Update 783 — Crypto Spring in Congress,
Student Loans, Live Nation, Week in Review
With the litany of crypto-related scandals and bank failures long-forgotten, both houses of Congress have recently adopted measures friendly to the cryptocurrency industry for the first time. The FIT bill that cleared the House on Wednesday would redefine securities and commodities for crypto purposes, with enormous regulatory jurisdictional implications for the Securities and Exchange Commission and the Commodities Futures Trading Commission.
Not for the first time, the Biden administration moved this week to forgive some student loans, this time of 160,000 of the most indebted. And, at long last, the DOJ filed an antitrust lawsuit against Live Nation Entertainment, following repeated violations of a 2010 consent decree. We detail these and the other major economic developments and hearings on the Hill this week below.
Good long Memorial Day weekends, all…
Best,
Dana
Headline
Crypto Spring Surprise: FIT Clears House, 279-136
After a quiescent period following the collapse of FTX in late 2022, the collapse of crypto-financier Signature Bank last year, and months of under-the-radar legislative drafting and negotiations in both chambers, a crypto spring has suddenly blossomed on Capitol Hill. Congress broke new but dubious ground on cryptocurrency legislation in a 279-136 House vote Wednesday, passing H.R. 4763, the Financial Innovation and Technology (FIT) for the 21st Century Act.
The Act provides overnight jurisdiction for the Commodity Futures Trading Commission (CFTC) in the case of “functional and decentralized” digital assets run on blockchains or ledgers where no one person or entity has unilateral control over the ledger asset or voting power, as well as over digital asset spot transactions. For the Securities and Exchange Commission (SEC), authority is restricted to non-decentralized assets. For its advocates, the bill would represent an imprimatur for an industry seeking the legitimacy of an “innovation-oriented” regulatory regime.
The bill significantly stacks the deck against the SEC, which would have 60 days to research and intervene where firms self-certify products as “crypto commodities” and would allow the CFTC to object to the intervention. Critics of the bill believe such a process would invite a flood of applications from the issuers of the more than 10,000 crypto assets in circulation as well as new prospective issuers – overwhelming the certification process and fast-tracking these products to market with little scrutiny. It would exempt crypto asset issuers whose annual sales are under $75 million.
One controversial provision would limit the scope of the SEC’s long-standing Howey test defining a security. The bill deems that digital assets sold as “investment contracts” that can be sold in secondary markets are not securities, which would undo years of legal precedent and likely create uncertainty in the securities markets applying well beyond digital assets.
71 Democrats — a disappointingly large number — voted in favor, including some in leadership which did not whip against the bill. House Financial Services Chair Maxine Waters (D-CA) and Representative Stephen Lynch (D-MA) led the bill’s opposition, along with Representatives Brad Sherman (D-CA) and Sean Casten (D-IL). SEC Chair Gary Gensler argued that the bill would allow issuers to self-certify decentralized assets and systems, allowing them to escape SEC oversight, undo regulation and oversight and investor safeguards by creating gaps: “The crypto industry’s record of failures, frauds, and bankruptcies is not because we don’t have rules or because the rules are unclear… It’s because many players in the crypto industry don’t play by the rules.”
The consumer and investor protection community has also inveighed against the bill, warning of “scams, hacks, theft, instability, and reckless [regulatory] evasion.” The White House Statement of Administration Position opposed but did not promise a veto of the bill.
The passage of the FIT Act in the House comes after the Senate voted 60-38 to approve a resolution rescinding a 2022 SEC guidance — Staff Accounting Bulletin (SAB) 121 — detailing how companies that safeguard their customers’ cryptocurrency holdings should book those assets. It requires reporting on both the debt and the asset sides of the ledger. 11 Democrats supported the resolution. President Biden issued a statement on May 8 promising to veto the resolution.
As a result, in the short run, SAB 121 and the FIT Act face long odds of becoming law this Congress — the former facing a veto threat, the latter lacking a Senate companion bill. But their surprising breadth of support creates cause for concern, in particular that FIT — the much bigger threat of the two — could get picked up in a lame-duck Senate session at the end of the year, or become a starting point for crypto legislation next Congress.
Behind this crypto spring surge of support in Congress for legislation tailored in the interests of the cryptocurrency industry lies a flow of financial support from industry super PACs poised to spend over $100 million on Congressional campaigns this cycle. Donald Trump, whose net worth is reported to include multi-billion dollars’ worth of crypto holdings, announced this week that his campaign would accept cryptocurrency donations.
Other Developments
President Biden Cancels $7.7 Billion More in Student Debt
On Wednesday, President Biden announced an additional $7.7 billion in student debt relief for 160,000 borrowers. These borrowers received an average of over $35,000 in debt cancellation. Specifically, this round of forgiveness goes to:
- 66,900 borrowers using the Public Service Loan Forgiveness program, a federal student loan program that provides hundreds of thousands of public workers such as teachers and firefighters with debt relief, with relief of $5.2 billion
- 54,300 borrowers using the Administration’s Saving on a Valuable Education (SAVE) program, which provides an income-driven repayment (IDR) plan to borrowers based on their income and family size, with relief of $600 million
- 39,200 borrowers who were approved for relief based on fixes made to their IDRs, with relief of $1.9 billion
This latest round of relief brings the amount of debt canceled by the Biden Administration to about $167 billion for 4.75 million borrowers. President Biden’s announcement represents his continued strategy to chip away at student debt with loan forgiveness actions that are smaller but may be easier to legally defend. President Biden concluded his announcement by declaring “I will never stop working to cancel student debt – no matter how many times Republican elected officials try to stop us.”
“Time to Break Up” Live Nation/Ticketmaster Monopoly
Yesterday, the Department of Justice (DOJ) and attorneys general for 29 states and the District of Columbia filed a lawsuit against Live Nation Entertainment in the Southern District of New York. The antitrust suit is the latest in a string of ambitious cases recently brought by the DOJ’s Antitrust Division as it seeks to rein in dangerous consolidation.
In 2010, the DOJ allowed Live Nation to acquire Ticketmaster but required a ten-year consent decree under which Live Nation was prohibited from threatening to block concerts from venues that choose to work with a different ticketing firm. Live Nation Entertainment has since become the world’s largest ticketing company and concert promoter and heavily consolidated the ticketing industry. The DOJ found that Live Nation repeatedly violated the consent decree and in 2019 extended the decree to 2025.
Yesterday’s suit alleges that Live Nation has continued to violate the conditions outlined in the consent decree and engaged in anticompetitive and illegal conduct, using its resources to entrench its monopoly power and insulate itself from competition. We welcome the DOJ’s latest move to rein in Live Nation’s anticompetitive conduct and bring much-needed competition to the heavily consolidated ticketing industry. Live Nation’s vertical consolidation has allowed it to leverage its power to the detriment of consumers, artists, and promoters. As Attorney General Merrick Garland said in announcing the suit “It is time to break up Live Nation.”
House Ag Okays GT Thompson’s Paltry Farm Bill
Yesterday, the House Agriculture Committee passed a $1.5 trillion farm bill proposal with a vote of 33-21. The five-year reauthorization bill, led by House Agriculture Chair GT Thompson (R-PA) is riddled with partisan policies and fails to address the extreme levels of consolidation within the agricultural sector.
The proposed Farm Bill would cut nearly $30 billion in SNAP benefits over the next ten years. These cuts would require future changes to the USDA’s Thrifty Food Plan, the basis for SNAP benefit levels, to be cost-neutral, thus preventing it from reflecting changes in nutrition standards.
Thompson’s farm bill starkly contrasts the proposed package released by Senate Agriculture Chair Debbie Stabenow (D-MI) in an attempt to put “the 2024 Farm Bill back on track.” Chair Stabenow’s farm bill notably includes important provisions to improve competition in America’s food systems, including provisions to establish an Office of the Special Investigator for Competition Matters within the USDA to investigate and prosecute violations of the Packers and Stockyards Act, a proposal previously put forward by Senator Jon Tester (D-MT), Chuck Grassley (R-IA) and Mike Rounds (R-SD). It is imperative that the farm bill include strong funding for SNAP and takes steps to tackle dangerous consolidation across the industries that produce our food.
CFPB Tackles Buy Now Pay Later In New Guidance
On Wednesday, the Consumer Financial Protection Bureau (CFPB) issued a new interpretive rule confirming that buy now pay later (BNPL) lenders are credit card providers, and must therefore provide consumers some of the same key legal protections and rights.
The BNPL credit products typically allow consumers to purchase an item by paying a portion of the price upfront and paying the rest over a set period. Non-upfront payments are debt and as a form of credit, BNPL products should be regulated as such. That’s why in 2022, 20/20 Vision joined over 70 other consumer advocacy organizations, including the National Consumer Law Center, to urge the Bureau to view these products as credit cards.
Under the interpretive guidance, consumers would have “a right to dispute charges and demand a refund from the lender after returning a product purchased with a Buy Now, Pay Later loan.” Additional regulation has been needed as the Bureau has found that over 13 percent of BNPL transactions involved a return or dispute. 20/20 applauds the CFPB’s latest effort to regulate the growing BNPL marketplace.
Hearings
SBC Focuses on Corporate Greed and Food Inflation
The Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Economic Policy convened on Wednesday for a hearing focused on how corporate price gouging, enabled by corporate consolidation, has driven up food prices and kept them high.
As Subcommittee Chair Elizabeth Warren (D-MA) highlighted, for most of 2023, corporate profiteering accounted for more than half of inflation throughout the U.S. economy. The supply chain shocks and labor disruptions of the pandemic drove up inflation, but even as these disruptions eased, the dominance of a few large companies over many industries in our food system allowed them to keep prices high and in many cases, keep raising them. As Sen.Warren noted, Kraft Heinz increased its profits by 448 percent in 2022 while Cal-Maine, the largest egg producer in the United States, increased its profits by over 700 percent.
The tremendous problem and impact of consolidation in America’s food system highlights the importance of promoting competition throughout the supply chains of the food we purchase.
House Ways and Means Holds Tax Policy Field Hearing
On Monday, members of the House Ways and Means Tax Subcommittee traveled to Erie, Pennsylvania for a hearing focused on Opportunity Zones and other Tax Cuts and Jobs Act (TCJA) provisions that some argue can help economically challenged communities. Under the leadership of Chairman Jason Smith (R-MO), the Ways and Means Committee has held numerous field hearings focused on the perceived benefits of the TCJA in an attempt to strengthen the Republican argument for extension.
Those present at the hearing also noted the importance of R&D amortization and the 100 percent bonus depreciation deduction, extensions of which are included in the Tax Relief for American Families and Workers Act of 2024 negotiated earlier this year by Senator Ron Wyden (D-OR) and Chairman Smith. The package cleared the House with bipartisan support but is currently stalled in the Senate due to what most believe to be political gamesmanship by Senate Finance Ranking Member Mike Crapo (R-ID).
Field hearings are a reminder of the real effect that “playing politics” can have in communities across the country, as businesses and families would benefit from passing the tax package including the business provisions highlighted above and an expansion of the Child Tax Credit (CTC). 20/20 Vision urges the Senate to vote on the Tax Relief for American Families and Workers Act of 2024 instead of allowing members to slowly kill the legislation behind the scenes.
Look Ahead
Thursday, May 30
- Q1 2024 GDP Second Estimate
Friday, May 31
- April PCE report