The Department of Homeland Security (DHS) has shut down, but impact has been limited thus far. The shutdown began February 14th, after Congress left for a week-long recess without a deal to fund the agency past the February 13th deadline. A quick resolution to the standoff is unlikely, as lawmakers are not scheduled to return to Washington until February 23rd.

But shuttering DHS is not expected to have a particularly visible impact right away. More than 90% of the 260,000 DHS employees are considered "essential" and will continue working, including Transportation Security Administration (TSA) agents at airports (air traffic controllers are part of the Transportation Department, which is not affected by the shutdown). TSA agents could start staging "sick outs" at some point in the standoff, potentially impacting air travel—a key pressure point to watch.

Other key DHS functions have available funds for now. The Federal Emergency Management Agency (FEMA), which deals with natural disasters, has billions available in a disaster relief fund for use in any emergencies. The Coast Guard will continue operations, though personnel will begin missing paychecks early next month if there is no resolution. Immigrations and Customs Enforcement (ICE) received billions from last summer's One Big Beautiful Bill Act, so the shutdown's impact on its operations is expected to be minimal even though it is ICE that is the central battle point in the shutdown. Senate Democrats and the White House have been unable to come to an agreement on restrictions on ICE agents, a key to the negotiations to reopen the agency. Democrats reportedly made an offer to the Republicans and the White House on February 16th, but a quick resolution to this mini shutdown seems unlikely. All other parts of the federal government are fully funded through September 30th and not affected by the dispute over DHS funding.

Securities and Exchange Commission (SEC) Chair Paul Atkins testified last week before the House Financial Services Committee and the Senate Banking Committee, part of the routine oversight of independent agencies by Congress. Unlike some other recent appearances on Capitol Hill by administration officials, the Atkins hearings were relatively cordial. Five notable topics covered during the two days:

• E-delivery: Atkins said he has instructed staff to work on a rule to make electronic delivery the default option for providing fund disclosures and other documents to investors — his clearest statement yet on the issue. Investors would still be able to request paper disclosures.
• Corporate disclosures: Atkins has made no secret that simplifying public company disclosure is among his highest priorities. He brought a 1,000-page annual report (known as a "10-K report") from utility company Entergy as a prop to illustrate how hard it can be for investors to find material information among an avalanche of paperwork. He said the agency wants to "modernize, rationalize and streamline" reporting so that it focuses on materiality. He also said he was "agnostic" on the issue of changing the quarterly reporting cycle to semi-annual but that the commission is evaluating that idea. President Donald Trump called last fall for moving public company quarterly reporting requirements to semi-annual to help companies focus less on short-term pressures and more on long-term goals.
• Crypto: Atkins said that he and Commodity Futures Trading Commission Chair Michael Selig were working toward a formal agreement on coordinating their oversight of the crypto industry, which he described as a "bridge to legislation." He urged Congress to pass the stalled crypto market structure legislation, the CLARITY Act, which would provide rules of the road for crypto regulation.
• Tokenization: Atkins said that the "innovation exemption" the SEC is working on for tokenized securities would be narrowly crafted, time-limited and subject to broad and diverse stakeholder input through the notice-and-comment process. Atkins said the agency wanted to avoid "picking winners and losers" as it considers tokenization.
• Proxy advisors: Atkins was critical of the entire "ecosystem" around proxy advisors. House Financial Services Committee Chairman French Hill (R-Ark.) focused a series of questions around the power of the two dominant proxy advisory firms, ISS and Glass Lewis, which provide research and voting recommendations to institutional investors on proxy questions. Atkins said that they were "more of a symptom" of a deeper problem — the "weaponization" of shareholder proposals. He said the SEC was "actively looking" at the whole ecosystem and what regulatory changes might be needed.

A package of measures designed to increase the supply and affordability of homes was overwhelmingly approved by the House of Representatives last week. The 390-9 vote was notable for its bipartisanship—a clear sign that housing has become a top political priority for both parties. The bill is a mishmash of policies designed to expedite zoning and design rules in states, expand grants and other aid for affordable housing, simplify regulation for federally funded housing developments, boost rural housing construction, increase access to small-dollar (under $100,000) mortgages, among other steps. The Senate passed its version of housing legislation last fall. While it has some overlapping provisions, there are significant differences between the two bills that will have to be worked out in negotiations in the coming weeks. But housing legislation has clear momentum on Capitol Hill and may be one of the only bipartisan issues that can get through Congress in a tense midterm election year.

Earlier this month, Rep. Barry Loudermilk (R-Ga.) announced he would not seek a seventh term in Congress this fall and Rep. Mark Amodei (R-Nev.) announced he would retire after serving eight terms in the House. That makes 51 House members who are not seeking re-election, the highest total since 1992 and the third-highest total since 1930. There are also nine senators who are not running for re-election this year. While retiring lawmakers have cited a variety of reasons for not running again, it's clear that the dysfunction on Capitol Hill is taking its toll on members.

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