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What's Up in Washington: Change is Afoot (MAG Quarterly- Volume Six, Issue One)


By Beth Provenzano, Vice President, Public Affairs, MAG 

March 8, 2018

The Fed has a new Chairman, and Mulvaney is Acting Director of the CFPB.  The mid-term elections will be here before we know it.  2018 will be a year to watch in Washington.

The next year should be an interesting one in Washington.  Major tax reform legislation was signed into law at the end of 2017.  2018 is a mid-term election year.  There are numerous appointments and confirmations at many governmental agencies, including the Federal Reserve (Fed), the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC), among others.  The elections and changes within the agencies, partnered with gridlock in Congress, will have an impact on policy progress and regulatory efforts in the year to come.

Tax Reform
Just before the end of 2017, President Trump signed the “Tax Cuts and Jobs Act” into law.  The law abolishes a variety of corporate tax breaks and lowers the rates for large and small businesses.  The corporate tax rate has been reduced from 35 percent to 21 percent, and “pass through” small businesses will receive a 20 percent deduction.  

Retailers have historically paid one of the highest effective tax rates compared to other industries.  The new corporate rate will allow merchants to direct resources to other priorities, such as investment back into their businesses.  

Federal Reserve
Jerome H. Powell was sworn in as Fed Chairman on February 5, 2018, succeeding Chairman Janet Yellen.  Currently, the Fed’s seven-member board has only three governors, which is the smallest number in the institution’s history.  Randal K. Quarles, the vice chairman for supervision, and Lael Brainard are the two other members of the board.  President Trump has nominated Marvin Goodfriend, a conservative economist, to join the board; and three seats remain open, without nominations announced.

Powell has experience and interest in payments, and last fall, as a Fed governor, he gave a speech where he noted that the Fed would step up its work in payment security; the challenges to traditional banking business models posed by FinTech stakeholders; and the impact of innovation in security, costs, and efficiency.  It will be interesting to watch how Powell’s tenure as Fed Chairman will influence not only monetary policy, but also payments policy.

Consumer Financial Protection Bureau
After former CFPB Director Richard Cordray resigned in November 2017, Office of Management and Budget Director Mick Mulvaney became Acting Director of the agency.  Mulvaney has long been a critic of the CFPB, and the Trump Administration is interested in taking the CFPB in a different direction than that of Cordray and the Obama Administration.   Republicans challenged the structure of the CFPB; and in late January, the D.C. Court of Appeals ruled that the single-director structure is constitutional and that the director cannot be fired without cause.  Despite this setback for conservatives, Mulvaney is actively engaged in implementing policy changes at the CFPB.

Mulvaney has used his tenure as Acting Director to review and undo some actions taken by Cordray, including requesting no funding from the Federal Reserve for the second quarter and issuing a series of requests to assess various functions of the bureau such as judicial process and enforcement actions, among other items.  These moves signify, in part, the Administration’s desire to reduce the regulatory burden and drastically alter the course and purpose of the CFPB.

Federal Trade Commission
The FTC is another federal agency that has multiple vacancies, although President Trump has nominated Joseph Simons, an antitrust attorney; Noah Phillips, chief counsel for Senate Majority Whip John Cornyn (R-TX); Christine Wilson, a Delta Airlines executive; and Rohit Chopra, a senior fellow at the Consumer Federation of America, to be commissioners.  Acting Chairwoman Maureen Olhausen is expected to step down, as she has been nominated to be a judge on the federal claims court, and Democratic Commissioner Terrell McSweeny’s spot will be filled by Simons.  These changes, if all of the nominated Commissioners are confirmed, will give the President the ability to revamp the agency, which enforces consumer protection actions.  

The FTC is typically made up of bipartisan commissioners, with three from the majority party and two from the minority.  The confirmation process will likely take a while with hearings, the committee process, and Floor votes.  Once seated, I would expect the Republican commissioners to review and examine enforcement actions through the same lens as the Administration’s nominees in other agencies – with the President’s stated goal or reducing regulatory burdens.

With all of the changes coming to key agencies it is important to also remember there will be mid-term elections in November.  More than 30 Republicans in both the Senate and the House of Representatives have announced retirement in 2018, including nine House committee chairmen.  A notable retirement for MAG members is House Financial Services Chairman Jeb Hensarling (R-TX).  Speculation is mounting about his successor at Financial Services, but it is too soon to know if the Republicans will be able to hold the majority in the House as Democrats position themselves to make significant gains.  The primaries throughout the summer and general elections in November will shape the policy dialogue for the remainder of President Trump’s first term.

It is common to see major legislation as well as personnel changes and turnover in a new Administration; however, the start to 2018 has the makings of what could be a dynamic and unpredictable year.  As President Trump settles into his second year in office, a new Fed Chairman takes the helm, new FTC commissioners are sworn in, and the CFPB drama continues to unfold, we will keep an eye on key payments policy priorities and the politics that surround them and ensure merchants’ voices are heard in Washington.