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

In Partnership with the Eris Group

Hensarling, Walden to Chair House Panels — The House Republican Steering Committee voted last Thursday to approve the recommended slate of Committee chairs for the 115th Congress. Rep. Jeb Hensarling (R-TX) will continue to serve as Chair of the House Financial Services Committee, while Rep. Greg Walden (R-OR) will succeed Rep. Fred Upton (R-MI) as Chair of the House Energy and Commerce Committee. Rep. Tom Price (R-GA) will need to be replaced as Chair of the House Budget Committee if and when the Senate confirms his appointment as Secretary of Health and Human Services. The complete roster of chairs is here.

Mnuchin Appointed to Treasury, Ross Tapped for Commerce — President-Elect Donald J. Trump announced last Wednesday that he will appoint Steven Mnuchin as Secretary of the Treasury and Wilbur Ross as Secretary of Commerce. Neither man has previously held public office. Mnuchin was finance chairman for the Trump campaign; he was most recently chairman of Dune Capital Management. He spent 17 years with Goldman Sachs, and was co-founder of OneWest Bank Group. Ross’s eponymous firm, W.L. Ross, has specialized in resolving, selling or liquidating failing businesses; before founding his own business, he ran the bankruptcy practice of Rothschild & Co. Both appointments are subject to Senate confirmation.

House Passes Risk-Based Regulation Plan — The House of Representatives voted last Thursday to approve H.R. 6392, the Systemic Risk Designation Improvement Act of 2016. Rep. Blaine Luetkemeyer (R-MO) sponsored the bill, which would remove the size criteria for designating systemically important financial institutions (SIFIs), instead requiring the Financial Stability Oversight Council to make these designations on a case-by case basis. The bill passed by a vote of 254-161, generally falling along party lines. It has no Senate counterpart, but seems a likely candidate for quick action in the next Congress.

Tarullo Credits Regulatory Changes for Recovery, Suggests Next Steps — The Fed might not object to moving away from a size-based designation of systemic importance, Federal Reserve Board Governor Daniel K. Tarullo suggested in remarks last Friday. He noted the industry’s dramatic recovery from the financial crises of 2008, “with substantial injections of taxpayer capital and the complementary support of other guarantees and lending facilities” and “the regulatory reform program put in motion even before the crisis had ended.” Now that the crisis has been resolved, he said, the next steps include workable resolution plans, stress testing, and taking a closer look at the status of large U.S. branches of foreign banks and the so-called “shadow banks” that hold “runnable liabilities” outside the banking system. He also called for a “more explicit and thorough tiering of requirements within the prudential regulatory regime.” Among other changes, he said he would support raising the threshold for enhanced supervision to $100 billion, and exempting community banks entirely from the Volcker Rule and the executive compensation rule.

OCC Moves Forward on Fintech Charters — Comptroller of the Currency Thomas J. Curry said last Friday that the OCC is asking for comment on plans to issue special-purpose national charters to fintech companies. “Doing so is in the public interest,” Curry told a group at Georgetown University. “Fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters,” he said. The agency simultaneously published a paper on the issues raised by chartering these institutions, and has asked for comment. Comments are due by January 15, 2017, suggesting that the agency feels some urgency.

SEC Renews Equity Market Structure Advisory Committee — The Securities and Exchange Commission voted last Tuesday to renew the Equity Market Structure Advisory Committee through August 2017. The committee was created in February 2015, and has met seven times to give the SEC advice on a wide range of issues, including Regulation NMS and the structure for an access fee pilot.

Coming up in Washington (and elsewhere):

December 7
House Financial Services Subcommittee on Monetary Policy and Trade holds a hearing on “Unconventional Monetary Policy.” 10:00 a.m., 2128 Rayburn House Office Building.

December 7
The Securities and Exchange Commission will hold a public meeting of its Advisory Committee on Small and Emerging Companies by telephone conference. The agenda includes recommendations on corporate board diversity and outreach to smaller businesses about capital raising. Live audio will be available on the SEC’s website. 11:00 a.m.

December 8
House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises holds a hearing on “The Impact of Regulations on Short-Term Financing.” 9:30 a.m., 2128 Rayburn House Office Building.

 The Ellis Insight. Jim Ellis reports on election-related news:

> President

Election vote canvasses are underway in all states, and the totals will soon be final. Official state certification of the results then follows, and must occur on or before December 13th in order to comply with Electoral College procedures. California is the state that lags the farthest behind in counting. According to the Secretary of State’s office, they still have more than 514,000 ballots to process. With the national presidential total continuing to rise, the final national count may fall just short of 135,000,000 votes. In any event, 2016 has set an all-time record for voter participation.

Re-counts appear to be underway in Wisconsin and Michigan. Officials in Pennsylvania say the re-count petition deadline has expired before the request was made. These re-tabulations are an exercise in futility since the outcome will not change.

Since Michigan has finally declared Trump the victor in that state, the final electoral vote count will be 306-232. Mr. Trump will have won 30 states and the 2nd Congressional District of Maine, while Hillary Clinton will take 20 states and the District of Columbia.

> Senate

Alabama:  The game within the political game is well underway in Alabama regarding the replacement for Sen. Jeff Sessions (R) once he wins confirmation as US Attorney General. Alabama Attorney General Luther Strange (R) has upped the pressure on Gov. Robert Bentley (R) to appoint him as Sessions’ successor. Such an appointment might make sense from Bentley’s perspective, too. The Governor is under investigation for misusing state funds in association with an extra-marital affair, a process directly under Strange’s purview.

Last week, the Attorney General announced that he would accept a Senatorial appointment if offered, and will run for the post whenever Bentley schedules the special election to fill the balance of Sessions’ term even if someone else is chosen. It is believed that the Governor will make the special election concurrent with the 2018 regular election, though he doesn’t have to do so under Alabama election law. Should Bentley appoint Strange, he would also be able to appoint the latter’s successor as Attorney General, and in effect choose the person who will conduct the investigation of himself.

Louisiana:  Little controversy is surfacing in the Louisiana Senate run-off campaign, now just under a week away on December 10th. Such is good news for State Treasurer John Kennedy (R), who is the clear favorite over Democrat Foster Campbell, a state Public Service Commissioner. No recent polling data has surfaced, but Kennedy winning by double digits is the clear projection. Little in the way of outside spending is coming into the state for the race, meaning a rather surprising virtual concession from the national Democratic Party.

Utah:  Five years ago, Sen. Orrin Hatch (R) indicated that the 2012 race would be his last campaign. He was originally elected in 1976. Former Gov. Jon Huntsman (R) is now saying that he may be interested in a Senatorial run when Hatch retires. But, the Senator is now sending signals that he may in fact seek re-election to an eighth term. He will be 84 years of age at the time of the next election. Others reportedly looking at the Senate race are former presidential candidate Evan McMullin, who scored 21% of the vote as an Independent, and Attorney General Sean Reyes (R).

West Virginia:  Harper Polling went into the field (11/16-17; 500 WV likely voters) to test Sen. Joe Manchin’s (D) 2018 re-election prospects. While the generic ballot favors a Republican candidate (46-38%), the Senator fares well against all potential big name West Virginia politicians. Doing best in a hypothetical ballot test was Rep. Evan Jenkins (R-Huntington) who trailed Manchin, 51-39%.  Rep. David McKinley (R-Wheeling) was down 20 points, trailing 34-54%. Second District Rep. Alex Mooney (R-Charles Town) fell back even further to 28-58%. Attorney General Patrick Morrisey (R) registered a polling deficit of 35-57%. Sen. Manchin’s favorability index is a relatively strong 56:42% positive to negative, which is not as good as President-Elect Trump’s 65:32%, or Sen. Shelley Moore Capito’s (R) 63:31%.

At the end of last week, Sen. Manchin was mentioned as a prospective Energy Secretary for President-Elect Trump. Obviously, Manchin resigning the seat would drastically change the 2018 Senate situation, so the West Virginia situation bears continued observance.

> House

CA-34:  Gov. Jerry Brown (D) has appointed Rep. Xavier Becerra (D-Los Angeles) to replace state Attorney General Kamala Harris (D), who was elected to the US Senate in November. Once Ms. Harris resigns her position, Rep. Becerra will officially leave the House. Upon the vacancy becoming official, Gov. Brown will then call a special election to replace Mr. Becerra. Immediately upon Brown naming Becerra as the next state AG, Assembly Speaker John Perez (D) announced that he will enter the congressional race once the special election is called.

CA-49:  Rep. Darrell Issa (R-Vista) was finally declared the winner in his southern California congressional district. The California counting process drags on for weeks after the election, but in the end Issa held his seat by just over 2,000 votes. Immediately upon the election being called, retired Marine Colonel Doug Applegate (D) committed to seeking a re-match with Rep. Issa in 2018. Applegate won the anchor county in the district, San Diego, but the Congressman’s margin was so large in Orange County that it allowed him to eclipse the deficit and win the district.

GA-6:  The announcement that Rep. Tom Price (R-Roswell) will become President-Elect Trump’s Secretary of Health and Human Services means a special election will be scheduled in this northern Atlanta suburban seat as soon as the seat becomes officially vacant. Democrats may contest this open seat in a special election, citing how well Hillary Clinton fared here. While Donald Trump carried this district only 48-47%, Rep. Price was winning re-election with 62% of the vote. In 2012, Mitt Romney posted a 61-37% win over President Obama. In Rep. Price’s seven congressional elections, he has averaged 76% of the vote. Therefore, any prospects of a Democratic upset fade when the Trump result is removed from the voting history matrix.

IL-17:  Rep. Cheri Bustos (D-East Moline), fresh from a 60-40% victory for a third term in November, is considering a challenge race for Governor opposite GOP Gov. Bruce Rauner. Rep. Bustos admits to “not closing the door” on running statewide in 2018.

KS-4:  When Rep. Mike Pompeo (R-Wichita) is confirmed as President-Elect Trump’s CIA Director, the special election cycle will feature no primary vote. The political parties will choose a nominee according to their own party rules and not from a straight vote of the people. Therefore, the nominees will be chosen, and then we will see only one election. Once a vacancy officially occurs, Gov. Sam Brownback (R) will schedule the vote to choose Rep. Pompeo’s successor.

> Governor

New Mexico:  Sen. Tom Udall (D) is openly considering running for Governor. He told the local media to expect an announcement about whether or not he will run “before the end of the year.”  Since Sen. Udall’s seat is not in-cycle during 2018, he can run for Governor without risking his federal position. If he runs and is elected the state’s chief executive, he will then be able to appoint his own successor.

Tennessee:  Gov. Bill Haslam (R) is ineligible to seek a third term, so speculation as to who will replace him is rampant. Sen. Bob Corker (R), whose seat comes up for election in 2018, is said to be contemplating a run for Governor instead of re-election. He is also among those President-Elect Trump is considering for Secretary of State. Should he not receive a presidential appointment, he will then decide whether he wants to enter the Governor’s race or run for another six-year term in the Senate. Also a prime prospect to run statewide for either Governor or Senator, depending upon what comes open, is Rep. Diane Black (R-Gallatin).