Congress takes an interest in financial services, climate change and big tech | Skadden, Arps, Slate, Meagher & Flom LLP
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- Major financial institutions, SPACs and consumer credit are the primary concerns of key congressional committees.
- Democrats are lobbying energy and social media companies over their alleged roles in spreading climate change misinformation, while Republicans want details about the activities of US climate envoy John Kerry during of the United Nations COP26 conference.
- Lawmakers’ focus on Big Tech has shifted from its market power to its effects on users, especially children. Members of both parties want to monitor companies for their social impacts.
- Senator Elizabeth Warren continues to scrutinize the private equity industry.
As expected, since Democrats took control of the House and Senate in January 2021, congressional oversight committees have intensified their focus on the private sector. Whether a bipartisan consensus, a single party, or an individual legislator directs oversight of a particular industry, companies should take note. A single legislator’s pet project could turn into a sector inquiry engulfing reckless company.
Despite high-profile divisions among Democrats over the Biden administration’s major policy initiatives, Democratic lawmakers in both chambers have shared an interest in overseeing the financial and tech industries and in addressing climate change.
Three of Capitol Hill’s most powerful and active players have focused heavily on Wall Street:
- Sen. Sherrod Brown (D-Ohio), Chairman of the Senate Banking, Housing and Urban Affairs Committee (Senate Banking Committee);
- Rep. Maxine Waters (D-California), chair of the House Financial Services Committee; and
- Sen. Elizabeth Warren (D-Mass.), member of the Senate Banking Committee, chair of its subcommittee on economic policy, member of the Senate Finance Committee and chair of its subcommittee on Fiscal Responsibility and Economic Growth .
Key agenda items in this area have included the use of special purpose acquisition companies (SPACs) to take companies public; supervision of the largest financial institutions; and general consumer protection issues, such as racial disparities in lending and improved financial performance of banks during the economic upheaval of the pandemic.
Congress’ focus on the financial sector has been reinforced by President Biden’s appointment of key progressives to high-level regulatory positions in his administration, including Gary Gensler as Chairman of the Securities and Exchange Commission and Rohit Chopra as director of the Consumer Financial Protection Bureau – an agency that the Trump administration effectively dismantled over the previous four years.
Democrats have made climate change a top watchdog priority. In September 2021, Rep. Carolyn Maloney (DN.Y.), chair of the House Oversight and Reform Committee, and Rep. Ro Khanna (D-Calif.), chair of the House Oversight and Reform Subcommittee the Chamber on the Environment, have sent letters. to prominent fossil fuel executives requesting documents and communications related to their organizations’ roles in “supporting misinformation and misleading the public to prevent action on the climate crisis.”
Following the requests, the committee held a hearing with seven CEOs, during which Rep. Maloney announced that she would issue subpoenas to companies that had failed to provide requested documents and communications. During a hearing break, Rep. Khanna hinted to reporters that the committee may hold additional hearings on the matter and interview other witnesses, including social media executives whose platforms may have broadcast material. climate misinformation.
Notably, Reps. James Comer (R-Ky.) and Ralph Norman (RS.C.), two key Republicans on the House Oversight and Reform Committee, are requesting a hearing with John Kerry, the presidential special envoy for the climate, to examine his participation in the recent United Nations Climate Change Conference (COP26) and the impact of the Biden administration’s climate policies on the economy. As minority party members, they cannot hold congressional hearings, but their request may provide insight into their climate priorities if Republicans retake the House in 2022.
As in previous years, Big Tech has been subject to bipartisan scrutiny. In the 117th Congress, however, lawmakers appear to have shifted their focus from antitrust topics to the role of industries in social issues.
In March 2021, 23 Democrats sent a letter to a tech company demanding answers regarding its advertising practices and alleged promotion of misinformation. The House Energy and Commerce Committee held a related hearing titled “Nation of Disinformation: The Role of Social Media in Promoting Extremism and Disinformation,” which included testimony from three CEOs of technology. The Senate Homeland Security and Governmental Affairs Committee also sent a letter to three social media companies regarding their policies for monitoring and removing extremist content.
In stark contrast, Republican efforts have largely focused on limiting Big Tech’s ability to police and censor content based on a user’s views and affiliations.
Despite partisan rancor on many issues, Democratic and Republican lawmakers have shown a bipartisan interest in understanding and regulating the industry’s impact on children and teens. In April 2021, Rep. Raja Krishnamoorthi (D-Ill.) requested information from a tech company and raised concerns about the quality of its content, advertising practices, and effects on children. The House Oversight and Reform Committee has also sent letters to two tech companies regarding their alleged role in facilitating human trafficking content and their impact on the mental health of teenage girls.
Meanwhile, the Senate Committee on Commerce, Science and Transportation held a hearing with a tech company executive regarding its alleged harmful effects on young people. Several Republican lawmakers have sent letters to tech CEOs requesting information about internal research or studies conducted by the companies to better understand the impact of their products on children’s mental health. Despite this overlapping issue, Republican lawmakers issued a press release along with the letters titled “Democrats Refuse to Help Expose Harms of Big Tech to Children.”
While no bipartisan consensus has emerged on these issues, both Democratic and Republican lawmakers appear to agree that the industry should be subject to some type of additional oversight. Therefore, regardless of the results of the November 2022 midterm elections, Big Tech will likely be in the congressional spotlight for the foreseeable future.
Senator Warren has long been a critic of private equity (PE) firms and shows no signs of letting up. In addition to reintroducing a 2019 bill targeting the PE, Senator Warren issued several watch letters.
In November, Senator Warren sent a letter to the private equity firm that owns a major pet retailer regarding its treatment of workers and animals. It has targeted buyout firms over their retail investments following the liquidation of several private equity-backed department stores and chains. In March 2021, after sending two letters to a network of retirement homes, Senator Warren announced plans to launch an investigation into for-profit care facilities and those owned by private equity firms. Recently, she and two other senators sent letters to two PE leaders in support of striking workers at a coal mine controlled by investment companies.
As chairman of the Senate Banking Subcommittee on Economic Policy, Senator Warren led a hearing titled “Protecting Businesses and Communities from Private Equity Abuses,” and the committee held a hearing on owners of private equity in October.
Although some news outlets have described attendance at these hearings as “sparse” and predict that lawmakers will remain largely indifferent to the industry’s suit, the House Ways and Means on Oversight subcommittee also held a hearing regarding the issue. significant private equity investment in health care in the United States. system. Additionally, in June 2021, Oversight Subcommittee Chairman Rep. Bill Pascrell (DN.J.) wrote to the Government Accounting Office, asking it to study the effects of PE in the care sector. health.
Congressional oversight of the private sector was active in 2021, and high-profile hearings late in the year signaled that 2022 will bring the same, especially as the midterm elections approach. We can expect Democrats to push forward aggressively on their platform as they fight to hold on to their majority. Meanwhile, Republicans will likely focus their attention on executive oversight.
Companies should therefore continue to monitor relevant press and assess their policies, procedures and related compliance efforts to determine if changes need to be made.