Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, sent a letter to President-Elect Joseph R. Biden, providing recommendations on areas where the Biden Administration should immediately reverse the actions of the Trump Administration, and several actions that the Biden Administration can immediately take to coordinate the federal response to COVID-19, keep people safely housed, protect consumers and small businesses, support the broader economy and ensure a global recovery.
Included with the letter is a list of regulations and other executive actions taken by the Trump Administration over the past four years within the jurisdiction of the House Committee on Financial Services that the Biden Administration should reverse. Also included are recommendations to strengthen certain regulations after the damage the Trump Administration has caused is reversed.
“On behalf of the Democratic members of the Committee on Financial Services, I would like to extend my congratulations to you, Vice President-elect Kamala Harris, and the team you are assembling,” wrote Chairwoman Waters. “As you begin to carry out the mandate given to you by the American people to restore trust in the federal government, I would like to highlight several areas where you and your team should immediately reverse the actions of your predecessors. For the past two years, the Committee on Financial Services, under my leadership, has conducted extensive oversight of the Trump Administration, shining a spotlight on the many harms inflicted, in addition to passing legislation to reverse those actions. Unfortunately, President Trump has generally abandoned any attempt to lead this country through the Coronavirus 2019 (COVID-19) pandemic, even though more than a thousand Americans are being killed every day. There are several actions that your incoming administration can immediately take to coordinate the federal response, keep people safely housed, protect consumers and small businesses, support the broader economy and ensure a global recovery.”
See here or below for the full letter text. See here for the attached list.
Dear President-elect Joseph Biden,
On behalf of the Democratic members of the Committee on Financial Services, I would like to extend my congratulations to you, Vice President-elect Kamala Harris, and the team you are assembling. As you begin to carry out the mandate given to you by the American people to restore trust in the federal government, I would like to highlight several areas where you and your team should immediately reverse the actions of your predecessors. For the past two years, the Committee on Financial Services, under my leadership, has conducted extensive oversight of the Trump Administration, shining a spotlight on the many harms inflicted, in addition to passing legislation to reverse those actions. Unfortunately, President Trump has generally abandoned any attempt to lead this country through the Coronavirus 2019 (COVID-19) pandemic, even though more than a thousand Americans are being killed every day. There are several actions that your incoming administration can immediately take to coordinate the federal response, keep people safely housed, protect consumers and small businesses, support the broader economy and ensure a global recovery.
In addition, Trump appointees have attacked diversity and inclusion, undermined consumer safeguards, decreased oversight of the largest banks and systemic threats to the economy, and rejected international development and cooperation at the Department of the Treasury (Treasury) and the independent financial services regulators. The Department of Housing and Urban Development (HUD) and the other agencies with the responsibility to oversee our housing markets have also taken actions to weaken our mortgage markets, reduce access to housing and homeownership opportunities, and hamstring fair housing protections. I will summarize the many actions taken by Trump’s appointed team below that warrant your attention, as well as actions your incoming administration should take, and I am attaching a full list of regulatory and administrative actions by the Trump Administration that your team should prioritize the elimination of on day one of your presidency.
Coronavirus (COVID-19) Pandemic Response
The pandemic remains the most immediate challenge to people and businesses, not only here in the United States, but around the world, and I am thankful that you are prioritizing your incoming Administration’s efforts to finally provide the leadership that is needed. My Committee has been singularly focused on developing legislation to ensure our government has every resource and tool available to support the health and economy of this country.
Fully Use the Defense Production Act of 1950 (DPA)
With new records for infections and hospitalizations occurring nearly daily, the need for critical medical supplies and equipment will continue for some time and key parts of the national stockpile will need to be replenished. In order to address these shortfalls, your Administration must ensure that the Departments of Defense and Health and Human Services use the DPA to boost production of key supplies such as N95 masks and other personal protective equipment.
- The Department of Defense should immediately stop the inappropriate use of the Coronavirus, Aid, Relief and Economic Security (CARES) Act DPA funds for support of the defense industrial base and instead use those resources to support the production of COVID-related medical supplies and equipment. In addition, your Administration should develop, after consulting with key stakeholders like representatives for essential workers, a publicly available assessment of the nation’s COVID supplies and equipment needs and your plan for how the government will meet those needs.
- Given the skyrocketing needs, the Biden Administration should immediately establish a mechanism for ensuring that Federal purchases do not interfere with state, territorial, tribal or local procurement except where absolutely necessary, and help make them whole when it is.
- Your Administration should appoint a coordinator to reach out to businesses to help foster opportunities for expanding the production of key supplies and equipment to harness the creativity and pent up willingness of the private sector to mobilize its tremendous capacity to combat the pandemic.
- The Biden Administration should also consider establishing a national commission to study the vulnerability of the United States created by the globalization of health and other critical supply chains and make recommendations to the U.S. Government on steps to address these vulnerabilities.
- Importantly, the Biden Administration should issue guidance that the DPA will not be used to force workers to return to unsafe work sites and should vigorously pursue any company that is charging exorbitant prices for key medical supplies and equipment.
- Finally, your Administration should review the use of the DPA since the beginning of the pandemic and determine whether additional enhancements are warranted, such as amending the DPA to allow its use for health emergency preparedness, which could have been used prior to the onset of the pandemic, and providing greater discretion to cabinet agencies to proceed expeditiously in the case of a future pandemic.
Issue an Executive Order to Prevent Evictions
More than a month after the CARES Act eviction moratorium expired, the Trump Administration issued a Centers for Disease Control (CDC) public health order intended to prevent most evictions from proceeding. However, this order expires at the end of the year. In addition, the order imposed needless hurdles on renters, including exposing them to potential criminal liability. I urge your Administration to work with Congress to implement a durable eviction moratorium, as included in the Heroes Act passed in October, but in the interim, to issue an executive order directing the CDC to extend and improve the CDC public health order so that people can remain in their homes until emergency rental assistance can be made available. I commit to working with your team to ensure that resources are available for the most vulnerable renters so that we prevent a future wave of evictions, while simultaneously stabilizing the rental market.
Promote Stable Housing During the Pandemic
During the pandemic, HUD and FHFA have both enacted new policies that impose restrictions and increased costs for certain loans that go into forbearance prior to endorsement by the Federal Housing Administration (FHA) or purchase by Fannie Mae or Freddie Mac (collectively, the Enterprises). These policies unfairly penalize lenders for loans that were fully underwritten according to FHA or Enterprise requirements. These policies have also contributed to significant credit overlays that may be disproportionately affecting access to credit for minority and other underserved borrowers, and may also be preventing borrowers from accessing forbearance and other protections available to them through the CARES Act. Your housing team should amend these policies to ensure the loans that go into forbearance are still eligible for FHA insurance and purchase by the Enterprises.
Additionally, although HUD has provided program waivers to public housing agencies (PHAs) and owners of HUD-assisted multifamily properties to use at their discretion, HUD can do more—using its broad waiver authority provided by the CARES Act—to keep people safely housed during the pandemic. While it is important to provide PHAs and owners with flexibility to make decisions to respond to local conditions, there are a few key policies that are necessary to protect tenants’ health and safety, regardless of where they might live, and that should be mandatory. Specifically, HUD should set the minimum rent at $0 and implement a uniform, interim recertification rule that requires PHAs and owners to presume that a tenant’s inability to pay rent has been caused by a loss of income, and as a result would be required to conduct an income recertification. To help people find housing where they can shelter in place during the pandemic, HUD should also require that PHAs and owners lift their tenant screening requirements when adding family members to a household and automatically extend the search period for vouchers to give families more time to find a landlord willing to rent an apartment to them.
Fully Use CARES Act Lending Authorities
The CARES Act also authorized the Board of Governors of the Federal Reserve System (“Federal Reserve” or “Fed”) and Treasury to dedicate up to $500 billion toward emergency lending facilities to support businesses, non-profit organizations, and state, local, territorial, and tribal governments. Since the Fed and Treasury began establishing these facilities in March, I, along with several of my colleagues, have urged Chair Powell and Secretary Mnuchin to improve the program requirements to better support the economy. This has included imposing appropriate workforce maintenance requirements and other conditions, so that participating entities are not using public money to lay off workers and increase unemployment. I have also emphasized that the terms of the Main Street Lending Program (MSLP) and Municipal Liquidity Facility (MLF) should be adjusted to ensure greater access and assistance to small businesses, non-profit organizations, colleges and universities, as well as state, local, territorial, and tribal governments. The Fed has made some of these changes, albeit slowly after nearly eight months of pressing by me and my colleagues. This includes expanding access to the MLF to mid-sized cities, making the MSLP available to non-profits, and reducing the MSLP’s minimum loan size threshold. The Fed has not adopted all of my recommendations, and the programs have been underutilized.
Unfortunately, Secretary Mnuchin and Chair Powell recently decided to close down the CARES Act’s emergency lending facilities at the end of this year. There are even reports Secretary Mnuchin may unlawfully try to transfer unused funds to the general fund in violation of the CARES Act. This would be a huge mistake, since these programs have been a crucial component of stabilizing financial markets since March, and the pandemic is clearly not over. Small businesses continue to struggle, especially minority owned businesses. One recent survey estimated 46% of Black small businesses either already closed or are planning to close by April 2021 without additional federal aid. Meanwhile, state and local governments are in a very weak financial position, facing estimated budget shortfalls of nearly $1 trillion next year.
Against this backdrop, closing these emergency lending facilities is deeply irresponsible and foolish. If Treasury tries to make unused funds unavailable to your administration and the Fed going forward, it is vital that your administration quickly reverse any unlawful action by the Trump Administration while utilizing and deploying whatever funds remain available to minimize job losses and stimulate the economy.
On top of the physical and mental tolls of this crisis, it is neither fair nor accurate for millions of people to be subject to years of diminished credit and employment opportunities due to negative information being reported on their consumer credit reports. Likewise, consumers with growing amounts of medical and other debt are unfairly facing the additional stress of harassing calls from debt collectors and are seeing their future credit prospects evaporating. There are several actions that should be taken to help consumers struggling during this pandemic:
- Fire Director Kathy Kraninger.
- Under new leadership, direct the CFPB to aggressively protect consumers by enforcing the law, including protections provided under the CARES Act, as well as other consumer financial protection laws, such as the prohibition on unfair, deceptive, or abusive acts or practices (UDAAP).
- In conjunction with the prudential regulators, the CFPB should issue strong guidance to the financial institutions to ensure they are doing all they can to provide appropriate forbearance and loan modifications for affected borrowers. CFPB should also rescind prior actions to relax enforcement of time limits for consumer reporting agencies or furnishers to investigate consumer report disputes.
- The CFPB should immediately begin work to replace the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule with a rule that protects consumers from predatory lenders.
- The new director should restore the roles and responsibilities of the Office of Fair Lending and Equal Opportunity.
- The CFPB should rescind a recent rule that would allow debt collectors to harass consumers over email or text, and instead bolster consumer protections against abusive debt collection practices.
- Issue a Presidential executive order directing the Treasury and other agencies to immediately suspend the collection of debts owed by consumers to the federal government until after the pandemic ends.
The pandemic has compounded what was already a crippling student debt crisis for millions of borrowers. President Biden should issue an executive order to promptly forgive up to $50,000 of debt for each federal student loan borrower and pause all student loan payments and interest accrual until the economy can recover. As Chairwoman of the House Committee on Financial Services, I will work with your Administration to secure similar relief for private student loan borrowers as well.
Restore America’s Leadership Role in International Development
As the global scale of the health and economic impact of the COVID-19 pandemic became apparent, our Committee took concrete steps to demonstrate support for global economic cooperation by providing early and expedited approval of substantial new contributions to the international financial institutions. We included in the CARES Act authorizations for the U.S. to participate in, and contribute to, the 19th replenishment of the World Bank’s International Development Association and the fifteenth replenishment of the African Development Fund. We authorized U.S. support for general capital increases for the African Development Bank and the International Finance Corporation (IFC)—the latter authorization was linked to an agreement with the World Bank to implement a critical package of reforms in the areas of human rights, transparency, public subsidies, and for-profit education. We also authorized a doubling of the U.S. commitment to the IMF’s emergency backstop facility, the New Arrangements to Borrow, an action that was praised by the IMF Managing Director as a powerful message of U.S. leadership just as the World Bank and IMF were announcing efforts to provide massive emergency assistance to help developing countries respond to the COVID-19 pandemic.
I believe your Administration must renew the urgency around the ambitious commitments made by the World Bank, while also balancing concerns that have been raised about the transparency and effectiveness of the Bank’s COVID response. Also, given the debt distress many developing countries were facing before the COVID crisis, there is now an even greater need for additional resources on a global scale.
- Your Administration should, within its first 100 days, support a $650 billion issuance of Special Drawing Rights at the International Monetary Fund, with no need for congressional authorization, which would provide a liquidity boost to developing and emerging economies that are facing a sudden depletion of foreign exchange reserves as they cope with the health and economic impacts of the coronavirus.
- You should encourage advanced economies to lend their new SDRs to a special purpose vehicle at the Fund to help developing countries. Moreover, your administration should work with IMF members to encourage them to agree now to a second $650 billion allocation of SDRs at the start of the next five-year “basic period,” in IMF terminology—again without congressional authorization—which begins on January 1, 2022. Such action would also signal a rejuvenation of U.S. support for internationalism, and that America is prepared and willing to lead the world in building an effective, multilateral approach to some of the world's most difficult problems.
Diversity and Inclusion
Your and Vice President-elect Harris’ election to the highest offices in our country comes at a time of crisis that is disproportionately hurting the communities of color. At the same time cities across America have witnessed the largest protests in a generation against systemic racism. People of color overwhelmingly voted for you to bring about long overdue change to the levers of power, and that includes efforts to ensure that the financial services industry and its regulators resemble the rich diversity of America.
- Immediately rescind Trump’s executive order that prohibited the use of federal funds for diversity training.
- Direct your Treasury team to put diversity and inclusion on the Financial Stability Oversight Council’s next agenda to ensure that the Council’s members, which include regulators for the entire financial system, are doing everything in their authority to accomplish our shared goal.
- Regarding the focus on diversity and inclusion, include incorporating diversity into your Administration’s planning and breaking down diversity goals into measurable objectives.
- To the greatest extent possible consider the nomination of individuals who are reflective of gender, racial, and ethnic diversity for agencies’ highest posts and their advisory positions. This Congress, we demonstrated that diversity and inclusion can be a bipartisan issue when the House passed legislation on a bipartisan basis to require diverse slates when considering filling certain federal vacancies, such as Fed bank presidents.
- Require disclosure of public companies and regulated entities of their boards’ diversity, including by approving proposals by national exchanges to change their listing standards to require such disclosure, as well as setting minimum board diversity levels.
In addition, I encourage you and your team to make full use of Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which created Offices of Minority and Women Inclusion (OMWI), at the Treasury Department and each of the independent financial regulators. Your administration, for example, should require mandatory compliance with the Joint Standards for Assessing the Diversity Policies and Practices of Regulated Entities by the Agencies, including annual reporting of diversity data by regulated entities. Further, given the exacerbated decline of Black businesses, in particular, as a result of the COVID-19 pandemic, your administration should ensure that OMWIs are monitoring and advising on any unintended consequences and harm that may be caused by agency polices to minority owned businesses and communities of color. If empowered, these offices can support our shared goal of bringing about change in the financial services industry.
Financial Stability and Consumer Protection
Since 2017, the Treasury Department has issued a series of reports focused on rolling back enhanced prudential standards -- including capital, liquidity, leverage, stress testing, and living wills -- that apply to the largest banks in the country, many of which regulators have implemented. Treasury has also recommended that regulators roll back the Volcker Rule, a critical safeguard to ensure banks don’t gamble with their customers’ deposits, as well as critical consumer safeguards, like those the CFPB finalized under former Director Richard Cordray to curb some of the harmful practices of payday lending. Trump’s Treasury has encouraged, and regulators have advanced, so-called “sandboxes” that, instead of promoting responsible innovation, create enforcement-free zones for bad actors to take advantage of.
Oversight of Wall Street and Financial Stability
I urge your leadership at the Department of the Treasury and your regulatory appointees to immediately take action to restore and enhance regulatory safeguards that put consumers, investors and taxpayers first, and ensures the financial system is better prepared for unexpected events. For example, your appointees should immediately reverse harmful rules that have eased prudential requirements for the largest banks, including the stress capital buffer, swap margin, and leverage rules. Based on the considerable research showing banks should maintain even higher levels of capital to appropriately reduce the risk of a future financial crisis, your appointees should further issue new rules to strengthen the capital regulatory framework especially for megabanks.
Your appointees should also take prompt action to strengthen the stress testing process to ensure it is a robust, periodic test that cannot be gamed by institutions, and that has meaningful consequences, including prohibiting bank capital distributions for failing to meet safety and soundness requirements or otherwise demonstrating an inability to comply with federal laws and regulations. Your Treasury Secretary must convene and coordinate with the regulators, as is provided for under Section 619 of the Dodd-Frank Act, to immediately rescind changes made under the current Administration that weakened the Volcker Rule, and initiate a new rulemaking that strengthens its implementation in a manner that will ensure transparency and compliance through extensive public reporting of bank trading activities. Regulators must also finalize long overdue rules, including strong rules on incentive-based compensation and small business lending data collection that are Dodd-Frank mandates but remain unimplemented more than a decade later. Prudential regulators must also exercise the broad powers Congress bestowed them with to hold recidivist megabanks, as well as their senior executives and board members, accountable for repeatedly breaking the law and harming consumers.
Furthermore, there are several steps the Administration can immediately take to address concerns with the fact that megabanks continue to grow larger. Your Administration and your appointees must be aggressive and use the tools at your disposal to strengthen the merger and acquisition and anti-trust review process to end the era of the government blindly rubber stamping those applications. To begin with, the Department of Justice and relevant regulators should provide a very strict review of the proposed merger of PNC Financial Services and BBVA USA to create the fifth largest U.S. bank. The Treasury Secretary, as chair of the Financial Stability Oversight Council (FSOC), should also engage with relevant regulators given the potential systemic risk issues related to such mergers.
Treasury, SEC, and the prudential regulators should take into account potential risks posed by large nonbank financial companies as well as the opaque leveraged lending market. In addition to eliminating heightened oversight of all of the nonbank financial companies previously designated by the FSOC under the Obama Administration, Trump’s FSOC recently adopted procedures that, in the words of two former Treasury Secretaries and Fed Chairs, would “make it impossible to prevent the build-up of risk in financial institutions whose failure would threaten the stability of the system as a whole.” Additionally, the last public progress report of the FSOC’s Hedge Fund Working Group outlined key data limitations that need to be addressed to better understand the risks posed by hedge funds. This work takes on new urgency considering the recent turmoil witnessed in the U.S. Treasury market and agency residential mortgage-backed securities in March 2020 as the COVID-19 pandemic initially intensified. Recent reports by the Financial Stability Board and the Federal Reserve highlighted vulnerabilities with a variety of non-bank financial institutions, including hedge funds, that contributed to market volatility. While the circumstances were different, there remain concerns about a Treasury market disruption that took place on October 15, 2014, with more to be done to strengthen transparency, monitoring, and risk management in this critical market. However, FSOC’s work on the risks posed by hedge funds and other nonbank entities appears to have halted in 2017 under Secretary Mnuchin’s leadership. Under new leadership, FSOC should immediately prioritize this work, along with eliminating the aforementioned procedures that prevent FSOC from fulfilling its purpose to promote financial stability.
Your predecessor’s hands-off approach to reining in financial stability by convening fewer FSOC meetings compared to the Obama Administration and dramatically reducing FSOC staff and Office of Financial Research (OFR) staff has undermined the ability of Treasury to adequately examine and respond to emerging threats to the economy. If given sufficient attention and resources, both FSOC and OFR can play a vital role in studying and identifying potential sources of systemic risk and mitigating those risks. For example, the OFR should be preparing economic forecasts and analyses for the FSOC to consider the risks of climate change. At a minimum, FSOC should be meeting more frequently as the pandemic imposes economic damage more significant than experienced during the Great Recession, and FSOC should discuss how to immediately reverse the litany of deregulatory actions that have left the financial system more vulnerable to a financial crisis.
Promoting financial stability is a crucial goal but the Trump Administration has ignored one of the most pressing systemic risks—climate change. Several U.S. financial regulators have stressed the importance of climate change as a financial stability threat, and earlier this year, the Commodities Futures Trading Commission (CFTC) concluded that “climate change poses a major risk to the U.S. financial system and its ability to sustain the American economy.” I urge you to immediately end Treasury’s silence on this critical issue and issue an executive order to address climate change at financial regulatory agencies to prioritize climate change as part of their oversight regulation of our nation’s financial institutions. The Treasury can also further support these efforts to engage internationally, by creating a new deputy assistant secretary position focused on international climate finance within the Office of International Affairs. Additionally, the Administration should not give preferential treatment to the oil and gas sector through the exercise of emergency lending authorities as the outgoing Energy Secretary encouraged. New leadership at the OCC should also promptly rescind a proposed rule to try to force banks to serve oil and gas companies even if doing so would enhance risks to the bank and to the financial system.
One sector in the financial services industry that is particularly exposed to climate risk is insurance. As climate disasters grow more frequent and intense, the insurance industry's losses from hurricanes, wildfires, and other climate events are also growing. Treasury must dedicate resources toward evaluating this threat, including properly funding and staffing the Federal Insurance Office (FIO). I expect that the FIO under your leadership will not only prioritize climate change, but long ignored concerns like auto insurance discrimination and more recent concerns like pandemic risk. My Committee has examined auto insurance discrimination and thinks the federal government can play a prominent role by providing national level insurance data. In addition, when the COVID-19 pandemic hit businesses across the country, it became painfully clear how little national level data is available on basic information like the number of small businesses that have business interruption coverage, and how much is being paid out in pandemic-related claims for business interruption, event cancellation, workers compensation, and liability policies. Furthermore, FIO should again play a vital role in promoting financial stability by informing the decisions of the Treasury, the FSOC, and Congress.
Furthermore, returning the CFPB to its intended role as the premier Federal watchdog for all consumers must commence on day one, beginning with the removal of the current Director and installing a leader who will fulfill the CFPB’s statutory mission to protect consumers. We need new leadership at the CFPB who will reverse the harmful administrative changes made by President Trump’s appointees, as detailed in my legislation, H.R. 1500, the Consumers First Act. We need a CFPB that will enforce the law and rescind enforcement-free zones that have been established by the current Administration. We need CFPB leadership that will quickly reverse harmful rules and replace them with a much stronger set of consumer safeguards relating to fair lending, payday lending, installment lending, credit reporting, debt collection, student lending, forced arbitration clauses, overdraft protection, among other consumer issues detailed in the appendix. Financial regulators should also curb predatory deposit advance and similar products that are often analogous to harmful payday loan products.
Deregulation under the guise of innovation is a bad policy that hurts consumers and must be rejected. In addition to rolling back rulemakings on the so-called “true lender” and “valid-when-made” doctrines, your prudential regulators should impose a moratorium on approving any deposit insurance application for an Industrial Loan Company (ILC) until the loophole that allows for a lending institution to be exempt from consolidated supervision and other requirements of the Bank Holding Company Act is addressed. Your appointed officials at the Office of the Comptroller of the Currency (OCC) must also not assume, as their predecessors have, that a law Congress passed over 150 years ago somehow gives them authority to provide a national bank charter to non-bank fintech or payment companies. I look forward to working with your Administration to advance responsible innovations that actually help people, such as FedAccounts and similar proposals that will help bank the unbanked.
Unfortunately, discriminatory lending has been and continues to be pervasive in our financial system, robbing millions of Americans of an equal chance at pursuing their dreams of owning a home or starting a small business. As such, I urge your team at the Department of Justice, CFPB, and prudential regulators to prioritize fair lending enforcement. The Department of the Treasury should also play a role to encourage and help coordinate these efforts. In addition, the CFPB needs to implement strong data collection requirements to better identify and shut down discriminatory practices, including by collecting small business data as required by Section 1071 of the Dodd-Frank Act, and by expanding the types mortgage data required by the Home Mortgage Disclosure Act (HMDA).
The OCC under this Administration’s leadership has also badly damaged the implementation of the Community Reinvestment Act (CRA), a critical civil rights law. Specifically, OCC finalized a harmful rule that undermines the purpose of CRA and will allow modern-day redlining to continue unchecked. In addition to rescinding this harmful rule, your prudential regulator appointees should work on a new plan to strengthen CRA’s implementation to ensure we can finally put an end to modern-day redlining.
Trump’s Securities and Exchange Commission (SEC or Commission) has taken several actions that have eroded shareholder rights, established regulatory barriers to shareholder engagement, increased issuer involvement in the proxy voting advice process and stripped away fundamental investor protections, including safeguards around private markets, where investors have few protections. Additionally, for the first time in years, SEC enforcement actions decreased during the Commission’s 2020 fiscal year. While the pandemic may be partially to blame for the decrease, the SEC’s relaxed approach to enforcement resulted in the Commission issuing no-action relief that temporarily exempts financial firms from enforcement action for non-compliance with the Customer Protection Rule, putting retail customers’ funds and securities at risk. It is Wall Street, not main street, who benefits from this decreased oversight and lax enforcement. I know that your team will again put investors first and prioritize holding all bad actors accountable by rescinding these SEC actions and strengthening enforcement.
The Administration should also take steps to rein in private equity, hedge funds, and other investment funds that engage in predatory investment practices. As American companies and workers find themselves dealing with increasing debt, and as the rate of unemployment rises, some investment funds are swooping in to take advantage of, and exacerbate, this misfortune. More specifically, certain private equity firms are siphoning profits and assets from their portfolio companies and, then, charging exorbitant management fees and forcing debt-financed dividend payments. This leaves the company saddled with so much debt that it collapses, leaving American workers jobless. Your appointed officials should immediately work to:
- Establish maximum debt limits and initial and ongoing debt-to-equity ratio requirements for acquired portfolio companies;
- Prohibit dividend recapitalizations or other investment payback methods for, at least, the first two years;
- Create standardized investment performance metrics; and,
- Ensure that private equity firms are forced to take responsibility for the targeted company’s worker pensions.
The Administration should also roll back efforts to provide retail customers with more access to private equity, including the SEC’s final rule expanding the definition of accredited investors. Additionally, over the past few years, hedge funds have even preyed upon Puerto Rico’s debt crisis by purchasing low-priced Puerto Rico debt in hopes of forcing the territory to have to pay back the debt at face value. Your Administration should explore options to protect the people of Puerto Rico from the predatory actions of hedge funds looking to exploit the island's debt situation. Relatedly, your agencies should prioritize overdue reforms leveraged hedge funds have opposed, and that FSOC was pursuing last in 2016, to better identify and mitigate systemic risks they pose.
Although these practices have been happening long before COVID-19, efforts by your appointed officials at the SEC to put an end to them will be vital to the nation’s post pandemic recovery.
Promoting Affordable Housing
Considering the ongoing COVID-19 pandemic, the primary goal of Treasury, HUD, and FHFA regarding the housing finance system should be focused on the pandemic response, not longer-term housing finance reform efforts. Housing finance reform is needed but I do not believe that during a pandemic and national recession is an appropriate time to rush such fundamental changes to our housing finance system, and I am very concerned that FHFA Director Calabria is taking steps to release the Enterprises from conservatorship before the end of his tenure. It is critical that you take whatever steps necessary to halt Director Calabria’s plans to fast track an end to conservatorship as soon as possible, including firing Director Calabria, and rolling back the capital rule for the GSEs. Our top priorities when it comes to housing finance should be to support housing market stability and ensure that homeowners and renters are getting the support that they need during this crisis, as well as to promote affordable housing in the recovery.
It is also critical that you take steps to preserve the “GSE Patch” for the duration of the pandemic and re-propose a replacement for the GSE Patch when the housing market has stabilized. Following the aftermath of the 2008 financial crisis and the wave of foreclosures that harmed the country, but in particular communities of color, Congress passed the Dodd-Frank Act to, among other things, reform the housing finance system. Since then, mortgages have been characterized by stronger underwriting requirements without the kind of predatory features that led to so many post-2008 foreclosures. Those reforms, including the ability-to-repay (ATR) and qualified mortgage (QM) requirements, have helped to ensure consumers are better protected in the mortgage market. Yet, the CFPB has moved forward with rulemakings that would make major changes to these critical mortgage protections. Apart from ensuring that the current “GSE Patch” is extended under the CFPB’s ATR/QM rule, your incoming CFPB team should immediately halt further consideration of the current proposal until the agency has identified a metric to replace or supplement debt-to-income that satisfactorily measures an individual borrower’s ability to repay a mortgage.
Even before the coronavirus pandemic hit, over half a million people in the U.S. were estimated to be experiencing homelessness, including more than 50,000 families with children. However, despite these troubling statistics, HUD and the U.S. Interagency on Homelessness (USICH) under the Trump administration have moved to enact rules and policies that reject evidence-based practices, such as Housing First, that would lead to more people experiencing homelessness and discrimination when seeking emergency shelter. In a country as wealthy as the United States, it is simply unconscionable that so many of our neighbors—who are disproportionately people of color and LGBTQ+ individuals—are forced to sleep on the streets, in cars, or in other places not fit for human habitation. Too often, instead of being connected to the services they need, people experiencing homelessness are criminalized by some communities merely for the hardship they're experiencing, leading many to interact with the justice system and cycle in and out of incarceration. The leadership of HUD and USICH is integral to the nationwide effort to end homelessness in America but has been greatly undermined by the actions of the Trump administration. I urge your incoming housing team to restore the credibility of HUD and USICH, and the United States, by removing the current USICH Director, Robert Marbut, rescinding harmful policies and returning to evidence-based practices that have been proven effective in reducing homelessness.
In addition, I urge your team to work with me and my committee to address chronic homelessness and the issues this population confronts. We have seen in the past that when we put significant housing resources together with social services, including health services, we have been able to greatly reduce homelessness among people experiencing chronic homelessness. For example, the HUD-VASH program has proven the power of pairing housing with social service leading to a 50 percent decrease among veterans experiencing chronic homelessness. Your administration needs to be bold in its approach and think outside the box to finally end homelessness. For example, your team could immediately expand how Medicaid services can be partnered with housing supports to better serve people experiencing chronic homelessness. We will never resolve our growing homelessness crisis with policing and prison cells rather than homes that provide community supports.
Your Administration should also look to significantly expand the use of Title V to convert unused federal lands and properties into affordable housing for people experiencing homelessness. However, such an approach must be met with thought and care, with an eye toward historic mistakes that have greatly contributed to the very problem we are trying to solve. The conversion of unused federal lands and properties for the creation of housing must be integrated into community fabrics, must not be concentrated in low-income communities and communities of color, and must ensure people can access supportive services.
Our country continues to face an affordable housing crisis that has caused millions of families to be at risk of or experience homelessness. Prior to the coronavirus pandemic, nearly 11 million renters in the U.S. were severely cost burdened, meaning they were spending over 50 percent of their income on rent. While unable to serve all households in need due to insufficient funding, HUD and USDA rental housing programs are an essential part of our country’s affordable housing infrastructure that ensures millions of families have a safe, decent, and affordable place to call home. Rather than bolstering these programs, the Trump administration repeatedly sought to cut or eliminate their funding and to impose harmful policies that would undermine the housing stability of HUD- and USDA-assisted families, such as dramatically increasing rents or making families of mixed-immigration status ineligible to live in federally-assisted housing. HUD should immediately reject and rescind these proposed policies, and work towards bolstering our nation's affordable housing infrastructure. To that end the House passed H.R. 5187 as part of the larger infrastructure package this year, which would provide more than $100 billion to support affordable housing throughout the country. While President Trump issued an executive order to reduce barriers to create more affordable housing, the order fails to acknowledge the effect of residential segregation and housing discrimination on the affordable housing market, while also disparaging important policy tools, such as environmental protections, labor requirements, and rent control. I urge you to revoke this executive order and replace with it with one that recognizes the need to preserve and increase the supply of affordable housing, while also acknowledging the need to address historic patterns of racial segregation of affordable housing in communities. Any new affordable housing must be integrated into the fabric of every communities across the country. Your incoming housing team should work closely with Congress so that we can make these investments, preserve and expand the supply of rental housing for low-income families and implement policies that promote housing stability for everyone.
At a time when the nation faces a racial reckoning on historic injustices, Trump’s HUD has continued to take steps to administratively weaken federal fair housing protections. Fair housing complaints reached an all-time high of more than 31,000 in 2018 according to longitudinal data from the National Fair Housing Alliance, with housing-related hate crimes increasing 15 percent. Bolstering the Fair Housing Act and uplifting fair housing principles throughout the country is central to the goal of racial equity and should be a top priority in your administration. Today, HUD's Office of Fair Housing and Equal Opportunity (FHEO) is staffed at its lowest levels since 1981. On day one, your administration should fully staff FHEO to bolster Fair Housing Act enforcement, improve fair housing complaint response times to meet statutory requirements, reverse the Trump administration's harmful regulations such as Affirmatively Furthering Fair Housing, Disparate Impact, and the Equal Access Rule, and work with advocates to strengthen pre-existing fair housing regulations and guidance. It is equally imperative that your team ensures that all HUD staff receive fair housing training to understand the nation's deeply and historically exclusionary housing system, HUD's role in that history, as well as their duty to uphold the Fair Housing Act and principles of equity as HUD employees.
I know you are a committed internationalist who understands that multilateral cooperation is essential to every major issue the world now faces—from climate change to the fight against terrorism to China’s increasingly confrontational foreign policy. Still, I do want to stress the importance of a strong U.S. leadership position at the international financial institutions, especially the International Monetary Fund (IMF) and the World Bank, both of which have underpinned global cooperation and played a critical role in the international financial architecture for over 75 years now. U.S. leadership at these institutions is not only central to their legitimacy, but they also help advance our own foreign policy and national security interests, as well as our values, including respect for human rights and democratic institutions. I urge you and your incoming team at Treasury to revive U.S. support for the World Bank’s climate finance and food security agendas in particular, which are both leading pillars of multilateral cooperation today.
With respect to international economic policy, I would urge you to support a new approach to U.S. trade agreements, one that doesn’t elevate special and corporate interests over the broader interests of the middle class, one that doesn’t prioritize, for example, the extension of pharmaceutical patents beyond our own domestic standards, and one that doesn’t insist upon the complete and total mobility of cross-border capital flows that prohibit a country’s ability to manage such flows—especially rapid, destabilizing short-term flows—in order the protect the stability of their financial systems, and the global financial system as well.
Your inauguration to the highest office in the land could not come soon enough. I look forward to working with your team to ensure that we build an economy that is fair, equitable and prosperous for all.
cc: The Honorable Patrick McHenry, Ranking Member
 “Waters Urges Fed to Address Concerns Regarding COVID-19 Programs Needed to Support Small Businesses and the Economy,” House Financial Services Committee, (April 16, 2020), https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=406504.
 The Congressional Oversight Commission has examined the underutilization of the MSLP and MLF, and several Commission members have noted that the terms of the facilities could be made much more generous, especially in contrast with the Fed’s corporate credit facilities. Congressional Oversight Commission, The Fourth Report of the Congressional Oversight Commission (Aug. 21, 2020), and The Fifth Report of the Congressional Oversight Commission (Oct. 15, 2020).
 Yahoo! Finance, Fed will return unused funds after Treasury orders central bank to wind down emergency loan programs (Nov. 20, 2020)
 Main Street Alliance, NEW Poll: Nearly Half of Black-Owned Small Businesses Closed Permanently Or Will Soon Shutter Due to Insufficient Federal COVID Relief (Oct. 16, 2020)
 Upjohn Institute for Employment Research, An updated proposal for timely, responsive federal aid to state and local governments during the pandemic recession (May 8, 2020).
 For example, see Bloomberg, Mnuchin plans to put $455 billion out of Yellen’s easy reach, (November 24, 2020)
 Section 432(a) of the Higher Education Act of 1965 (20 U.S.C. 1082(a)) provides the Department of Education with legal authority to broadly cancel student debt, stating that the Secretary of Education has the authority to modify a loan, and “... compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.”
 Letter from World Bank President Malpass to Treasury Secretary Mnuchin, dated March 20, 2020 at https://financialservices.house.gov/uploadedfiles/malpass_ltr_mnuchin_3202020.pdf
 See https://www.whitehouse.gov/presidential-actions/executive-order-combating-race-sex-stereotyping/.
 See U.S. Department of The Treasury, Regulatory Reform (last accessed Nov. 17, 2020)
 Gregg Gelzinis, Andy Green, and Marc Jarsulic, Resisting Financial Deregulation (Dec. 4, 2017), Center for American Progress.
 For example, see Remarks of Former Federal Reserve Governor Daniel K. Tarullo, Departing Thoughts (April 4, 2017); Simon Firestone, Amy Lorenc and Ben Ranish, An Empirical Economic Assessment of the Costs and Benefits of Bank Capital in the U.S. (2017), Federal Reserve Board; International Monetary Fund, Benefits and costs of bank capital (2016); Federal Reserve Bank of Minneapolis, The Minneapolis Plan to End Too Big to Fail (Dec. 2017); and James Barth and Stephen Matteo Miller, Benefits and Costs of a Higher Bank Leverage Ratio (2017), Mercatus Working Paper, George Mason University.
 Gregg Gelzinis, Hollowing Out the Volcker Rule (Oct. 3, 2018), Center for American Progress
 See House Committee on Financial Services, In Advance of Wells Fargo Hearings, Waters and Green Release Investigative Report Exposing Failures of Megabank’s Management, Board, and Regulators (Mar. 4, 2020).
 Jeremy Kress, Big banks are growing due to coronavirus — that's an ominous sign (May 1, 2020), The Hill
 For example see, House Committee on Financial Services hearing entitled, The Next Megabank? Examining the Proposed Merger of SunTrust and BB&T (Jul. 24, 2019); Graham Steele, Amanda Fischer, and Sandeep Vaheesan, Letter to the Department of Justice re: Antitrust Division Banking Guidelines Review (Oct. 16, 2020); and FTC Commissioner Rohit Chopra and Professor Jeremy Kress, Comment Letter on the U.S. Department of Justice’s Bank Merger Competitive Review Guidelines (Oct. 16, 2020)
 See Letter from Timothy F. Geithner, Jacob J. Lew, Ben S. Bernanke, and Janet L. Yellen to Steven L. Mnuchin and Jerome H. Powell, (May 13, 2019).
 Remarks by former Treasury Deputy Assistant Secretary Jonah Crane at a Meeting of the Financial Stability Oversight Council (Nov. 16, 2016). Also see FSOC, Financial Stability Oversight Council Releases Statement on Review of Asset Management Products and Activities (Apr. 18, 2016).
 FSB, Holistic Review of the March Market Turmoil (Nov 17, 2020); and Federal Reserve, Financial Stability Report (Nov. 9, 2020)
 U.S. Department of the Treasury, Federal Reserve Board, Federal Reserve Bank of New York, SEC, and CFTC, Joint Staff Report: The U.S. Treasury Market on October 15, 2014 (Jul. 13, 2015).
 For example, see Graham Steele, A Regulatory Green Light: How Dodd-Frank Can Address Wall Street’s Role in the Climate Crisis (Jan 2020), Select Committee on the Climate Crisis Majority Staff Report, Solving the Climate Crisis – The Congressional Action Plan for a Clean Energy Economy and a Healthy, Resilient, and Just America (June 2020)
 Committee Press Release, Waters Sends Letter to Energy Secretary Condemning Redlining Comments, Pushing Back Against Preferential Treatment for Oil and Gas Sector (Jun. 23, 2020)
 OCC, Proposed Rule Would Ensure Fair Access to Bank Services, Capital, and Credit (Nov. 20, 2020)
 NCLC, Civil Rights and Consumer Groups Condemn “Emergency” Regulatory Guidance that Allows Banks to Make Payday Loans (Mar. 26, 2020)
 See House Committee on Financial Services virtual hearing entitled, License to Bank: Examining the Legal Framework Governing Who Can Lend and Process Payments in the Fintech Age (Sep. 29, 2020).
 See Aaron Glantz and Emmanuel Martinez, Kept Out: For people of color, banks are shutting the door to homeownership (Feb. 15, 2018).
 Remarks by former Treasury Deputy Assistant Secretary Jonah Crane at a Meeting of the Financial Stability Oversight Council (Nov. 16, 2016). Also see FSOC, Financial Stability Oversight Council Releases Statement on Review of Asset Management Products and Activities (Apr. 18, 2016).