Law360 (April 7, 2020, 8:07 PM EDT) -- As House Democrats develop their proposal for another COVID-19 relief package, a memo obtained by Law360 shows that Financial Services Committee staff are recommending a blanket ban on stock buybacks, a halt to all evictions and foreclosures, and a pause on any negative credit reporting.
The memo from committee staffers to Democratic committee members represents the early stages of discussions for another relief bill following the over $2 trillion measure that became law March 27. It suggests sweeping changes that would impact banking, housing, corporate regulation, credit reporting and other areas. These proposals face many hurdles but show the approach House Democrats might take in further relief legislation, which House Speaker Nancy Pelosi, D-Calif., outlined Friday.
In corporate regulation, the memo recommends a blanket ban on stock buybacks, regardless of whether companies accept federal relief funds, "until the impacts of the coronavirus on the American financial system have ended to ensure that companies are using their excess cash to pay workers, shore up their bottom lines and invest in their communities."
Other items would require large public companies that accept emergency loans or assistance to give workers stock shares and board representation and make disclosures about environmental impact, international tax payments, diversity and political activity. House Democrats sought some of these measures in the latest relief bill but did not secure them.
Another proposal would pause new financial regulation by "temporarily prohibit[ing] federal financial regulators from adopting rules not directly related to responding to the coronavirus response through the length of the crisis."
The banking and credit reporting ideas in the memo include a moratorium on bank fees such as overdraft fees and ATM charges for the duration of the crisis, along with free cashing of federal stimulus checks. Credit reporting agencies would not be allowed to record negative events during and for four months following the pandemic and other major disasters declared in the future.
Another item would halt debt collection during COVID-19 and protect stimulus payments from garnishment. While the latest relief bill paused payments and interest accrual on federal student loans, Democratic staff suggested extending that policy to private education loans and using $60 billion to forgive $10,000 of student debt to about 6 million private borrowers.
The housing suggestions include $100 billion for low-income renters, $35 billion for low-income homeowners and $100 billion for affordable housing, using construction as economic stimulus. Other ideas include a universal moratorium on evictions for failure to pay rent, regardless of whether the landlord uses federally backed loans. The funds for low-income renters would then go to landlords. Staff also suggested a universal moratorium on foreclosures and repossessions, regardless of whether the loan originator relies on federal funds. The proposal would also forbid repossession of automobiles, recreational vehicles and mobile homes because such losses could leave people homeless.
A major insurance provision would create a federal reinsurance program for pandemics modeled on the Terrorism Risk Insurance Program "to promote the availability and affordability of insurance coverage that includes pandemic risks."
Along with the industry requirements, the memo also suggests giving $2,000 direct payments to most adults each month until the unemployment rate recovers to within two percentage points of its pre-crisis level. This proposal would likely cost trillions of dollars, but lawmakers on both sides of the aisle have shown interest in some direct payments, with two rounds of $1,200 per adult included in the latest bill.
The ideas come from House Financial Services Committee staff but largely track with previous goals outlined by Chairwoman Maxine Waters, D-Calif. Any particular item would need approval from Waters and Democratic leaders, including Pelosi, before they made it into a bill.
None of these proposals can become law without approval from Senate Republicans and President Donald Trump, who are likely to push back on many of the Democratic ideas. Although Senate Majority Leader Mitch McConnell, R-Ky., has shown some interest in further relief legislation, he has promised to fight what Republicans have called a "liberal wish list."
"I'm not going to allow this to be an opportunity for the Democrats to achieve unrelated policy items that they would not otherwise be able to pass," McConnell said in a radio interview last week.
--Editing by Gemma Horowitz.
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