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

In Partnership with the Eris Group

Senate confirms Mnuchin, McMahon, Mulvaney, Pruitt — Last week the Senate voted mainly along party lines to confirm Steven T. Mnuchin as Secretary of the Treasury; Linda McMahon as Administrator of the Small Business Administration; former Rep. Mick Mulvaney (R-SC) as Director of the Office of Management and Budget; and Scott Pruitt as Administrator of the Environmental Protection Agency. Consideration of the President’s nominees will resume when the Senate returns from recess on February 28.

Acosta nominated to Department of Labor after Puzder withdraws — Last Thursday President Trump announced the nomination of R. Alexander Acosta to serve as Secretary of Labor, after his previous nominee, Andrew Puzder, withdrew. Acosta currently serves as Dean of Florida International University Law School, and previously served on the National Labor Relations Board. He has served as Chairman of U.S. Century Bank, the largest domestically owned Hispanic bank in Florida, since 2013.

Regional banks ask for comprehensive regulatory review — CEOs of eighteen regional banks sent a letter to House and Senate leadership to ask Congress to consider “the cumulative impact of regulations implemented in the wake of the financial crisis,” and work toward meaningful tax reform. The banks specifically asked Congress to streamline the “competing capital regimes” of Dodd-Frank, Basel III, and the CCAR/DFAST; to eliminate government-mandated price controls; to require “rigorous cost-benefit analyses for all new regulations;” and to “review and rationalize” the corporate tax structure.

Crapo, Hensarling challenge Yellen on regulatory relief, monetary reform — Federal Reserve Board Chair Janet Yellen delivered the agency’s semiannual report on monetary policy to the Senate Committee on Banking, Housing and Urban Affairs and the House Financial Services Committee last week. Senator Mike Crapo (R-ID) asked Chair Yellen “how the Fed plans to normalize monetary policy and wind down the Fed’s balance sheet,” which still includes close to 35 percent of the agency mortgage-backed security market. Rep. Jeb Hensarling (R-TX) said “there is zero evidence that zero interest rates and a bloated Fed balance sheet lead to a healthy economy,” and accused the Fed of “unlawfully pay[ing] above market interest rates to some of the nation’s largest banks in order to prop up select credit markets.”

Senate rules will slow Dodd-Frank reform, Crapo says — While House Financial Services Committee Chairman Jeb Hensarling (R-TX) has vowed to move quickly on legislation to repeal Dodd-Frank, the “practical reality” on the Senate side is that the 60-vote requirement will slow that process down, Senate Banking Committee Chairman Mike Crapo (R-ID) said last Wednesday. Speaking before the Third Annual Financial Services Conference sponsored by Jones Walker LLP and the Mid-Size Bank Coalition of America, Chairman Crapo said that regulatory relief for community and regional banks was a priority for him, as are reforming Fannie Mae and Freddie Mac, reviewing the Basel capital standards, and improving the transparency and accountability of the Financial Services Oversight Council.

CFPB requests information on alternative data for credit scoring — At a field hearing last Thursday in Charleston, WV, Consumer Financial Protection Bureau Director Richard Cordray announced a formal Request for Information about ways to expand access to credit for consumers who are “credit invisible” or lack sufficient credit history to have a credit score. Specifically, the agency wants feedback about the pros and cons of using alternative sources of information, such as mobile phone bills and rent payments, to help build a credit history. Comments are due to the CFPB by May 19.

US-EU “covered agreement” on insurance leaves states unhappy — The House Financial Services Subcommittee on Housing and Insurance began the process of “Congressional consultation” on the covered agreement between American and European insurance regulators, as required by Dodd-Frank. Negotiations on the agreement concluded before the end of the Obama administration, and involved “unprecedented” participation by the state insurance agencies, said Michael T. McRaith, former director of the Federal Insurance Office. The agreement gives US reinsurers opportunities in Europe that were previously unavailable to them, but Wisconsin Commissioner of Insurance Ted Nickel, speaking on behalf of the National Association of Insurance Commissioners, said that stakeholders and the state agencies did not have adequate input into the negotiation. The House Ways and Means Committee and the Senate Banking Committee will be holding their own hearings on the agreement.

IRS scam still hitting seniors hard — The Senate Special Committee on Aging heard testimony last week from a victim of a telephone scam that targets senior citizens by telling them they face criminal punishment for unpaid taxes, and heard from government and industry advocates working against elder fraud. Lois Greisman, Associate Director of the Division of Marketing Practices at the Federal Trade Commission’s Bureau of Consumer Protection, described the agency’s enforcement actions against Western Union, and said that it was using most of the $586 million settlement to compensate victims. In the past year, however, the most popular vehicle for the scam has switched from wire transfers to iTunes cards. Tim Camus, Deputy Inspector General under the Treasury IG for Tax Administration, said that disrupting these transactions, such as through a 72-hour right of rescission on large money transfers, can often be enough to let families of victims become aware of the problem.

CFPB wins full court review of constitutionality — The Consumer Financial Protection Bureau (CFPB) won its petition last Thursday for a full-court review of last October’s decision that the agency is structured unconstitutionally. The U.S. Court of Appeals for the District of Columbia will hold an en banc hearing on May 24 to review PHH Corp.’ s challenge to Director Robert Cordray’s authority. In an interview with Bloomberg lastTuesday, House Financial Services Committee Chairman Jeb Hensarling (R-TX) reiterated his commitment “to protect consumers from . . . a rogue agency” that “has been ruled unconstitutional.”

Appeals court will review SEC administrative law judge system — The full U.S. Court of Appeals for the District of Columbia announced last Thursday that it will also hear oral arguments on May 24 on the constitutionality of the Securities and Exchange Commission’s administrative law judges (ALJ). Last August, a three-judge panel rejected Raymond J. Lucia’s argument that the administrative law judge presiding over an enforcement action against Raymond J. Lucia Companies, Inc. had been appointed unconstitutionally.

SEC, state regulators will share information on crowdfunding and regional offerings — The Securities and Exchange Commission and the North American Securities Administrators Association announced last Friday that they have agreed to share information in ways that will make it easier for companies to make intrastate offers through websites and social media without having to register with the federal government. A new memorandum of understanding will allow the SEC and state agencies to share data about these companies, in order to monitor compliance and prevent fraud.

This Week in Washington:

This week is a district work period for both the House and the Senate. Monday, February 20, was the federal Presidents’ Day holiday.

The Ellis Insight. Jim Ellis reports on political news:

> Senate

Alabama:  Newly appointed Sen. Luther Strange (R) has already made political history. At 6’9” tall, Mr. Strange is now the tallest person ever to serve in the United States Senate. Former Sen. Alan Simpson (R-WY) had been the tallest, at 6’7”. The late Sen. Fred Thompson (R-TN) was 6’6”.

Arizona:  Sen. Jeff Flake (R) is again receiving bad polling news in early Republican primary ballot tests. The Political Information Marketing firm (PMI) surveyed the likely Arizona Republican electorate (2/7; 921 AZ likely GOP primary voters) and found former state Sen. Kelli Ward leading Sen. Flake, 30-23% in a head-to-head pairing. Earlier polls had also signaled that Flake has major trouble within his own base, the after-effect of his personal feud with then-candidate Donald Trump during the presidential campaign. State Treasurer Jeff DeWit (R), the Trump campaign’s chief Arizona official, may enter the race. He has not formally done so, but has announced that he won’t seek re-election as Treasurer.

Florida:  In the last election, South Florida attorney and law professor Tim Canova ran a high profile Democratic primary challenge to Rep. Debbie Wasserman Schultz (D-Weston). The race had a national perspective because Wasserman Schultz was, at the time, chair of the Democratic National Committee. Later, after accusations that the DNC was favoring Hillary Clinton, Sen. Bernie Sanders publicly endorsed Canova, and the entire controversy led to her undoing as party leader. The first-time congressional candidate raised and spent almost $4 million on his campaign, but still lost 43-57%. Soon after his defeat, Mr. Canova announced that he would try again in 2018.

Now, however, he may be changing his sights. Last week, he opened the door to the idea that he might challenge Sen. Bill Nelson in next year’s Democratic primary instead of Ms. Wasserman Schultz. A race against Mr. Nelson would carry much longer odds than even running for the House again and would be a surprising turn of events. In either case, Mr. Canova will be rated as a heavy political underdog.

Wisconsin:  Rep. Sean Duffy (R-Wausau), one of the many Republicans eyeing a Senate challenge to incumbent Tammy Baldwin (D), has decided not to enter the statewide race. In a statement, Rep. Duffy said, “…that this is not the right time for me to run for Senate. We have eight great kids and family always comes first.”  He went on to say he will help the eventual Republican nominee defeat Sen. Baldwin and continue to work hard for his 7th District constituents. The statement did not contain an official announcement for re-election, but the tone of his comments suggests he plans to continue serving in the House.

The top Republicans reportedly considering the Senate race are: Lt. Gov. Rebecca Kleefisch, state Senate Majority Leader Scott Fitzgerald, and venture capitalist Eric Hovde who ran in the 2014 Republican primary but lost to former Gov. Tommy Thompson. Milwaukee County Sheriff David Clarke is also a potential Senate candidate. Though a Democrat, he would likely run as a Republican.

> House

GA-6:  Gov. Nathan Deal (R) scheduled the special election to replace Health & Human Services Secretary Tom Price for April 18th, with a run-off on June 20th. Mr. Price represented the northern Atlanta suburban 6th District for six-terms, leaving for the Administration after being elected to a seventh in November. The Democrats plan to mount a significant challenge in this contest, wanting to back investigative filmmaker Jon Ossoff. He has four other Democratic opponents running in the jungle primary, however, including former state Sen. Ron Slotin. Eleven Republicans have filed as candidates, the most prominent of who are former Secretary of State Karen Handel, state Sen. Judson Hill, former state Sen. Dan Moody, businessman Kurt Wilson, and ex-Gwinnett County Republican Party chairman Bruce LeVell.

Republicans will be favored to hold this seat, which typically performs as a reliable district for the GOP. President Trump scored only a 1.5 percentage point victory here in November, thus the Democrats are optimistic that a low special election turnout and an energized liberal base could help them score an upset.

KS-4:  The nominees are now chosen for the April 11th special election to replace CIA Director Mike Pompeo in the south-central Kansas US House district. As reported two weeks ago, the 4th District Republican Committee selected state Treasurer Ron Estes. The Democratic committee then countered with newcomer James Thompson, a local Wichita attorney, who upset former state Treasurer Dennis McKinney. It is clear that the majority of local convention delegates felt the party was in stronger position fielding a fresh face than an individual who had already lost badly to Estes. In 2010, Estes unseated incumbent Treasurer McKinney by 17 points, and his margin was a whopping 25 points in the 4th District. Mr. Estes is a big favorite to claim the seat in early April.

SC-5:  With the confirmation of South Carolina Rep. Mick Mulvaney (R-Lancaster/Rock Hill) as Director of the Office of Management & Budget, the special election cycle to fill his 5th Congressional District vacancy has already begun. Under South Carolina election law, the primary will be the eleventh Tuesday after the vacancy becomes official. A partisan run-off will be conducted if no candidate receives an absolute majority on the thirteenth Tuesday after vacancy, and the general election follows on the 18th Tuesday post vacancy. In this case, the special primaries should occur on May 2nd, any run-off: May 16th, with the special general election on June 20th. At this point, seven Republicans are already announced candidates, including state House Speaker Pro Tempore Tommy Pope, state Rep. Ralph Norman, and former South Carolina Republican Party chairman Chad Connelly. No Democrats have yet announced.

> Governor

Kansas:  Wichita oil company CEO Wink Hartman (R), a previous congressional candidate (losing to current CIA Director Mike Pompeo in 2010), became the second Republican to enter the open Governor’s race. Earlier, former state Rep. Ed O’Malley announced his candidacy. Many more individuals, including as many as three statewide officials, are expected to attempt to succeed term-limited Gov. Sam Brownback (R). Several Democrats and Independent Greg Orman, who unsuccessfully challenged Sen. Pat Roberts (R) in 2014 as the de facto Democratic nominee, are considering the race.

Maine:  Sen. Susan Collins (R) is acknowledging that she is at least considering a run for Governor next year. The Senator would not have to risk her seat to run, since she does not again face the voters until 2020. She was first elected in 1996, and won a fourth term in 2014 with 67% of the vote. Sen. Collins will obviously be a major factor in the open Governor’s race should she decide to run. Two-term Gov. Paul LePage (R) is ineligible to seek a third term.

Massachusetts:  Attorney General Maura Healey (D) again reaffirmed that she will not challenge Gov. Charlie Baker (R) next year. She reiterated that her course of political action is to run for re-election to her current position. Former state Finance Secretary Jay Gonzalez is the only announced Democratic gubernatorial candidate, but others are soon expected to follow suit. Newton Mayor Setti Warren (D) appears to be the most likely to enter the race. Rep. Seth Moulton (D-Salem) is mentioned as a potential candidate but has taken no discernible steps toward forming a gubernatorial campaign committee. Gov. Baker currently enjoys high job approval ratings.