Trump Tax Reform Proposal – Core Principles
On April 26, Treasury Secretary Steven Mnuchin and Director of the National Economic Council Gary Cohn held a press briefing to introduce the key elements of the Trump administration’s tax reform initiative.
Consistent with proposals put forth during Trump’s presidential campaign, Secretary Mnuchin indicated that the president continues to target a reduction in the top corporate tax rate to 15%. In response to a question of whether or not tax reform will pay for itself, Mnuchin advised: “This will pay for itself with growth and with reduced [sic] — reduction of different deductions and closing loopholes.”
House Financial CHOICE Act
On April 26, the House Financial Services Committee held a hearing to discuss the Financial CHOICE Act, the Republican proposal to repeal and replace significant portions of the Dodd-Frank Act. In advance of the hearing, the Majority Staff released a memorandum providing a section-by-section summary of the proposed legislation.
Noteworthy provisions include:
- Section 601 would establish a threshold (10% average leverage ratio) for “qualifying banking organizations” to elect not to be subject to certain regulations such as risk-based capital and liquidity rules;
- Section 901 would repeal the so-called Volcker Rule; and
- Section 841 would repeal the Department of Labor’s fiduciary rule and require it to follow the SEC’s lead in future rulemaking related to that topic.
This proposed legislation does not appear to have any Democratic support.
FHFA Single Security Initiative – Update
In March 2017, the FHFA released An Update on the Single Security and the Common Securitization Platform. One noteworthy update is that the FHFA has pushed the timeline for Release 2 back from 2018 to the second quarter of 2019.
Institutional asset managers continue to express reservations regarding this initiative, whereby both Fannie Mae and Freddie Mac will issue a common single mortgage-backed security (to be called the Uniform Mortgage-Backed Security or UMBS).
MetLife Seeks Delay in SIFI Case
MetLife has asked the US Court of Appeals to delay its ruling on the government’s appeal regarding MetLife’s designation as a systemically important financial institution (SIFI), in part because the Trump administration has ordered a review of the Financial Stability Oversight Council’s designation process, and MetLife believes this could have bearing on the government’s position in this case.