FY24’s Bell Lap at Last

Update 765 — FY24’s Bell Lap at Last
DOJ vs Apple; Bank Merger Rules; NAR

Congress is poised to pass the six remaining appropriations bills for FY24 almost halfway through the current fiscal year. Though disagreements between Speaker Johnson and the White House endangered the package in its final stages of negotiation, Democrats have emerged from the grueling FY24 appropriations process with only minor spending cuts and policy bruises. This agreement will not come without consequence for Speaker Johnson, who will face a motion to vacate, filed earlier today, when the House returns from a two-week recess. FY25 lurks on the horizon and promises similar GOP calls for extreme policy riders and funding cuts, in a process likely to be concluded after — and colored by — the November elections. 

The week saw several other major developments. The DOJ’s Antitrust Department took action to rein in big tech by initiating a suit against Apple. FDIC made notable progress toward strengthening severely outdated bank merger guidelines in the wake of the proposed Capital One-Discover merger. And a National Association of Realtors $418 million settlement could have big ramifications for the housing market. See details on these, other policy developments, and major congressional hearings from this week below.

Good weekends all…



Congress Agrees on $1.2 Tr. Package, Closing FY24 Fight

The long and winding road to an FY24 budget is finally all but over save for the final vote in the Senate. This week, Hill leaders and the Biden Administration agreed on a second funding package containing the six remaining FY24 appropriations bills. The House passed the package on Friday in a 286-134 vote, with support from a minority share of Republicans. 

As with the first package of bills, the second package amounts to a best-case outcome for Democrats given tight spending caps and Republican demands for extreme policy riders. While Speaker Mike Johnson (R-LA) has touted a few wins for his party like an increase of 8,000 ICE detention beds, 22,000 border agents, and cuts to diversity, equity, and inclusion programs at the Pentagon, Democrats were able to secure an additional $1 billion in funding for early education and Head Start along with other priorities widely opposed by GOP members.

Republican discontent with the terms of the funding deal materialized into a motion to vacate filed by Marjorie Taylor Greene (R-FL) shortly after House approval of the funding package. Taylor Greene referred to this motion as a warning and the chamber will not have to consider it until after the upcoming two-week recess. 

It’s not clear that Johnson could have moved the latest funding package without some sort of political fallout, stuck between a rock (House Freedom Caucus) and a hard place (Democrats and the Administration). Last weekend, disputes over funding the Department of Homeland Security through a full-year CR caused worries that yet another stopgap measure might be necessary to avoid a partial shutdown. Republicans demanded money for detention facilities and beds for migrants at the southern border while Democrats pushed for pay equity for the Transportation Security Administration. But the White House vowed to oppose the suggested CR it felt would worsen the crisis at the border in an election year. In the end, both Democrats and Republicans secured funding for these priorities in the form of a full-year appropriations bill. 

Congress will soon turn its full attention to FY25, for which Budget proposals from the House Budget Committee and President Biden have already been released. The stark contrast between these two proposals suggests trouble ahead for the FY25 process, which will likely face tight spending caps (one percent increase compared to FY24) outlined in the Fiscal Responsibility Act (FRA). The November election could also prevent Congress from finalizing FY25 funding legislation until the New Year and introduce complications that were not a factor this year. Although Democrats were able to escape the FY24 process relatively unscathed, Republicans will continue to push for extreme policy riders and harmful cuts that should be adamantly opposed by Congress and the Administration. 

Other Developments

Realtor Settlement’s Shocks Real Estate Industry

On March 15, the National Association of Realtors — representing roughly half of America’s two million realtors — unveiled a settlement for numerous lawsuits over accusations of anti-competitive practices in violation of antitrust laws. In addition to a $418 million payout, the NAR agreed to numerous rule changes, most notably eliminating the six percent commission rate as the industry standard. While the final agreement will not be available for a few weeks, at which point it requires approval from a federal court, the fallout from the settlement is expected to be massive.

Almost nine out of ten American home sales are handled by NAR-affiliated agents, and Americans pay roughly $100 billion in real estate commissions annually. With the six percent realtor commission eliminated and commission rates falling as commission rates become competitive, home sellers stand to save billions of dollars — which in turn could encourage more homeowners to put their homes on the market, increasing the housing supply and driving down home prices. The realtor profession will likely see monumental changes — having to compete with their fellow realtors over the prices of their services and relying less on anti-competitive practices such as “steering” — forcing it either to reform practices or leave the profession entirely. The jury is still out on the extent to which this settlement will put downward pressure on housing prices, as supply still is not meeting demand and high mortgage rates look unlikely to decline for the foreseeable future.

Biden Administration Boosts Federal Role in Housing

On Thursday, the Biden Administration released its annual Economic Report that, among other things, outlined how the affordable housing crisis came about and what policy proposals could be pursued to address the crisis. The report outlined how exclusionary zoning and land-use restrictions in particular have contributed to the affordability crisis, prioritizing the increase in home value for existing homeowners at the expense of renters and both new and prospective home buyers.

In response, the report suggested that the Biden Administration adopt policies that encourage zoning reform by offering states and localities incentives to update their zoning laws, with specific mention going to policies such as Biden’s proposal of a $20 billion in planning and housing capital grants for states and localities that expand their housing supply and lower their housing costs for middle- and lower-income households. Beyond zoning reform, the report also called for reducing supply constraints in the short and long term by providing federal subsidies, such as Biden’s proposed tax credits for new and first-generation home buyers.

FDIC Releases New Draft Guidance on Bank Mergers

Yesterday, the Federal Deposit Insurance Corporation (FDIC) released its Statement of Policy (SOP) on Bank Merger Transactions. The draft guidance appears to take meaningful steps towards improving the process through which the bank regulator reviews proposed mergers subject to FDIC approval. The FDIC’s board voted to approve the draft guidance at its meeting yesterday, with Chairman Gruenberg, Director Chopra, and Director Hsu supporting and Vice Chairman Hill and Director McKernan opposing moving forward.

Under the proposed guidance, the FDIC expects to more closely scrutinize any application resulting in an institution with greater than $50 billion in assets or for which a significant number of Community Reinvestment Act (CRA) protests are received. Those applications that would result in an institution with more than $100 billion in assets and be more likely to present potential financial stability would also be further scrutinized. The changes represent bank regulators’ move towards a more expansive approach to considering bank mergers. 

There is a serious need to revamp the currently-used 1995 Bank Merger Competitive Review Guidelines, which primarily focus on deposits and branches while ignoring the effects of proposed bank mergers on “too-big-to-fail” or “too-big-to-manage” dynamics. 

The draft guidance is subject to a 60-day comment period en route to implementation. 

DOJ Sues Apple For Anti-Competitive Behavior

Yesterday, the Department of Justice (DOJ), along with 15 states and the District of Columbia, filed a lawsuit against Apple in which it contends that the company violated antitrust laws in the Biden administration’s first antitrust action against Apple.

The DOJ accuses Apple of monopolizing the smartphone market where it holds over 65 percent of the market share. At the heart of the suit is the DOJ’s argument that “Over the years, Apple has repeatedly responded to competitive threats… by making it harder or more expensive for its users and developers to leave than by making it more attractive for them to stay.” It further accused Apple of forcing developers to “use its payments system to lock in both developers and users on its platforms.” Apple’s dominant iPhone platform and ecosystem have driven the company’s astronomical valuation. 

The suit is the DOJ’s latest move to rein in Big Tech companies that have used their outsized market power to shape not just the markets of the tech products but reverberate through industries affected by their restrictions including – as the suit outlines – financial services, social media, and news media.

Biden’s Public Service Student Debt Forgiveness

On Thursday, the Biden Administration announced its latest action on student debt forgiveness, erasing $5.8 billion in debt for nearly 78,000 borrowers. The debt relief applies specifically to government and nonprofit employees who applied to the Public Service Loan Forgiveness (PSLF) program, a program that provides relief for $62.5 billion in student debt for essential public employees such as teachers, nurses, firefighters, and others. 

An additional 380,000 federal borrowers using the PSLF program who are on track to have their loans forgiven in less than two years were promised that they would be eligible for debt cancellation if they continued their public service work within that period. This current round in student debt relief brings the Biden Administration’s total to $143.6 billion in loans canceled for nearly four million borrowers out of the total of $1.77 trillion in debt held by American borrowers as the President seeks to make progress on a key campaign promise 8 months before the election. 


Characteristics and Challenges of Today’s Homebuyers

The House Financial Services Committee on Housing and Insurance convened on Wednesday to discuss the current state of the housing market, with a focus on the experience of homebuyers in a tight market. GOP members adamantly stressed that Congress should focus on supply-side solutions, such as eliminating red tape and zoning reform, while focusing less on demand-side policies, such as tax credits for homebuyers. The Republicans, led by Chair Warren Davidson (R-OH), cited the role of inflation in driving up not only housing costs but borrowing costs as interest rates have remained higher for longer, arguing against the federal government providing housing support in the form of monetary aid.

Democrats, while on the same page with the GOP as to the severity of the affordable housing crisis, called on Congress to take action in ways that addressed both the demand-side and supply-side issues. Along with witness Nikitra Bailey from the National Fair Housing Alliance, Ranking Member Emanuel Cleaver, II (D-MO) and Maxine Waters (D-CA) also brought attention to the racial and ethnic gaps in homeownership, stressing that systemic racism in the lending and housing markets have not gone away and need to be addressed. 

SSA Commissioner O’Malley at Senate Finance and Aging

Social Security Administration (SSA) Commissioner Martin O’Malley testified in front of the Senate Committees on Finance and Aging on Thursday. Much of the conversation in both hearings centered on customer service challenges currently facing the SSA, issues that O’Malley has prioritized fixing during his first three months as Commissioner. 

Commissioner O’Malley took special care to discuss the issue of overpayments and “clawback cruelty” – a practice where the SSA recoups overpayments (sometimes totaling thousands of dollars) by zeroing out Social Security benefits until the difference is recovered. O’Malley noted that they are working on preventing overpayments in the first place while also reforming the way they handle payment mistakes to make them less impactful on beneficiaries. The SSA, under O’Malley’s leadership, is also working on fixing long wait times for their 1-800 number and the review process for disability claims. The agency is currently serving more beneficiaries than ever before with the smallest staff in 27 years, driving operational challenges. Congress must work to adequately fund the SSA so it can better address barriers that keep recipients from accessing their benefits. 

House Small Business Hears from SBA Administrator

The House Committee on Small Businesses convened on Wednesday to question Isabel Castillas Guzman, the Administrator of the Small Business Administration (SBA), as to the current state of the SBA and its mission of providing support to America’s small businesses. The GOP, led by Vice Chairman Blaine Luetkemeyer (R-MO), grilled Guzman over how the SBA has dealt with fraud, especially in the COVID relief programs, and how they have ensured that organizations that swindled taxpayer dollars are properly identified and prevented from taking advantage of the system again. The GOP also accused Guzman and the SBA of stonewalling oversight, stating that they do not believe that the SBA is trustworthy in its stewardship of taxpayer dollars.

Democrats like Ranking Member Nydia Velazquez (D-NY) stressed that Administrator Guzman inherited a mess and has done much to get the SBA back on track in providing small businesses with much-needed aid. Furthermore, Democrats lauded the SBA’s efforts for contributing to the recovery of small businesses post-pandemic and helping to prop up the recovery of the economy as a whole.

HFSC Republicans Continue Attacks on the SEC

The House Committee on Financial Services Subcommittee on Capital Markets convened on Wednesday to consider the Securities Exchange Commission’s recent activity along with a slate of thirteen bills and resolutions. These included:

  • a bill to require an assessment and report to Congress on the adequacy of the SEC’s cost-benefit analysis concerning major rulemakings,
  • a bill to mandate minimum comment periods of at least 60 days for all SEC-initiated rulemakings, with certain exceptions, calculated from the date published in the Federal Register,
  • a bill to require the SEC to submit a public, semi-annual report to Congress describing the details of certain meetings between SEC employees and international standards setters, and to clarify that certain agreements with international standards setters are subject to the requirements of the Administrative Procedure Act,
  • a bill to require the Commission to review certain “reviewable actions” by SEC staff, and
  • a bill to require the semi-annual testimony of the Chairman of the SEC before the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, with testimony on at least one instance to include the testimony of the entire Commission.

The bills, resolutions, and overall hearing largely represented a continuation of Subcommittee Republicans’ ceaseless attacks on the SEC for taking action to protect investors and capital markets. As Subcommittee Ranking Member Brad Sherman (D-CA) noted in his opening statement, “The rules in Washington are clear, when the facts are with you, argue about the facts; when the public policy are with you, argue about the public policy. And when you have bad facts and you’re wrong about the public policy, scream about the procedure.” Subcommittee Republicans adopted this tactic and this will likely continue to do so 

Look Ahead

Next week, both the House and Senate will be out of session.

Thursday, March 28

  • GDP Q4 2023 Third Estimate

Friday, March 29 

  • February PCE report