Your Weekly Report on the Discord from Washington, D.C.
In Partnership with the Eris Group
House Panel Approves 12 Bills – The House Financial Services Committee marked up and passed 12 measures
intended to boost economic growth and block terror activity last week. Of particular interest are:
- R. 4852, Rep. Scott Garrett’s Private Placement Improvement Act, which would exempt private funds from the requirements that apply to investment company sales literature, and would streamline SEC filing requirements under Regulation D;
- R. 4854, the Supporting America’s Innovators Act sponsored by Rep. Patrick McHenry (R-NC), which would raise the Investment Company Act exemption to cover qualifying venture capital funds owned by up to 250 investors;
- R. 5143, the Transparent Insurance Standards Act sponsored by Rep. Blaine Luetkemeyer (R-MO), which would establish a series of “reasonable requirements” before the federal agencies can agree to any international insurance standards, and require the Federal Reserve to finish work on a domestic capital standard before adopting any international rule;
- R. 5311, the Corporate Governance Reform and Transparency Act sponsored by Rep. Sean Duffy (R-WI), which would clarify the disclosure responsibilities of proxy advisory firms;
- R. 5424, the Investment Advisers Modernization Act sponsored by Rep. Robert Hurt (R-VA), which would update recordkeeping requirements for investment advisers; and
- R. 5429, the SEC Regulatory Accountability Act sponsored by Rep. Scott Garrett (R-NJ), which would require the SEC to specify the problem a new regulation seeks to address, and to conduct a cost-benefit analysis before proposing or adopting a new regulation.
Nobody’s Happy With the SEC – At least, that was the overall impression left by Chair Mary Jo White’s appearance before the Senate Banking Committee last week. Committee Chairman Richard Shelby (R-AL) urged the SEC to evaluate cost-benefit ratios of its regulations more careful, while ranking member Sen. Sherrod Brown (D-OH) criticized the agency for not moving more quickly to promulgate new rules. Senator Brown asked Chair White when the SEC would “stop handing out warnings and start giving tickets” for repeat violations. Senator Mike Rounds (R-SD) asked about disagreements between the SEC and the Department of Labor in their approaches to a fiduciary rule; Chair White minimized these differences, and said that the DOL had made changes in response to the SEC’s feedback. Responding to a question from Senator Jon Tester (D-MT), Chair White said that the SEC is understaffed, which has slowed progress on several regulations, including its version of the fiduciary rule.
Senate Appropriations Opens Door to US Financing for Exports to Cuba – The Senate Appropriations Committee approved a bill on Wednesday to provide funding for the Treasury Department, the IRS, the SEC, the CFTC, the FTC, and other agencies. The panel included a set of bipartisan amendments that would end the travel ban to Cuba, allow the export of telecommunications services to Cuba, and allow US financial institutions to provide financing for American agricultural exports to Cuba. The Committee approved a similar measure last year, but it had no counterpart in the House bill, and was not part of the final appropriations agreement.
FINRA Names SEC Veteran as New President & CEO – The Financial Industry Regulatory Authority (FINRA) announced on Monday that Robert W. Cook will succeed Richard G. Ketchum as the organization’s President and CEO in the second half of 2016. Ketchum has also been serving as FINRA’s Chairman; Cook will not assume those responsibilities, and the Board will announce his successor later this year. Cook has most recently been a partner with Cleary Gottlieb Steen & Hamilton, but served as Director of the Division of Trading and Markets of the U.S. Securities and Exchange Commission from 2010 to 2013. He holds bachelor’s and law degrees from Harvard, and is a graduate of the London School of Economics.
House Vote Expected on Fiduciary Rule Override – The House of Representatives is expected to vote this week on whether to override the President’s veto of H.J. Res 88, the attempt to nullify the Department of Labor’s rule on conflicts of interest for retirement advisers. Overriding the veto would require a 2/3 majority, or 287 votes, which the measure is unlikely to reach.
CFPB Updates Truth in Lending (Reg Z) Thresholds for the CARD Act, HOEPA and Dodd-Frank – The Consumer Financial Protection Bureau issued its annual final rule on dollar amounts for Truth in Lending provisions that apply under the Credit Card Accountability Responsibility and Disclosure Act of 2009, the Home Ownership and Equity Protection Act of 1994, and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new amounts take effect on January 1, 2017.
Federal Banking Agencies Publish List of Underserved Communities – On Friday the FDIC, OCC, and Federal Reserve published its annual list of distressed or underserved, nonmetropolitan, middle-income communities where revitalization or stabilization activities will qualify as community development under the Community Reinvestment Act.
This Week in Washington (and elsewhere):
Senate Banking Committee receives the Federal Reserve’s semi-annual monetary report to Congress. Federal Reserve Board Chair Janet Yellen will be the only witness. SH-216 Hart Senate Office Building, 10:00 a.m.
House Financial Services Committee hears testimony from Federal Reserve Board Chair Janet Yellen on monetary policy and the state of the economy. 2128 Rayburn House Office Building, 10:00 a.m.
House Judiciary Committee holds Part II of a hearing to examine allegations of misconduct against IRS Commissioner John Koskinen. Witnesses include Jonathan Turley, Professor of Law at The George Washington University; Andrew McCarthy, former assistant US Attorney for the Southern District of New York; constitutional law professor Michael Gerhardt of the University of North Carolina; and Todd Garvey, Legislative Attorney with the Library of Congress. 2128 Rayburn House Office Building, 10:00 a.m.
House Financial Services Task Force to Investigate Terrorism Financing holds a hearing on “The Next Terrorist Financiers: Stopping Them Before They Start.” 2128 Rayburn House Office Building, 10:00 a.m.
The Ellis Insight. Jim Ellis reports on upcoming races:
Nominations: The Washington, DC Democratic primary officially ended the presidential primary season, and it sent Hillary Clinton to the Democratic National Convention with a 79% win. She will claim a first ballot victory, but only with the help of Super Delegates to augment her pledged delegate total. Combined, Ms. Clinton will easily surpass the 2,383 delegate votes required for nomination. For his part, Sanders will likely attract close to 1,900 votes on the convention floor.
Controversy continues to swirl around Democratic National Committee chair Debbie Wasserman Schultz (D-FL-23), and it is believed that Sen. Bernie Sanders will make her removal one of the conditions for him endorsing Ms. Clinton. With the now-presumptive nominee moving to take over the party apparatus, it is conceivable that the Florida Congresswoman will be replaced despite her promises that she will finish her term as the national party chair. To complicate matters for her, Wasserman Schultz is embroiled in a serious Democratic primary contest for her South Florida House seat with law professor Tim Canova, who has reportedly raised well over $1 million for the campaign and attracted Sen. Sanders’ personal endorsement.
For the Republicans, Donald Trump has secured the requisite number of bounded Republican delegates to also secure a first ballot victory. Despite the complaints of many establishment GOP leaders, the Trump nomination is now inevitable.
The latest three national polls all show Ms. Clinton leading the presidential campaign, but in the single-digit range. Ipsos Reuters (6/11-13; 1,323 registered voters) posts the former Secretary of State to a 41-32% spread. Rasmussen Reports (6/14-15; 1,000 registered voters) sees a tighter 44-39% margin. CBS News (6/9-13; 1,048 registered voters) is also in that same realm at 43-37%. Considering Trump’s many gaffes and stumbles during the previous two weeks, his numbers remain relatively strong in the released national polls.
Florida: Speculation continues that Sen. Marco Rubio (R) will reverse course and run for re-election, after all. He has stated many times that he would not seek another term in the Senate because of his run for president. But, with party leaders putting intense pressure on him to run, his public position is beginning to change. Instead of issuing an outright denial, Sen. Rubio now wants to talk the decision over with his family over the weekend. Time is running out with the Florida candidate filing deadline fast approaching on June 24th. Lt. Gov. Carlos Lopez-Cantera (R) and Rep. David Jolly (R-FL-13) both say they will exit the Senate race if the incumbent decides to re-enter.
Iowa: The first post-primary Senate poll finds six-term Sen. Chuck Grassley (R) looking slightly vulnerable in his new race with former Lt. Gov. Patty Judge (D). Public Policy Polling surveyed the Iowa electorate (6/9-10; 630 IA registered voters) and finds the Senator, who has not dropped below 64% in his five re-elections, leading only 48-41% in this initial survey. The Iowa race continues to be one to watch, but Sen. Grassley remains a decided favorite.
Nevada: What had been presumed for months became reality. Both Attorney General Catherine Cortez Masto (D) and US Rep. Joe Heck (R-Henderson) easily captured their respective party nominations, setting up the race that could become the determining factor over which party will control the body in the next Congress. Masto notched 81%; Heck 65%, the latter overcoming a last minute challenge from former Senate nominee Sharron Angle (R) who jumped into the race just as candidate filing was closing. Senate Minority Leader Harry Reid (D) is retiring, thus leaving the Nevada seat open and hotly contested.
California: With ballots still coming in and being counted more than a week after the primary election was held, several races have changed. In San Jose, with 100% of the precincts reporting, challenger Ro Khanna (D), a former Clinton Administration official, has now taken a 39-37% lead over Rep. Mike Honda (D). Irrespective of the final finishing percentage, these two will again battle in the general election. Honda won a tight 52-48% victory over Khanna in 2014.
Turning to Rep. David Valadao’s (R) Bakersfield-anchored 21st CD, it appears that businessman Emilio Huerta (D) has slipped passed the election night second-place finisher and will qualify for the general election. Huerta, the son of the late Dolores Huerta, who was the co-founder of Cesar Chavez’s United Farm Workers labor organization, now clings to a 797 vote cushion after trailing for days. Rep. Valadao placed first in the jungle primary, garnering 56% of the vote as compared to Huerta’s 22.8%, who is now just ahead of local city councilman Daniel Parra’s (D) 21.5% total.
In the tight Santa Barbara seat, Republican businessman Justin Fareed eked out a surprise second place finish over Assemblyman Katcho Achadjian (R-San Luis Obispo). Fareed now leads Achadjian by more than 4,000 votes with 100% of the precincts reporting, which should be more than enough to secure him the second place finish and send him to the general election. Santa Barbara County Supervisor Salud Carbajal (D) placed first with 32% followed by Fareed at 21% and Achadjian at 19 percent.
The Anaheim seat also has a new qualifier. It appears that Garden Grove Mayor Bao Nguyen (D) has expanded his small lead over Republican Bob Peterson to a full percentage point. This likely creates another double-Democrat general election, since former state Sen. Lou Correa (D) easily captured first place. Correa and Nguyen will advance to the general election, where the former state legislator will be heavily favored to win the seat.
IL-10: In what again promises to be a presidential year toss-up election, former Rep. Brad Schneider (D-IL-10) released his internal Normington Petts poll (6/6-9; 400 IL-10 registered voters) that posts him to a 47-43% edge over Rep. Bob Dold (R-Kenilworth). Last month, Dold released his North Star Opinion Research survey data that gave him a 48-41% advantage. Both men have unseated the other as incumbents since 2012, so this third contest between the two should be just as tight and interesting.
Nevada: The Nevada primary yielded nominees in what will be a pair of hotly contested US House races. In the open 3rd District, businessman and frequent candidate Danny Tarkanian (R) upset state Senate Majority Leader Michael Roberson to win the Republican primary. He will now face software developer Jacky Rosen (D) in what promises to be a toss-up general election. In the central 4th District, state Sen. Ruben Kihuen (D), riding an endorsement from Sen. Harry Reid (D), the Democratic Party leadership, and key labor union backing, took the party nomination over former state Assemblywoman Lucy Flores and state School Board member Susie Lee. Mr. Kihuen now faces freshman Rep. Cresent Hardy (R) in what will be another hard fought battle. Mr. Hardy was one of the top Republican upset victors in the 2014 election.
NC-9: Republican congressional candidate Mark Harris, as expected, is petitioning for a formal recount of the June 7th primary contest in which he fell short of Rep. Bob Pittenger (R-Charlotte) by just 142 votes. Though the spread is razor thin, it is unlikely a recount would change the result that much, but Harris has little to lose in asking for a re-canvass. The forced mid-decade redistricting process drastically changed the 9th District, adding 60% new territory. Additionally, Pittenger’s business activities are the subject of a FBI investigation, which obviously did not help the incumbent in his attempt to secure re-nomination.
Virginia: The big news from the June 14th primary night was Rep. Randy Forbes (R) falling to defeat in the new Virginia Beach-anchored 2nd District. Forbes’ 4th District had been re-drawn as a Democratic seat in the court-forced mid-decade redistricting, thus prompting him to move into the open 2nd District seat. There, state Delegate Scott Taylor (R), spending only about 20% of the amount Forbes expended, claimed a major 53-41% victory and will easily win the general election. In the open 4th, state Sen. Don McEachin (D) scored a landslide primary victory and now faces Henrico County Sheriff Mike Wade. McEachin begins the general election campaign in the strong favorite’s position.
North Dakota: In what is viewed as a major upset, businessman Doug Burgum, who took the unusual step of forcing a primary after the state Republican convention delegates formally endorsed Attorney General Wayne Stenehjem, promptly entered the primary and thrashed the four-term statewide officeholder by a 60-39% margin. Mr. Burgum now faces state Rep. Marvin Nelson (D) in what should be an easy race for the Republican.