Oversight and Investigations Informer – August 1, 2022

What We Are Watching:

REP. PORTER SLAMS BLM FOR LACK OF LEASING OVERSIGHT: Rep. Katie Porter questioned the Bureau of Land Management for implementing reforms to thwart “bad actors” in the oil patch on public lands, but said more must be done to ensure companies on a blacklist don’t slip through the cracks. “Companies that repeatedly pollute our public lands are still allowed to do business with the federal government,” said Porter, chair of the House Natural Resources Oversight and Investigations Subcommittee, during a hearing. The panel sought to probe BLM’s use of an “exclusions list” that is meant to track companies barred from working with the federal government because of pending investigations, prior misuse or fraud.

REP. CASTOR REQUESTS DOJ PROBE INTO FLORIDA POWER & LIGHT: Rep. Kathy Castor has asked the U.S. Department of Justice to investigate Florida Power & Light (FPL), the state’s largest electric utility, over its use of dark money and reports that it sought to manipulate elections and coverage in its favor. “Generally, electric utilities should operate in the public interest and it appears that FPL and its officers use dark money, pressure campaigns and illicit, and possibly illegal, activity to disadvantage the citizens of Florida,” U.S. Rep. Kathy Castor wrote in a letter Thursday to U.S. Attorney General Merrick Garland.

Key Insights:  

FPL Chief Communications Officer David Reuter stated that documents cited in the news reports were “both an inaccurate and misleading representation of our actions. … From the moment we learned about these allegations, we undertook a thorough investigation which found no evidence of illegal wrongdoing by FPL or any of our employees”.

What We Are Watching:

WARREN TEASES CRYPTO BILL AT SENATE BANKING HEARING: The Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled, “Protecting Investors and Savers: Understanding Scams and Risks in Crypto and Securities Markets.” At the hearing, crypto-critic Sen. Elizabeth Warren (D-MA) teased the possible release of her own crypto bill to regulate the crypto industry, though with a limited Congressional calendar, it is unlikely to gain much traction. On the House side, the markup of stablecoin legislation being negotiated by leaders of the House Financial Services Committee was delayed until after the August recess. Chairwoman Maxine Waters (D-CA) released a statement saying that despite good progress in negotiations between herself, Ranking Member Patrick McHenry (R-NC), and Treasury Secretary Janet Yellen, there is still no deal. It is rumored the biggest point of contention is over issues related to crypto wallets.

SENS. DURBIN & MARSHALL INTRODUCE CREDIT CARD BILL: Sens. Dick Durbin (D-IL) and Roger Marshall (R-KS) introduced legislation that would require the Federal Reserve to ensure large credit-card issuing banks offer at least two networks over which a transaction may be processed. Sen. Durbin has been a long-time critic of the two credit card companies targeted, Mastercard and Visa, calling them a duopoly. Sen. Marshall said he is concerned about rising credit card fees harming small businesses. The proposed bill would be similar to the Durbin Amendment to the 2010 Dodd-Frank Act, in which Sen. Durbin inserted an amendment to require competing networks for debit card transactions. The new bill would amend the Electronic Fund Transfer Act and apply to any bank card issuer with more than $100 billion in assets. It would also put the Federal Reserve in charge of overseeing the regulations.

Week Ahead:  

The Senate Committee on Banking, Housing, and Urban Affairs is holding two hearings this week:

• A Full Committee hearing on Tuesday, August 2, at 10:00 a.m. entitled, “‘The Rent Eats First’: How Renters and Communities are Impacted by Today’s Housing Market.”
• A Full Committee hearing on Thursday, August 4, at 10:00 a.m. entitled, “Borrowed Time: The Economic Costs of Climate Change.”

Key Insights:  

Sen. Joe Manchin (D-WV) and Majority Leader Chuck Schumer (D-NY) struck a deal on an energy, healthcare, and tax package. Included in the deal is an increase of the carried interest tax, which many lawmakers criticize as a problematic gap in the tax code. The bill would change the carried interest tax rules such that to qualify for the reduced long-term capital gains rate a private equity investment would have to be held for five years. The bill changes the holding period to begin when a fund substantially finishes making an investment, not when funds start making them. Because of how private equity firms operate, in practice that could mean they must hold them for closer to eight to ten years from when investments start. The bill builds on a provision in the 2017 Tax Cuts and Jobs Act that increased the holding period to three years from one. The bill would also exempt taxpayers making less than $400,000 per year.

However, it is still unclear if Sen. Kyrsten Sinema (D-AZ) will support the bill. With Republican votes unlikely, Democrats will need every one of their Senators in agreement in order to meet the 50-vote threshold to pass the bill through budget reconciliation and avoid a filibuster.

What We Are Watching:

KHANNA HOLDS HEARING ON DANGERS OF LEADED AVIATION FUEL: Representative Ro Khanna (D-CA), Chairman of the Subcommittee on Environment, held a hearing on July 28, 2022, to investigate the health consequences of leaded aviation fuel and its potential impact on the environment. There is currently a knowledge gap regarding the impacts of airborne lead exposure from aviation fuel, although studies have shown that lead causes adult mortality and irreversible damage to children. While no immediate steps have been taken to prevent the use of leaded aviation fuel, the EPA announced its intention to start the process of regulating lead pollution from aircrafts earlier this year. Additionally, the FAA recently outlined a new initiative that charts a course for the safe elimination of leaded aviation fuel by the end of 2030. Notably, producers have appealed to push back the leaded fuel phaseout.

BIDEN ADMINISTRATION EXPECTED TO DECLARE MONKEYPOX HEALTH EMERGENCY: The Biden administration is expected to declare monkeypox a public health emergency in the coming days, according to two people with knowledge of the matter. The declaration, which is made by the Department of Health and Human Services (HHS), would follow a similar decision made by the World Health Organization. By designating the outbreak an emergency, HHS could then take a slew of actions, including accessing new money and appointing new personnel, according to the law that dictates how and when the federal government can declare such an emergency.

Week Ahead:

The Senate Finance Committee is holding a hearing on Wednesday, August 3, at 2:30 p.m. entitled “A System in Need of Repair: Addressing Organizational Failures of the U.S.’s Organ Procurement and Transplantation Network.”

Key Insights:  

The federal government is facing increasing pressure to combat the monkeypox virus, while HHS Secretary Becerra defended the federal government’s response saying, the agency has “done everything we can at the federal level” and encouraged local and state governments to “do their part.” The administration announced on Friday, 7/29 that more than 780,000 doses of the monkeypox vaccine are now available. Some advocates disagreed with Becerra and are asserting the federal government should be allocating more emergency funding for health departments. Tom Temprano, political director of San Francisco-based Equality California cited parallels between the delayed federal response to the AIDs epidemic in the 1980s. Notably, San Francisco became the first major city in the country to declare monkeypox a local health emergency. Mayor London Breed (D) committed to mobilizing resources to accelerate prevention and planning.

What We Are Watching:

FTC CHAIR UPENDS ANTITRUST STANDARDS WITH META SUIT: With antitrust legislation on life support in Congress, regulators are stepping into the spotlight on competition. The New York Times explains how a suit filed by the FTC against Meta (formerly Facebook) over plans to acquire virtual reality fitness startup “Within” could upend long-understood takes on competition policy. Observers are also buzzing over how antitrust enforcers may seek to use things like consumer data and labor concerns as factors in blocking future mergers.

DANIEL SNYDER TESTIFIES BEFORE OVERSIGHT: The Washington Post reports that Commanders owner Daniel Snyder sat for 10 hours with House Oversight Committee investigators behind closed doors following he earlier refusal to testify at a hearing alongside NFL Commissioner Roger Goodell. Details from the closed-door transcribed interview have stayed confidential, but expect a committee release or report at some point.

What We Are Watching:

JETBLUE AND SPIRIT ANNOUNCE PLAN TO MERGE, CREATING FIFTH LARGEST U.S. AIRLINE: JetBlue Airways reached a deal to buy Spirit Airlines on Thursday, a merger that could reshape the airline industry by putting pressure on the nation’s four dominant carriers. The deal, which values Spirit at $3.8 billion, would create the nation’s fifth-largest airline, with a share of more than 10 percent of the market, behind United Airlines, which has a nearly 14 percent share. Delta Air Lines and Southwest Airlines control more than 17 percent each, while American Airlines has more than 18 percent. The merger is likely to face a thorough investigation from the Biden administration’s antitrust regulators, who have taken an aggressive stand against corporate consolidation, especially in industries already dominated by a few businesses. Given that reality, JetBlue’s top executive sought to cast the Spirit deal as a way to make his industry more competitive, rather than less.

NORTHROP GRUMMAN DISMISSES SPECULATION THAT ITS 2018 ACQUISITION OF ORBITAL ATK COULD BE CHALLENGED: Northrop Grumman does not expect an ongoing antitrust review of its acquisition of Orbital ATK to have any “adverse impact” on the company, CEO Kathy Warden said July 28. During a second-quarter earnings call, Warden was asked to comment on news reported by Politico July 22 that the Federal Trade Commission is weighing legal action against Northrop Grumman for alleged violations of the 2018 agreement with the U.S. government that allowed it to acquire the space and defense firm Orbital ATK.

KHANNA SLAMS REGAN FOR REFUSAL TO APPEAR AT LEAD HEARING: EPA has come under fire from the House Oversight and Reform Committee for declining to participate in a subcommittee hearing on the health dangers of leaded aviation fuel. Environment Subcommittee Chair Ro Khanna (D-Calif.) sent a letter to EPA Administrator Michael Regan and Federal Aviation Administration interim Administrator Billy Nolen yesterday lamenting how neither official was willing to testify at a hearing scheduled for this Thursday on “how leaded aviation fuel is poisoning America’s children.” Khanna wrote that both agencies had also declined a subcommittee request to send deputy administrators or other senior officials working on the issue.

Key Insights:

In recent days, the Biden administration has ramped up efforts to crack down on corporate mergers that it views as contributing to anti-competitiveness in industry. Just last week, it was reported that the Federal Trade Commission (FTC) is weighing whether to bring legal action against Northrop Grumman for allegedly violating the terms of a 2018 settlement that allowed its purchase of rocket motor manufacturer Orbital ATK, and antitrust experts claim that there is a good chance the FTC will either tighten the terms of the deal or sue to undo the merger altogether. Such actions show the Biden administration’s willingness to pursue an unapologetic antitrust agenda, and there is no reason to indicate that the approach to the JetBlue-Spirit merger will be any different. The deal is likely to face increased scrutiny and possible investigation in the near future.