November Newsletter
Washington Policy Update
Allison Karakis, Director of Legislative Affairs
The highly-anticipated November elections are finally over with Joe Biden becoming the president-elect. The House remains in Democratic control by a slim margin, while a few seats remain undetermined. In typical 2020 fashion, control of the Senate is still unknown and will be decided by two runoff elections in Georgia. This unique circumstance occurred due to a resignation in 2019 that setup a special election, and a state law that requires candidates to receive over 50% of the vote to avoid a runoff. Republicans are widely expected to win at least one of the seats and maintain control of the Senate. Both races are still considered competitive, and the unprecedented situation has political parties and groups from across the country focusing their resources in Georgia. It is estimated that spending will range from a few hundred million to a billion dollars.
Regardless of the outcomes in Georgia, the next two years will be marked by extremely thin margins in both the House and Senate which will have a big impact on the legislative agenda. President-elect Biden will need to appeal to the centrists in both parties but lean heavily on executive orders and regulatory changes to successfully implement his agenda.
There is still work to do before the new Congress takes office in January. A government funding bill must be passed by Dec. 11 to avoid a shutdown, meanwhile many of the COVID-19 response programs continue to expire. Stimulus talks appear to have stalled, but pressure to reach an agreement will increase as rising coronavirus numbers continue to impact renters, homeowners and many industries.
President-elect Joe Biden Announces Agency Review Teams and Some Cabinet Nominees

President-elect Joe Biden’s transition team is in full swing. He has announced agency review teams that are responsible for understanding the operations of each agency and ensuring a smooth transfer of power. Team leads include:
  • Department of Housing and Urban Development to also review the Federal Housing Finance Agency (FHFA) – Erika Poethig, Urban Institute
  • Department of Treasury – Don Graves, KeyBank
  • Federal Reserve, Banking and Securities Regulators – Gary Gensler, Massachusetts Institute of Technology
Although most cabinet nominees will be released in the coming week, a few have been announced including former Federal Reserve Chair Janet Yellen for Secretary of the Treasury.

FDIC to Create Mission-Driven Bank Fund
The Federal Deposit Insurance Corporation (FDIC) is seeking experienced financial advisors to support the development of a new Mission-Driven Bank Fund. The fund will provide a vehicle for private sector and philanthropic investment in FDIC-insured Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs). Mission-driven banks refers to MDIs and CDFIs which are banks, savings banks and savings associations that commit a larger portion of their portfolios to minority, lower-income and rural communities compared to mainstream banks.
FDIC expects the Mission-Driven Bank Fund to help MDIs and CDFIs:
  • Raise the capital necessary to serve their communities more effectively
  • Weather the effects of economic downturns and recover more quickly
  • Attract technical expertise to grow their operations and expand their services
  • Acquire, deploy and maintain technology solutions
  • Build capacity and scale to achieve cost-efficiencies
Federal Bank Regulators to Limit Impact of COVID-19 Related Bank Growth
The federal bank regulatory agencies announced an interim final rule that provides temporary relief for community banking organizations related to certain regulations and reporting requirements as a result of their growth in size from the coronavirus response. Due to participating in federal coronavirus response programs – such as the Paycheck Protection Program – and other lending that supported the U.S. economy, many community banking organizations have experienced rapid and unexpected increases in size, which are generally expected to be temporary.
Community banking organizations with less than $10 billion in total assets as of Dec. 31, 2019, that have crossed a relevant threshold generally will have until 2022 to either reduce their size or prepare for new regulatory and reporting standards. This change is important as community banking organizations often have fewer resources available to prepare and comply with previously unanticipated regulatory requirements, especially during a time of economic disruption.
FHFA Issues Final Capital Rule for Fannie Mae, Freddie Mac
FHFA adopted a final rule that establishes a new regulatory capital framework for Fannie Mae and Freddie Mac. This is another step towards FHFA’s goal of releasing them from conservatorship.
The rule requires that Fannie Mae and Freddie Mac must maintain tier 1 capital in excess of 4% to avoid restrictions on capital distributions and discretionary bonuses. As of June 30, 2020, the organizations together would have been required under the final rule to maintain $207 billion in common equity tier 1 (CET1) capital, $265 billion in tier 1 capital and $283 billion in adjusted total capital to avoid limits on capital distributions and discretionary bonus payments.
Treasury Requests Federal Reserve Return Unused CARES Act Funds
Treasury Secretary Steven Mnuchin sent a letter to Chairman of the Federal Reserve Board of Governors Jerome Powell requesting the return of unused CARES Act funds from the Primary Market Corporate Credit Facility (PMCCF), the Secondary Market Corporate Credit Facility (SMCCF), the Municipal Liquidity Facility (MLF), the Main Street Lending Program (MSLP) and the Term Asset-Backed Securities Loan Facility (TALF).
The letter read in part, “With respect to the facilities that used CARES Act funding (PMCCF, SMCCF, MLF, MSLP, and TALF), I was personally involved in drafting the relevant part of the legislation and believe the Congressional intent as outlined in Section 4029 was to have the authority to originate new loans or purchase new assets (either directly or indirectly) expire on December 31, 2020. As such, I am requesting that the Federal Reserve return the unused funds to the Treasury. This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds.”