House Financial Services Passes Comprehensive Reform Bill — The House Financial Services voted 30-26, mostly along party lines, to pass the Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act last Tuesday without a single amendment. The 571-page package had support from community banking organizations, the National Association of Realtors, the U.S. Chamber of Commerce and the National Association of Home Builders, among other groups. It would roll back many of the provisions enacted by Dodd-Frank, incorporates several previously passed regulatory relief measures, and would create a new chapter of the bankruptcy code as an alternative to “too big to fail.” Floor action on the bill has not been scheduled.

House, Senate Announce Wells Fargo Investigations — The House Financial Services Committee has launched an investigation into Wells Fargo’s alleged opening of unauthorized accounts, and federal regulators’ role in investigating this activity, Committee Chairman Jeb Hensarling (R-TX) announced last Friday. The Committee will hear testimony from Wells Fargo Chairman & CEO John Stumpf later this month, and has asked the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) for all copies of all records related to the agencies’ investigation. Meanwhile, the Senate Banking Committee has scheduled a hearing on the subject for next Tuesday, with Mr. Stumpf, Comptroller Tom Curry, CFPB Director Richard Cordray and a representative of the Los Angeles City Attorney’s office as witnesses. The CFPB, OCC and City and County of Los Angeles fined Wells Fargo a combined $185 million in penalties on September 8.

Senate Democrats Ask Wells Fargo About Bonuses — Before Tuesday’s Senate Banking Committee hearing, ranking member Sen. Sherrod Brown (D-OH) with Senators Elizabeth Warren (D-MA), Bob Menendez (D-NJ), and Jeff Merkley (D-OR) wrote to Wells Fargo Chairman and CEO John G. Stumpf to ask whether, in the wake of these recent fines, the bank plans to use its authority to recover funds paid to bank executives as bonuses. Specifically, the Senators asked whether the bank would try to recover any of the more than $20 million in bonuses received by Carrie Tolstedt, who served as Senior Executive Vice President of Community Banking between 2010 and 2015 but has recently announced her retirement.

Flood Insurance Premiums Must Reflect Risk, Shelby Says — Last Tuesday’s Senate Banking Committee hearing on the Technical Mapping Advisory Council’s 2015 Annual Report focused on recommendations for ways that the Federal Emergency Management Administration (FEMA) can improve communications about flood risk, to make flood insurance rates more accurate. Chairman Richard Shelby (R-AL) noted that FEMA’s rate model is based on “limited data from the 1970s,” and that “nearly half of FEMA’s maps remain out of date.” Roy Wright, head of FEMA’s National Flood Insurance Program, told the Committee, “We need to meet the transformations in flood hazard analysis with complimentary leaps forward in our actuarial and underwriting practices. Simply, we need to set premiums that best reflect the risk.”

Comptroller Defends Leverage Ratios — In remarks before Harvard’s Kennedy School last Thursday, Comptroller of the Currency Thomas Curry said that “now is not the time to change course” on addressing “the basic lessons” learned during the financial crisis of 2008: “the value of strong capital and its corollary the danger of excessive leverage, the need for ample liquidity, and the importance of effective supervision.” He said that with current capital levels, the nation’s 33 largest banks would be able to continue to lend despite an economic downturn, and that current capital requirements make the banking system “a source of strength.”

Big Banks No Safer? — Meanwhile, a paper released last week by the Brookings Institution and co-authored by former Secretary of the Treasury Lawrence H. Summers argues that “financial market information provides little support for the view that major institutions are significantly safer than they were before the crisis and some support for the notion that risks have actually increased.” New regulations, they assert, have contributed to a “dramatic decline in franchise value” among the largest financial institutions, making them “more vulnerable to adverse shocks.”

Warren Presses DOJ, FBI on Prosecutions for 2008 Financial Crisis — Last week marked the eighth anniversary of the collapse of Lehman Brothers, and Senator Elizabeth Warren (D-MA) wants to know why nobody’s gone to jail. In letters to the Inspector General of the Department of Justice and FBI Director James Comey, Senator Warren asked for a review of the DOJ’s failure to act on referrals by the Financial Crisis Inquiry Commission (FCIC) and argued that the FBI’s investigation into Secretary Clinton’s email server set a new standard for “public transparency around the fate of the FCIC referrals.”

Lockhart to Leave Atlanta Fed in February — Federal Reserve Bank of Atlanta President and CEO Dennis Lockhart announced last Tuesday that he will step down from that position on February 28, 2017, after ten years in that role. Thomas Fanning, chairman of the Atlanta Fed’s board of directors, will lead the search for a successor, and the Atlanta Fed will host a live webcast on October 6 to explain the search process and answer questions from the public.

 

This Week in Washington (and elsewhere):

September 20
Senate Committee on Banking, Housing and Urban Affairs holds a two-panel hearing on “Wells Fargo’s Unauthorized Accounts and the Regulatory Response.” Wells Fargo Chairman & CEO will testify first, followed by Comptroller of the Currency Tom Curry, CFPB Director Richard Cordray, and James Clark, Chief Deputy City Attorney for the City of Los Angeles. 10:00 a.m. SD-538 Dirksen Senate Office Building.

September 21
House Financial Services Subcommittee on Housing and Insurance holds a hearing on “The Future of Housing in America: A Better Way to Increase Efficiencies for Housing Vouchers and Create Upward Economic Mobility.” 10:00 a.m., 2128 Rayburn House Office Building.

September 21
House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises holds a hearing on “Corporate Governance: Fostering a System that Promotes Capital Formation and Maximizes Shareholder Value.” 2:00 p.m., 2128 Rayburn House Office Building.

September 22
House Committee on Financial Services holds a hearing on the Annual Report of the Financial Stability Oversight Council. 10:00 a.m., 2128 Rayburn House Office Building.

September 22
House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises holds a hearing on “Examining the Agenda of Regulators, SROs, and Standards-Setters for Accounting, Auditing, and Municipal Securities.” 2:00 p.m., 2128 Rayburn House Office Building.

September 22
House Oversight and Government Reform Subcommittee holds a hearing on “Examining Billion Dollar Waste through Improper Payments.” 3:00 p.m., 2154 Rayburn House Office Building.

The Ellis Insight. Jim Ellis reports on upcoming races:

> President


We continue to see Donald Trump posting polling gains against Hillary Clinton. Since September 11^th, seven surveys were completed and publicly reported. Again the Los Angeles Times/University of Southern California tracking poll seems at odds with the other available data, but that is not surprising since the methodology is different than the more traditional approach. The Times/USC data finds Mr. Trump taking a national 47-41% lead, his largest since July 28^th.

The pollsters here are attempting to track the ebbs and flows of a representative respondent universe. The administrators randomly chose a group of 3,000 individuals who agree to be polled throughout the campaign. Five hundred of those are called on a nightly basis.

The six other surveys, from Ipsos/Reuters, Quinnipiac University, CBS/New York Times, YouGov/The Economist, Rasmussen Reports, and Fox News all show a race hovering almost dead even. Quinnipiac and You/Gov find Ms. Clinton two points ahead, Fox News sees a 41-40% Clinton spread, CBS and Ispsos/Reuters project a tie, and Rasmussen Reports forecasts a two-point Trump national lead. Averaging these latter half-dozen polls, the spread is just half of one percentage point in Ms. Clinton’s slight favor. Adding the LA Times data to the mix, the average lead turns Mr. Trump’s way by just under one percentage point.

Thus, the plethora of available data all suggests the race is effectively tied. Not counting the LA Times outlier poll, the two candidates fall between 39 and 41% in all of the aforementioned surveys.

Trump is also improving in state polling, as three separate polls project him leading in Ohio with an expanding margin. Two polls, from JMC Analytics and CNN/ORC also find Trump forging ahead of Ms. Clinton in all-important Florida. The Florida-Ohio-North Carolina triumvirate of states is critical for Trump to win. He must win all three in every potential victory scenario. Ms. Clinton can lose them all and still claim national victory.

The Clinton campaign is continuing with their attack ad strategy against Trump, this time using many clips from disabled veterans, including an unidentified former Sen. Max Cleland (D-GA), and showing these individuals watching Trump make statements about the “sacrifices” he’s made.

Seizing upon Clinton referring to many Trump supporters as “deplorables”, the Trump ad strategy attempts to turn the tables on her in that it uses her own language. The ad makes the supposition that her harsh comments are directed toward working people in the Trump coalition.

On the national Electoral College vote count, looking at all of the states where each candidate is leading, Ms. Clinton would secure the election with 272 electoral votes versus Mr. Trump’s 266. The latter would hold all 24 states that Mitt Romney won in 2012, and then convert Florida, Ohio, Iowa, Nevada, and the 2^nd Congressional District of Maine.

> Senate 


Arkansas:  The Emerson College Polling Society conducted a four-state series of surveys. Including the Arkansas race gave us our first glimpse into the campaign between Sen. John Boozman (R) and former US Attorney Connor Eldridge (D). As expected, it is the first term Senator who possesses a substantial lead as the candidates enter the political stretch run. The Emerson poll (9/9-13; 600 AR likely voters) finds Sen. Boozman’s advantage to be 44-30%.

Colorado:  Though the Republican Party’s campaign apparatus has already conceded the Colorado race to incumbent Sen. Michael Bennet (D) and Republican nominee Darryl Glenn has little money, the polling still shows the challenger on the outer rim of the competitive range. According to the Emerson College Polling Society (9/9-13; 600 CO likely voters), Sen. Bennet’s lead is 46-39%.

Florida:  CNN/ORC (9/7-12; 788 FL likely voters) conducted the latest Florida Senate poll and projects Sen. Marco Rubio (R) to what appears to be his largest lead over Rep. Patrick Murphy (D-Jupiter/West Palm Beach). According to CNN, Rubio’s advantage has now jumped to eleven points, 54-43%. The September polls, all from different research sources, find the Senator with leads of three, five, seven, and now eleven points.

Georgia:  The third Emerson College Polling Society survey was conducted in Georgia (9/9-13; 600 GA likely voters), and also sees Sen. Johnny Isakson (R) positioning himself to clinch his re-election bid. The ECPS data shows Isakson holding a large 48-32% lead. Fox-5 News in Atlanta confirmed Sen. Isakson’s margin with their own Opinion Savvy poll (9/14; 568 GA likely voters). They find the split to be consistent with Emerson’s finding: 47-34%.

Missouri:  The Emerson College survey that appears as an outlier is finding Sen. Roy Blunt (R) trailing Secretary of State Jason Kander (D) by a two-point 42-40% spread. The last four polls all showed Blunt leading between three and seven points. The inconsistency, however, is within the Emerson poll itself.

The presidential ballot test reveals Donald Trump leading Hillary Clinton 47-34%. Therefore, it appears unlikely that Blunt would be trailing within the same sampling group. The ballot test result is even more curious when seeing that Blunt’s favorability index is actually better than Kander’s, and the two candidates’ standing in the gender segment is reversed from what we are seeing in every survey from around the country. Here, the ECPS crosstabs suggest that Republican Blunt is performing better among women while Democrat Kander is carrying the male segment.

Nevada:  Two more Nevada surveys came into the public realm this week, and both confirm what almost every other survey shows, that is Rep. Joe Heck (R-NV-3) holding a small lead. NBC News/Wall Street Journal/Marist College (9/6-8; 627 NV likely voters) delivered a 47-45% Heck split. Later, Monmouth University (9/11-13; 406 NV likely voters) confirmed the margin. They find Heck up by a similar 46-43%.

New Hampshire:  The New Hampshire primary finally made Gov. Maggie Hassan (D) and Sen. Kelly Ayotte (R) the official party nominees. Gov. Hassan was unopposed while Sen. Ayotte defeated multiple Republican opponents with a strong 79% of the vote. The two have been in a toss-up battle for most of the last year. We can expect a photo finish in this contest, one that will go a long way to deciding which party controls the Senate in the next Congress.

Ohio:  The plethora of Buckeye State polls now all come to the same conclusion, that Sen. Rob Portman (R) is putting this race away. Three more surveys were released this week containing good news for Sen. Portman. CNN/ORC (9/7-12; 769 OH likely voters) gives Portman his largest lead of any poll during the election cycle, a 58-37% spread reaching 21 points. Bloomberg Politics/Selzer & Company (9/9-12; 802 OH likely voters) basically confirms Portman’s large lead. They project the race at 53-36%, a 17-point gap. Suffolk University (9/12-14; 500 OH likely voters) sees the spread being closer, 39-31%, but with an undecided factor that far exceeds any other recent poll.

Stories are surfacing that the Democratic Senatorial Campaign Committee is cancelling the majority of their ad buy, and virtually acknowledging that ex-Gov. Ted Strickland’s (D) political obstacle is likely too formidable to scale.

> House 


DE-AL:  The September 13^th primary produced a Democratic nominee who will almost assuredly win the open seat in November. Former state Labor Secretary Lisa Blunt Rochester easily overcame her two strongest Democratic opponents to capture the party nomination. She needs only to get past former Wyoming Mayor Hans Reigle (R) in the general election. Ms. Rochester touched 44% in her crowded primary while Mr. Reigle was unopposed on the GOP side. Ms. Rochester now becomes the prohibitive favorite to succeed Rep. John Carney (D-Wilmington), who is advancing to the general election as the party’s gubernatorial nominee.

ME-2:  Maine’s 2^nd District that contains the cities of Bangor, Presque Isle, Caribou, and the Lewiston-Auburn region will play an important role in the presidential election. Right now, Donald Trump leads in the district polling, meaning he could win an Electoral Vote from the state. Maine is one of two states – Nebraska is the other – that splits its Electoral Votes. One is awarded two votes for winning the statewide vote and one each for placing first in the congressional districts.

Republican Bruce Poliquin won the 2^nd District seat in 2014, and he seeks re-election to a second House term. A new Colby College/Survey USA poll (9/4-10; 347 ME-2 likely voters) tested the Poliquin vs. Emily Cain (D) re-match. Mr. Poliquin defeated then-state Sen. Cain two years ago by five percentage points. The new poll shows an almost identical result. According to the S-USA data, Rep. Poliquin leads Ms. Cain, 50-45%.

MI-1:  The open northern Michigan seat is solidly in the toss-up category. Democratic nominee Lon Johnson, the former state party chairman, released the results of his very recent Anzalone Liszt Grove Research poll (9/11-13; 500 MI-1 likely voters). The data gives Johnson a 43-41% lead over retired Marine Corps General Jack Bergman (R). The 1^st District covers all of the Upper Peninsula and a large section of the northern sector of the state’s lower peninsula. Three-term Rep. Dan Benishek (R) is retiring due to a self-imposed term limit. MI-1 is a key Democratic conversion opportunity.

NH-1:  In one of the closest primary challenge campaigns during the entire election cycle, scandal tainted Rep. Frank Guinta (R-Manchester) survived his challenge with a 629-vote margin against Republican businessman Rich Ashooh. Because the final result was within one percentage point, 46-45%, a re-count could have been conducted. Instead, Mr. Ashooh conceded the contest and Rep. Guinta will advance to the general election. There, he will again face former Rep. Carol Shea-Porter (D-East Rochester). The two have opposed each other three previous times, with Guinta winning twice. New Hampshire’s 1^st District has defeated more incumbents than any other congressional seat during the last ten years.

For an incumbent who scores well below a majority in his primary, he would normally have little chance of winning in November. But, against Shea-Porter who has twice lost as an incumbent here, any outcome is possible. The presidential turnout trends will go a long way toward determining the final outcome.

NH-2:  Rep. Annie Kuster (D-Concord) was unopposed for re-election. Republican former state Rep. Jim Lawrence won the crowded GOP primary, but he has little chance of unseating Ms. Kuster in the general election.

> Governor


Delaware:  The late September 13^th primary sent a Democrat and Republican to the general election. The November winner replaces term-limited Gov. Jack Markell (D). At-large Rep. John Carney (D-Wilmington) was unopposed for the Democratic nomination, and he is already considered a prohibitive favorite in the general election. State Sen. Colin Bonini won a 70% Republican primary victory, but he will have a difficult time creating enough momentum to overtake Congressman Carney.

New Hampshire:  Democratic Executive Councilor Colin Van Ostern won a decisive Democratic gubernatorial victory against two credible opponents, but the story of the primary night was on the Republican side. Here, Executive Councilor Chris Sununu, son of former Governor and White House Chief of Staff John Sununu (R), eked out a close 31-30-21-18% victory over state Rep. and self-funding candidate Frank Edelblut, Manchester Mayor Ted Gatsas, and state Sen. Jeanie Forrester. Van Ostern will begin the short general election as the favorite, particularly since Democrats have won nine of the last ten gubernatorial elections. New Hampshire is one of two states — Vermont is the other — that maintains two-year terms for their Governors.

North Carolina:  After trailing in the polls since early August, a new Civitas Institute poll (9/11-12; 600 NC likely voters) finds Gov. Pat McCrory (R) re-taking the lead over Attorney General Roy Cooper (D). The new data stakes the Governor to a two-point, 45-43% edge.