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

In Partnership with the Eris Group

House Passes Sweeping Financial Services Appropriations Bill – The House of Representatives approved its 2017 Financial Services and General Government Appropriations bill, which includes a wide range of provisions only tangentially related to budgets. The bill cuts funding overall by $1.5 billion from 2016 levels, and particularly slashed at the IRS, granting it $236 million less than last year and $1.3 billion less than the President asked for. The SEC would lose its “reserve fund” created by Dodd-Frank. The bill would subject the Consumer Financial Protection Bureau to the appropriations process, replace its Director with a five-member Commission, and be required to study the use of pre-dispute arbitration before issuing regulations. The bill includes the Financial Institution Bankruptcy Act, which seeks to eliminate “too big to fail,” and the SEC Small Business Advocate Act, which would an office within the SEC and establish an advisory committee to identify challenges unique to small businesses.

Don’t End GSE Conservatorship Without Comprehensive Reform, Corker Tells Watt – Senator Bob Corker (R-TN) led a bipartisan group of six Senators in a letter to Federal Housing Finance Agency (FHFA) Director Mel Watt on Thursday that warned against taking Fannie Mae and Freddie Mac out of conservatorship before Congress acts on comprehensive reform. “[W]e all agree changes will be needed to the existing structure,” the Senators wrote. “However, we firmly believe those changes should come through housing finance reform legislation, not unilateral action.” The Senators wrote that they hope housing finance reform will be on the agenda in the next Congress. Other signatories to the letter were Sen. Mike Crapo (R-ID), Sen. Dean Heller (R-NV), Sen. Mark Warner (D-VA), Sen. Jon Tester (D-MT) and Sen. Heidi Heitkamp (D-ND).

FHFA Will Launch Common Platform for Fannie & Freddie by Year-End – The FHFA released An Update on the Implementation of the Single Security and the Common Securitization Platform Thursday, announcing that Fannie Mae, Freddie Mac and Common Securitizations Solutions will be ready to start using the Common Securitization Platform by the end of 2016. The CSP is expected to issue its first Single Securities in 2018. The new platform has been a goal of FHFA’s since 2012; the complete timeline of planned changes is here. The agency continues to seek feedback on this process, and interested parties can comment online here.

GE Capital No Longer Systemically Important – In the first action of its kind, the Financial Stability Oversight Council (FSOC) voted last Wednesday to rescind its designation of GE Capital as “systemically important” to the nation’s financial stability. Treasury Secretary Jacob J. Lew said that “GE Capital has made fundamental strategic changes that have resulted in a company that is significantly smaller and safer, with more stable funding,” and noted that the Council’s action proves that “designation of nonbank financial companies is a two-way process.”

FHFA Seeks Input on Credit Risk Transfer – Two weeks ago, the Federal Housing Finance Agency issued a progress report and a request for input (RFI) on Fannie Mae and Freddie Mac’s credit risk transfer activities and use of primary mortgage insurance. The FHFA specifically wants industry and consumer feedback on the question of expanding the use of front-end credit risk transfer structures. Comments are due to the FHFA by August 29, and can be submitted electronically or mailed to the agency at FHFA, Office of Financial Analysis and Modeling, 400 7th Street, S.W., 9th floor, Washington, DC 20219.

SEC Proposes Rule to Require Business Continuity and Transition Plans for Investment Advisers – Stakeholders have until August 29 to comment on a proposed new SEC rule that would require all SEC-registered investment advisers to adopt and implement written plans for business continuity and transition. The plans should “address operational and other risks related to a significant disruption in the investment adviser’s operations.” The proposal calls for these plans to address, among other issues, data management and protection; alternative physical locations; reviews of third-party service providers; communications plans; and plans for transition when the adviser is unable to continue providing services. Comments can be emailed to, or submitted via this electronic form.

Puerto Rico Avoids Default – The Senate voted 68 to 30 two weeks ago to save Puerto Rico from a $73 billion debt crisis, allowing the President to sign the measure into law before a July 1 default date. Among other provisions, the bill imposes a temporary stay on lawsuits from creditors while the government of Puerto Rico tries to renegotiate its debt. Both Republican and Democrat leaders criticized elements of the package, but Treasury Secretary Jack Lew said that allowing the Commonwealth to default on constitutional debt would be too dangerous for all involved.

This Week in Washington (and elsewhere):

July 12
House Financial Services Committee holds a hearing on “Making a Financial Choice: More Capital or More Government Control?” Witnesses will include representatives of academia and the private sector, and they will offer views on a discussion draft of the Financial CHOICE Act of 2016. 2128 Rayburn House Office Building, 10:00 a.m.

July 12
House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on “Examining the Opportunities and Challenges with Financial Technology (‘FinTech’): The Development of Online Marketplace Lending.” Witnesses include representatives of the Electronic Transactions Association, Prosper Funding, the American Bankers Association, and the law firm of O’Melveny & Myers. 2128 Rayburn House Office Building, 2:00 p.m.

July 12
House Judiciary Committee holds a hearing on oversight of the Department of Justice. Attorney General Loretta Lynch will testify. 2237 Rayburn House Office Building, 10:00 a.m.

July 12
House Judiciary Committee Task Force on Executive Overreach holds a hearing on “Executive Overreach in Regulatory Enforcement and Infrastructure.” 2237 Rayburn House Office Building, 3:00 p.m.

July 13
House Committee on Oversight and Government Reform holds a hearing on “Oversight of the FDIC Application Process.” Matt Browning will testify on behalf of the National Association of Industrial Bankers and the Utah Bankers Association. 2154 Rayburn House Office Building, 10:00 a.m.

July 13
House Financial Services Committee holds a hearing on HUD accountability. 2128 Rayburn House Office Building, 10:00 a.m.

July 14
Senate Committee on Small Business & Entrepreneurship holds a hearing on “Searching for Capital: How Venture Capitalists and Angel Investors Fund Entrepreneurs and Startup Companies.” SR-428A Russell Senate Office Building, 10:00 a.m.

July 14
Senate Committee on Banking, Housing and Urban Affairs holds a hearing on “Evaluating the Financial Risks of China.” SD-538 Dirksen Senate Office Building, 10:00 a.m.

July 14
House Financial Services Subcommittee on Oversight and Investigations holds a hearing on “The Financial Stability Oversight Council and the Designation of Non-Bank Financial Companies.” 2128 Rayburn House Office Building, 11:00 a.m.

The Ellis Insight. Jim Ellis reports on upcoming races:

> President

Last week’s big news was the FBI recommending no charges against Hillary Clinton and her staff involving their role with the private email server. Much controversy has surrounded the former Secretary of State’s data security practices, and it is clear that we will hear more about the situation as the general election progresses. Donald Trump immediately called foul, saying the process is “rigged.” Whether Clinton’s security practices and the investigation aftermath develop any political legs remains to be seen.

Polls were fewer in the holiday week, but half a dozen were still conducted from six different survey research firms. The sampling ending date range stretched from June 29 through July 6. The ballot tests fell between +11 for Clinton (Ipsos/Reuters; 7/2-6; 1,345 US registered voters) all the way to +2 for Trump (Rasmussen Reports; 7/5; 1,000 US registered voters). The rolling average for the six studies was +4 in Clinton’s favor. The polls trended more toward Clinton in the latter stages of the polling period.

This week’s data results will begin to tell us whether she will suffer any degree of polling leakage as a result of the email investigation result.

> Senate

Democracy Corps:  Greenberg Quinlan Rosner Research conducted a series of seven polls in key Senate states for the Democracy Corps liberal issues group and the Women’s Voices, Women Vote organization. The results were interesting in the fact that they often went against the previous polling average in several states, yet the data did not demonstrate a particular partisan skew. The sampling group consisted of 300 registered voters from each of the tested states during the June 11-20 period, but was released last week. Therefore, a large state like Pennsylvania, with a population of just under 13 million, and a small state such as New Hampshire, with only little over 1 million inhabitants, feature the same size sampling group. This would suggest that the polling error factor is higher in the larger states.

Arizona:  The Greenberg Quinlan Rosner data gives Sen. John McCain (R) a 44-42% advantage over Rep. Ann Kirkpatrick (D-AZ-1). This is in line with recent polling, though the results average, according to the Daily Kos Elections Page, is McCain +5. The GQR finding gives Donald Trump a six-point advantage over Hillary Clinton.

Nevada:  GQR also surveyed the important open seat Senate campaign between Rep. Joe Heck (R-NV-3) and former state Attorney General Catherine Cortez Masto (D). Though there have not been enough polls taken of the Nevada electorate to develop a state average, the GQR poll actually delivers good news for the Republicans. It finds Heck holding a five-point lead, 46-41%, while Clinton and Trump fall into a tie.

New Hampshire:  The GQR data also finds Sen. Kelly Ayotte (R) and Gov. Maggie Hassan (D) languishing in a dead heat, as virtually all polls have recorded. Here, the Democracy Corps report portends a one point edge for Gov. Hassan, but the polling average results in a two point advantage for Sen. Ayotte. Either way, all data reveals a race performing in the toss-up category, which will probably be the case until the very end. The presidential polling average yields a five point margin in Ms. Clinton’s favor, but the latest surveys find Trump improving. The GQR survey finds the two national candidates tied, which is likely more indicative of the current Granite State status.

North Carolina:  The GQR Democracy Corps Tar Heel State poll produces a different result than any other previous NC survey. Here, the data suggests that challenger Deborah Ross (D), a former state Representative, has pulled into a small 38-36% lead over Sen. Richard Burr (R). The aggregate average still provides Sen. Burr with a +4 point edge, however. The GQR presidential spread gives Ms. Clinton a ten point North Carolina lead, far beyond what other pollsters are determining, since the aggregate surveys find the presidential candidates in a statistical dead heat. It is reasonable to believe that a Democratic skew is present in this particular polling sample.

Ohio:  The GQR Buckeye State poll finds former Gov. Ted Strickland (D) leading Sen. Rob Portman (R), but that is not particularly unusual. Though most surveys give Portman a slight advantage, others during the past few months have found results that put Strickland ahead even though Portman fares better in the personal and job approval categories. Here, the Democracy Corps finds Strickland up 43-40%. The average, however, gives Sen. Portman a four-point spread. The GQR presidential numbers in this all-important state produce a tie between Clinton and Trump, while the recent aggregate average suggests the presumptive Democratic nominee is holding a four-point edge.

Pennsylvania:  The Keystone State is an example where the Democracy Corps survey produced much better numbers for the Republican candidate than the aggregate average. GQR finds Sen. Pat Toomey (R) leading Democrat Katie McGinty 46-38%, while the aggregate average finds Toomey’s margin to be four percentage points. This state could well play a critical role in determining the Presidency. Democracy Corps finds Hillary Clinton leading by nine points, an unusual result when compared with Toomey’s strong performance from the same polling sample. The aggregate PA presidential average hovers around the five-point margin in Clinton’s favor.

Wisconsin:  For months, the average polling data has suggested a strong lead for the Democratic challenger, former Sen. Russ Feingold. The GQR data again finds a better Republican performance, with Sen. Ron Johnson pulling into only a 46-45% deficit situation. The aggregate average suggests a much different 11-point Feingold advantage. Like in Pennsylvania, the Democracy Corps data produces better Republican numbers in the Senate race, yet the same polling sample posts an even larger-than-average spread for Ms. Clinton over Mr. Trump, twelve points versus the average of nine.

> House

CA-24:  The California Secretary of State has now certified that businessman and former UCLA football player Justin Fareed (R) has qualified for the general election. He edged state Assemblyman Katcho Achadjian (R), and now faces Santa Barbara County Supervisor Salud Carbajal (D), the first-place qualifier. Though Carbajal is a clear favorite in the general election, this race could turn competitive as the hard-working Fareed continues to demonstrate that he is a viable congressional candidate.

CA-32:  Finally, and long after the June 7th primary, the California Secretary of State has confirmed that state Assemblyman Roger Hernandez (D) has clinched second place, edging out Republican Gordon Fisher by 792 votes. Mr. Hernandez will now challenge veteran Rep. Grace Napolitano (D-Norwalk) in a double Democratic general election. Though Hernandez received good political news, a judge enacted a protection order against him for his ex-wife. Rep. Napolitano remains the heavy favorite in her Democratic Los Angeles County district, but this contest will be more competitive than had Republican Fisher advanced to the general election. Despite being challenged by two opponents, Rep. Napolitano still managed to secure a majority in the jungle primary of 51.4%.

FL-4:  The Republican battle to replace retiring Rep. Ander Crenshaw (R-Jacksonville) has produced its first poll prior to the August 30th primary. The University of North Florida conducted the congressional GOP primary survey (6/28-29; 403 likely FL Republican primary voters) and finds former Duval County Sheriff John Rutherford leading local official Hans Tanzler III and state Rep. Lake Ray, 27-13-9%. The Republican winner becomes the prohibitive favorite for the general election in this safest of Florida Republican districts.

FL-5:  Rep. Corrine Brown (D-Jacksonville) was indicted on federal charges involving improper use of an unregistered Virginia charity. The indictment was not released, so the actual charges are not yet known. Rep. Brown has been redistricted into a seat that now stretches from Jacksonville to Tallahassee instead of her familiar district that traveled from Jacksonville to Orlando. Obviously, the indictment will hurt her ability to win the August 30th Democratic primary. Rep. Brown was already in a competitive contest, in largely unfamiliar territory, against veteran former state legislator and ex-congressional candidate, Al Lawson.

MI-8:  The Michigan Democratic Party has replaced former Screen Actors Guild president Melissa Gilbert (D), who withdrew from challenging freshman Rep. Mike Bishop (R-Rochester/ Lansing). The new Democratic candidate will be local attorney Suzanna Shkreli. Rep. Bishop is now even a heavier favorite to win his first congressional re-election.

WA-8:  Former Seattle sportscaster Tony Ventrella (D) withdrew from the Democratic congressional primary for the right to challenge six-term Rep. Dave Reichert (R-Auburn), last week. His action leaves real estate broker Santiago Ramos and management consultant Alida Skold as the only Democrats in the primary field. Mr. Ventrella was viewed as the strongest potential Dem candidate, but Rep. Reichert was always cast as a strong re-election favorite. Now, the incumbent’s electoral prospects are even brighter.

> Governor

Indiana:  Gov. Mike Pence (R) is apparently on the short list to become Donald Trump’s Vice Presidential nominee. If he is the choice, then we can expect the announcement before July 15th, and not when the Republican National Convention begins. Under Indiana election law, Republicans would have to finalize their ballot on or before 7/15, meaning if Pence is to withdraw from the Governor’s race he would have to do so before that date to give the Republican Party an opportunity to replace him as the party nominee.

Oregon:  The Oregon iCitizen organization released the results of their online gubernatorial survey (6/23-27; 555 OR registered voters respondents). The data gives interim Gov. Kate Brown (D) a surprisingly small 42-35% advantage over the Republican nominee, former Oregon Medical Association president Bud Pierce.