Public Affairs & Government Relations

Oversight & Investigations Informer – November 1, 2021

NOTABLE DEVELOPMENTS

What We Are Watching:

CONGRESS WORKING TO FINALIZE SPENDING DEAL: Democrats are attempting to complete a framework agreement on their Build Back Better agenda that they plan to pass through reconciliation. The updated proposal has been pared down to a roughly $1.75 trillion price tag, and includes expanded access to pre-school, extended child tax credits, and over $500 billion in green energy investments. The bill also establishes a 15% minimum corporate tax rate and raises income tax rates for high earners. Democrats are still negotiating state and local tax deductions and a provision to lower the cost of prescription drugs.

Week Ahead:  

The Senate and the House are both in session.

Key hearings include: A House Agriculture Committee hearing on food supply chain issues: A House Homeland Security Committee hearing on preventing cyberattacks; a Senate HELP Committee hearing on the federal COVID response.

CYBERSECURITY

What We Are Watching:

STATE DEPARTMENT FORMING BUREAU TO CONFRONT INTERNATIONAL CYBERSECURITY THREATS: As part of the Biden administration effort to create a large-scale federal response to cybersecurity threats, the State Department will create a new bureau of cyberspace and digital policy. This bureau will be led by a Senate-confirmed ambassador-at-large.

SENATE PASSES TELECOMMUNICATIONS SECURITY BILL: The Senate unanimously passed The Secure Equipment Act, which would prohibit the Federal Communications Commission from authorizing products from companies on the commission’s ‘covered list.’ Among the companies on this list are Chinese telecom companies Huawei and ZTE. The bill had previously passed in the House, and President Biden is expected to sign the measure into law.

U.S. CYBER DIRECTOR OUTLINES STRATEGY: Chris Inglis, who serves as the United States’ first National Cyber Director, published his first statement of strategic intent along with an op-ed in the Wall Street Journal. Inglis intends to improve federal coherence in facing cyber threats, improve public-private collaboration, and better align federal resources.

Week Ahead:  

The House Homeland Security Committee will hold a hearing entitled: “Evolving the U.S. Approach to Cybersecurity: Raising the Bar Today to Meet the Threats of Tomorrow” Nov. 3, 10 A.M.

ENERGY SECTOR 

What We Are Watching:

BIG OIL’S BIG TOBACCO MOMENT FALLS SHORT: House Committee on Oversight and Reform held it long waited hearing to examine Big Oil’s role in climate denial. Leaders of the world’s largest energy companies testified for six hours in a hearing that was ultimately eclipsed in the media by negotiations in congress over the President’s Build Back Better plan and Facebook’s name change announcement. Notable moments include Rep Katie Porter’s (D-CA) departure from whiteboard to cup-fulls of M&Ms to illustrate what she called a disparity between public commitments and investment dollars committed to renewables and sustainability by companies. As. Rep. Jim Jordan noted, the hearing came at an awkward time when the Biden Administration is actively requesting members of OPEC to pump more oil while House Democrats pressured the CEOs of the world’s largest producers of energy to decrease production. In the end, Committee Chairwoman Carolyn Maloney (D-NY) announced plans to subpoena documents related to energy companies’ lobbying around climate policy, drawing a sharp rebuke from her Republican counterparts.

COP26 LOOKS FORWARD TO COP27: The United Nations summit in Glasgow kicked off this week. The Biden Administration arrived without a significant policy win on climate as the ongoing negotiations with the Congressional Progressive Caucus and Senators Sinema and Manchin have yet to reach an agreement. China’s Xi Jinping and Russian President Vladimir Putin have opted to skip the meeting, and UN Secretary General Antonio Guterres warned that he is “very concerned the upcoming COP26 in Glasgow will fail.”

CLIMATE SPENDING IN FOCUS: $555 billion in climate spending hangs in the balance as Democrats hammer out the text of the slimmed down reconciliation package now at $1.75 trillion. The White House touts the spending plan as the “biggest clean-energy investment in the nation’s history” and environmental groups have thrown their support behind the measure. Some climate and clean energy provisions have already been left on the cutting room floor as Senator Joe Manchin poured cold water on the $150 billion Clean Energy Performance Program (CEPP), a central policy supported by the progressive caucus.

Week Ahead:  

On Tuesday, the Senate Committee on Energy and Natural Resources will hold a business meeting at 10 am to consider the following energy nominations, among others: DOE: Geraldine Richmond, Under Secretary for Science; Brad Crabtree, Assistant Secretary (Fossil Energy and Carbon Management), and Asmeret Berhe for Director of the Office of Science; FERC: Willie L. Phillips, Jr., Commissioner.

Key Insights:

COP26 has begun, where the world’s largest economies and most climate vulnerable states will seek to hammer out commitments to emissions reductions.  Meanwhile, wholesale prices for natural gas have crept higher in the past month with a supply crunch being felt most acutely in Europe. The urgency around a new global agreement on emissions targets was captured best by UK Prime Minister Boris Johnson’s opening remarks that “the world is at one minute to midnight” with limited time to address the IPCC’s dire warning that the window for action is closing fast. The energy transition and addressing climate change are inextricably linked and efforts to curb emissions must also recognize that a “tidy” reorientation of the world away from fossil fuels will require sustained investments in maintaining the existing infrastructure while looking ahead.

FINANCIAL SERVICES SECTOR

What We Are Watching:

NEW DIRECTOR, NEW DIRECTION: Rohit Chopra had his first hearing as the Director of the Consumer Financial Protection Bureau (CFPB) last Wednesday. Director Chopra announced that his focus for the agency will be to create more competition amongst consumer lending, minimize home foreclosures, enforce penalties when large firms violate laws, and monitor Big Tech’s platform payment systems.

DEPARTMENT OF JUSTICE INVESTIGATES VISA: The DOJ is conducting an antitrust investigation into the financial incentives Visa gave to financial technology companies such as Square, PayPal, and Stripe. These incentives included lower fees or other rewards so the financial technology companies would use Visa’s transaction system.

FIGHTING FOR CRYPTO JURISDICTION: The Commodities Futures Trading Commission (CFTC) wants to be the federal agency with the most regulatory control over digital assets. Acting Chairman Rostin Behnam during his nomination hearing argued that the CFTC should be the “primary cop” on the crypto beat. Shortly after, Senator Elizabeth Warren (D-MA) argued that the Consumer Finance Protection Bureau (CFPB) has a role in regulating crypto as well.

Week Ahead:  

The U.S. House Committee on Financial Services is hosting three hearings this week:

The Senate Banking, Housing, and Urban Affairs Committee is hosting one hearing this week:

SEC Chair Gary Gensler will speak at The Securities Industry and Financial Markets Association’s (SIMFA) Annual Meeting on November 2, 2021. Discussion topics will include retail investing, diversity, equity, and inclusion, sustainable finance, and ESG.

Key Insights:  

Regulators across the Biden Administration continue in a turf war over crypto. Last week’s offer by Rostin Behnam of the CFTC to have the agency regulate the digital asset market is just another voice in the increasingly publicized cryptocurrency regulation debate. Senator Elizabeth Warren (D-MA) also announced her view of the Consumer Financial Protection Bureau becoming the agency to police crypto payments, while Gary Gensler of the Securities and Exchange Commission has already begun efforts to expand the SEC’s authority on the topic. The President’s Working Group report on stablecoins, set to be released on November 1, will reportedly give insight on jurisdiction.

HEALTHCARE SECTOR

What We Are Watching:

PFIZER VACCINE GRANTED APPROVAL FOR USE IN CHILDREN FIVE TO 11: Last Tuesday, the Food and Drug Administration’s (FDA) Vaccines and Related Biological Products Advisory Committee (VRBPAC) unanimously voted to grant Pfizer’s COVID-19 vaccine Emergency Use Authorization (EUA) for children ages five to 11. According to Pfizer’s data, the vaccine is safe and 90.7 percent effective in preventing COVID-19 in children of this age group. Eligible children may receive two doses of the vaccine, each containing one-third of the active ingredients in the adult dose, at least three weeks apart. While Pfizer officials said the vaccine “effectively neutralized the delta variant” in young children, some VRBPAC panelists expressed concern that the vaccine’s risks may outweigh its benefits for young children.

FTC PREVENTS EXPANSION OF KIDNEY CARE PROVIDER: Last Monday, The Federal Trade Commission (FTC) curbed the expansion of DaVita’s Utah, ordering the kidney care provider to divest itself of three dialysis clinics, as well as putting industry on notice that the FTC’s orders will once again routinely require prior approval for future transactions affecting each relevant market for which a violation was alleged, for a minimum of ten years. The FTC’s proposed order comes after an investigation into last month’s proposed acquisition of the University of Utah’s dialysis business, which aimed to bring 18 Utah dialysis clinics under DaVita’s wing. In its complaint, the FTC argued that there are only three providers of outpatient dialysis services in the greater Provo, Utah, area, with DaVita and the University of Utah managing seven out of eight total clinics.

DOJ PROBES MARKING AND PRICING OF NOVARTIS’ HEART FAILURE PRODUCTS: Novartis disclosed last week that the Department of Justice (DOJ) requested marking and pricing information related to its heart failure blockbuster product, Entresto. The focus of the probe includes compensation paid to physicians according to coverage. Last year, Novartis agreed to pay $678 million to resolve a lawsuit filed in 2013 by the U.S. government, which alleged the drug maker used kickbacks to doctors.

Week Ahead:  

This Thursday, November 4, 2021, the House, Education, Labor and Pensions Committee will hold a full committee hearing titled “Next Steps: The Road Ahead for the COVID-19 Response” at 10 am EST. Speakers will include CDC Director Rochelle Walensky, National Institute of Allergy and Infectious Diseases Director Anthony Fauci, Acting FDA Commissioner Janet Woodcock, and Assistant Secretary for Preparedness and Response at HHS, Dawn O’Connell.

Key Insights:

Under the latest iteration of the Build Back Better Act, the federal government would temporarily close the Medicaid gap through 2025 by offering premium subsidies to the two million individuals living below the poverty line in the 12 Medicaid expansion holdout states. To accomplish this, the proposal would expand eligibility for premium subsidies and cost-sharing reductions in the ACA to ensure that those below poverty level pay no premiums.

INDUSTRIALS SECTOR

What We Are Watching:

AMERICAN AIRLINES FORCED TO CANCEL HUNDREDS OF FLIGHTS: American Airlines has cancelled over 1500 flights since Friday, citing weather affecting its hub in Dallas-Fort Worth and cascading staffing issues. Airlines are struggling to return to full schedules after COVID slowdowns, and other airlines have also been forced to make mass cancelations in recent week.

INTERNATIONAL PROTEST OF U.S. ELECTRIC VEHICLE SUBSIDIES: A group of 25 ambassadors wrote a letter to the Biden administration and the U.S. Congress to protest a proposed electric vehicle tax credit that the ambassadors say will violate World Trade Organization agreements. Signatories included ambassadors from the European Union, Germany, Canada, Japan, Mexico, France, South Korea, and Italy.

DEFENSE CONTRACTORS WARN THAT VACCINE MANDATE MAY CAUSE PROGRAM DELAYS: Politico reports that senior Defense contractors are warning that President Biden’s vaccine mandate may cause delays in critical weapon programs. Executives warn that even if just a handful of key engineers walk off the job as a result of the mandate, serious delays that affect national security may result.

Week Ahead:  

The House Agriculture Committee will hold a hearing entitled “The Immediate Challenges to our Nation’s Food Supply Chain.” Wednesday, November 3 at 10:00 A.M.

TECH, MEDIA & TELECOM SECTOR 

What We Are Watching:

CRYPTO FIRMS TARGETED BY INTERNATIONAL REGULATOR: The Financial Action Task Force, an international body that coordinates government policy on illicit finance, called on governments to toughen regulation of crypto firms and impose stricter identity verification for customers. FAFT’s guidelines have no force of law but have steered global anti-money laundering and terrorist financing policy in the past.

TIK TOK DODGES BIOMETRIC DATA QUESTIONS: In a hearing in front of the Senate Subcommittee on Consumer Protection, Product Safety and Data Security, Tik Tok faced questions from several lawmakers over its policy to allow the collection of biometric data from U.S. users. Tik Tok’s Head of Public Policy pivoted away from these questions, instead citing third-party studies that Tik Tok collects less data in aggregate than its social media peers.

Week Ahead:  

Task Force on Financial Technology Subcommittee hearing on “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL (Buy Now Pay Later) and Other Emerging Fintech Cash Flow Products” on Tuesday, November 2nd at 10:00am.

On November 3rd, the House Economic Disparity and Fairness in Growth Committee holds a hearing on “Our Changing Economy: The Economic Effects of Technological Innovation, Automation and the Future of Work.”

Key Insight:

In a key vote at the FTC last week, Rohit Chopra, who was confirmed to lead the CFPB in early October, cast the fifth vote. The FTC voted 3-2 to implement merger enforcement orders that will now require acquiring companies to get prior commission approval for any deal impacting “each relevant market for which a violation was alleged” for at least 10 years. While much of Lina Khan’s transformational agenda at the agency has been stymied with the current 2-2 split at the Commission, agency officials noted that Chopra had cast a vote on the proposal before he left for CFPB, raising the question of other areas where Democrats may take advantage of this workaround in current agency rules.

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The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., it’s management, its subsidiaries, its affiliates, or its other professionals.

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