Your Weekly Report on the Discord from Washington, D.C.
In Partnership with the Eris Group
Super Moon Alert — A little school girl tells us that on Monday, an extra special Super Moon will appear. The moon will be closer to Earth than it has been since 1948 and will not be this close again until 2034. It promises to be, as the President-elect would say, HUGE. So go out and look at the moon. But be careful, staring at the moon can give you perspective. Now back to our regular programming.
The United States prepares for its 45th Presidential transition, and Congress returns to town next week. Beyond that, it would be irresponsible for us to speculate (much) on what might happen next. That said, we’ll go ahead and make some general observations:
- Barack Obama remains President until January 20, 2017, and will continue to pursue his priorities through the means available to him.
- The Consumer Financial Protection Bureau (CFPB) is an obvious first target for the Trump Administration and the Senate and House Republican majorities. Director Richard Cordray, serving a five-year term that will not expire until 2018, will face strong pressure to resign, while Senate Democrats urge him to stay and dig in. The prospect of replacing the director with a commission is much stronger, and it is likely that the CFPB under a Trump administration will focus more on enforcement than on promulgating new rules.
- Changes are likely to the Financial Stability Oversight Council and its role, with a strong chance that AIG, Prudential and MetLife will be considered for “de-listing.”
- The Department of Labor’s fiduciary rule cannot be rescinded, but a Republican Congress and Republican President can delay and eliminate funding for its implementation.
- Over the next four years, President Trump will have the chance to nominate at least one Justice to the Supreme Court, and probably more. The new administration will also be able to appoint key regulators in all the financial agencies as their terms expire: at the Federal Reserve, the FDIC, the SIPC, the SEC, the OCC and other Treasury agencies, and the CFPB.
- Congress is likely to consider and approve Rep. Blaine Luetkemeyer’s bill to give Congress an increased role in the International Association of Insurance Supervisors (IAIS) and the Financial Stability Board (FSB).
- The Trans Pacific Partnership is dead, and future trade deals are likely to be bilateral rather multilateral. A new US-UK trade and investment agreement will be a priority, especially in light of Brexit, and a bilateral agreement with Mexico will focus on border security and remittances.
- President-Elect Trump is likely to follow through on promises to roll back the Obama administration’s regulations and executive orders, especially in the areas of energy and the environment.
- Immigration reform, a major focus of the Trump campaign, will be at the top of next year’s agenda.
Among the first things we’ll see on Capitol Hill in January will be a new budget, with reconciliation instructions that allow for a repeal of the Affordable Care Act (Obamacare). Adding policy issues to reconciliation bills allows them to pass with simple majorities, and protects them from Senate filibusters. We expect Congress to pass a package that looks a lot like the “curative amendment” passed by the Senate earlier this year, which President Obama vetoed.
Kirk, Ayotte Lose Senate Seats — Although Republicans held a majority of seats in the Senate, Senator Mark Kirk (R-IL) lost his race to Rep. Tammy Duckworth (D-IL) and Senator Kelly Ayotte (R-NH) lost to Governor Maggie Hassan (D-NH). Senator Kirk had chaired the Senate Banking Subcommittee on National Security and International Trade and Finance. Ayotte had chaired the Senate Commerce Subcommittee on Aviation, Operations, Safety and Security.
Defeated House Incumbents include Garrett, Mica, Guinta, Dold — Rep. Scott Garrett (R-NJ), chair of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, lost his re-election bid Tuesday to Josh Gottheimer, a former aide to President Bill Clinton. Garrett, a seven-term incumbent, was a founder of the House’s Freedom Caucus. Rep. Frank Guinta (R-NH), another member of the Financial Services Committee, lost to Carol Shea-Porter, and Patrick Murphy (D-FL) gave up his seat to make an unsuccessful Senate run. Rep. Bob Dold (R-IL), a member of the House Ways and Means Committee, lost his race to former Rep. Brad Schneider. Twelve-term Rep. John Mica (R-FL), chairman of the Oversight Subcommittee on Transportation and Public Assets, lost in a redrawn district to national security expert Stephanie Murphy.
OCC Announces Web-Based Filing System for Licenses — The Office of the Comptroller of the Currency announced last Monday that starting early next year, banks will be able to use a web form to file licensing and public welfare investment applications and notices. The Central Application Tracking System (CATS) will go online in three phases, beginning on January 17, 2017.
Coming up in Washington (and elsewhere):
House Financial Services Committee holds a hearing on “Examining the SEC’s Agenda, Operations, and FY 2018 Budget Request.” SEC Chair Mary Jo White will be the only witness. 10:00 a.m., 2128 Rayburn House Office Building.
House Financial Services Subcommittee on Housing and Insurance holds a hearing on “Modernizing Appraisals: A Regulatory Review and the Future of the Industry.” 10:00 a.m., 2128 Rayburn House Office Building.
House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade holds a hearing on “Understanding the Role of Connected Devices in Recent Cyber Attacks.” 10:00 a.m., 2322 Rayburn House Office Building.
The Ellis Insight. Jim Ellis reports on the week that was:
The 2016 election cycle ended with one of the biggest upsets in presidential election history, and a fitting way to end this unique campaign. Donald Trump was elected President and, for the second time in the last five elections, did so winning only an Electoral College victory. The national popular vote went to Hillary Clinton.
Currently, Ms. Clinton sits at 60.165 million votes (47.7%) as compared to Trump’s 59.868 million votes (47.4%). Libertarian Gary Johnson is posting 3.4 million votes and Green Party candidate Jill Stein records 1.2 million. Together, the national voter turnout is just over 126.18 million votes. This is below 2012 (129 million) and the all-time record year of 2008 (131 million). But, counting of absentee and provisional votes persists in most states. California and Washington still have sizable numbers to count since they allow mail votes to be postmarked on Election Day. Therefore, the current figure will continue to rise.
Though Clinton is ahead in the popular vote, one must remember that the Trump campaign conceded states that possess almost a quarter of the nation’s population. Not competing for California, New York, Illinois, and New Jersey allowed Ms. Clinton to rack up huge margins that allowed her to possibly inflate the popular vote spread.
The electoral count stands with Trump at 290, and possibly expanding to 306 once Michigan is called. Local Michigan media outlets have called the state for Trump, citing his 13,000 vote lead, but votes remain to be counted. With New Hampshire going to Clinton by just over 1,300 votes, her final count looks to be 232 electoral votes, or 248 if Michigan ends up in her camp. Trump won 29 states and 30 if Michigan holds for him, compared to Clinton’s 20 plus the District of Columbia.
This election will prove to be historic, and marks the first time since Dwight Eisenhower that a person was elected having never before won a political office. Mr. Trump is the first president to have neither political nor military experience before assuming the Presidency.
The US Senate picture is becoming clearer, as only one state remains undecided. Louisiana, with its unique electoral system that schedules the nominating election concurrently with the national general election, must now hold run-off elections in situations where no candidate secured a majority of the vote. Such is the case in the US Senate race as state Treasurer John Kennedy (R) will face Public Service Commissioner and frequent statewide candidate Foster Campbell (D) in a December 10th run-off election. Should Kennedy win, and he is favored, the Republican majority will land at 52 seats as compared to the minority Democrats’ 48.
Democrats defeated two GOP incumbents, Sens. Mark Kirk (IL) and Kelly Ayotte (NH), the latter in a razor-thin result, just 743 votes from almost 708,000 ballots cast. Republicans scored big with upset wins from incumbent Ron Johnson in Wisconsin and Rep. Todd Young in the Indiana open seat.
Even though Sen. Johnson is the incumbent, his victory was the stunner of the evening. Trailing for the entire year in polling, usually from five to twelve points, the Senator was able to rebound for a 50-47% win over ex-Sen. Russ Feingold (D), the man he unseated six years ago.
When Democrats were able to convince former Indiana Sen. Evan Bayh to return as their 2016 open seat nominee, he began the campaign with a 21 point lead in the polls. That lead began to dissipate once Young and the National Republican Senatorial Committee (NRSC) began hitting Bayh on his lobbying contracts and not maintaining a home in Indiana. At the end of the race, Young hit his stride and polling was detecting that an upset was possible heading into Election Day. He then went onto to score a ten point victory, meaning the race swing an incredible 31 points since mid-July.
Sen. Pat Toomey (R-PA), who ran an excellent campaign but appeared to be trailing former gubernatorial chief of staff Katie McGinty (D) in what is normally a Democratic-voting Pennsylvania, was able to ride the Trump turnout model to win a tough re-election by just under two percentage points. Sens. Roy Blunt (R-MO) and Richard Burr (R-NC) both won re-election after bruising campaign battles. GOP Senators John McCain (AZ), Marco Rubio (FL) Chuck Grassley (IA), and Rob Portman (OH) all began in what appeared to be competitive contests, but each won easily. In fact, Sen. Grassley’s bid for a seventh term was so strong that he carried 98 of the state’s 99 counties.
For the Democrats, former Nevada Attorney General Catherine Cortez Masto became the first female of Latin descent to win a US Senate seat. She scored a two-point victory over Rep. Joe Heck (R-Henderson) to hold the seat of retiring Senate Minority Leader Harry Reid.
Though polling consistently suggested that Senate Democrats would score at least a 50-50 split, or even a 51- or 52-seat outright majority, it was the Republicans who prevailed in the end.
Republicans also had a good election night in the House even though they lost several of their 247 seats. Expecting reduction margins between 12-15 districts, the GOP looks to escape with maybe as only a six-seat loss when the four undecided races are finally settled. Two California campaigns, featuring Reps. Ami Bera (D-Sacramento) and Darrell Issa (R-Vista) remain uncalled. California typically counts thousands of absentee and early votes after the election, so these two contests could drag on for some time. Both incumbents have small leads.
The other two undecided contests are the pair of open Louisiana run-offs in Districts 3 and 4. The 3rd District, vacated by Rep. Charles Boustany (R-Lafayette) who failed to qualify for the Senate runoff, features a double Republican affair between Public Service Commissioner and former gubernatorial candidate Scott Angelle and retired police captain Clay Higgins. Tuesday’s election, which was only a three-point separation between the top two finishers was much closer than predicted. Therefore, Angelle has to be viewed as only a slight favorite in the December 10th runoff.
In the Shreveport-based 4th District, Democrat J. Marshall Jones and Republican state Rep. Mike Johnson will do battle in the run-off election. Since the 4th is a solid seat for the GOP, being vacated by Rep. John Fleming’s (R) unsuccessful run for Senate, Mr. Johnson becomes a decided favorite for the run-off.
Overall, the new partisan division sits at 238 Republicans and 193 Democrats. Since LA-3 is guaranteed to elect a Republican, the actual count is 239-193. Being favored in LA-4, and if Rep. Issa holds, the GOP final number would reach 241, meaning a loss of only six seats from the previous Congress.
Eight incumbents, six Republicans and two Democrats, were defeated for re-election. The mid-decade Florida redistricting map cost Reps. John Mica (R-Winter Park) and David Jolly (R-Pinellas County) their seats. The two seats that keep going back and forth between specific Democratic and Republican candidates, IL-10 and NH-1, again flipped back to the Democrats. Former Reps. Brad Schneider (D) and Carol Shea-Porter (D) both return for new shots at serving in Congress. They again defeated Reps. Bob Dold (R) and Frank Guinta (R), respectively.
Also losing were GOP Reps. Scott Garrett (R-NJ-5), and Cresent Hardy (R-NV-4). For the Democrats, veteran Rep. Mike Honda (D-San Jose) lost his 17th District to a fellow Democrat, former Commerce Department official Ro Khanna. In 2014, Honda defeated Khanna, 52-48%. This election wasn’t even close: Khanna won 60-40%. Rep. Hardy fell to state Sen. Ruben Kihuen (D) in a district that was drawn to elect a Democrat, and did so again.
Republicans fared well in this election because they won the majority of the toss-up races. Going into the election, it appeared that 20 seats were too close to call. Democrats realistically needed to sweep the entire toss-up category and the take 16-19 additional lean and likely Republican districts. In the end, Republicans won 12 of the 20 toss-up campaigns, meaning the Democrats had no chance to re-capture the majority they lost in the 2010 election.
Twelve gubernatorial races were on the ballot this week, and Republicans look to gain a net two state houses, thus adding to their already inflated total.
Gaining three states, Missouri, New Hampshire, and surprisingly Vermont, while potentially losing North Carolina as Gov. Pat McCrory (R) trails Attorney General Roy Cooper (D) by approximately 5,000 votes with only absentees and challenges remaining, the GOP now controls 33 Governors’ mansions as compared to the Democrats’ 15. North Carolina remains undecided, while Independent Bill Walker (AK) is a former Republican.
Incumbents Steve Bullock (D-MT), in a close race, Kate Brown (D-OR), Gary Herbert (R-UT), and Jay Inslee (D-WA) were all re-elected. Republicans held their open seats in Indiana and North Dakota. Democrats retained open state houses in Delaware and West Virginia.