Last month, we talked about the reconciliation bill being discussed in Congress, along with the IRS proposal.
Fast forward one month and nothing has changed. No vote has been taken on reconciliation bill and no vote has occurred on the Senate infrastructure bill.
Here’s a look at where we were and where we are at today.
The $1 trillion Senate bill is still sitting in the House of Representatives. While the merits of the bill aren’t being discussed, it still plays a pivotal role on how this may or may not play out. The House’s $3.5 trillion reconciliation bill is also still being discussed, although it looks like there is some movement. Sen. Joe Manchin (D-W.V.) and Sen. Kyrsten Sinema (D-Ariz.) are still opposed to the bill in the House. Without their support, this bill won’t pass the Senate, and the House won’t hear a bill knowing it will fail in the Senate. Sen. Manchin has said he would be willing to support a $1.5 trillion package, and although this isn’t close to what the House would like to pass, it has definitely started the negotiating process.
Earlier this week, President Biden told House progressives the spending package needs to be $1.9-2.2 trillion. House Progressive Caucus Chair Rep. Pramila Jayapal (D-Wash.) wants the bill to be between $2.5-2.9 trillion.
There is clearly a gap between what the president wants and what progressives would like to see in this bill. This is the part of the process that gets ugly and folks get their feelings hurt.
It’s now time for members of the House Democrats to have hard talks about what they want in the bill and what they can cut.
There are three main ways Democrats can lower the cost of the package: remove items from their massive wish list, delay the start date of measures or end them after a few years, or narrow the eligibility or generosity of the programs.
Right now, the only thing you hear being discussed is the price tag of this bill and not the merits.
The IRS proposal you’ve been hearing about for weeks isn’t currently in the bill, but could be added at any time. This proposal is a top priority from the White House and Secretary of the Treasury Janet Yellen. The White House estimates this proposal alone will generate $460 billion in revenue to help offset whatever the final price tag is for the bill.
Bankers nationwide have contacted their congressional delegations to let them know of their opposition to this proposal, and all members of the Oklahoma delegation are strongly opposed. In the last couple of days, there have been rumors they might change the $600 minimum account balance to $10,000. While the increase in the dollar amount is nice, it still doesn’t change the merits of the proposal.
We’ll continue to stay in touch with our delegation as new information surfaces.
On Sept. 23, President Biden announced his intention to nominate Saule Omarova to be the next Comptroller of the Currency. The American Bankers Association provided information on Professor Omarova’s background and some of her positions on topics that will be important to all bankers.
Below is the information provided to me by the ABA.
The Biden Administration plans to nominate Dr. Saule Omarova to be the Comptroller of the Currency. Dr. Omarova is a financial regulation and banking professor at Cornell University Law School. She previously worked as a banking lawyer at Davis Polk & Wardwell and served as a special adviser in President George W. Bush’s Treasury Department. If confirmed, Dr. Omarova would be the first Senate confirmed woman and person of color to lead the OCC.
The Office of the Comptroller of the Currency is a supervisory agency in charge of the safety and soundness of national, federally-chartered banks. Dr. Omarova has published policy viewpoints that, if implemented, would fundamentally transform the regulatory structure and the industry she is being nominated to supervise.
Dr. Omarova’s extensive academic record expresses her views on how to restructure the banking system, and by extension the U.S. economy. She has proposed that instead of a private-sector banking system, the government should manage the business of deposit taking and lending, deciding where credit should be allocated rather than leaving it to the market. She wrote in a 2021 paper that her proposals would “end banking as we know it.”
Dr. Omarova has proposed to relegate community banks to “pass through” entities that hold their deposits on behalf of the Federal Reserve, effectively eliminating the community banking model that not only provides the U.S. the most diverse and competitive banking system in the world, but also meets the unique and evolving needs of small businesses and consumers in communities across the country.
In her publications Dr. Omarova:
• Consistently demonstrates skepticism towards private markets, advocating for more government control of the economy: “[T]he key is to show that the proposed restructuring of the Federal Reserve’s balance sheet would fundamentally alter the systemic dynamics of finance. Eliminating private banks’ deposit-taking function and giving the Fed new asset-side tools of [sic] shaping economy-wide credit flows… will dramatically reduce the levels of speculative activity in secondary markets for financial instruments.”
• Advocates for expanding the Federal Reserve’s role to include price controls on systemically important financial assets, politically sensitive commodities, and wage and salary indices: “[W]e propose the extension of the Fed’s present [open market operations] mandate beyond the task of affecting interest rates alone, to encompass all prices that are what we label “systemically important … The S&P 500 or Wilshire 5000 market indices constitute one class of candidates… Certain sensitive commodity prices—those for widely used fuels, foodstuffs and some other raw materials, for example – constitute another class of candidates. Finally, wage or salary indices constitute yet another class of candidates.”
• Misconstrues the banking sector’s role in and contributions to the economy: “[F]inancial institutions – regardless of their size or other attributes – are privately-owned firms whose overarching business priority is to maximize their own profits and shareholder returns, not the nation’s macroeconomic goals.”
• Supports a recasting of the Federal Reserve’s mission to maintain deposit accounts, which would significantly alter the financial and monetary plumbing that stands behind the U.S. economy and markets: “[R]eform the composition of the Fed’s liabilities, by replacing commercial bank reserve accounts with universally available deposit accounts. The core idea here is simply to allow all U.S. citizens and lawful residents, local governments, non-banking firms and non-business entities to open transactional accounts directly with the Federal Reserve, thus bypassing private depository institutions. …”
• Supports a drastic increase in the Fed’s balance sheet: Transitioning all demand deposits, which currently stand at $4.7 trillion, to the Federal Reserve would require a corresponding increase in the Federal Reserve’s assets. “In principle, FedAccounts can be made available as an alternative to bank deposit accounts, upon a person’s request. As explained below, however, the more effective option would be to transition all deposits to the Fed. … ”
• Would relegate community banks to “pass through” their deposits to the Federal Reserve, undermining the valuable role community banks play in their communities: “[C]ommunity banks and small credit unions could be licensed to offer “pass-through FedAccounts” on the same terms as, and directly backed by, deposits at the Federal Reserve. These licensed “community banking institutions” (CBIs) would operate physical branches and ATMs on the Fed’s behalf and receive a fee for their services. … ”
• Supports abolishing the FDIC as deposit insurer and supervisor of state charted institutions, effectively ending the dual banking system: “The Federal Deposit Insurance Corporation would have no practical role to play. All of the continuing prudential oversight and chartering responsibilities can then be consolidated and transferred to the Office of the Comptroller of the Currency, the primary regulator of federally-chartered banks. Accordingly, the scope of the Federal Reserve’s own formal bank regulatory functions would significantly shrink, if not disappear. … ”
• Would break up regional and large banking organizations: “[T]he Federal Reserve could begin exercising its broad statutory powers to reduce the balance sheet size and to limit the scope of activities of any BHC with assets above the $250-billion threshold that poses ‘a grave threat to the financial stability of the United States[.]’”
• Supports a mandatory government approval of new fintech offerings and financial products: “A broader, more explicitly macro-structural approach to ex ante regulatory vetting of new fintech offerings would be to introduce a system of mandatory pre-approval of financial products.”
A date hasn’t been set for the confirmation hearing, and it wouldn’t be the first time a nominee has been announced and no confirmation hearing takes place. Usually if the nominee looks like it won’t be approved, the president will then go back to the drawing board for a nominee he or she feels will make it through the process.
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The SAFE Banking Act is still alive, the language is the same as when it passed the House, it’s just taking a different route.
The language was offered as an amendment to the National Defense Authorization Act. The amendment was added to the NDAA on Sept. 21, and the NDAA passed the House in a 316-113 vote on Sept. 23.
The language still has to be approved by the Senate, and we all know Sen. Majority Leader Schumer and Sen. Banking Committee Chair Brown don’t like the SAFE Act. Earlier this summer, Schumer released a draft of the Cannabis Administration and Opportunity Act. Below are a few of the key points from Leader Schumer’s proposal, it’s important to know several moderate Democrats in the Senate have already come out against the proposal.
- Remove marijuana from the Controlled Substances Act.
- Establish a Cannabis Products Regulatory Advisory Committee.
- Allow marijuana companies access to the United States banking system.
- Promote loans to small minority-owned cannabis businesses.
- Set up a system to tax marijuana in states that legalize it.
- Create an Opportunity Trust Fund funded by federal cannabis tax revenue to reinvest in communities impacted by marijuana criminalization.
- Immediately expunge nonviolent marijuana-related arrests and convictions from federal records.
- Allow individuals serving time in federal prison for nonviolent marijuana crimes to petition courts for resentencing.
- Establish a Cannabis Justice Office at the DOJ to help fund job training, legal aid, and re-entry initiatives.
- End discrimination in federal public benefits for medical marijuana patients and adult use consumers.
As you can tell, there are a lot of issues going on in Washington. We’ll continue to stay in the middle of all of them and report any fundings. Should you ever need anything from us please don’t hesitate to reach out!