With just days remaining until August recess, Congressional Democrats had largely given up on passing any major legislation. So, the announcement of a deal between Majority Leader Chuck Schumer and Senator Joe Manchin surprised nearly everyone. The $700 billion agreement includes climate change provisions, deficit reduction and prescription drug reform and will utilize the reconciliation process to allow passage with 50 Senate votes. There are still significant hurdles before the bill can move forward including a review by the Senate parliamentarian for relevance to the budgetary process. Additionally, moderate Democratic Senator Krysten Sinema hasn’t indicated her position and Democrats will only be able to lose a few votes in the House. Some moderate democrats in the House previously prioritized an increase in the state and local income tax deduction, which was not included in the bill.
Congress did make some progress by recently passing a bipartisan bill called the Chips and Science Act. It includes $52 billion aimed at increasing domestic manufacturing of semiconductors. It is expected to be signed by President Biden in the coming days.
As Congress returns home for August recess, the upcoming elections will become their focus. Those in safe districts will spend time raising money and campaigning for more vulnerable colleagues in their party. Upon return to Washington, the House has just 11 scheduled session days before the mid-term elections making it likely that a continuing resolution will be used to keep the government funded past Sept. 30.
Thompson Testifies Before House Financial Services Committee
Federal Housing Finance Agency (FHFA) Director Sandra Thompson recently testified before the House Financial Services Committee.
In Director Thompson’s written testimony, she stated, “The FHLBanks’ core function is to provide liquidity in times of stress. This support is critical for small and community banks that often do not have access to other sources of low-cost funding. When the pandemic began, the FHLBanks helped to maintain liquidity in the market, meeting unprecedented advance demand from their member financial institutions. However, as we approach the 100th anniversary of the FHLBanks, now is a good time to re-examine their approach. We want to make sure they are positioned to continue to serve the needs of today and tomorrow, so FHFA will conduct a 90-year lookback, as well as a forward-looking analysis of the FHLBank System. We plan to engage a variety of stakeholders in the coming months, in addition to holding public listening sessions throughout the country. We want this review to be an opportunity to examine everything from the FHLBanks’ membership base, operational efficiency, and effectiveness, to more foundational questions about mission, purpose, and organization. We, of course, welcome the input of Members of Congress.”
FHFA Announces Office of Financial Technology
In July, the FHFA announced establishment of the Office of Financial Technology. This Office will serve as a centralized source of information to support FHFA in addressing emerging risks and advancing priorities related to the adoption and deployment of financial technology (fintech).
The new Office will:
- Support the FHFA in developing strategies for its regulated entities to advance housing finance fintech and innovation in a safe and sound, responsible, and equitable manner;
- Engage with market participants, industry, nonprofits, consumer groups, and academia to facilitate the sharing of best practices of housing finance fintech and innovation;
- Establish ongoing outreach through the regulated entities, promoting awareness and understanding of housing finance fintech and innovation;
- Facilitate interagency collaboration with other regulators to enable information sharing and partnership opportunities; and
- Serve as an FHFA resource for innovations, general trends, and emerging risks in housing finance fintech.
Inflation Reduction Act of 2022
The Inflation Reduction act of 2022 is a compromise between Majority Leader Chuck Schumer and Senator Joe Manchin that will utilize the reconciliation process to pass the Senate with a simple majority. The bill is expected to raise $739 billion in revenue, spend $433 billion and reduce the deficit by over $300 billion.
Provisions include:
- A 15% minimum corporate tax
- Ending the carried-interest tax break used by private equity firms to lower their tax bill
- Electric vehicle tax credits including $4,000 for a used car and $7,500 for a new vehicle
- Tax credits for homeowners to add heat pumps, rooftop solar, electric HVAC and water heaters to their homes
- Lower drug prices for consumers through government negotiations with drugmakers and a cap of $2,000 for Medicare participants on out-of-pocket expenses
- Extension of Affordable Care Act premium subsidies to 2025
Treasury and HUD Release Guide to using American Rescue Plan Funds for Affordable Housing
Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, a part of the American Rescue Plan, allocated $350 billion to state, local, and Tribal governments to support pandemic recovery. Treasury issued a Final Rule for SLFRF intended to provide broad flexibility for the use of funds, including for affordable housing with further guidance adding two additional housing provisions: (1) increasing flexibility to use SLFRF to fully finance long-term affordable housing loans; and (2) expanding presumptively eligible affordable housing uses to further maximize the availability of SLFRF funds for affordable housing.
Treasury and the Department of Housing and Urban Development jointly published a “How-To” Guide that provides examples of how these flexibilities can help facilitate affordable housing investments by combining SLFRF with existing sources of federal financing.
Michael Barr Confirmed as Vice Chair for Supervision of the Federal Reserve
In 66-28 votes, the Senate confirmed Michael Barr to a four-year term as the Vice Chair for Supervision of the Board of Governors of the Federal Reserve and as a member of the Board of Governors to complete a term ending January 31, 2032. The confirmation filled all seven Board seats for the first time since 2013.
Barr was recently the dean for public policy and a professor of law at the University of Michigan. He previously served at the Department of Treasury during the Obama administration where he played a key role in shaping the 2010 Dodd-Frank Act.
