Capitol View V O L U M E 5 , N U M B E R 1 J A N U A R Y 2 0 0 - - PDF document

Capitol View

V O L U M E 5 , N U M B E R 1 J A N U A R Y 2 0 0 8 V A L U E A D D E D , V A L U E S D R I V E N.

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HALFTIME IN THE 110TH

Upcoming Agenda The Second Session of the 110th Congress is underway, with the House returning on January 15 and the Senate reconvening on January 22. This Session will have a somewhat limited window for legislative

• accomplishments. There will be a lengthy Summer Recess with the usual August break, as well as the

Democratic and Republican Conventions. In addition, because it is an election year, Congress will likely attempt to leave as early as possible for the campaign season. The House has already tentatively scheduled the date of its final adjournment for the end of September. Senate Republicans are particularly concerned with the potential impact of the upcoming elections on the number of seats they control in that body. Twenty-three of the 49 seats the Republicans currently control are up for election this year, while the Democrats will only have to defend 12 of their 51 seats. Senators Joe Lieberman of Connecticut and Bernie Sanders of Vermont are Independents, but caucus with the Democrats. The first significant item on the Administration’s agenda for Congress is the renewal of the Foreign Intelligence Surveillance Act which is currently due to expire on February 1. The President will also be seeking more money for the wars in Iraq and Afghanistan, the renewal of his No Child Left Behind education reform law, the permanent enactment of his first term tax cuts, and the passage of free trade agreements for Colombia, Panama and South Korea. Because of concerns regarding the overall state of the economy – particularly the recent problems with the housing market – the Administration may also propose an economic stimulus package to include tax rebates for individuals and tax breaks for businesses to encourage investment. Congressional Democrats will seek to pass legislation to reduce global warming by regulating carbon dioxide

• emissions. In December, the Senate Committee on the Environment and Public Works reported the American

Climate Security Act (S.2191). The Act establishes a “cap and trade” program within the Environmental Protection Agency, allowing for the creation of an annual cap on greenhouse gases like carbon dioxide, in addition to the issuance of credits to allow covered source of pollutants to emit prescribed levels. The credits can be traded, purchased or sold. The Chairman of the Energy and Commerce Subcommittee on Energy and Air Quality, Representative Rick Boucher (D-VA), has said his Subcommittee will produce similar legislation early this year. The Democratic Leadership is also expected to introduce its version of an economic stimulus package.

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In November, the House passed the Mortgage Reform and Anti-Predatory Lending Act (H.R.3915) to better regulate the subprime lending markets. The Senate will have to consider its version of a housing market reform

• bill. The House has also passed the Patent Reform Act of 2007 (H.R.1908). The Senate Leadership would like

to set aside some time to debate and vote on its Patent Reform Act (S.1145) Speaker Nancy Pelosi (D-CA) will also renew her efforts to pass legislation to compel the Administration to withdraw U.S. forces from Iraq. There were numerous efforts to do this in the First Session, but a combination

• f the President’s veto and the need for producing 60 votes in the Senate to invoke cloture prevented these

efforts from succeeding. First Session The First Session of the 110th Congress saw a flurry of activity on the Floors of both the Senate and the House. Before leaving in December, the Senate conducted its 442nd Roll Call vote of the year and the Members of the House cast their 1,186th vote, the most Floor votes ever cast in a single session of Congress. While the Congress passed 155 bills last year, more than one-third involved naming post offices or courthouses. However, among the more significant legislative accomplishments of the First Session are the following: Omnibus Appropriations – Before leaving for the year, Congress passed an Omnibus Appropriations bill which combined 11 appropriation bills calling for $555 billion in spending for FY 2008, including 8,993 earmarks for Member-sponsored spending programs. When funds from the already enacted Defense Department Appropriations Bill are included, the overall discretionary spending level for FY 2008 amounts to $932.8 billion. Energy Legislation – Congress enacted the Energy Independence and Security Act of 2007 (P.L. 110- 140), which enhanced the Corporate Average Fuel Economy (CAFE) standards for automobiles and strengthened renewable fuel standards. Terrorism Risk Insurance – Congress passed the Terrorism Risk Insurance Program Reauthorization Act

• f 2007 (P.L. 110-160), which will extend the Federal backstop for terrorism risk insurance through

December 31, 2014. Minimum Wage – Congress raised the minimum wage to $5.85. Ethics and Lobbying Rules – Congress passed the Honest Leadership and Open Government Act of 2007 (P.L. 100-81), which strengthened ethic standards for Members of Congress, staff and lobbyists. Alternative Minimum Tax – Congress enacted the Tax Increase Prevention Act of 2007 (P.L. 100-166), which extends the exemptions for individuals to the Alternative Minimum Tax (AMT) through 2007. Without this bill, the AMT would have applied to about 2.3 million more families in the 2007 tax year. 9/11 Commission – Congress passed the Implementing the 9/11 Commission Recommendations Act of 2007 (P.L. 110-53), which enacted into law 23 recommendations of the National Commission on Terrorist Attacks Upon the United States.

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The State of the Union Address is scheduled for January 28. It will be the final State of the Union speech of the Bush Presidency.

Kevin Faley is the Editor of Capitol View and a partner in Venable’s Legislative Practice Group. Mr. Faley can be reached at 202-344-4706.

__________________________________________________________________________________________ ECONOMIC FACTORS PLACE SPOTLIGHT ON BANKING ISSUES More often than not, major banking bills are passed by Congress and sent to the President as the two-year Congressional cycle winds down in even-numbered years. Generally the seeds for legislative action are sown and nurtured during the First Session; if they bear fruit, then they are acted upon in the Second Session. As Members of Congress return to Washington for the Second Session of the 110th Congress, it seems likely that the pattern will be repeated. Economic factors are unquestionably going to be primary forces driving the legislative agenda on Capitol Hill, and nowhere is that likely to be more evident than in both the Senate Banking and the House Financial Services

• Committees. House Financial Services Committee Chairman Barney Frank (D-MA) impressed many of his

colleagues with his ability to forge bipartisan alliances and report out consensus legislation. During the First Session, the House approved and sent to the Senate a number of bills that originated in the House Financial Services Committee, including bills dealing with GSE reform, FHA reform, predatory lending, and industrial loan companies (ILCs). The Presidential aspirations of Senate Banking Committee Chairman Chris Dodd (D-CT), which some believe impeded action on many of the House-passed bills that were sent to the Senate, will not be a factor in the Second Session. It is not impossible that the presidential aspirations of other members of Congress – particularly Senator Hillary Rodham Clinton (D-NY) – will impact the Senate Banking Committee’s agenda. On December 3, 2007 Senator Clinton wrote to Treasury Secretary Paulson outlining steps that she believes are needed to end the foreclosure crisis. They are:

• Impose a foreclosure moratorium of at least 90 days on subprime, owner-occupied homes
• Freeze the monthly rate on subprime adjustable rate mortgages, with the freeze lasting at least 5 years or

until the mortgages have been converted into affordable, fixed-rate loan

• Require the mortgage industry to provide status reports on the number of mortgages it has modified.

Senator Clinton has also called for the establishment of a fund of up to $5 billion to help hard-hit communities and distressed homeowners weather the foreclosure crisis. FHA Reform: One area primed for action in 2008 is FHA reform. On September 18, the House passed and sent to the Senate the “Expanding American Homeownership Act of 2007” (H.R. 1852), a bill reforming a number of aspects of the Federal Housing Administration (FHA). Among other things, the House-passed bill:

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• Authorizes zero and lower down payment loans for borrowers that can afford mortgage payments, but

lack the cash for a required down payment.

• Authorizes more than double the current funding level for housing counseling, to help subprime

homebuyers and borrowers late on mortgage loan payments.

• Directs FHA to provide mortgage loans to higher risk (but qualified) borrowers, without authorizing

unnecessary fee hikes on such borrowers.

• Raises FHA multifamily loan limits, so these loans can fully fund construction costs in high cost areas,

and enhances sale of foreclosed FHA rental housing loans to localities, so that affordable housing can be maintained in local communities.

• Authorizes up to $300 million a year from the bill’s excess profits for affordable housing, instead of

returning such funds to the General Treasury.

• Raises FHA single family loan limits, which now bar loans above 95% of the median home price in each

local area and shut FHA out of higher cost home markets. The amendment raises the FHA loan limit in each area to the lower of (a) 125% of the local area median home price or (b) 175% of the national GSE conforming loan limit. The amendment also retains the bill’s provision for a nationwide FHA loan floor

• f 65% of the GSE conforming loan limit, and gives HUD authority to raise these loan limit amounts by

up to $100,000 “if market conditions warrant.”

• Directs FHA to make available refinancing loans to existing qualified homeowners who are in default or

at risk of default due to rate resets or mortgage market conditions, and authorizes lower down payments for such purpose. A companion bill was introduced by Senate Banking Committee Chairman Chris Dodd on November 13. Entitled the “FHA Modernization Act of 2007” (S. 2338), Dodd’s bill passed the Senate by a vote of 93 to 1 on December 14. Since the Dodd and Frank bills differ in some significant details (ex., the Senate bill lacks the “affordable housing fund” contained in the House bill, and lowers the current 3% down payment requirement to 1.5% rather than limiting it as the House bill would), the differences will need to be reconciled by a conference committee and a final consensus package approved by the House and the Senate before it can be sent to the President to be signed into law. GSE Reform. On May 23, 2007, the House passed and sent to the Senate the “Federal Housing Finance Reform Act of 2007” (H.R. 1427) by a vote of 313 to 104. Among other things, the bill would consolidate the Office of Federal Housing Enterprise Oversight (“OFHEO”) which under existing law is the primary regulator

• f Fannie Mae and Freddie Mac with the primary regulator of the Federal Home Loan Banks, the Federal

Housing Finance Board (“FHFB”). The new regulatory body, which would have responsibility for the regulation and supervision of the government sponsored enterprises (GSE) of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, would be known as the Federal Housing Finance Agency (“FHFA”) and would have broad powers analogous to current banking regulators. This measure is currently pending in the Senate.

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Affordable Housing Trust Fund. On October 10, 2007 the House voted 264 to 148 to pass and send to the Senate for consideration the “National Affordable Housing Trust Fund Act of 2007” (H.R. 2895). The trust fund would be paid via revenues derived from the GSEs and from the FHA mortgage insurance program, which the Secretary of Housing and Urban Development could then use to provide assistance to states, Indian tribes, insular areas, and participating local jurisdictions to increase the supply of decent quality affordable housing, especially for low-income, extremely low-income, and very poor families. The assistance could be in the form

• f construction, rehabilitation, and/or preservation of affordable housing units. This measure is currently

pending in the Senate. Predatory Lending: On November 15 by a vote of 291-127 the House voted to approve and send to the Senate the Frank-Miller-Watt “Mortgage Reform and Anti-Predatory Lending Act of 2007” (H.R. 3915). Designed to “combat abuses in the mortgage lending market, and to provide basic protections to mortgage consumers and investors,” among other things, if enacted into law the bill would:

• establish a federal “duty of care”;
• prohibit steering;
• require licensing and registration of mortgage originators (including brokers and bank loan officers);
• set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to

repay;

• attach limited liability to secondary market securitizers who package and sell interest in home mortgage

loans outside of these standards. (Individual investors in these securities would not be liable);

• expand and enhances consumer protections for “high-cost loans” under the Home Ownership and

Equity Protection Act; and

• include certain protections for renters of foreclosed homes.

H.R. 3915 is now pending in the Senate, along with the Home Ownership Preservation and Protection Act of 2007 (S. 2452), a companion bill introduced by Senate Banking Committee Chairman Dodd on December 12, 2007. As the Second Session of the 110th Congress gets underway, these and other measures will all be in various stages of play.

William Donovan is a partner at Venable and divides his time between the Legislative and Financial Services Practice

• Groups. Mr. Donovan can be reached at 202-344-4939.

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VENABLE IN THE NEWS Former Senator Birch Bayh, the author of the 1980’s landmark Bayh-Dole Patent Reform Act, met last month with more than 70 members of the People’s Republic of China’s intellectual property offices in Beijing to discuss the impact of the Act on the economy of the United States and that of other countries such as Brazil, Germany, and the United Kingdom, which have adopted patent systems based on Bayh-Dole. The PRC government is examining ways to craft legislation that would follow the Act’s structure and implementation. Senator Bayh was invited to make his presentation by Dr. Zhang Qin, Deputy Commissioner of the State Intellectual Property Office. Dr. Zhang joined Senator Bayh in a question and answer discussion following Bayh’s remarks. Senator Bayh is a member of Venable’s Legislative Practice Group and served in the United States Senate for 18 years. Our partner, Tom Quinn, was quoted in the January edition of Corporate Counsel on the significant support for Barack Obama’s presidential campaign among corporate general counsel. Tom is a member of Venable’s Legislative Practice Group. _____________________________________________________________________ Capitol View is published by the Legislative Practice Group of the law firm Venable LLP, 575 7th Street, N.W., Washington, D.C. 20004-1601. Internet address: http://www.venable.com. It is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations. Editor: Kevin O. Faley Associate Editor: Barbara Reres Questions and comments concerning materials in the newsletter should be directed to Kevin Faley at kofaley@venable.com. Please direct address changes to Barbara Reres at breres@venable.com.