Overnight Regulation: White House downplays talk of nationalizing 5G after blowback | Azar sworn in as HHS chief | EPA chief set for grilling | Crypto exchange under scrutiny after massive theft

Welcome to Overnight Regulation, your daily rundown of news from the federal agencies, Capitol Hill, the courts and beyond. It’s Monday evening where FBI Deputy Director Andrew McCabe has reportedly stepped down. It’s also a day before President Trump’s first State of the Union address.

 

THE BIG STORY:

The White House said Monday there had been “no decisions” made about creating a nationalized 5G broadband network after reports about the proposal sparked fierce blowback.

“Right now we’re in the very earliest stages of the conversation. There are absolutely no decisions made on what that would look like, what role anyone would play in it,” White House press secretary Sarah Huckabee Sanders said at Monday’s press briefing.

She added that the focus for now was “simply the need for a secure network.”

 

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Background… Her comments came after Axios reported Sunday that a National Security Council memo floated creating a nationalized broadband network for better security against foreign state-sponsored hacks by countries like China.

The idea of nationalizing the 5G network being built by private companies was quickly criticized by Republicans and the telecom industry.

Click here for more on the proposal.

 

The Blowback… All five members of the Federal Communications Commission, from both parties, came out against the proposal.

“Any federal effort to construct a nationalized 5G network would be a costly and counterproductive distraction from the policies we need to help the United States win the 5G future,” Republican FCC Chairman Aji Pai said in a statement Monday.

“There is a worldwide race to lead in #5G and other nations are poised to win,” Jessica Rosenworcel, one of the commission’s two Democrats, wrote on Twitter. “But the remedy proposed here really misses the mark.”

Click here for more on the FCC reaction.

 

Lawmaker react… Rep. Greg Walden (R-Ore.), the chairman of the House Energy and Commerce Committee, also rejected the idea.

“We’re not Venezuela — we don’t need to have the government run everything as the only choice,” he said at a conference.

Walden said he had not known about the proposal and did not believe it was being seriously considered.

Click here for more.

 

Trade groups… The telecom trade also weighed in.

“There is nothing that would slam the breaks more quickly on our hard-won momentum to be the leader in the global race for 5G network deployment more quickly than the federal government stepping-in to build those networks,” said Jonathan Spalter, present of trade association USTelecom.

The Hill’s Ali Breland with the recap.

 

ON TAP FOR TUESDAY

The Senate Environment and Public Works Committee holds an EPA oversight hearing where they will hear from agency Administrator Scott Pruitt.

Treasury Secretary Steven Mnuchin testifies before the Senate Banking Committee on the Financial Stability Oversight Council’s annual report.

The Senate Health, Education, Labor and Pensions Committee holds a hearing on reauthorizing the Higher Education Act.

The House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on the financial technology “fintech” marketplace.

The House Energy and Commerce Subcommittee on Communications and Technology will hold a hearing to review a number of bills aimed at expanding broadband access.

The House Science Committee holds a hearing on management at the Energy Department.

 

REG ROUNDUP

Health care: President Trump said prescription drug prices will come “rocketing down” under the leadership of Alex Azar, who was sworn in on Monday as the new head of the Department of Health and Human Services.

“We have to get the prices of prescription drugs way down and unravel the tangled web of special interest that are driving prices up for medicine and for really hurting patients,” Trump said at a ceremony honoring Azar, a former pharmaceutical executive and HHS official.

Azar replaces former HHS Secretary Tom Price, who resigned in September after coming under fire for traveling on chartered and military aircraft.

“As our new secretary, Alex will continue to implement the administrative and regulatory changes needed to ensure that our citizens get the affordable high quality care that they deserve,” Trump said at the White House.

Azar will also be charged with curbing the opioid crisis, Trump added.

“I think we’re going to be very tough on the drug companies in that regard and very tough on doctors in that regard,” he said.

The Hill’s Rachel Roubein has more here.

 

Cyber security: A Tokyo-based cryptocurrency exchange is coming under the scrutiny of Japanese regulators after hackers pulled off what may be the largest cryptocurrency theft to date.

The hackers made off with hundreds of millions in virtual currency from the exchange, Coincheck, on Friday.

Japan’s financial regulator, the Financial Services Agency (FSA), on Monday ordered the exchange to “improve business operations” following the “illicit transfer,” Coincheck announced in a blog post.

The FSA ordered Coincheck to investigate the incident, submit a written report, provide proper support to customers, and to strengthen and develop new methods to prevent future thefts. The agency gave the exchange a Feb. 13 deadline to comply.

“In moving towards reopening our services, we are putting all of our efforts towards discovering the cause of the illicit transfer and overhauling and strengthening our security measures while simultaneously continuing in our efforts to register with the Financial Services Agency as a Virtual Currency Exchange Service Provider,” Coincheck said.

Reports vary on the how much NEM, a type of cryptocurrency, the hackers snatched from the exchange with estimates ranging from $400 million and $530 million.

Olivia Beavers explains.

 

Environment: Environmental Protection Agency (EPA) Administrator Scott Pruitt was personally involved in the process to remove sections on climate change from the agency’s website, records obtained by a green group show.

The Environmental Defense Fund (EDF) said the records it obtained via the Freedom of Information Act show a high degree of involvement by Pruitt in the April process of removing climate sections and replacing several of them with a section on President Trump’s executive order to roll back the Clean Power Plan.

Environmentalists have been highly critical of the EPA’s decision to remove the pages, some of which still haven’t been replaced and instead forward to a page about the removal process.

In one April email to colleagues in the EPA’s communications office, Lincoln Ferguson, an adviser to Pruitt, asks how close they are to removing and replacing the Clean Power Plan section.

“The Administrator would like it to go up ASAP. He also has several other changes that need to take place,” Ferguson wrote.

J.P. Freire, then the head of communications, responded, “You can tell him we … are just finishing up.”

Ferguson then asked if the change could happen that day: “Just asking because he is asking.”

Timothy Cama has more details.

 

Environment: The Environmental Protection Agency’s (EPA) internal watchdog office complained that the Trump administration’s proposed budget cuts would create a “significant challenge” to its work.

Inspector General Arthur Elkins sent a letter last year to the White House Office of Management and Budget (OMB), outlining his concerns regarding the budget proposal for fiscal 2019, which the administration is still developing and is planning to release next month.

“The proposed fiscal year (FY) 2019 budget creates a significant challenge for the Environmental Protection Agency’s (EPA’s) Office of Inspector General (OIG) and its ability to accomplish its agency oversight mission,” he wrote in the September letter, which the office released recently in response to Freedom of Information Act requests.

Elkins had asked for $62 million for his office’s 2019 operations. But EPA officials instead asked the White House for $41 million, citing OMB’s request that budget not go too far above Trump’s request for fiscal 2018, which was $37 million, according to the letter and a report Elkins sent to Congress in November.

“Such a proposal would substantially inhibit the OIG from performing the duties of the office, including mandatory OIG responsibilities explicitly required by federal law,” he said.

Elkins’s office has opened numerous high-profile investigations into EPA Administrator Scott Pruitt, including probing his travel spending and his decision to spend about $25,000 on a soundproof booth for his office.

Timothy Cama has more here.

 

Environment: Environmental Protection Agency (EPA) head Scott Pruitt will head to a Senate committee Tuesday for his first oversight hearing in that chamber since taking the job.

Pruitt is due to testify before the Environment and Public Works Committee hearing.

The event is likely to highlight Democratic senators’ strong objections and Republicans’ warm support for Pruitt’s aggressive deregulatory agenda in his nearly one year in office.

Pruitt has started to roll back nearly all of the major elements of the Obama administration’s EPA agenda, such as the Clean Power Plan and the Clean Water Rule.

He has even started to dig further back than Obama, with a regulatory change last week that lets some major polluting facilities be subject to less stringent air emissions standards.

Timothy Cama and Miranda Green with the preview.

 

Finance: Leaders of prominent conservative groups are urging the Trump administration to issue an executive order to index capital gains taxes to inflation, arguing that doing so would end taxes on “phantom income.”

“For much the same reason that regular income tax brackets were indexed to inflation over 30 years ago, we believe that it is only a matter of fairness to do the same for capital gains,” the conservative leaders said Monday in a letter to President Trump and Treasury Secretary Steven Mnuchin.

Under current law, when people sell investments, they pay taxes on the difference between the amount they sold the investment for and the amount for which they purchased it. But the conservatives argue that taxpayers’ actual gains are lower than the amount that’s currently taxed because of inflation.

“For example, if someone saving for retirement purchased an S&P index fund for $1,000 in 2008 and dutifully held it for ten years, they could now sell it for $1,934. That’s a gain of $934,” the conservative leaders wrote.

“Unfortunately, the full amount would be subject to taxation. But $168 of that $934 isn’t a real gain at all. It’s phantom income that was eaten away because of inflation. And yet, taxpayers are currently forced to pay taxes on this nonexistent income.”

Naomi Jagoda explains here.

 

Energy: The governor of Washington on Monday rejected a permit that would allow North America’s largest oil-by-rail terminal to be built in the state.

Gov. Jay Inslee (D) said that he was in agreement with state regulators who unanimously recommended last month that he reject oil companies Tesoro and Savage’s application to build a terminal at the Port of Vancouver.

Washington’s Energy Facility Site Evaluation Council voted last November to deny the permit and submitted its recommendations to Inslee in December.

“The Council has thoroughly examined these and other issues and determined that it is not possible to adequately mitigate the risks, or eliminate the adverse impacts of the facility, to an acceptable level,” Inslee said in a letter to the council.

Vancouver Energy, a joint venture of Tesoro and Savage, had prosed building an energy terminal that would accept crude oil delivered by rail from mid-North America and the Bakken oil fields. It would ship over 131 million barrels of oil per year down the Columbia River.

Miranda Green has more here.

 

Criminal justice: Republican lawmakers — boosted by support from the White House, governors and outside conservative groups — say they’re confident they will pass a criminal justice reform bill before the 2018 midterm elections.

“I think it would be a great thing if we could pass prison reform and get it to the president’s desk,” Sen. John Cornyn (R-Texas), the chief vote counter for the GOP majority in the Senate, told a group of donors affiliated with billionaire conservative brothers Charles and David Koch on Saturday night.

“I’m more optimistic about that happening this year and in the next few months than I’ve ever been.”

Prison reform is a priority for the Koch network, which is holding its winter seminar in the California desert this weekend.

Jonathan Easley has the story here.

 

Finance: A group of Democratic senators is pushing President Trump to include “Buy American” and “Hire American” proposals in his long-awaited infrastructure plan.

In a letter to the president dated Friday, nine Democrats and Sen. Bernie Sanders (I-Vt.), who caucuses with the Democratic Party, argued Trump must include these principles to deliver on his promises to American manufacturers and the middle class.

“As you draft your infrastructure proposal, we encourage you to not only protect existing ‘Buy America’ laws, but to work with Congress to expand these protections and address coverage gaps,” the lawmakers write.

Mallory Shelbourne has more on their letter.

 

Energy: Republican Sen. John Barrasso (Wyo.) is placing a hold on President Trump’s nominee to oversee the Department of Energy’s environmental cleanup programs.

Barrasso is placing a hold on Anne White’s nomination until the Energy Department committed to ending its process of reselling excess government-owned uranium on the market. Barrasso said the process hurts his state’s uranium mining industry.

The Energy Department frequently sells excess uranium it owns in order to finance cleanup operations and decommission nuclear sites.

Miranda Green has the story.

 

IN OTHER NEWS

Massive cryptocurrency heist spurs calls for more regulation – Bloomberg

Rocky road for Colorado drillers as regulatory clampdown looms – Bloomberg

Trump’s anti-regulation push more slow crawl than big bang – Financial Times

Case of shackled kids revives home-school regulation debate – Associated Press