First 100: Still No Sign of the Congressional Review Act

Plus, Biden needs to crack down on tax evasion from the ultra-rich.

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It’s March 22, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.

The Chief

We’re now two weeks and counting before the window closes on introducing resolutions for the Congressional Review Act. I wrote about this two weeks ago for First 100 (as did Mark Joseph Stern for Slate), and nothing has changed. There still has not been a single resolution introduced. And introducing a resolution doesn’t mean it automatically gets a vote, it’s a simple act of beating a deadline with a one-line bill that would repeal a regulation finalized in the previous 60 legislative days. It’s preferable to going through the agency process for nullifying a regulation because a) it’s instantaneous rather than years of administrative procedure, b) it’s not subject to judicial review, unlike agency rulemaking, and c) it only requires 50 votes in the Senate to pass, and what else exactly is the Senate doing in the next month or so?

It’s probably because of the easy drafting of CRA resolutions that none have been introduced yet; Capitol Hill works better on deadline. But there’s a strange kind of working backward from the result going on. You could imagine putting out a bunch of resolutions and letting the particular advocacy groups rally around them and push the holdouts on the Democratic side to get to a majority. Or you could imagine an insular process, where the Democratic leadership tries to figure out exactly which CRA resolutions might get 50 Senate votes, and only then allows those to be introduced.

This seems completely backwards: you build momentum by putting the bill out there, not by taking an internal poll. But that’s the way it’s obviously been decided. The leadership has, incredibly, been able to put a lid on introducing resolutions, from an allegedly rebellious caucus, simply through either implicit or explicit threats that only the resolutions guaranteed to pass can move forward.

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Now the advocacy groups, who have wanted to jump in and build awareness, are finally getting involved. Today, over 300 organizations will petition Congress to upend the so-called “fake lender” rule finalized by the Office of the Comptroller of the Currency (OCC). It’s also known as the “rent-a-bank” rule, and whatever you call it, predatory lenders can use it to neutralize state limits on interest rates on consumer loans.

I wrote about this rule all the way back in November 2019. Before this went into place, it was illegal for non-bank lenders to evade limits on interest set by the states. But with the logic usually reserved for late-night drinking games, the OCC made it legal to route the loans from the non-bank lender though a federally chartered bank, therefore making the loans eligible for federal pre-emption, under the National Bank Act of 1864 (!). So instead of being restricted to charging 36 percent interest in places like Illinois or Colorado or Arizona or Montana, or even lower in New York and Arkansas, these lenders can launder their loans and charge 300 or 400 percent or whatever they wish.

Here’s an example of a disabled military veteran being put into a loan with a 160 percent interest rate in California, where the cap is a little over 36 percent. Though cited by consumer protection advocates, this is a state bank laundering the loan, so not necessarily subject to the OCC rule. But OCC's rent-a-bank rule would allow this for federally chartered banks as well. There are dozens of rent-a-bank lenders currently operating; Elastic, OppFi, LoanMart and NetCredit are among the biggest.

In short, it’s a loanshark facilitation rule from the federal government. And it can be overturned by majority vote, through a Congressional Review Act resolution. The only reason there aren’t thousands of people tying up the Capitol switchboards about this right now is that nobody knows about it. That’s what happens when you hide the legislation that would actually fix it until you’re sure it can pass.

This is also not a situation where anyone should care that future bank regulators would not be able to pass a “substantially the same” regulation in this arena. First of all, that fear, which has taken root in Congress as an excuse, is misplaced and incorrect. But even if it were true, we don’t want any regulations on how to cleverly end-run state interest rate caps!

Whenever this issue is presented to voters in a transparent way, they overwhelmingly opt for limiting the interest rate, even amid lender warnings that this will reduce the flow of loans. Last November, Nebraska voted on a 36 percent interest rate cap and it passed with 83 percent of the vote. Why wouldn’t you tell people that the last Republican administration allowed predatory lenders to evade this, and that there’s a way for Democrats to reverse it? And if there’s someone in the Democratic coalition who’s against this, could they reveal themselves?

’Cause I’m the Taxman

One thing about living in America is that you know that the rich are getting away with something, and the moments of change sometimes come about by finding out what. That could be the outcome of this very interesting paper from some researchers (including Gabriel Zucman), which indicates that the top one percent of households failed to record 21 percent of their income, a missing portion that ranges even higher as you go further up the ladder. This is growing worse because of partnerships, which got even larger tax benefits from the Trump tax cuts.

“How do you think they got so rich,” you say. It adds up to about $175 billion in tax savings every year, enough to fully fund the child tax credit increase. Now the only way to get at some of this is through the kind of enforcement that’s going to require reinvestment in the IRS. But just shifting the mix of where the agency devotes its enforcement resources would help. As one of our original Day One Agenda pieces from tax law professor Victor Fleischer noted, audit rates for taxpayers earning over $1 million dropped four-fold between 2015 and 2018. Reinvigorate that and at least some of the tax gap is shrunk. That’s why it’s one of the most impactful things President Biden can do on his own, and part of our executive action tracker. This tax season will prove to be an early test.

What Day of Biden’s Presidency Is It?

Day 62.

Today I Learned

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