Patrick McHenry

Mr. McHENRY

Mr. McHENRY. Mr. Chair, I claim the time in opposition to the amendment, even though I am not opposed to it.

Mr. McHENRY. Mr. Chair, I claim the time in opposition to the amendment, even though I am not opposed to it.

Mr. McHENRY. Mr. Chair, let me say first that Republicans unanimously voted to support the Waters-McHenry bipartisan deal to strengthen the Bank and combat Chinese aggression, but we are not going to support this partisan bill here on the floor today. This amendment is a fine one. This amendment, as with some other amendments that the Democrats are offering today that the Rules Committee made in order--as I understand it, they made in order 19 Democrat amendments and two Republican amendments, so that is quite a ratio, but I think there is a point where additional reporting requirements, as I said earlier, and other mandates can burden an agency to the point of diminishing returns. If you want the Export-Import Bank to be effective, it is often better to advocate for initiatives within the Bank, like the Waters-McHenry bill, and make the Bank focus on priorities. This is one area, with opportunity zones, that we support in a bipartisan way to get investment in disadvantaged communities across the country. Those opportunity zones are a part of now tax law. That standalone bill was a bipartisan one last Congress and the Congress before that had great consensus. So what the gentlewoman from Michigan (Ms. Tlaib) is advocating here matches up quite nicely with that to ensure that the Bank is focused on those same areas that have been historically disadvantaged or economically left behind. Some of those areas are in my district, some are in her district, but they are throughout the country. So, as I said, I do not oppose the amendment, I support the amendment, and I think it is important for the Bank to focus on important communities across the country, but especially those that are economically disadvantaged. Mr. Chair, I reserve the balance of my time.

Mr. McHENRY. Mr. Chair, let me say first, Republicans unanimously voted for the Waters-McHenry bipartisan deal to strengthen the Bank and combat Chinese aggression, but we are not going to support this partisan bill. I would note that the amendment offered here clarifies the definition of minorities under the section of the bill that was a priority for the chair of our committee, Chairwoman Waters, which is the Office of Minority and Women Inclusion, which is referred to as OMWI. I would just note that in this bill, the Democrats have prioritized OMWIs over the global economic and national security threats posed by China and even Russia. OMWIs are important. That is fine. We included that in the bipartisan bill, and that was part of the tradeoff of a bipartisan bill, including something that was a priority for Chairwoman Waters, but also in that agreement were provisions that were tough on China. I thought it was a fair trade in order to get a bipartisan bill. OMWIs and being tough on China are not mutually exclusive ideas, but my colleagues on the other side of the aisle felt that they needed to prioritize, and so they chose OMWIs as opposed to a rational stance against Chinese aggression or even Russian actions. To the extent that Mr. Case's amendment clarifies language that will have no impact and will not be enacted anyway, I don't oppose it. Mr. Chairman, I reserve the balance of my time.

Mr. McHENRY. Mr. Chairman, I yield myself the balance of my time. Mr. Chairman, I would say to my colleague, yes, it is important that we have robust global trade. Ex-Im, at its height, at its strongest year, supported just shy of 2 percent of American exports. I don't want to diminish a little less than 2 percent, but most export is done through the private sector without a government program like Ex-Im. I would also say that, as a matter of our national interest, we shouldn't be subsidizing Chinese foreign policy with One Belt, One Road. We shouldn't be subsidizing their island-building in the Pacific. We shouldn't be subsidizing their actions in Hong Kong. That is what we negotiated with the Waters-McHenry bipartisan bill. I am disappointed that we are not dealing with that policy. Instead, the majority decided to go the partisan route, which the Republican majority leader of the Senate has already said is dead on arrival. The President said he is going to veto this bill. We could have gone a bipartisan route with a bipartisan outcome, but they chose a different route. Look, the majority is the majority. They have the votes to go do what they want to do. But that means I don't need to vote for bad policy just to get along. That is why I tried to negotiate a good bill, and that is why we had a good bill. Mr. Chairman, I support the amendment, and I yield back the balance of my time.

Mr. McHENRY. Mr. Chair, I yield myself the balance of my time. Mr. Chair, this is a failure of bipartisan policymaking, and this is a sad day. I am not angry. I appreciate Chairwoman Waters attempting to strike a bipartisan deal. In fact, we had a deal, and we filed that bill. It is H.R. 3407 that encouraged Members to sign the discharge petition so we can actually support something that was a bipartisan negotiation, not this bill before us today that doesn't take on the important work of banning Chinese state-owned enterprises from accessing our export credit agency. That is what this is about. So I ask my colleagues to vote ``no'' on this very important measure of international export activities, and I yield back the balance of my time.

Mr. McHENRY

Mr. McHENRY. Madam Speaker, I rise to pay tribute to a great education leader in my district, Dr. Patricia Skinner of Gaston College. She has been president of Gaston College for 25 years, nearly half of the college's existence. Over the last two decades, the college has seen tremendous progress. Dr. Skinner facilitated the opening of two new campuses in addition to the construction of 11 new academic and administrative buildings and recently opened the Center for Advanced Manufacturing at the Dallas campus. She has done a fantastic and phenomenal job, and we wish her great success in her retirement. Spending more time with her two daughters and her grandchildren will put her through the paces as we well know. We wish Dr. Skinner well in her retirement.

Mr. McHENRY

Mr. McHENRY. Will the gentleman yield?

Mr. McHENRY. Mr. Speaker, I want to thank the gentleman for his support, and I want to thank the chairwoman of the House Financial Services Committee for her support as well. I am grateful for the work of Chairwoman Waters and her Financial Services Committee staff for the hard work they have put in to protect investors and help small businesses. Mr. Speaker, I will include in the Record a letter from Republic in support of the bill.

Mr. McHENRY. Mr. Speaker, I include the remainder of my statement in the Record. I am pleased the House is taking up my legislation and I would like to thank the gentlewoman from California, the Chairwoman of the Financial Services Committee, for her co-sponsorship of this bill. We have worked together on this bill for three Congresses now. I appreciate all the hard work that she and her staff have done to make this a bill that works to protect investors and promote small businesses, particularly in communities that are being left behind. We all agree small businesses and entrepreneurs are America's true job creators. This is especially true in communities I represent in western North Carolina. But today, America's small businesses are still struggling to find capital. Small business lending from traditional banks continues to decline, and small business loans in America's small towns are less than half it was merely fifteen years ago. Investment crowdfunding is one way we can reverse this concerning trend. In 2012, I wrote the original bill to legalize investment-based crowdfunding, making it easier for businesses to raise capital. That bill became part of the JOBS Act. Unfortunately, the SEC's final rule contained serious structural flaws that require Congress's immediate attention. In particular, crowdfunding is suffering from the so-called ``12-g problem.'' The ``12 g problem'' refers to a section of the Securities Exchange Act of 1934, which subjects crowdfunded companies to requirements similar to a public company, but at a very low asset threshold. Our proposed amendment fixes the ``12-g problem'' by raising the asset threshold for both small businesses that already have revenue, and for those startups that do not. This makes it more likely that high-growth companies will consider crowdfunding as an option for raising capital. Another significant problem for crowdfunding is that, under the SEC rule, single purpose funds are not permitted. Single purpose funds allow Main street investors to invest along with more sophisticated lead investors who have an obligation to advocate for their best interests. That means better terms and greater transparency for the investors. A single purpose fund also improves the capitalization table for companies that hope to attract venture capital in the future. Although the bill does not include everything I would have hoped, we worked hard to find a compromise that addresses the most urgent problems with investment crowdfunding that need correcting now. To that end, I want to thank Chairwoman Waters again for her continued support on this important, bipartisan compromise. This bill shows that we can work together in a bipartisan way to help American small businesses in seeking to raise capital by connecting folks not just in their local communities, but across America. I am pleased that this legislation enjoys support from my colleagues on both sides of the aisle. I urge my colleagues to join us in support of this bill. Mr. Speaker, I yield back the balance of my time.

Mr. McHENRY

Mr. McHENRY. Mr. Chair, I include in the Record an article on behalf of the Due Process Institute, the American Civil Liberties Union, and FreedomWorks in opposition to this bill. [From the Due Process Institute, ACLU, and FreedomWorks] No Benefit to a Beneficial Ownership Reporting System That Increases America's Over-Incarceration Problem and Fails To Adequately Protect Privacy H.R. 2513 would require people who form or already own businesses, particularly small businesses, to submit extensive personal, financial, and business-related information to the government's Financial Crimes Enforcement Network (FinCEN). Legislative efforts to stop international crime by trying to ``follow the money'' such as H.R. 2513 likely have the best intentions in mind. However, the Due Process Institute, the American Civil Liberties Union, and FreedomWorks have serious concerns with several provisions of the Corporate Transparency Act of 2019 and believe the House should vote no TODAY on H.R. 2513 until these issues are fully addressed. In sum, the creation of at least 5 new federal crimes for first-time ``paperwork'' violations that are felony criminal offenses calling for prison time is a dramatic step in the wrong direction. No matter how well-intentioned, this bill bears no real relation to combatting terrorism or money laundering and instead eliminates a significant amount of personal and financial privacy. On that score, the bill fails to adequately address how all of the personal and financial information disclosed to, and collected by, the government will be used solely for legitimate purposes or specifically address how privacy interests will be protected. Key Terms are Too Vague Importantly, numerous key terms and phrases in the bill are poorly defined. For example, the current definition of ``beneficial owner'' includes anyone who ``directly or indirectly'' exercises substantial control or receives substantial economic benefit from an entity. What does it mean to indirectly control an entity? The bill does not explain. We also cannot look to current FinCEN regulations to divine meaning. The bill does not replicate current FinCEN definitions of beneficial ownership and broadens the current definition to include an individual that ``receives substantial economic benefits from the assets of a corporation.'' Again, the bill does not explain the term. This lack of clarity has very serious consequences when a bill creates at least 5 new federal criminal laws that do nothing but increase this nation's overreliance on criminalization as a cure for every problem. Vague or overly broad statutory text leaves people vulnerable to unfair criminal investigations and prosecutions. Complex Criminal Compliance Laws Unfairly Burden Small Businesses & Nonprofits Furthermore, this bill exempts most large entities with the compliance teams necessary to help them navigate new and burdensome requirements. Determining what is to be reported, when, and by whom, in a complex regulatory scheme is difficult. Large corporations are exempt--leaving the reporting burdens solely to small or independent businessowners as well as many nonprofits. Compounding this problem, these new disclosure requirements would apply not only to newly formed entities but also to those that have already been in existence--yet a businessowner (even a first- time offender) who fails to comply with any aspect of the requirements could face a prison sentence, as might a non- profit organization that inadvertently fails to meet all of the requirements to qualify for an exemption in the bill. These kinds of requirements easily set traps for honest people trying to faithfully comply with complex laws, particularly owners who lack experience or significant funds and volunteer-based nonprofits also lacking in funds and expertise to retain sophisticated business lawyers who can help them. Beneficial Ownership Information Would Lack Sufficient Privacy Protection The bill currently would permit beneficial ownership information to be shared with local, Tribal, State, or Federal law enforcement under nearly any circumstances where they may assert an existing investigatory basis and agree to abide by vague privacy standards. The receiving agency may then use that information, without meaningful limitation, for any other law enforcement, national security, or intelligence purpose. These standards are entirely too broad and leave far too much personal information vulnerable to disclosure. The bill should permit FinCEN to disclose beneficial ownership information only when presented with a warrant based on probable cause. Without a clear standard limiting information disclosure, there would be few if any limits on the sharing of this information. Search warrants based on probable cause are the standard for obtaining information in criminal investigations and it would be reasonable to require them in this context. Moreover, the bill contains inadequate safeguards for protecting against the improper disclosure of information or for appropriately limiting the use of the information disclosed. At a minimum, the bill should limit use of the information to the investigative purposes for which it was collected and require the deletion of information after it is no longer useful for its investigative purpose. And it fails to provide either. The truth is: there are already hundreds of federal criminal laws on the books, along with a wide swath of powerful investigative tools and authorities, that the government can use to adequately address or prevent money laundering and this bill is an unnecessary step in the wrong direction. We hope you share our bipartisan concerns and oppose this legislation when voting today unless serious amendments are made.

Mr. McHENRY. Will the gentleman yield?

Mr. McHENRY. Mr. Chair, I demand a recorded vote.

Mr. McHENRY. Mr. Chair, again, I would highlight that the civil liberties concerns here are enormous. When you do minimal redaction of specific personally identifiable information, you could still expose data in certain jurisdictions of small business owners in a way that I don't think is warranted, nor do I think the bill's sponsor would like to seek, and I think this is deeply problematic. I would urge my colleagues to look at the contents of this amendment and then to think through the concerns that they would have if it were their information exposed in a minimally redacted way. I don't think they would be quite comfortable with it. Now, think of asking every small business owner in your district to submit this information to another Federal database and then explain to them that they will minimally redact their information, maybe not their name, maybe their address, right, and then otherwise the explanation of their business would be exposed to the public. I don't think it is a smart way to go here. I don't think this is the way we should be legislating. I do think it outlines the underlying concerns I have with this type of database, in not being required to get a subpoena in order to access it. And then an amendment that says that we are going to basically, I don't know, outline in Cherryville, North Carolina, every small business ownership structure in our little town or in Denver, North Carolina, which is an unincorporated area that I live in, likewise, taking a small population with a few small businesses and exposing the ownership structure of small businesses. I don't think this is a smart amendment. I don't think it is what we should be intending as Members of Congress, and I think both folks on the left and the right and in the middle can look at this and think this is not the way to go. So I urge you to vote against this amendment, and I yield back the balance of my time.

Mr. McHENRY. Mr. Chairman, I yield myself the balance of my time. I include in the Record a letter in opposition to this very amendment from the National Federation of Independent Business opposing this amendment. [From NFIB] House Makes Last Minute Bait-and-Switch on Corporate Transparency Act In advance of today's vote, an amendment filed last night shows the true motivations of those pushing the Corporate Transparency Act of 2019 (H.R. 2513). Despite months of rhetoric about protecting the privacy of small business owners, this last-minute amendment would allow the Treasury Department's Financial Crimes Enforcement Network to make public the individual names, addresses, birth dates, and even the driver's license numbers of small business owners. This is a complete reversal of what promoters of this bill have been saying over the last several months. Purportedly about national security, in reality, this bill shifts a burden from big banks, something they said today is merely ``a client pain point,'' to small businesses who simply cannot absorb an additional 131.7 million hours of paperwork over the first 10 years at a cost of $5.7 billion. And, with the last-minute amendment, it allows for the creation a public registry. ``Supporters of this bill have revealed their cards today,'' said Brad Close, NFIB's Senior Vice President, Public Policy. ``This amendment confirms one of small business owners' greatest fears--that the true intention of those pushing this bill is to establish a public registry of every small business owner--something that can be used to shame law-abiding small business owners for free speech activities or political purposes. This is a serious breach of the privacy and first amendment rights, and we urge members of the United States House of Representatives to defeat this amendment today.'' The amendment filed last night would prohibit FinCEN from making public the names of specific businesses but would not prohibit FinCEN from listing the names of business owners or the personally identifiable information of business owners such as home addresses. This morning, The Hill published an op-ed by NFIB President and CEO Juanita D. Duggan on the significant risks and penalties the Corporate Transparency Act imposes on small business owners. This followed on the heels of an announcement by NFIB of a coalition of 38 business groups, including NFIB, who joined together in strong oppositior of this legislation. To read more on NFIB's efforts to protect small business privacy, visit https://nfib.com/protectprivacy.

Mr. McHENRY. And, Mr. Chair, I include in the Record two newspaper pieces, or news articles, if you will, from The Wall Street Journal and from The Verge. From The Verge, it says: ``FBI violated Americans' privacy by abusing access to NSA surveillance data, court rules.'' And the second, from The Wall Street Journal, says: ``FBI's Use of Surveillance Database Violated Americans' Privacy Rights, Court Found.'' These are two recent articles that have been published in the last 10 days. [From The Verge, Oct. 8, 2019] FBI Violated Americans' Privacy by Abusing Access to NSA Surveillance Data, Court Rules (By Nick Statt) FBI Agents made tens of thousands of unauthorized searches on American Citizens The Federal Bureau of Investigation made tens of thousands of unauthorized searches related to US citizens between 2017 and 2018, a court ruled. The agency violated both the law that authorized the surveillance program they used and the Fourth Amendment of the US Constitution. The ruling was made in October 2018 by the Foreign Intelligence Surveillance Court (FISC), a secret government court responsible for reviewing and authorizing searches of foreign individuals inside and outside the US. It was just made public today. THE FBI MADE UNAUTHORIZED, WARRANTLESS ELECTRONIC SEARCHES ON AMERICAN

Mr. McHENRY. Mr. Chair, I am prepared to close, and I yield myself the remainder of my time. Mr. Chair, this is a disappointing bill. According to the National Federation of Independent Businesses, this will create $5.7 billion in new regulatory costs for America's smallest businesses. My friend and colleague just said one or two employees, but the bill before us today says 20 or fewer employees. Traditionally, Congress has exempted small businesses from onerous government regulation, and Congress, in its wisdom, has set a threshold of small businesses that is 50 and above for most regulations that are of national import. This bill turns all that on its head. It turns it all on its head and says: No, no, no. We are going to have a special carve-out for all small businesses, $5 billion and under of revenue and 20 employees and fewer. The whole mindset here is absolutely wrong. We are putting a new small business mandate on America's smallest businesses, and we have an intelligence bureau that is going to go out to the public and request information directly from the public. We don't do that with NSA to look at your cell phone records. In fact, we require the NSA to go before a court in order to look at a cell phone database, and there is an enormous amount of litigation around that. What we have here is a new Federal Government database by an intelligence bureau most people haven't heard of, and it is a mandate on small businesses. There are no due process protections here. You don't have to go before a court in order to look at this. In fact, they can just peruse it at will. You have no data security standards, so we don't even know if this will be held to the same standard of data breaches that have already occurred in our intelligence bureaus and for Federal employees, nor the same liability standards for Federal users as the private sector has to protect personally identifiable information. Again, there is not regulatory relief. Our friends in the banks want this because they want to be relieved of the burden of collecting this information. I certainly understand that. But they are still going to have to collect that information. There is no repeal of the underlying rule that requires the banks to collect that type of information in order to transact business with those small businesses and businesses of other sizes. So there is no regulatory relief, with few civil liberty protections. We don't have a cybersecurity standard in the database. And it is a new mandate on small businesses. But if you are content with that, vote ``yes,'' and if you don't think that is sufficient, vote ``no.'' I am going to stand with the NFIB, the American Farm Bureau, the National Association of Home Builders, National Association of General Contractors of America, the National Retail Federation, the Real Estate Roundtable, and other organizations here in Washington, like the ACLU, Heritage Action for America, the FreedomWorks Foundation, and the American Civil Liberties Union, as I mentioned, but I want to mention them twice so that people hear that clearly. There is bipartisan opposition to this, and so I encourage my colleagues to vote ``no'' against this new mandate. Stand with your small business folks, and we will come to a better compromise than what we have here before us today. Please vote ``no.'' Mr. Chair, I yield back the balance of my time.

Mr. McHENRY. Mr. Chair, I yield 2 minutes to the gentleman from Tennessee (Mr. John W. Rose), from Temperance Hall.

Mr. McHENRY. Mr. Chair, I include in the Record a letter from the National Federation of Independent Businesses in opposition to this bill and a letter dated October 18, 2019, in opposition to the bill.

Mr. McHENRY. Mr. Chair, I reserve the balance of my time.

Mr. McHENRY. Mr. Speaker, I yield 2 minutes to the gentlewoman from Missouri (Mrs. Wagner), the ranking member of the Subcommittee on Diversity and Inclusion, and the vice ranking member of the Committee on Financial Services.

Mr. McHENRY. Mr. Chairman, I yield the gentleman from Kentucky an additional 30 seconds.

Mr. McHENRY. Mr. Chairman, I yield myself such time as I may consume. I am opposed to H.R. 2513, and I want to begin by outlining my opposition. This bill before us is a new small business mandate on the smallest businesses in America. The bill before us today requires some of the smallest businesses in America, those with fewer than 20 employees and those with less than $5 million in receipts, to file annually a list of all of their owners with the Financial Crimes Enforcement Network, or FinCEN. For those who are watching on C-SPAN, I have a trivia question for them, Mr. Chairman. I bet most of them have never heard of FinCEN. I bet those in the House office buildings, Mr. Chairman, have not heard of FinCEN. It is a little-known agency even here in Washington that deals with financial crimes, in the Treasury Department. Imagine you are a small business owner. You are getting a notice from the Financial Crimes Enforcement Network mandating that you disclose the owners of your entity. This would be the first consumer-facing intelligence bureau that we would have in the Federal Government. This bill would require small business owners and small business investors to submit their personal information to a new Federal database without adequate privacy protections. This new Federal database will be accessible to law enforcement without a warrant and without a subpoena, a disturbing violation of due process, in my view. This has the fewest civil liberties protections of any Federal intelligence bureau database. It is a lower standard of accountability than what Congress provides in the PATRIOT Act, which largely targets foreign actors. According to the National Federation of Independent Business, this bill would also add more than $5.7 billion in new regulatory costs for America's small businesses. Supporters of the bill are calling for these changes without any direct evidence to justify the mandate. There is plenty of anecdote, but no data. For several months leading up to the committee's consideration of this bill, I sought data from the intelligence bureau called FinCEN and from the Treasury Department, along with the Department of Justice, to better understand the need for this legislation. They provided none. They gave anecdotes of very scary stories to try to compel me as a legislator to vote for what is a very specific threshold in law and a very specific new small business mandate. I refuse to legislate based off of anecdotes. I would like to have hard data. My questions have not been answered by FinCEN, the Treasury Department, or the Department of Justice. We have no information on how beneficial ownership information will be protected, in addition to that. We do not have information on how the privacy of small businesses will be preserved. In fact, we have an amendment here considered on the House floor that could further expose their data to the public, so even that determination is not in stone now with the bill before us. We don't have information on how many law enforcement agencies will have access to the database, how many financial institutions will have access to the database, or what threshold for amount of sales and the number of employees will yield the most effective outcome. In the bill, we have $5 million of revenue and under, and 20 employees and under. We have no data to back up that that is the right threshold for either the dollar amount or the number of employees. We will have stories, and we will have Members come to the House floor telling us stories of bad actors, but that is anecdote. That is not data to provide for this threshold. If we are going to have such an encroachment on America's personally identifiable information of small businesses across this country, shouldn't we have solid data? I believe so. I believe we have a number of issues that need to be dealt with to make this bill sustainable and provide protections for civil liberties. I believe that combating illicit finance is a nonpartisan issue that all Members want to address. Our actions must be thoughtful and data- driven. For example, in committee, we came together in support of H.R. 2514, the COUNTER Act, introduced by the gentleman from Missouri (Mr. Cleaver) and the gentleman from Ohio (Mr. Stivers). H.R. 2514 is a compilation of bipartisan policies that modernize and reform the Bank Secrecy Act and anti-money laundering regimes. It balances security and privacy. I think we have a nice bipartisan bill that was reported out of the committee without a dissenting vote. It provides the Treasury Department and other Federal agencies with the resources they need to help catch bad actors. There have been years of work in the production of that bill that is wrapped up in this larger bill. I am disappointed that the COUNTER Act is not being considered as a standalone bill, instead being swept into this bill. Because I believe as a standalone bill, we could get that bill through the House, through the Senate, and signed by the President into law this year. I think it is unfortunate that we are not considering that as a standalone measure. I thank my colleagues on the other side of the aisle for listening to some of our concerns on the Republican side of the aisle. We will have some Republican Members who vote for this bill. I, however, will not. The encroachment on the question of civil liberties, the lack of separation of powers, the lack of the use of a subpoena, and the lack of regulatory relief for those who are collecting this data, both in terms of small businesses and financial institutions, has not been fixed nor dealt with. In particular, the Rules Committee last night rejected amendments that would require law enforcement to obtain a subpoena before accessing--I am sorry, during committee, there was a rejection of a subpoena in our discussions, and then last night, the Rules Committee rejected my amendment that would provide greater certainty for small businesses and for community banks by repealing the customer due diligence rule, which requires financial institutions to collect similar data that is being required in this bill. I believe that issue still merits a more thoughtful solution that doesn't treat legitimate small businesses as collateral damage, like the current bill does. Mr. Chair, I am opposed to the bill, and I reserve the balance of my time.

Mr. McHENRY. Mr. Speaker, I yield 2 minutes to the gentleman from Troy, Ohio (Mr. Davidson).

Mr. McHENRY. May I inquire of the Chair the time remaining.