The financial industry has been the driving force behind some of the most damaging economic trends of our time. In spite of this fact, since the spasm of reform reflected in the Dodd Frank Act, financiers have faced very little scrutiny from lawmakers. Instead of regulating the industry, many governing officials from both parties have chosen to collect campaign checks in exchange for helpful votes.
Maxine Waters has rejected this complacency in favor of aggressive oversight. The committee’s failure to oversee the industry for so long, however, has left a significant backlog of issues to examine, in addition to the plethora of new and novel issues emerging under this administration. In an effort to help advocates and members of the public understand the scope of the task that the House Financial Services Committee (HFSC) faces, the Revolving Door Project has compiled a list of problems that deserve the committee’s scrutiny.
Financialization’s deleterious impacts on ordinary people are sadly ubiquitous. So while we have attempted to make this document wide-ranging we can by no means claim that it is comprehensive. In recognition of that fact, we will work to regularly update this document to reflect the latest developments on issues under the committee’s broad jurisdiction.
Despite not being comprehensive, the list is incredibly long — we acknowledge a thoroughgoing inquiry into the ravages financialization has wrought on Americans is more than a two year endeavor.
Suggestions have been broken down by subcommittee and further divided into groups of generally similar issues. We note topics on which the committee has already held hearings. This list is a companion to the similar list we have generated for the House Ways & Means Committee.
Think we have missed something? Email us at firstname.lastname@example.org to let us know!
Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets
- Hopelessly Conflicted: As a partner at the corporate law firm Sullivan & Cromwell, now-Securities and Exchange Commission (SEC) Chairman Jay Clayton represented many of the companies that he is now tasked with regulating. That includes such high profile offenders as Valeant Pharmaceuticals, Deutsche Bank, Volkswagen, and countless others, some of whom were kept confidential on the public copy of his financial disclosures. Although he promised to recuse on all matters of enforcement concerning his former clients or his wife’s family’s sketchy investments, the low rate at which he has been absent from votes casts doubt on how strictly he is adhering to that promise (or how narrowly he interprets its reach). For the sake of establishing public trust, the committee should probe how closely he has followed his recusal agreement and whether stricter conflict of interest laws are needed for financial regulators, as in Senator Elizabeth Warren’s anti-corruption act.
- 1MDB, Goldman Sachs, and the SEC: The New York Times summarizes the context well: “Goldman Sachs is facing one of the most significant scandals in its history, a multibillion-dollar international fraud that investigators say was masterminded by a flamboyant financier with a taste for Hollywood and carried out with help from the Wall Street firm’s bankers.” It is unfortunate that while Goldman’s stock plummeted in the midst of increasing public evidence of the firm’s wrongdoing, we have cause to wonder whether having an ally at the top of the SEC helps explain the stock’s subsequent recovery. Because not only did Clayton used to represent Goldman Sachs… and Clayton’s wife used to work for Goldman Sachs… Clayton’s Senior Policy Advisor at the SEC, Alan Cohen, was in charge of Goldman Sachs’ *compliance work* when the 1MDB scandal (i.e., its lack of compliance with the law) unfurled. A person who should be held accountable for Goldman’s failures is on the inside, potentially working against accountability. How the SEC is or is not addressing Goldman’s scandal is a topic worth investigating.
- Gaming the System: Conflicts of interest pose numerous threats to an agency’s integrity, even when conflicted members strictly adhere to their recusal agreements. Loss of a decision-making member to recusals means that the agency does not function as designed. The committee should undertake an investigation of how Clayton’s recusals have affected enforcement. It should also investigate whether corporations specifically hired counsel from Sullivan & Cromwell to force his recusal and get a more favorable decision. That this happens is not mere speculation, but was a well-recorded practice when Mary Jo White, another conflicted Chair, headed the SEC.
Lack of Resources
- The Securities and Exchange Commission (SEC): From 2016 to 2018, the SEC’s budget remained flat, leading to a two year long hiring freeze, even as the industry it is tasked with regulating grew. That led to a 5 percent decrease in staff size in 2017 alone (numbers are not yet available for 2018), and follows years of underfunding. Persistent underfunding has also meant that the agency lags in technological preparedness. Although Commissioner Clayton has requested a budget increase for 2019, his budget request falls below what the Obama administration requested for 2017 (a request that itself was insufficient). All of this means that those violating securities law are more likely to get away with it. Perhaps more concerning is the possibility that the low probability of enforcement has encouraged financial industry employees to break the law more frequently as the risk-reward calculus shifts toward likely impunity for rule breaking. This committee must work to understand the budget constraints that the SEC is facing and how its lack of resources has affected the industry.
Industry Friendly Rules: During this administration, even more rules coming out of regulatory agencies appear to have come directly from the desks of corporate lobbyists than under Obama’s disappointing SEC Chairs. These rules often do more to cater to the financial industry’s demands than to rein in its excesses.
- Proxy Advisory Firms: Late last year SEC Commissioner Clayton stated that revisiting rules for proxy advisory firms would be at the top of the agency’s agenda, exactly as sought by countless corporate lobbyists. This emphasis, however, seems to be misplaced, relying on corporate America’s overstatement of these firms’ power to set shareholder preferences (or the undesirability of such influence if real). Their influence appears to be marginal, but corporations still view their tendency to advise against big executive pay packages or encourage climate risk reporting requirements as a threat. Of course, progressives believe investors ought to have greater, rather than lesser, influence in setting the agenda of the businesses they ostensibly own.
- Best Interest Rule: While this SEC has appeared very concerned with protecting big, sophisticated investors, it is apparently less interested in shielding small investors who are saving for retirement from abuse. While SEC Chair Clayton stated at the start of his tenure that clarifying the standard of conduct for investment advisors was one of his priorities, the resulting rule, called the Regulation Best Interest rule, released last year, is a weak response. Many consumer advocates have expressed their concern that this rule does not represent any improvement over the status quo, in stark contrast to the Department of Labor’s fiduciary rule which was targeted by the Trump administration and then overturned by a U.S. Circuit Court last year.
- Relevant Hearing: Putting Investors First? Examining the SEC’s Best Interest Rule March 14, 2019 (during which “Barbara Roper, director of investor protection at the Consumer Federation of America, warned that the regulation, as currently written, does more to weaken investor protections than to strengthen them.’”)
- Leveraged Lending Guidance: In 2013, financial regulators released guidance that sought to slow the rapid expansion in the volume of highly-leveraged loans, on which the private equity business model relies heavily. The guidance discouraged banks from underwriting loans at more than six times leverage. This briefly constrained private equity firms, but they soon found a way around the limitations by setting up their own lending operations and extending loans to other firms in the industry. At this point 90 percent of “the credit risk of leveraged loans to corporations is held by non-banks.” Rather than responding to this market adaptation, and the renewed growth in the volume of leveraged loans that has accompanied it, with new guidance to address these developments, Trump administration regulators have chosen to relax enforcement of the existing guidance. Giving private equity firms free rein to pillage companies like Toys “R” Us has dire implications for thousands of people’s livelihoods. Why are regulators not responding to this clear threat?
Hands off? Whether it is as a result of a lack of resources, willful negligence designed to benefit financial industry players, or conflicts of interest, it is clear that regulators are not engaged in the type of oversight and enforcement that is necessary to keep our financial markets safe moving forward.
- SEC and Stock Buybacks: Supporters of the Tax Cuts and Jobs Act told the public that the reduction in the corporate tax rate from 35 percent to 21 percent would lead to more investment and therefore more growth. It is no surprise that this has not come to pass and that instead, a majority of the tax cut seems to have been applied to stock buybacks. This remarkable giveaway to executives and investors is occurring while wage growth remains slow and high quality jobs remain difficult to find for too many. These buybacks would have been illegal until 1982, when Reagan’s SEC adopted a new rule that determined companies buying their own shares did not constitute price manipulation as long as the buying pattern fit within certain parameters. Last year, SEC Commissioner Jackson released research indicating that corporate executives appear to systematically sell more shares in the days surrounding buybacks, indicating that they are taking advantage of insider information. In light of all of this evidence, and requests from Senators to revisit the rules, lack of action from the SEC on these issues is unconscionable.
- Fewer Cases, Weaker Penalties: In addition to the seemingly friendlier rulemaking, financial regulatory agencies under President Trump appear to have eased up on enforcement. Since Trump took office, the number of cases and the size of penalties have both fallen notably at agencies like the SEC and the CFTC. The SEC in particular seems to be focusing those enforcement efforts that it does undertake on small- and medium-sized players rather than the market’s largest actors. Enforcement plays an important role in stopping bad behavior at specific firms and discouraging transgressions across the sector. Therefore, falling enforcement has potentially broad implications for the safety of financial markets and fairness. Lawmakers should probe the reasons behind falling enforcement and its effects, both present and potential future implications. And House Democrats establishing an alternative vision for enforcement could influence Democratic Commissioners in the event Democrats retake the White House.
Subcommittee on Consumer Protection and Financial Institutions
- Former Bankers Run Bank Regulatory Agencies: Perhaps more than in any other regulatory sector, the cops on the beat for the financial industry come almost exclusively from those institutions that they are charged with regulating. As the financial sector has grown more complicated, the argument has increasingly become that only insiders can possibly understand it well enough to oversee it. While of dubious integrity, this argument is pervasive and therefore should be debunked through oversight. The subcommittee should work to understand how this insider pattern has developed and how it has impacted regulatory decision-making and enforcement for the issues under the subcommittee’s jurisdiction. Among the currently serving appointees deserving of further scrutiny are Comptroller of the Currency Joseph Otting, several members of the Federal Reserve Board of Governors, and members of the Federal Reserve Bank of New York.
- Personal Vendetta: Comptroller of the Currency, Joseph Otting, has set his targets on the Community Reinvestment Act. Not, as many advocates would hope, to strengthen that standard, which has sadly fallen well short of its goals to eliminate racial disparities in lending. Instead, he is working to simplify and loosen the standard for banks. This decision is even more concerning because it seems to be motivated by personal animus. Community advocates came very close to successfully halting a merger between CIT Bank and OneWest bank, at which Otting was CEO and which was accused of rampant discrimination in lending and banking services. That would have cost him a $24.9 million payday. Even though the merger eventually went through and Otting was able to cash out, the experience has clearly colored his impression of the standard and led him on a campaign to destroy it.
Industry Friendly Rules
- FDIC Small-Dollar Lending Guidance: The Federal Deposit Insurance Corporation (FDIC) is considering changing its guidance on FDIC-insured institutions offering small-dollar loans. There is some support for banks offering small-dollar-lending services so that consumers can be better protected from the predatory practices that flourish in the non-banking margins of the lending industry. Without sufficient regulation, however, allowing banks to enter the “deposit advance” lending space will do little to alleviate the problems in the payday lending industry. In some ways, it could actually aggravate these problems, as a group of state attorneys general highlighted in a letter to the FDIC earlier this year. In the past, payday lenders have used relationships with state-chartered banks from states with lax interest laws to open operations in states with stringent interest laws since those protections only apply to banks chartered in that state. These AGs also emphasize that new guidance should encourage banks to seriously consider consumers’ ability to pay. The committee should ensure that the FDIC is giving proper consideration to these concerns and that any new guidance that it issues does not bear out these worries.
- Relevant Hearing: Ending Debt Traps in the Payday and Small Dollar Credit Industry April 30, 2019
- National Bank Charters for Financial Technology Firms: Innovation in financial technology continues at a rapid rate, making it difficult at times for regulators and lawmakers to keep up with, and make sense of, new and often complex software and algorithms. Nonetheless, this area is especially ripe for oversight, since the potential dangers posed by algorithms, poor privacy policies, and more, are opaque to the average citizen. Rep. Emanuel Cleaver has called for such oversight, especially as it relates to the evidence suggesting that algorithms can perpetuate racial discrimination. Given these dangers, the Office of the Comptroller of the Currency’s (OCC) decision to accept applications from financial technology (“fintech”) firms for National Bank Charters should be given careful consideration. Obtaining such a charter would allow fintech firms to bypass state charters and therefore, state-level oversight. Is the OCC prepared to properly oversee these firms? Do they understand the risks in fintech? Are the potential benefits of such a charter worth the potential risks? Joseph Otting has repeatedly referred to the banks that he oversees as his “customers,” casting doubt on his willingness to fully weigh these questions of risk.
- Systemically Important Financial Institution (SIFI) Status: At first the Systemically Important Financial Institution (SIFI) designation, created by Dodd-Frank, was only applied to banks and insurers, but with time regulators began discussing other types of firms that could qualify, including asset managers. Many of these firms, such as BlackRock, launched a lobbying campaign to avoid that outcome, an effort that eventually succeeded. Regulators have chosen not to extend the designation to new firms and have instead been stripping the label from insurers, thereby reducing the scrutiny they face and safeguards by which they must abide. Most recently, the Financial Stability Oversight Council (FSOC) has released proposed guidance that raises the bar for designation, making new non-bank designations nearly impossible and working at odds with the legislative mandate the Council is purporting to fulfill. It is imperative that lawmakers understand how regulators reached their decisions and whether the conclusion that these firms do not pose a systemic risk is a reasonable one. As the financial crisis should have made clear, all too often risky behavior seeks sectors that receive lax oversight.
- The Volcker Rule: Trump administration regulators have also taken aim at another important Dodd-Frank reform: the Volcker Rule. The Volcker Rule placed restrictions on proprietary trading by banks in an effort reduce their exposure to risk and thus ensure that they would not require costly bailouts again in the future. Many within the industry have complained that the Volcker Rule is too complex and restricting. Given the personal history of most Trump administration regulators, it is unsurprising that they are responding to banker complaints by seeking to ease the burden on banks from rules designed to safeguard the broader American economy. These regulators released a revised Volcker rule last spring which would weaken the original regulation considerably, increasing the risk the U.S. repeats a crash like that of 2008. Although regulators appear unlikely to approve the revised rule as is, after facing complaints even from bankers that the first take was poorly drafted, the administration clearly remains committed to weakening this key safeguard.
Lack of Enforcement:
- Consumer Financial Protection Bureau (CFPB): Since the Obama-era appointee Richard Cordray resigned in 2017, enforcement actions at the CFPB have fallen precipitously, even as “consumer complaints have risen to new highs.” Under the leadership of Mick Mulvaney, who directed the Bureau in an acting capacity from 2017 to the end of 2018, staff were actively prevented from doing their jobs, causing many to leave the agency and morale among the remaining employees to plunge. The HFSC hearing with now-Director Kathy Kraninger helped to shed a light on some of these problems. It would be highly desirable, however, to oblige Mick Mulvaney, who presided over the agency’s gutting, to testify. Furthermore, additional investigation into the extent of the sabotage and its effects is likely still necessary. The Committee has a chance to begin to develop an agenda for a revitalized CFPB under a pro-consumer president while also developing evidence for whether Kraninger might merit removal for cause.
- Relevant Hearing: Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau March 7, 2019
- More like Wells Fargo: Wells Fargo has come under intense scrutiny for its rampant abuses and continued failure to change its behavior. The OCC, however, reported that its review of 40 large and mid-size banks had found that Wells Fargo was not the only institution that opened bank accounts without customers’ permission. The practice was reportedly widespread; in a three-year period the banks under review had opened up to 10,000 accounts without customers’ permission. The OCC, however, refused to name the banks that took part in this fraudulent behavior, a decision that many Democratic lawmakers criticized for depriving consumers of essential information about banking abuse. Now that House Democrats have the power to obtain this information, it is important that they do so.
- Faster Bank Mergers: Bank regulators in the last two years have been accelerating their review of bank mergers. Lawmakers and advocates have raised concerns that the faster process is indicative of insufficient scrutiny on the part of regulators. The OCC, for example, has changed the way that it weighs community input so that it is less likely to derail deals. This is particularly concerning as mergers are one of the only opportunities community groups have to press banks on their fair lending practices and force greater compliance.
- Car Loans: More and more Americans are behind on their car payments, even as the economy continues to be strong. This is not an accident, but the result of a medley of lax oversight and deregulatory actions. Over the past decade banks have been loosening their standards for auto lending in order to take advantage of the high-yield market and have faced little resistance from regulators for their recklessness. In the spring of 2018 congressional Republicans added fuel to the fire by using the Congressional Review Act to repeal CFPB guidance on auto loan rates for minority borrowers, who studies found faced discrimination in car lending. This led to a boom in the already growing subprime car loan market. As banks and the used car industry profits, however, millions of Americans are suffering. The committee should seek to understand the full extent of the problem and learn what, if anything, regulators are doing to respond.
- Relevant Hearing: Examining Discrimination in the Automobile Loan and Insurance Industries May 1, 2019
Subcommittee on Housing and Insurance
- Staffing Crisis: While staffing issues have plagued many departments under President Trump, the Department on Housing and Urban Development (HUD) is facing an acute crisis. HUD has long been facing staffing and resource constraints, but these are only growing more severe. In just under a decade, the department lost nearly 20 percent of its staff while staff government-wide grew by 11 percent. In the last few months it has also suffered from losses in its highest leadership positions. What has caused these losses and what are the effects on the Department’s ability to administer its essential programs in an effective manner?
- Ben Carson: While Secretary of Housing and Urban Development Ben Carson has not gotten the same attention as some of this administration’s louder senior officials, he has nonetheless faced numerous questions about his suitability for office. These have included concerns about his conflicts of interest, allegations of nepotism, and incompetence.
- Conflicts: Carson previously headed several personal LLCs that controlled his real estate investments. Although he has surrendered control of these entities, he is still taking passive income from them, an arrangement that fails to eliminate the possibility that he use his office for personal enrichment.
- Nepotism: In addition to hiring the seemingly unqualified son of a close friend, Carson has given members of his own family unprecedented access and power in the department, despite warnings from ethics officials that doing so would violate ethics rules. It has been reported that Carson’s wife, Candy, a former real estate agent, frequently appears at official meetings. Ben Carson Jr. apparently organized departmental meetings, including a “listening tour” in Baltimore, where both he and his wife are heavily involved in the business community. Moreover, HUD officials apparently arranged numerous meetings for Carson’s son, giving him access to high level officials directly involved in matters that concerned Carson Jr.’s business holdings. The committee must ascertain how this involvement may have affected departmental decisions and see that those involved are penalized.
- Suitability for Office: Donald Trump’s penchant for staffing Cabinet-level roles with under-qualified individuals must be understood as a deliberate effort to undermine the government’s ability to serve the public interest. In addition to lacking the experience to effectively run a government agency and showing plain contempt for HUD, Carson has also apparently lacked initiative to even try. A cadre of Trump-aligned officials has steered the agency, poorly, in his stead.
Industry Friendly Rules:
- Lobbyists Calling the Shots: In Carson’s HUD, it seems that industry lobbyists are being given free rein to influence personnel decisions. Last year a manufactured housing industry trade group requested that an agency official who had been opposed to their desired regulatory reforms be removed, a request that senior officials in the Department obliged. With that resistant official out of the way, the Department kicked off the process to reconsider regulations on manufactured housing to which the trade group had been opposed. Why was this trade group allowed such latitude? Are officials in HUD giving sufficient thought to safety and quality concerns or merely working to fulfill industry’s requests?
- Threatening Progress on Fair Housing Act Enforcement: Ben Carson has been challenging progress made during the Obama administration towards fulfilling the goals of the Fair Housing Act of 1968. Carson has, for example, worked to dismantle the Affirmatively Furthering Fair Housing (AFFH) rule since early last year. HUD first announced that it was extending the deadline for communities to submit an Assessment of Fair Housing (AFH) until 2020. Then, in August, the Department proposed changes to the rule that would shift its focus to reducing the regulatory burden on local jurisdictions and increasing housing supply, rather than on fair housing enforcement. Carson has also proposed changes to the Obama administration’s Disparate Impact rule, which holds entities responsible for decisions with discriminatory impacts, even when discrimination cannot be proven to have been intentional. This represents a plain abandonment of the effort to fulfill the goals of the Fair Housing Act, an achievement that remains distant over five decades after the law’s passage. There is no reasonable justification for this move, something that can be made clear by forcing Carson to attempt to defend his indefensible decisions in a congressional hearing.
- Relevant Hearing: Housing in America: Oversight of the U.S. Department of Housing and Urban Development May 21, 2019
- Pushing Immigrant Families Out of their Homes: In an effort to bar undocumented immigrants from accessing public housing, HUD may now be pushing thousands of citizens, including many children, out of housing assistance programs. The Department has proposed a new rule that would require all members of a household to verify their immigration status before accessing housing assistance. Undocumented family members would not be allowed to live with their documented family members under the new rules, practically meaning that families will likely choose to forego assistance rather than live apart. This new rule is inhumane and administration officials should be made to answer for their horrendous proposal.
- Relevant Hearing: Housing in America: Oversight of the U.S. Department of Housing and Urban Development May 21, 2019
Effects of a Cop Off the Beat
- HUD and the Shutdown: The combined implications of incompetence, absenteeism and general indifference at HUD were on display during the government shutdown at the start of this year. HUD failed to put in place a contingency plan for the hundreds of contracts that expired in late December and early January. As a result, many people in government housing were faced with extreme uncertainty about whether or not they would be able to stay in their homes. Uncertainty for landlords about if, or when, they would receive government payments led them to delay necessary repairs to properties and refuse new Section 8 tenants. HUD also failed to take steps to protect funding for homeless service providers, threatening basic services for some of the country’s most vulnerable people. While all of the shutdown’s ill-effects cannot be pinned on HUD’s planning, it is clear that the Department failed to take basic steps that would have safeguarded essential programs. Agency officials must answer for these unacceptable failures.
- Private Equity and Real Estate: In the wake of the financial crash, Wall Street turned to the rental market for new revenue streams, exploiting the vulnerability that they had helped to create. Private equity firms bought single-family homes out of foreclosure, often in bulk, and then rented them out while they waited for the housing market to rebound and the assets to appreciate. There are multiple concerning trends that have arisen from this practice, all deserving of greater scrutiny.
- Wall Street’s hunger for single family rental properties has pushed housing prices up, crowding out homebuyers. At first, private equity firms focused on buying cheap properties for which there was very little demand. As prices have risen, however, they have continued purchasing homes at the peak of the market while people who lost their homes to foreclosure have largely been closed out of homeownership. The committee should work to fully understand the root causes and the consequences of this novel market domination.
- Private equity firms are also pushing up rents in their properties and, in some cases, surrounding markets. These firms have come to exert market power in certain markets, and concentrated markets make for rising prices market-wide.
- Although private equity firms argued that they would not only provide returns for investors, but a better experience for tenants, that assertion has since been disproven. Horror stories of their failures to maintain properties abound. Furthermore, private equity firms appear to be quicker to evict as well. Many have been known to file eviction notices on tenants that are just a day late on rent, allowing them to charge late fees. A study by the Federal Reserve Bank of Atlanta found that private equity firms were 18 percent more likely to file eviction notices than were small landlords. These problems raise important questions about renters’ rights and landlords’ obligations. The committee should take this opportunity to consider whether current protections are sufficient and how they could be improved.
- In addition to closing out potential homebuyers and making life harder for renters, private equity’s domination of the single family rental market also poses threats to financial markets’ stability. These firms have begun to securitize rental revenues, which will almost certainly lead to riskier behavior. More worrisome, Fannie Mae recently began providing financing for single-family rental securitization. Congress failed to examine the risks posed by mortgage securitizations in the 2000s. They should work vigilantly to not repeat that mistake.
- No Help for Families in Unsafe Housing: HUD is failing the families that rely on its programs. While these failures cannot solely be attributed to this administration, it does appear to be making the existing problems worse. For example, the continued loss of departmental personnel has left HUD ill-equipped to respond when properties in its programs fail health and safety inspections. This puts thousands of families in unsafe situations and is unacceptable. This administration has failed to give attention to these issues or propose solutions, choosing instead to focus on downsizing the department and lifting “regulatory burdens.” Congressional hearings could expose this contemptuous indifference in addition to shining a light on the long-run structural challenges facing HUD.
- Relevant Hearing: Housing in America: Oversight of the U.S. Department of Housing and Urban Development May 21, 2019
Subcommittee on National Security, International Development, and Monetary Policy
- Deripaska and Mnuchin: The Treasury Department’s decision to lift sanctions on several companies tied to Russian oligarch, Oleg Deripaska raised eyebrows at the start of this year. Many argued that the Treasury Department’s deal with Deripaska was too lenient and did not make sufficient demands of him to cede control of the businesses in question. That could be because, as was reported in late January, Treasury Secretary Mnuchin is seemingly tied to Deripaska through Leonard Blavatnik, a Ukrainian-born U.S. billionaire with whom Mnuchin apparently did business and is reported to have sold his share of a film production company. Rep. Jackie Speier has raised these concerns, but they have arguably not been sufficiently aired, either through an investigation or a dedicated hearing.
- FinCEN Whistleblower Signals Need for Further Scrutiny: A whistleblower within the Financial Crimes Enforcement Network (FinCEN) has been charged for leaking information relating to the financial transactions of Trump associates to BuzzFeed News. This case should warrant further scrutiny from the committee for several reasons. First, that an official was leaking this information suggests that there may be further suspicious transactions of which we are not yet aware. Second, it raises questions about Steven Mnuchin’s conflict of interest in overseeing a department that is investigating a campaign of which he was a major part. Third, the administration’s decision to retaliate against this whistleblower should raise questions about what it might be trying to hide.
- Trump’s Ties to Saudi Arabia Pose National Security Threat: Donald Trump’s refusal to place his businesses in a blind trust has created numerous conflicts of interest, including several that pose a threat to national security.
- Last fall, Trump stood by Saudi Arabian Crown Prince Mohammad Bin Salman despite the CIA’s conclusions that the Crown Prince had ordered the murder of U.S. resident Jamal Khashoggi. It is plausible that the money Trump receives from the Saudi government and other citizens through apartment sales and hotel rentals influenced his decision.
- Saudi Arabia is not, however, the only country with which this President has, and continues to have, business dealings. In 2017, seven foreign governments rented condominiums from Trump without congressional approval, in breach of the emoluments clause. There have also been numerous reports of foreign nationals and anonymous shell companies renting and buying apartments from this President.
- Questions have also swirled about the President’s decision to soften his stance on the Chinese company ZTE, which has been fined repeatedly for violating US sanctions policy, coinciding with a Chinese state-owned company approving millions of dollars of loans for a Trump project in Indonesia.
Given the role the Treasury Department plays in sanctioning Saudi Arabia, the committee should dig deeper into what role these financial interests may have played in the President’s foreign policy decisions and work to understand what sort of threat they could pose in future cases.
Subcommittee on Oversight and Investigations
- The Federal Vacancies Reform Act: The Federal Vacancies Reform Act of 1998 clarifies the procedure for filling vacancies that result from resignation, death, or some other circumstance that prevents an individual from fulfilling a position’s function. This often means designating someone within the agency who will take the position or clarifying who has the power to name individuals to the role in an acting capacity. The Trump administration, from its start, has been rocked by constant resignations but the President has largely chosen to stretch or ignore the Act’s edicts. Instead, he has routinely filled newly empty spots with outsiders, in many cases likely breaking the law. This has included his decision to appoint Mick Mulvaney as acting director of the CFPB, Keith Noreika as Acting Comptroller of the Currency, and Joseph Otting as acting director of the Federal Housing Finance Agency (FHFA). Such appointments have had negative consequences for their respective agencies and for the public at large. In conjunction with other committees, HFSC should open an investigation into violations of the Federal Vacancies Reform Act, analyze failures in its enforcement mechanisms, and use the information revealed to propose a fix for the law.
- Vacancies: Now over two years into Trump’s presidency, countless essential positions throughout the executive branch remain vacant, or have been filled temporarily by acting officials or special advisors. Only 58 percent of senate-confirmed positions in Treasury have been filled. In some cases, the absence of a confirmed official has left divisions in the control of unconfirmed counselors, like Craig Phillips and Brian McGuire, effectively bypassing the Senate’s advice and consent role. Indeed, former BlackRock Managing Director Craig Phillips led the Administration’s entire banking deregulation and housing agendas for two years without ever being nominated to a Senate-confirmed position. Such a blatant disregard for the constitutional division of powers should not go unchallenged.
- Obstructionism in Independent Agency Nominations: The Trump administration has allowed numerous seats on independent agency boards to sit empty for months or years at a time before even putting forward nominations for the vacancies. A Democratic seat at the SEC has been vacant since December and President Trump only formally nominated a replacement early this month, despite the fact that Senate Minority Leader Chuck Schumer submitted Allison Lee’s name to fill the spot in late July. Meanwhile, no such nomination has been put forward for the FDIC vacancy, nor has Commissioner Martin Gruenberg (currently serving an expired term) been renominated despite Schumer’s request. It is important that such obstructionism and its effects not be overlooked. The Committee should take this opportunity to understand how this delay has affected enforcement at these agencies, drawing attention to the harm stemming from this administration’s unwillingness to fulfill statutory requirements that agency leadership not be dominated by the president’s party. It should also seek to coordinate its efforts with other committees who should be investigating similar vacancies at the agencies under their jurisdiction.
- Financial Disclosures: Several Trump administration officials have faced complications with their financial disclosures. That includes Treasury Secretary Mnuchin whose disclosures the Office of Government Ethics (OGE) declined to certify. OGE concluded that Mnuchin’s decision to sell his stake in the film production company, StormChaser Partners, to his then-fiancée Louise Linton has created an unacceptable conflict of interest now that the two are married. OGE lacks enforcement power, however, meaning that Mnuchin faces no penalty for this violation. The House Financial Services Committee should work to understand how OGE’s weakness may have threatened the government’s capacity to work in the public interest and how it can increase the office’s enforcement power.