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Senate Banking Committee considers Consumer Financial Choice and Capital Marketplace Protection Act

Brandon Moseley

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On Friday the Senate Banking Committee held a hearing on the Consumer Financial Choice and Capital Markets Protection Act, S. 1117/HR2319.

Starting in October 2016, two categories of money market mutual funds commonly used by state and local governments, businesses, non-profits and other organizations were forced to abandon a key feature: the funds will no longer be allowed to offer a stable $1 per share valuation. Proponents of the legislation argue that the move negatively impacted two kinds of funds vital to the needs of public and private organizations: stable value institutional prime money market funds, which invest in short term debt issued by businesses and stable value institutional tax-exempt money market funds, which invest in short-term debt issued by states and municipalities. HR2319 would reverse the rules back to what they were before 2016. Proponents of the legislation point argue that the rule change has meant that $billions have moved from commercial banks to the stock market as a result of the rule change.

Jim Byard, the former Mayor of Prattville and Director of the Alabama Department of Economic and Community Affairs (ADECA) wrote an editorial supporting the legislation.

“After the financial meltdown, government regulators at the Securities and Exchange Commission (SEC) made a deal with some of our nation’s biggest financial companies to make a change to a financial tool that is widely used by businesses and state and local governments, known as money market funds,” Byard wrote.

“This deal turned out to have significant economic consequences. This highly technical rule changed the way money market funds are valued. These funds are used to pool the cash that municipalities and businesses use to manage taxpayer funds, support business operations or meet other financial obligations. That cash would then be invested in things our communities need.”

“When the rule change was implemented in October 2016, over one trillion dollars flowed out of those funds and drove up borrowing costs significantly above the Federal Reserve’s interest rate increases over the past two years,” Byard continued. “Municipal investments in Alabama fell by 50 percent, raising the cost of bonds that finance the maintenance and construction of schools, hospitals, roads and bridges, utilities and other critical infrastructure.”

“Enacting legislation to reverse this problem would seem like a no-brainer,” said Mayor Byard. “Unfortunately, well-heeled opponents from Wall Street are lobbying to block the legislation. Of course, no action will continue to force Alabama’s taxpayers and job creators to pay a premium for trying to drive economic growth and improve the lives of people in their communities.”

Alabama’s U.S. State Senators: Doug Jones (D) and Richard Shelby (R) are critical on this issue; because they both have votes on the powerful Senate Banking Committee. HR2315 has already passed the Republican-controlled U.S. House of Representatives with bipartisan support. The bill had 70 House co-sponsors including 28 House Democrats. Among them were Congresswoman Terri Sewell (D-Selma). The bill is being sponsored in the Senate by Pat Toomey, R-Pennsylvania, and Joe Manchin, D-West Virginia; but if the bill fails in the Senate Banking Committee it will never get to the Senate floor for an up or down vote. To get out of committee it likely will need the support of both Shelby and Jones. Co-sponsors in the Senate include: Mike Rounds (R-South Dakota), Robert Menendez, D-New Jersey, and Gary Peters, D-Michigan.

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Byard said, “As a former mayor and ADECA director, I know firsthand, that following the financial crisis, state and local governments and main street businesses took the brunt of the hit, due to Washington-knows-best policy decisions. All, while the largest Wall Street firms grew and became more profitable. Municipal budgets are being squeezed, and businesses with plenty of cash-flow, net worth and collateral are continuing to face tough credit conditions from commercial banks.”

A number of Alabama groups are lobbying Jones and Shelby to support the legislation.

“The legislation referenced above is of great importance because it will enable both private industry and local and state government to cost efficiently fund desperately needed public works projects to ensure Alabama has the enhanced infrastructure for needed economic development. Fostering job and tax base growth and expanding the economy is the road to prosperity,” Alabama Road Builders Association (ARBA).

“We are very concerned that local governments, hospitals, universities and community colleges will lose a significant purchaser of local tax-exempt debt if money market funds are not permitted to retain a fixed net asset value. As a result, our members will lose the opportunity to remain a vital part of the construction trades.”

“ASU uses tax-exempt bonds to finance capital expenditures including new construction, facilities upgrade, and property and equipment purchases,” wrote Alabama State University Vice President for Business and Finance Wanda L.P. Smith. “We are concerned with the Security and Exchange Commission’s (SEC) new rule, effective September 2016, prime money market funds may no longer purchase such debt obligations. The current SEC rule will increase project costs and could delay the implementation of future capital plans at ASU.”

“Counties and cities deeply depend on money markets funds to manage their debt to expand roads, schools, water systems, and other infrastructure projects,” wrote State Senator Gerald Dial, R-Lineville. “While it is important everywhere, it is especially important to the continued development of rural Alabama. So your support for S.1117 and the reform of rule 2A-7 is very much needed. All of this can be remedied by passage of S.1117 to restore traditional fixed asset values to Money Funds.”

“On behalf of the City Council of Mountain Brook, please be advised that the City Council requests your support for S.1117, the Consumer Financial Choice and Capital Markets Protection Act,” wrote Mountain Brook Mayor Steward Welch III.

“Without this legislation Alabama would be put at a competitive disadvantage,” wrote Alabama Treasure Young Boozer (R). “Without MMFs Alabama issuers will be choosing between more costly alternatives such as bank loans and other potentially less efficient types of capital markets financing.”

Some on the far left are opposing S.1117 because they oppose any rollback of Obama Administration banking regulations by the Trump Administration.

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Courts

Alabama Parole and Probation Officers supervising nearly 9,000 violent criminals

Brandon Moseley

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The Alabama Bureau of Pardons and Paroles released a report Thursday that was shared with state legislators and the media this week that shows Alabama’s 300 parole and probation officers are tasked with supervising 8,993 people convicted of violent crimes.

The officers are tasked with supervising more than 27,000 Alabama offenders as well as more than 3,600 offenders from other states who chose to move to Alabama following their incarceration in other states. Those are just the active cases.

There are an additional 22,947 inactive offenders for a total caseload of 50,055.

“The supervision of all these offenders that our officers provide daily is crucial to the safety of Alabamians and we are thankful for the selfless and dedicated work of these law enforcement officers,” said Bureau Director Charlie Graddick in a statement.

Graddick said that the Bureau put nine new officers into the field last week to begin supervising parolees and probationers and hopes to hire up to 138 more officers over the next three years — if the budget allows.

In the session that recently ended, the Legislature cut the bureau’s budget nearly in half.

“We are in need of more officers as we work to reduce caseloads,” Graddick said.

The report shows that 79 percent of the Alabama clients the bureau supervises were granted probation by judges throughout the state.

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Sixteen percent of the Alabama offenders are parolees who were granted release from prison by the Alabama Board of Pardons and Paroles.

Of the 6,078 Alabama parolees being supervised, 58 percent are violent offenders, some requiring much more intensive supervision.

Alabama has historically underfunded and understaffed the aging prison facilities managed by the Alabama Department of Corrections.

The Alabama Bureau of Pardons and Paroles is tasked with attempting to safely reintegrate parolees into society as well as to rehabilitate offenders sentenced to probation so that they do not re-offend and have to join the state’s prison population again.

A recent Department of Justice report claimed that Alabama’s prisons are among the most dangerous in the country.

The state has a critical need to increase prison capacity to reduce prison overcrowding and protect the public from crime and violence.

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Economy

Sewell, Rogers vote for bipartisan bills to improve Paycheck Protection Program

Brandon Moseley

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U.S. Reps. Terri Sewell, D-Selma, and Mike Rogers, R-Saks, voted in favor of a bipartisan bill aimed at improving the Paycheck Protection Program, dubbed the Payroll Protection Program Flexibility Act.

“The Paycheck Protection Program has been a lifeline for tens of thousands of Alabama businesses, but there are still too many small businesses that have been unable to access necessary resources because of the program’s strict stipulations,” Sewell said.

Sewell said many small businesses have not applied despite their urgent need because they do not believe they can meet current standards, and many are afraid to use the money because of the program’s strict requirements.

“The bills the House passed today would both make the PPP program more flexible so it can reach more small businesses in need, and also increase the program’s transparency to ensure funding is going to main street businesses that need support the most,” Sewell said.

Rogers said he was pleased the act passed the House.

“The bill will add more flexibility to these loans to help small businesses even more,” he said. “It will extend the loan forgiveness period, allow businesses that receive forgiveness to also receive payroll tax deferment and will allow businesses to spend different amounts on payroll costs and mortgage, rent, and other expenses. I hope these modifications will further help our small businesses that are the heartbeat of our local economies.”

According to the U.S. Small Business Administration, more than 60,000 Paycheck Protection Program loans have been issued to small businesses in Alabama with each recipient receiving an average PPP loan of about $100,000.

According to Sewell’s office, the new bill would provide needed flexibility to the Paycheck Protection Program — originally created by Congress in the CARES Act in April — in order to make this key program functional for the small businesses that need it the most.

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Sewell’s office provided a lengthy explanation of what the legislation does:

Under the current Paycheck Protection Program, the PPP loan converts to a grant as long as the small business uses the loan within eight weeks of the CARES Act enactment – that is, by June 30 – and uses at least 75 percent of the loan proceeds on payroll and the rest for such necessary expenses as rent, mortgage interest, and utilities. Many small businesses, particularly very small businesses, have reported that, with these restrictions, the loans do not meet their needs.

The bill makes the PPP program more flexible in the following key ways, in order to make it more accessible and usable for the vulnerable small businesses that need it the most:

Allowing loan forgiveness for expenses beyond the 8-week covered period to 24 weeks and extending the rehiring deadline. Back in March, the PPP program was established as an eight-week program, ending on June 30. However, it is clear that the economic effects of the pandemic will impact small businesses long past June 30. The current eight-week timeline does not work for local businesses that could only very recently have customers and those that are only allowed to open with very heavy restrictions. Small businesses need the flexibility to spread the loan proceeds over the full course of the crisis, until demand returns.

Increasing the current limitation on the use of loan proceeds for nonpayroll expenses from 25 percent to 40 percent. Currently, under regulations issued by the Trump Administration, the PPP loans require that no more than 25 percent of loan proceeds can be spent on non-payroll expenses such as rent, mortgage interest, and utilities. This limitation has prevented many small businesses, such as independent restaurants, from applying to the program because their rent is significantly more than 25 percent of their monthly expenses. The 40 percent limitation in this bill is much more realistic.

Extending the program from June 30 to December 31. By ensuring the PPP program will operate for 24 weeks, rather than only eight, this bill will ensure that many more truly small businesses will be able to take advantage of the program.

Extending loan terms from two years to five years. According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001 terrorist attacks and the 2008 recession took more than two full years. This was also true for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenues to pay back the loan.

Ensuring full access to payroll tax deferment for businesses that take PPP loans. The purpose of PPP and the payroll tax deferment was to provide businesses with liquidity to weather the crisis. Receiving both should not be considered double-dipping. Businesses need access to both sources of cash flow to survive.

The Payroll Protection Program Flexibility Act passed on a 417 to 1 vote. Alabama Congressmembers Bradley Byrne, Mo Brooks, Robert Aderholt, Martha Roby, and Gary Palmer also voted for the legislation. It now heads to the Senate for their consideration.

Rogers represents Alabama’s 3rd Congressional District. Sewell represents Alabama’s 7th Congressional District.

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Congress

Brooks, Palmer join lawsuit against House’s proxy voting rule change

Brandon Moseley

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U.S. Rep. Gary Palmer, R-Hoover, and Mo Brooks, R-Huntsville, have joined constituents and members of the House Republican Conference as plaintiffs in a lawsuit challenging the constitutionality of a recently passed resolution that allows representatives to cast votes for themselves and others on the House floor, known as proxy voting.

The rule change was supported largely by Democrats along party lines who said it was needed during the pandemic to protect the health and safety of members of Congress.

“This rule change is not a mere procedure change, but a direct assault on the Constitution and over 200 years of precedent,” Palmer said. “The Constitution requires that Congress assembles. There is no emergency so great that Congress cannot meet to do its job of representing the people.”

Brooks said the proxy voting scheme is not only “unprecedented and antithetical” to the job of a House member, but it is also “blatantly unconstitutional.”

“Article 1, Section 5 of the Constitution requires that a ‘a Majority of each (House of Congress) shall constitute a Quorum to do Business; . . . and (each House) may be authorized to compel the Attendance of absent Members,'” Brooks said. “The Constitution requires that the House assemble a majority of its Members to conduct business, and there is no more serious House business than voting.”

Palmer said members of Congress should rise to the challenge of the pandemic and meet in person.

“Our history is littered with wars, pandemics, and attacks on American soil, but none of that has ever prevented Congress from meeting to do the people’s business,” Palmer said. “The current public health crisis should not change that precedent. Precautions can be taken, but Congress must show up to work like everyone else.”

House Republican Leader Kevin McCarthy of California is the leader of the proxy vote lawsuit. Alabama Congressman Bradley Byrne, R-Montrose, is already one of the plaintiffs.

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Byrne sues Speaker Pelosi to stop House rule changes

“The Constitution is clear that a majority must be present for the House to conduct business,” Byrne said. “Speaker Pelosi’s attempt to allow Democrats to cast multiple ‘proxy’ votes for their colleagues is a blatant violation of the Constitution. Under rules adopted last week, as few as 22 Democrats could claim a quorum and win a vote against all 197 Republicans. This scheme gives Pelosi and her lieutenants complete and dangerous unconstitutional powers. If Democrats won’t show up to vote, they should turn the speaker’s gavel over to Leader McCarthy and the Republicans who are actually willing to show up and work for the people they represent.”

“This week, House Democrats will break over 230 years of precedent and allow Members of Congress to vote by proxy on the House floor,” Leader McCarthy said. “This is not simply arcane parliamentary procedure. It is a brazen violation of the Constitution, a dereliction of our duty as elected officials, and would silence the American people’s voice during a crisis. Although I wish this matter could have been solved on a bipartisan basis, the stakes are too high to let this injustice go unaddressed. That is why, along with other members of the House and our constituents, I have filed a lawsuit in federal court to overturn Speaker Pelosi’s unconstitutional power grab.”

The Republican plaintiffs point out that in the last 231 years, the House of Representatives has never permitted a member to vote by proxy from the floor of the chamber. This includes during the Yellow Fever of 1793, the Civil War, the burning of the Capitol during the War of 1812, the Spanish Flu of 1918 and 9/11.

The GOP plaintiffs claim that voting by proxy is flatly prohibited by the Constitution.

Article I, Section 4, Clause 2 states: “The Congress shall assemble at least once in every Year, and such Meeting shall . . . .” o Article I, Section 5, Clause 1 states: “Each House shall be the Judge of the Elections . . . and a Majority of each shall constitute a Quorum to do Business; . . . and may be authorized to compel the Attendance of absent Members.” o Article I, Section 6, Clause 1 states: “The Senators and Representatives . . . shall . . . be privileged from Arrest during their Attendance at the Session of their respective Houses” • The constitution clearly contemplates the physical gathering together of representatives as a deliberative body. As the Supreme Court has held, to constitute a “quorum” necessary to “do business,” the Constitution requires “the presence of a majority, and when that majority are present the power of the house arises.” United States v. Ballin, 144 U.S. 1, 6 (1892)

The plaintiffs have filed a constitutional challenge in the D.C federal district court seeking to enjoin the use of proxy voting in the United States House of Representatives.

Congressman Mo Brooks represents Alabama’s Fifth Congressional District. Congressman Gary Palmer represents Alabama’s Sixth Congressional District. Alabama Democrats were unable to find candidates willing to challenge either of the two popular incumbents. Brooks did defeat a Republican challenger in March.

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Elections

Carl, Hightower raising money for July GOP primary runoff

Brandon Moseley

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Mobile County Commissioner Jerry Carl and former State Senator Bill Hightower are running in the Republican Party primary runoff on July 14.

Both campaigns are preparing for the final push. Their Federal Elections Commission reports on their fundraising efforts are through the end of March.

Carl reported total receipts of $1,513,462.10. $709,525.10 of Carl’s money comes contributions. $670,169.60 of that is contributions from individuals; while $37,700 are contributions from other committees. Carl has contributed $1,655.50 to his own campaign. Carl’s congressional campaign also reports personally loaning his campaign $758,900.

Carl has already spent $1,307,240.85. $1,114,940.85 was for campaign operating expenses, $400 was for contribution refunds and $191,900 were loan repayments. Carl entered the month with $206,221.25 in cash on hand and debts of $567,000.

R.E. Myles of Grand Bay, AL donated $8400 to Carl’s campaign. Myles is the President of the law firm McDowell, Knight, Roedder, & Sledge. There are two entries for Mr. Myles of Grand Bay. The second is for $5,600. Carl’s other top contributors include: Rachel Burton is a Mobile housewife $5,800. Philip Burton of Mobile contributed $5,600. Burton works for the Burton Property Group. Clarence Burke Jr. of Foley works for Wolf Creek Industries $5,600. Nancy Myles of Grand Bay is retired, $5,600. Morgan Myles is a Mobile engineer with Core Industries, $5600. White-Spunner & Associates is a real estate firm, $5,400. Warren Nicholson of Mobile, who works for NFINA Technology, $5,400. Kathy Nichols of Mobile is retired, $5,400. Matt Metcalfe is a Mobile realtor, $5,400. Jerry Lathan is a contractor from Theodore, $5,400.

Former State Senator Bill Hightower reported total contributions of $1,071,355.21. $1,032,155.21 were individual contributions; while $39,200 were contributions from other committees. Hightower has no outstanding loans.

Hightower has already spent $858,340.60. $848,860.60 were operating expenses. $5,600 were refund contributions to individuals. $3,880 were other disbursements. The Hightower campaign had $213,023.40 in cash on hand.

Club for Growth PAC is supporting Hightower and they have donated $19.600 to his campaign. Major contributors include: Richard Uihlein of Lake Forest, Illinois is the CEO/owner of Uline, $11,200. Roy Drinkard of Cullman is the owner of Drinkard Construction, $2,800. Lamar Harrison of Wilmer, AL is the President of Gulf Construction and Hauling, $2,800.00. Rhonda Scott is an Opelika homemaker, $2,800.00. Allen Harris of Opelika is the owner of Bailey-Harris Construction Company $2,800. Donna Williams is a Mobile homemaker $2,800. George Montgomery is the president of his own company $2,800. Sherri Trick is a Tuscaloosa homemaker $2,800. Carrie Montgomery of Mobile is the treasurer at Gulf Fastener. $2,800. Kreis William of Birmingham is a vice president at JohsonKreis Construction $2,800.

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The winner of the Republican primary runoff will face the winner of the Democratic Party primary runoff between James Averhart and Kiani Gardner

The First Congressional District is an open seat, because incumbent Bradley Byrne, R-Montrose, is not seeking re-election.

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