Congress: Action avoids shutdown

Congress put together a compromise measure Wednesday that should avoid a government shutdown at the end of the week.

The continuing resolution that passed both chambers of Congress Wednesday would keep the government funded at current levels through Dec. 9 and includes funding to fight the spread of the Zika virus, provides aid to flood-ravaged areas in Maryland and Louisiana, and delivers funds for the U.S. Department of Veterans Affairs and military construction. Senate Democrats had voted down the same measure Tuesday in protest over the exclusion of funding for the Flint water crisis, which House leaders then added to a water projects bill as a satisfactory alternative.

Leaders on both sides of the Senate cast Wednesday’s vote as a necessary compromise to buy lawmakers enough time to negotiate an omnibus appropriations bill to keep the government funded this year.

Although all 12 bills normally used to fund the government have been cleared by the House and Senate Appropriations committees, partisan fights over gun control measures, funding to fight the spread of the Zika virus and protections for LGBT contractors have derailed efforts in both chambers. Several of the bills have passed one or the other chamber, but none have been sent to President Barack Obama’s desk.

Earlier attempts to pass legislation in the Senate funding anti-Zika efforts have been blocked by Democrats who objected to the levels of funding — previous efforts have been either completely or partially offset by cuts elsewhere — or riders reducing funding for Planned Parenthood’s affiliate in Puerto Rico.

Wednesday’s vote also put reauthorization of major programs like the EB-5 visa program back on track.

The last time a series of separate spending bills passed on time was 1996.

Congress: one possibility is a short-term CR

After three weeks of negotiations to produce a bipartisan continuing resolution to keep the government running beyond the end of this month and into December, Senate Majority Leader Mitch McConnell, R-Ky., last week took action by offering legislation to fund the government, largely at current levels, through Dec. 9. The bill is generally consistent with Democratic demands for a “clean” CR without policy riders. The majority leader’s bill includes bipartisan provisions that have long been part of CR discussions, such as the $1.1 billion in funding for Zika virus eradication efforts, $37 million for opioid abuse assistance, and $500 million in emergency assistance for communities affected by flooding and other natural disasters. Democrats expressed immediate opposition to the Republican bill, claiming that several issues were unresolved. In particular, Leader McConnell’s bill does not include emergency funding for communities facing drinking water contamination issues, such as the lead pollution in the drinking water in Flint, Michigan, a provision Senate Democrats have actively pursued since the summer.

Nevertheless, McConnell’s bill does not yet appear to have the 60 votes of support necessary to advance on Tuesday, when a procedural vote on the bill is scheduled to occur. Beyond the Democratic opposition, Republican senators are not united behind the bill. Senator Lindsey Graham, R-S.C., told reporters he would vote “no” because the bill does not contain a rider, supported by Democrats, to fix the quorum provisions of the Export-Import Bank so that it may approve loans even in the absence of a board quorum. Other Republicans, led by Sen. Ted Cruz, R-Texas, have been pushing to include in the CR a provision to prevent the transfer of internet governance from the Commerce Department’s National Telecommunications and Information Administration to the ICANN, an international nonprofit organization. That provision is not included in Leader McConnell’s bill.

So, one possibility is a short-term CR into the first week of October if the parties are close to a deal by the end of the week but lack the time to get it fully enacted by midnight on Friday.

In Congress: Funding Government.

The Senate this week to act first on a continuing resolution (“CR”) to keep the government running beyond the end of this month, when the current fiscal year ends.

But the path forward in the House of Representatives is still not resolved.

Senate leaders are working to draft a CR that will keep the government funded into fiscal year 2017, which begins on Oct. 1. Press reports indicate Senate Majority Leader Mitch McConnell, R-Ky., and Minority Leader Harry Reid, D-Nev., have engaged in discussions on the details of a short-term CR that would run through Dec. 9 and would include supplemental funding to combat the Zika virus outbreak in the United States. The December deadline would allow lawmakers to adjourn and hit the campaign trail, while also giving congressional leaders and administration officials’ time to negotiate a larger spending deal for the remainder of FY 2017 following the election.

The House Republicans remain divided on a strategy for the CR. A conference meeting was held last Friday, but members remain split on setting the scope and length of a CR. While many members support a short-term CR, the more conservative wing of the conference is pushing for a six-month extension that would keep the government running at current levels into the next session of Congress. A six-month CR is unacceptable to the president and Democrats, as well as to some Republicans, so it is unlikely to be able to pass the Senate in any event. In addition, several members want to attach controversial policy riders, including a ban on more Syrian refugees. The House may not have much choice in the matter if the Senate acts first on a short-term CR and leaves town.

Energy issues dominate the hearing schedule in Congress this week.

A House and Senate conference committee on comprehensive energy legislation is scheduled to meet formally for the first time on Thursday. Members will be working out the differences between their two versions of legislation that could be the first update to federal energy policy since 2007. The Senate passed its bill with overwhelming bipartisan support in April, while the House narrowly passed its own version of energy modernization legislation on a party-line vote, meaning there will be significant issues for the conference committee to work through this fall.

The House Energy and Commerce Subcommittee on Energy and Power is scheduled to meet on Wednesday to review the Federal Power Act, particularly the Federal Energy Regulatory Commission and electricity markets over the past 20 years.

There are two House Foreign Affairs hearings scheduled on Thursday afternoon that are focused on energy markets. The Foreign Affairs Subcommittee on the Middle East and North Africa will hold a joint hearing with the Energy Subcommittee of the House Committee on Science, Space and Technology to discuss energy resources in the Eastern Mediterranean. The Foreign Affairs Subcommittee on Asia and the Pacific is also scheduled to meet to discuss opportunities to advance U.S. energy policy in Asia, particularly the region’s dependence on liquefied natural gas from the United States and the economic and security interests involved.

On Friday morning, the House Oversight and Government Reform Subcommittee on Transportation and Public Assets will hold an oversight hearing on the Federal Emergency Management Agency’s response to the devastating flooding that occurred in Louisiana in August. The agency has approved more than $100 million in disaster relief grants for flood victims, but Congress may be asked to provide additional emergency funds to assist with the recovery effort.

While not Energy related per se., on Thursday, the House Financial Services Subcommittee on Oversight and Investigations will meet to discuss the Obama administration’s $400 million cash payment of U.S. taxpayer funds to Iran that has been linked to the release of several U.S. hostages. The payout has come under intense scrutiny, particularly from congressional Republicans. The hearing will focus on the $400 million cash payment and the implications on U.S. efforts to inhibit terrorism financing.

The Iran payout is also the subject of a hearing in the House Judiciary Committee on Wednesday. The Judiciary Subcommittee on the Constitution and Civil Justice is scheduled to hold an oversight hearing on the lack of transparency on money from the Judgment Fund, a permanent Treasury Department account used to pay judgments and claims against the United States.

House Panel Advances $579B Defense Funding Bill For 2016

A House panel on Tuesday advanced its nearly $579 billion Pentagon spending bill for 2016, leaving the legislation effectively unchanged from a draft version, including a contentious clause allowing the use of billions of dollars in wartime funding to circumvent sequestration-level spending caps.

The House Appropriations Committee agreed by voice vote to send the fiscal year 2016 Defense Appropriations Act on to the full House, after a two-hour markup hearing that ultimately saw it adopt only two amendments.

The adopted amendments included one with minor technical changes put forward by Defense Subcommittee Chairman Rodney Frelinghuysen, R-N.J., and another put forward by Rep. Barbara Lee, D-Calif., to offer a “sense of Congress” that it has the constitutional duty to debate and then determine whether to authorize any use of U.S. military force against the Islamic State group. That amendment passed in a 29-22 vote.

Overall, the bill provides $578.6 billion in discretionary funding for the U.S. Department of Defense, $24.4 billion up on FY2015 and about $800 million up on the presidential budget request. About $88.4 billion of this would come from Overseas Contingency Operations, or OCO, funding — referred to by the committee as Global War on Terrorism funding — which is supposed to be used to fund war spending.

Of that overall funding, $116.7 billion would go to procurement, $12.5 billion more than in 2015, with planned acquisitions including two DDG-51 guided missile destroyers and three Littoral Combat Ships for the U.S. Navy, 65 F-35 Lightning II jet fighters across the services — among other jet acquisitions — and a number of large aircraft, including 16 P-8A Poseidons and 12 KC-46 tankers.

Pentagon research and development efforts would receive $67.9 billion, a $4 billion increase, much of which is intended to support aircraft development, including the continued development of the F-35 and the RQ-4 Triton Unmanned Aerial Vehicle, a new U.S. Air Force bomber and the next-generation Joint Surveillance Target Attack Radar System command and control plane.

The bill would also provide a 2.3 percent pay raise for troops, higher than the 1.3 percent increase suggested in the administration’s proposal, and would maintain funding for the A-10 close air support aircraft, which has been put on the chopping block by the Air Force several times in recent years, drawing strong pushback from lawmakers in both chambers, who argue that there is no adequate replacement available for the “Warthog.”

Although the bill, unlike other House appropriations bills put forward for 2016 so far, meets and even exceeds the presidential budget request, it has drawn criticism from both Democratic lawmakers and the administration, particularly for its extensive use of OCO funding — about $38 billion more than requested in the presidential budget — to get around the strict sequester budget cap.

The White House had yet to issue an official policy statement on the legislation as of Tuesday, but has previously threatened to veto the similar 2016 National Defense Authorization Act, which is used to authorize budget authority for the DOD, citing its heavy use of OCO funds, among other factors.

House Approves Bicameral 2016 Budget Deal

Thursday the US House of Representatives agreed to a $1.12 trillion bicameral 2016 budget deal that seeks to repeal the Affordable Care Act and broadly cut federal spending over the long-term, with the exception of defense spending.

House lawmakers voted 226-196 on the measure — officially, a conference report to accompany the Senate budget resolution — which was brought to the floor quickly after House and Senate negotiators announced Wednesday that they had reached a final compromise between their competing budget plans. The Senate is expected to vote on the plan on Monday.

The plan is intended to “get Washington’s fiscal house in order” through imposing necessary limits on spending while still ensuring investment in national priorities and shoring up national defense and other important programs, House Budget Committee Chairman Tom Price, R-Ga., said on the House floor Thursday. (Credit AP).

But the compromise deal, put together with limited Democratic input, was slammed by Democratic House lawmakers, who criticized its spending priorities and alleged use of “gimmicks” to help bolster defense spending, among other issues.

Under the compromise budget resolution, federal discretionary spending for fiscal year 2016 would be $1.12 trillion, closer to the proposed House budget than the Senate one, which had floated a discretionary spending level of about $1.16 trillion.

Baseline defense spending would be capped at $523 billion and nondefense spending at $493 billion, with an additional $96 billion going toward defense Overseas Contingency Operations, or OCO, funding. Overall spending, including mandatory programs and interest on outstanding debt, would be about $3.87 trillion.

Over the long-term, the compromise budget seeks to bring the federal budget back into surplus by 2024 and ensure those surpluses continue by calling for a constitutional balanced budget amendment.

This would be the result of more than $5 trillion in planned spending cuts over the next decade, across a wide variety of federal programs, although defense spending would receive a significant boost over that period.

These cuts include the repeal of the ACA in order to “start over with patient-centered reforms,” Republican budget negotiators said Wednesday, with a policy statement in the budget plan arguing the health care bill is “unaffordable, intrusive [and] overreaching.”

Planned cuts and changes to federal funding would not be limited to discretionary spending, with changes planned for mandatory spending programs such as Social Security and Medicare, although a plan to effectively privatize Medicare by using a voucher system, included in the House budget, was removed from the final bicameral plan.

Although not binding and not strictly necessary for the congressional spending process, the budget resolution is intended to be used as broad template for the appropriations bills Congress considers each year.

It also offers the congressional majority the benefits of using the budget reconciliation process, allowing the passage of certain spending-related policy measures without the opportunity of filibuster by the minority party.

The House has already started its appropriations process and began debate on Wednesday on 2016 funding bills covering military construction and the U.S. Department of Veterans Affairs, as well as energy and water development, having used its own budget plan as a guide to allow the process to move forward before lawmakers had agreed to the bicameral deal.

House Passes Two Dodd-Frank Loan Rules Bills

The U.S. House of Representatives on Tuesday passed a pair of bills designed to loosen Dodd-Frank Act, rules that had purportedly discouraged lending for manufactured homes and exempt certain insurance and other fees from the limits imposed by the “qualified mortgage” rule.

Lawmakers voted 286-140 to pass H.R. 685, the Mortgage Choice Act, and 263-162 on H.R. 650, the Preserving Access to Manufactured Housing Act, amid opposition to both bills from a number of Democratic lawmakers. The Mortgage Choice Act would roll back important Dodd-Frank protections and undermine the work of the U.S. Consumer Financial Protection Bureau by driving up the cost of mortgages, helping to “fatten the pockets of those who would gouge our constituents,” argued House Financial Services Committee ranking member Rep. Maxine Waters, D-Calif.

But Financial Services Committee Chairman Jeb Hensarling, R-Texas, said it would help cut through unintended consequences of Dodd-Frank as well as subsequent “bad and dumb” regulatory overreaches that have harmed access to credit.

“We’ve got to quit protecting consumers right out of their homes,” Hensarling said.

The Mortgage Choice Act would ament the Truth in Lending Act to exclude charges levied by a title insurance provider affiliated with a lender from the fee caps included under the CFPB’s qualified mortgage, or QM, definition, bringing them in line with the current treatment of third-party title insurers. Fees and taxes held in escrow to be passed on to the government or other third parties would also be excluded from the fee cap.

For a loan to qualify as a QM, lenders must meet certain criteria, such as keeping the loan within certain debt-to-income ratios for borrowers and capping the points and fees that are charged at 3 percent of loan principal.

In return, lenders receive “safe harbor” or “rebuttable presumption” protections, giving them defenses in legal actions brought by borrowers over certain issues with their mortgages.

Under PAMHA, the fee and interest rate thresholds under which loans for manufactured homes are considered “high cost” under the Home Ownership and Equity Protection Act would be raised, with that exemption extended to apply to homes worth up to $75,000, up from a ceiling of $50,000.

This is because the cost, and thus fees, associated with originating and servicing a low-value loan are typically higher in percentage terms than for a larger loan, meaning that under HOEPA they are wrongly considered “high-cost” loans that come with a range of drawbacks for lenders, according to the bill’s sponsors, who argue that these small-value loans are not the sort of predatory loans HOEPA is intended to protect against.

The White House has made clear it will veto both bills if they come to the president’s desk, saying in statements Monday that it believed each would “weaken key consumer protections and provisions” included in Dodd-Frank.

In addition to the two bills passed Tuesday, lawmakers also easily passed a group of six bills from the House Financial Services Committee on Monday, including several other changes to lending law.

The legislation passed included the Capital Access for Small Community Financial Institutions Act, which would allow private credit unions to become part of the Federal Home Loan Bank System, giving them broader access to low-cost credit for lending, and the Helping Expand Lending Practices in Rural Communities Act.

Under that bill, individuals would be able to apply for a rural area designation if they are outside the official U.S. Department of Agriculture rural area definitions now used by the CFPB to possibly take advantage of the looser QM standards that apply for rural loans.

Lawmakers also agreed to the passage of the SAFE Act Confidentiality and Privilege Enhancement Act, which would enable public officials overseeing the financial services industry to share information submitted to the Nationwide Mortgage Licensing System and Registry — which keeps track of certain financial services licensing and registration information — without losing privilege or confidentiality protections.