Policy Environment

House Republicans have once again managed to maintain cohesion within their caucus and passed the significant tax bill through reconciliation. The bill, named the “One Big Beautiful Bill Act,” incorporates many of President Trump’s priorities. Initially, disagreements among House Republicans regarding items, such as the State and Local Income Tax (SALT) cap and concerns about deficits, threatened to delay or derail the bill. However, a week of intensive meetings, which included President Trump’s visit to the Capitol, overnight sessions, and an early morning final vote, culminated in the House passing the bill with a 215-214 vote. Senate Republicans are aiming for passage before the July 4 recess, despite a host of concerns from various members. Additionally, the necessity to pass a debt ceiling increase included in the House version adds another layer of urgency, as Treasury’s ability to operate under extraordinary measures may be exhausted by August.

Congress continues its other duties as well, with both the House and Senate utilizing the Congressional Review Act to send joint resolutions on various issues, including financial services, to President Trump. Furthermore, Congress has commenced the FY2026 appropriation process, having recently received President Trump’s budget proposal, which suggests a nearly 23% reduction in non-defense discretionary spending and a 13% increase in defense spending.

President Trump recently sparked speculation regarding the future of Fannie Mae and Freddie Mac by posting on social media, "Fannie Mae and Freddie Mac are doing very well, throwing off a lot of CASH, and the time would seem to be right. Stay tuned!" A few days later he posted “Our great Mortgage Agencies, Fannie Mae and Freddie Mac, provide a vital service to our Nation by helping hardworking Americans reach the American Dream — Home Ownership. I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President. These Agencies are now doing very well, and will help us to, MAKE AMERICA GREAT AGAIN!” This has led to further speculation on the steps the Trump Administration might take toward ending the nearly 17-year conservatorship of these mortgage entities.

House Passes Reconciliation Bill

The House has passed, with a 215-214 vote, the bill titled the “One Big Beautiful Bill Act” through the reconciliation process. This bill reauthorizes numerous provisions from Trump’s 2017 tax bill, while introducing several updates and changes. Key provisions include:



• Increasing the State and Local Income Tax (SALT) deduction to $40,000.
• Raising the debt limit by $4 trillion.
• Permanently extending the 2017 law allowing pass-through businesses to deduct up to 20% of their qualified business income from their taxable income, with an increase to 23% beginning in tax year 2026.
• Creating deductions for qualified tips and overtime compensation for tax years 2025 through 2028.
• Restoring the 12.5% allocation increase to the 9% low-income housing tax credits (LIHTC) for 2026 through 2029.
• Lowering the bond-financing threshold for the 4% LIHTC to 25%, instead of 50%, for projects financed by bonds issued before 2030.

CFPB Nomination Withdrawn

In early May, President Trump announced the nomination of Jonathan McKernan to be the Undersecretary of Domestic Finance at the Treasury Department. McKernan had previously undergone a nomination hearing before the Senate Banking Committee to become the Director of the Consumer Financial Protection Bureau. Recently, however, the Senate was formally notified that this nomination has been withdrawn.