confusion for investors. Vargas opposed the amendment, arguing that a reasonable investor would find ESG metrics material and that requiring all public companies to disclose them would ensure a level playing field. The amendment was rejected in a 21-31 vote.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 31-22.

 H.R. 4344, to amend the Securities and Exchange Act of 1934 to allow for the SEC to seek and Federal courts to grant restitution to investors and disgorgement of unjust enrichment.

Rep. Ben McAdams (D-Utah) introduced his bill and his Amendment in the Nature of a Substitute, which would reverse the decision in Kokesh v. Securities and Exchange Commission and give the SEC up to 14 years to seek disgorgement of ill-gotten gains, as well as give the SEC the authority to seek injunctions, including director and officer bars. McAdams said the 14-year statute of limitations would give the SEC sufficient time to prosecute wrongdoers and would cover almost all major securities law violations. Huizenga spoke in support of the legislation, saying that it would provide clarity and protect investors. Reps. Maloney, Waters also spoke in support of the bill.

Amendment Offered by Rep. Ann Wagner (R-Mo.)

Wagner introduced her amendment, which would change the proposed 14-year statute of limitation to six years, extending the SEC’s current disgorgement period by one year. Wagner said proper statutes of limitations are important and having a 14-year limitation would allow the SEC to obtain a judgement more than a decade after the alleged conduct occurred, adding that the greater the distance between the time of the alleged violations and when the SEC brings a claim, the more likely it is that evidence gets stale and the results of the case may be unjust. McAdams spoke against the amendment, saying the underlying bill is a “careful bipartisan compromise” which the amendment would undermine. Waters also spoke against the amendment. Hill commented that ten years would be the ideal length for such a statute of limitations. The amendment was rejected by a vote of 19-35.

The amended measure was favorably reported to the House by a vote of 49-5.

 H.R. 4335, the “8-K Trading Gap Act of 2019.”

Rep. Carolyn Maloney (D-N.Y.) introduced her bill and her Amendment in the Nature of a Substitute, which would fix a loophole in current law that allows corporate executives to trade on information before it is disclosed to the public or to shareholders. Maloney explained that when there is a significant public event at a company, the company has to disclose that event to the public by filing a form 8-K within four days of the event occurring, but during this four-day gap, executives at the company know what other investors do not and can trade profitably during this gap. Huizenga and Waters spoke in favor of the bill.

The Amendment in the Nature of a Substitute was approved in a 54-0 vote. The amended measure was favorably reported to the House by a vote of 52-0.

 H.R. 4320, the “Corporate Management Accountability Act of 2019.”

Rep. Katie Porter (D-Calif.) introduced her bill and her Amendment in the Nature of a Substitute, which would require publicly traded companies to disclose their policies on whether senior executives or shareholders bear the costs of paying the company’s fines and penalties. Axne spoke in support of the bill, saying it would hold executives accountable for poor decision making.

Huizenga said the bill as drafted is overly broad since it would it would require disclosures on each named reporting officer for the past three fiscal years regardless of whether or not they were subject to any clawback or withholding. He said it would only be another hurdle and greater cost that would discourage companies from going public.

Amendment Offered by Rep. Barry Loudermilk (R-Ga.)

Loudermilk commented that the proposed legislation might be an example of “death by a thousand cuts” to smaller public companies, and that it would require even companies that do abide by the law to comply with an added cost and report “that nothing happened.” He offered an amendment that would require disclosures only if a company has actually clawed back or withheld compensation and only apply to executives who were at the company at the time of the fine or penalty, and remove the requirement from companies that do not have clawback procedures. McHenry supported the amendment, arguing that the average investor would not care about the disclosures as required in the original bill. Waters, Porter and Pressley spoke against the amendment, with Porter arguing it goes against the purpose of the bill and that investors would not know at the time that they invest whether they would be responsible for paying fines. The amendment was rejected in a 22-31 vote.

The Amendment in the Nature of a Substitute was approved in a voice vote, and the amended measure was favorably reported to the House by a vote of 31-22.

For more information on this markup, please click here.