#2021-3, January 22, 2021

Biden Sworn-in as 46^th President; Appoints Interim Agency Heads and Halts Regulations in Process

On Wednesday, Joseph R. Biden was sworn-in on the West Front of the Capitol building as the nation’s 46^th President.  Shortly after being sworn-in, President Biden signed a number of executive orders and swore-in more than 1,000 federal employees for positions at various government agencies who do not need Senate confirmation.  He also halted all regulations in process and appointed interim heads at cabinet agencies while his nominees await hearings and confirmation votes in the Senate.

Most of those appointed as acting agency heads are career civil servants and will hold their positions until nominees are confirmed. Among those appointed are:

• Andy Baukol, acting secretary, Department of the Treasury
• Matt Ammonn, acting secretary, Department of Housing and Urban Development
• Rob Fairweather, acting director, Office of Management and Budget
• Tami Perriello, acting administrator, Small Business Administration
• Dave Uejio, acting director, Consumer Financial Protection Bureau

In addition, the White House issued a memo directing “executive departments and agencies” to freeze any pending regulations not yet published in the Federal Register. These regulations must be approved by a department or agency head designated by the new president; the Office of Management and Budget may permit exceptions to the review process in emergencies or for other urgent reasons.

For rules sent to the Office of the Federal Register but not yet published, the memo directs departments and agencies to withdraw them from the Federal Register and seek approval. For rules that have been published but that have not yet taken effect, the White House asked departments and agencies to consider delaying effective dates for 60 days, seeking public comments and considering petitions for reconsideration.  It is unclear whether the memo covers the independent banking regulatory agencies and we will monitor its potential effect on further SBA regulations regarding the Paycheck Protection Program.

Biden to Nominate Chopra for CFPB, Gensler for SEC Chair; Kraninger Resigns from CFPB

This week, President Biden announced that he will nominate Rohit Chopra to serve as director of the Consumer Financial Protection Bureau (CFPB) and Gary Gensler to chair the Securities and Exchange Commission (SEC).  Chopra has served since 2018 as a Democratic member of the Federal Trade Commission and was a member of the launch team for the CFPB, serving as assistant director of the bureau for student lending and as student loan ombudsman.

Gensler was chairman of the Commodity Futures Trading Commission from 2009 to 2014, where he led rulemaking to implement several Dodd-Frank Act reforms to swaps and derivatives markets. Gensler is currently an economics and management professor at the Massachusetts Institute of Technology, co-director of the MIT Computer Science and Artificial Intelligence Laboratory’s fintech project and a senior adviser to MIT’s Digital Currency Initiative.

In related news, CFPB Director Kathy Kraninger resigned as head of the agency shortly before President Biden was sworn into office.  Kraninger led the Bureau since 2018, when she was appointed to a five-year term.  However, the Supreme Court in 2020 held that the director can be removed by the president.

SBA Releases FAQs on Second-Draw PPP Revenue Reduction, Loan Calculations

On Tuesday, the SBA released a frequently asked questions document addressing several issues regarding second-draw PPP loans.  Specifically, the FAQs address how to calculate revenue reduction and maximum loan amounts for second-draw PPP loans, as well as the documents borrowers must provide to back up these calculations.

The agency also issued a reminder regarding borrowers who have applied for second-draw loans and who currently have loans under review by SBA, or SBA has determined that the borrower may not have been eligible for a first-draw loan. In these cases, SBA said that the lender will not receive an SBA loan number for a borrower’s second-draw loan until the issue related to the first-draw loan is resolved.

To read the FAQs, click here.

Regulators Issue Final Rules Regarding Role of Supervisory Guidance

The federal banking regulatory agencies this week issued final rules codifying that regulatory guidance does not have the force and effect of law.  The rule was originally promulgated in response to industry concerns that institutions would not need to rely on a 2018 interagency statement to clarify the role of guidance.

The final rule states that guidance does not "take enforcement actions or issue supervisory criticisms based on non-compliance with supervisory guidance. Rather, supervisory guidance outlines supervisory expectations and priorities, or articulates views regarding appropriate practices for a given subject area." The rule reiterates that regulations do have the force and effect of law and enforcement actions can be taken if regulated institutions are in violation.

The final rule was adopted on an agency-by-agency basis instead of as a joint rulemaking.  The agencies noted that “having separate final rules has enabled agencies to better focus on explaining any agency-specific issues to their respective audiences of supervised institutions and agency employees.” The Federal Reserve is expected to adopt a similar rule in the coming weeks.

To read the FDIC rule, click here, to read the OCC rule, click here and to read the CFPB rule, click here.

Agencies Issue FAQs on Suspicious Activity Reporting

Earlier this week, the federal banking agencies also released a set of FAQs that provide clarity on several suspicious activity reporting and other anti-money laundering issues.  The FAQs do not create any new requirements and only clarify existing expectations.

Among the issued addressed in the FAQs are SAR character limits, maintaining a customer relationship following the filing of a SAR, requests by law enforcement for financial institutions to maintain accounts as well as receipt of grand jury subpoenas and law enforcement inquiries. 

To read more, click here.