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Your Weekly Report on the Discord from Washington, D.C.

In Partnership with the Eris Group

Happy getaway day — Washington feels it’s earned this three-day weekend. A lot of people will be gone all of next week, as both the House and the Senate are in recess, and some schools have already let their students out for the year. So this week counted double. Let’s review . . .

Senate Votes to Block Fiduciary Rule — On Tuesday, the Senate voted 56-41 to pass the House Joint Resolution that “disapproves and nullifies” the Department of Labor’s rule on the definition of “fiduciary” and conflicts of interest related to retirement investment advice. The resolution passed the House in late April. The Senate vote tracked party lines, except for Senators Joe Donnelly (D-IN), Heidi Heitkamp (D-ND), and Jon Tester (D-MT), who voted to block the rule; and Senators Tom Carper (D-DE), Ted Cruz (R-TX), and Bernie Sanders (I-VT), who did not vote. The White House has already said it will veto the resolution.

Mobile Banking Can Help Consumers, FDIC Says — Yesterday the Federal Deposit Insurance Corporation released its findings from a series of focus groups that asked whether and how mobile financial services (MFS) can help meet the needs of underserved communities. The report found that mobile banking “improves the convenience of banking services, consumers’ control over finances, and in some cases the affordability of banking services.” The FDIC identified several strategies for banks considering these services, and suggested ways to improve current services. The agency’s next step is a demonstration project, which it is currently soliciting comments and feedback on. The FDIC is also looking for institutions that would be willing to participate in a demonstration project.

CFTC Finalizes Cross-Border Margin Rule — The Commodity Futures Trading Commission voted 2-1 to approve its final margin rule on collateral for international derivatives transactions that do not occur through a clearing center. The rule, which would apply to CFTC-registered swap dealers and major swap participants that do not have safety-and-soundness regulators, resembles one adopted last year by the federal banking agencies. In casting his “no” vote, Commissioner J. Christopher Giancarlo called the rule “impractical, unnecessary and contrary to the cooperative spirit of the 2009 G-20 Pittsburgh Accords.”

House Approves Two Small Business Relief Bills
 — On Monday, the House approved two small business relief bills by voice vote: HR 2121, which would give mortgage loan originators a grace period to obtain a new license when they switch jobs, and HR 4139, which would extend by five years the temporary auditing exemption for emerging growth companies to comply with Section 404(b) of the Sarbanes-Oxley Act.

Appropriations Subcommittee Cuts SEC Budget, Wants CFPB On Budget ­— The House Appropriations Subcommittee on Financial Services and General Government marked up and approved an appropriations bill on Wednesday that would, among other provisions, cut the requested budget for the Securities and Exchange Commission by $300 million, and subject the Consumer Financial Protection Bureau and the Office of Financial Research to the appropriations process. The bill would also give institutions the chance to change their operations before receiving a designation as systemically important.

House Members Ask GAO for Their Own Fintech Study
 — In an apparent response to last month’s letter from Senate Democrats asking for a new study of federal regulation of fintech, House Deputy Whip Patrick McHenry (R-NC) led a group of 11 Republicans and Rep. Jared Polis (D-CO) in submitting their own request for a Government Accountability Office report on how financial regulation may be stifling innovation. Specifically, the legislators ask, “how has fragmentation and overlap in financial regulation slowed or otherwise harmed innovation, and restricted the ability of financial firms of all sizes and charter types from pursuing new technological ventures?” The letter also asked the GAO to recommend best practices for regulators to foster collaboration and innovation, similar to the UK Financial Conduct Authority’s Project Innovate.

Regulations Cannot Protect Banks from All Remittance Risks — The House Financial Services Task Force to Investigate Terrorism Financing called the heads of FinCEN and Treasury’s Office of Technical Assistance to testify Tuesday at a hearing on coordinating the government’s response to stopping terror finance. The hearing covered a wide range of topics, including geographic targeting and the effectiveness of rules now in place. Rep. Keith Ellison (D-MN) noted that banks are increasingly unwilling to provide wire transfer services to institutions based in Somalia, because they feel the regulatory risks are too great. FinCEN Director Jennifer Shasky Calvery said that while the Money Remittances Improvement Act of 2014 should provide banks with more confidence about offering these services without US supervisory warnings, the risks on the Somali side may still be too high for the banks to want to get involved.

Senate Panel Praises SBA 7(a) Loan Guaranty Program — The Small Business Administration’s 7(a) loan guaranty program is making access to funding easier for record numbers of entrepreneurs, Administrator Maria Contreras-Sweet told the Senate Committee on Small Business & Entrepreneurship yesterday. The SBA guaranty program is helping to fill in a shortfall in traditional small business lending of $58 billion since 2008. The default rate on 7(a) loans is a remarkably low 1.47%, but both Republican and Democratic Senators agree that more oversight is appropriate as the program continues to grow. Committee Chairman Sen. David Vitter (R-LA), ranking member Sen. Jeanne Shaheen (D-NH), along with Senators Jim Risch (R-ID), Kelly Ayotte (R-NH) and Gary Peters (D-MI) introduced a bill yesterday to strengthen the SBA’s Office of Credit Risk Management.

This Week in Washington (and elsewhere):

Monday is the federal holiday in observance of Memorial Day, and both the House and Senate are in recess all week. With luck, things will be slow, so we won’t be publishing a Golden Apple next Friday. Look for the next issue on June 10.

The Ellis Insight. Jim Ellis reports on upcoming races:

> President

Democrats:  Former Secretary of State Hillary Clinton scored a Washington State beauty contest primary win, meaning that delegate apportionment was not tied to the results. She defeated Sen. Bernie Sanders (I-D/VT) 54-46%, but the preponderance of delegates still went to Sen. Sanders based upon his March 26th caucus victory. Ms. Clinton will clinch the nomination on June 7th, and proceed to the Democratic National Convention in Philadelphia with her first ballot victory secured.

Republicans:  Donald Trump scored a 76% win in the Washington primary and took 38 of the available 44 delegates. The victory means he will mathematically clinch the Republican nomination when the winner-take-all (51 delegates) New Jersey primary concludes on June 7th. According to several news reports, enough free agent unbound delegates have already verbally committed to supporting Trump, meaning he has the minimum vote count necessary for nomination. Reaching the majority 1,237 delegate vote number among only bound delegates, which he will achieve on June 7th, will legally secure his victory.

Several new polls were released during the week with the preponderance showing a small rebound for Ms. Clinton, when compared to those from the previous week. Four polls, conducted during the May 19-25 period, find the former Secretary of State holding leads of between one and five points, nationally. Morning Consult (5/19-23; 2,001 registered voters (RVs); Clinton, 42-40%), YouGov/Economist (5/20-23; 1,622 RVs; Clinton 42-41%), Rasmussen Reports (5/23-24; 1,000 RVs; Clinton 40-39%), and Ipsos/Reuters (5/21-25; 1,271 RVs; Clinton 41-36%) are the most recent pollsters. All results fall into the toss-up range, particularly with neither candidate coming anywhere close to 50% preference.

> Senate

California:  A new Public Policy Institute of California poll (5/13-22; 1,704 CA adults; 1,338 CA registered voters; 552 likely Democratic jungle primary voters; 284 likely Republican jungle primary voters) again finds Attorney General Kamala Harris (D) and Rep. Loretta Sanchez (D-CA-46) both in position to advance to the general election. Under California’s jungle primary system, members of the same party can qualify for the November vote. The PPIC poll projects Ms. Harris placing first with 27% preference, as she has during the entire election cycle, with Rep. Sanchez pulling 19 percent. None of the Republican candidates break into double-digits. The winner succeeds retiring Sen. Barbara Boxer (D).

Georgia:  Sen. Johnny Isakson (R) registered a strong 77% Republican primary victory against two opponents. Investment counselor Jim Barksdale won the Democratic nomination over two opponents with 53%. Because each man garnered a majority of the vote in their respective primaries, there will be no run-off election. Sen. Isakson is the prohibitive favorite in the general election.

North Carolina:  Public Policy Polling went back into the North Carolina field, as the Raleigh-based firm does every month, and finds Sen. Richard Burr (R) still holding only a tepid lead over former state Rep. Deborah Ross (D). The poll (5/20-22; 928 NC registered voters) finds Sen. Burr leading Ms. Ross 39-36% with 8% going to Libertarian candidate Sean Haugh. Despite Democrats originally being dissatisfied with their Tar Heel State candidate recruitment, this contest is now clearly in the competitive realm.

> House

Georgia Primary Results:  Congressional incumbents scored another good primary result, as every Georgia member seeking re-nomination won outright majorities. The only district run-off will occur in the western 3rd CD where state Sen. Mike Crane and West Point Mayor Drew Ferguson will battle each other in a July 26th Republican run-off. The winner will replace retiring Rep. Lynn Westmoreland (R-Grantville) in the new Congress. The 3rd is heavily Republican.

Elsewhere, Rep. Doug Collins (R-Gainesville) captured 61% in defeating four GOP opponents, including former Rep. Paul Broun (R-GA-10) who used to represent about half of the current 9th District. With no Democratic opponent, Rep. Collins has been re-elected. Eleventh District Rep. Barry Loudermilk (R) also posted a 60% win against multiple candidates in his suburban Atlanta domain. None of the four Georgia Democratic members had primary challenges. Except for the open Westmoreland seat, no change is expected in the Peach State congressional delegation for the coming term.

Texas Run-off Results: Voters decided run-off elections on May 24th, and two individuals effectively won their respective congressional seats. In the Lubbock area, former Texas Tech University chancellor and George W. Bush Administration official Jodey Arrington defeated Lubbock Mayor Glen Robertson (54-46%) to secure the Republican nomination. With no Democrat on the November ballot, Mr. Arrington will replace retiring Rep. Randy Neugebauer (R-Lubbock) in the next Congress. On the Texas-Mexico border, attorney Vincente Gonzalez (D) easily captured the Democratic run-off, and will replace retiring ten-term Rep. Ruben Hinojosa (D-McAllen) next year. The 15th District that stretches from just south of Austin to the Mexican border is heavily Democratic.

FL-19:  More is becoming clear in the wake of Rep. Curt Clawson’s (R-Bonita Springs/Ft. Myers) surprise retirement announcement. In addition to Sanibel Island City Councilman Chauncey Goss (R) entering the race, former US Ambassador to the Vatican Francis Rooney (R) also says he will run. Ex-state Rep. and former congressional candidate Paige Kreegel (R) publicly stated that he will “probably run.”  We can expect a crowded Republican field. The seat will remain under GOP control, and the August 30th Republican primary will determine Mr. Clawson’s successor.

HI-1:  Freshman Rep. Mark Takai’s (D) retirement due to health issues appeared to mean a crowded Democratic field would do battle to replace him. All eyes now, however, are on former US Rep. Colleen Hanabusa (D-Honolulu). She is beginning to indicate interest in getting back her old job, and many are waiting to see what she ultimately decides before making plans of their own. Reports suggest that Hanabusa will clear the Democratic field should she announce for the seat.

Currently, the former Congresswoman is chairing the commission to bring a light rail system to the Islands. Democrats will likely hold the seat, but former US Representative, state legislator, and Honolulu City Councilman Charles Djou (R) is not yet ruling out a fourth run for the seat. He won a special election in 2010 when then-Rep. Neil Abercrombie (D) resigned to concentrate on his gubernatorial campaign, but fell in the regular election to Ms. Hanabusa. State Sen. Donna Mercado Kim (D), who placed second to Takai in 2014, said she is unlikely to run in 2016.

MI-8:  Actress Melissa Gilbert (D), who was accumulating significant resources to mount a major challenge against freshman Rep. Mike Bishop (R-Rochester/Lansing), is withdrawing from the race. Citing the recurrence of problems from a neck injury sustained four years ago, Ms. Gilbert is ending her campaign. The only other Democrat who entered the race, former Eaton County Commissioner Linda Keefe, has reported petition signature problems and may be disqualified. Should Keefe also be forced to withdraw, Rep. Bishop will have no Democratic opponent in the fall since the candidate filing deadline passed on April 19th.

> Governor

Illinois:  Though Senate Minority Whip Dick Durbin (D) stated he remains committed to his present duties, he seemed to leave the door open to those Democratic leaders who want him to challenge Gov. Bruce Rauner (R) in 2018. With Durbin not ascending to the party’s top leadership position when Minority Leader Harry Reid (D-NV) retires next year, many believe that Mr. Durbin will take a run at the Governor’s post. The Senator was re-elected in 2014, and would have a free ride to run for Governor.

North Carolina:  A new Civitas Institute survey (5/21-23; 600 NC registered voters) finds Gov. Pat McCrory (R) substantially rebounding against Attorney General Roy Cooper (D). The data shows Gov. McCrory back in front 45-40%, after falling to a 36-46% deficit in Civitas’ last poll one month earlier. The flap over transgender bathrooms that began in the Charlotte area is one reason the numbers have drastically fluctuated in the short-term. Irrespective of this issue, we can expect this to be a tight race all the way to Election Day.

Ohio:  Attorney General and former US Senator Mike DeWine (R) is confirming reports that he will run for Governor in 2018 when incumbent and former presidential candidate John Kasich (R) will be ineligible to seek a third term. DeWine served two terms in the Senate, first winning in 1994 before losing to current incumbent Sen. Sherrod Brown (D) in 2006. Prior to his service in the Senate, Mr. DeWine spent four terms in the House and one as Lt. Governor. He was originally elected to the state legislature. After losing in 2006, Mr. DeWine rebounded to win the open Attorney General’s office in 2010, and was easily re-elected in 2014.