Your Weekly Report on the Discord from Washington, D.C.
In Partnership with the Eris Group
UK triggers Article 50 — In a letter last Tuesday, United Kingdom Prime Minister Theresa May formally notified European Community President Donald Tusk of the UK’s intention to withdraw from the European Union. Withdrawing will require the UK to repeal its own laws that let EU rules apply within the UK, and May proposes a “bold and ambitious Free Trade Agreement” between the UK and the EU. The treaty sets a two-year time frame for completing withdrawal, which May’s letter acknowledges “will be a challenge.”
Toomey letter targets regulations on leveraged lending — Senator Pat Toomey (R-PA) has asked the Government Accountability Office (GAO) to look at whether the federal banking agencies’ guidance on leveraged lending could be subject to the Congressional Review Act. The Congressional Review Act, part of the 1996 Contract with America, allows the House and Senate to overturn certain regulations by joint resolution. Toomey’s letter acknowledges that the agencies’ guidance is not technically a rule, since it did not go through a notice and comment process, but said that the guidance “prescribes detailed policy.”
FSOC gets Congressional pressure — Both sides of Capitol Hill challenged the Financial Stability Oversight Council (FSOC) last week. The House Financial Services Oversight and Investigation Subcommittee held a hearing last Tuesday to discuss a majority staff report on FSOC’s system for determining whether financial institutions are “systemically important.” Chairman Ann Wagner (R-MO) and most of the hearing’s witnesses agreed that Dodd-Frank’s threshold for the SIFI designation is arbitrary; that the system codifies “too big to fail;” and that the FSOC applies its standards inconsistently. The majority’s proposed Financial CHOICE Act would address these concerns, Wagner said. Meanwhile, ten Senators led by Sen. Tom Cotton (R-AR) sent a letter to Treasury Secretary Steve Mnuchin asking him to review FSOC’s policies and procedures, and urging him “to end ‘Too Big To Fail.’”
Regulatory burden is suppressing loan demand, bankers say — Although banks and credit unions are experiencing record levels of profitability, loan demand is weak, and some businesses that do need credit to support growth are having a hard time getting it. The House Financial Services Subcommittee on Financial Institutions and Consumer Credit heard testimony last Tuesday from a panel of lenders and small business representatives who suggested changes that might help, including support for new bank charters, amending the CFPB’s “ability to repay” rule, and updating the Bank Secrecy Act. Banker Scott Heitkamp, representing the Independent Community Bankers of America, warned against looking only at rising earnings without weighing those figures against rising costs of compliance.
Senate to look at housing finance, growth bills after tax reform, says Crapo — Senate Banking Committee chairman Mike Crapo (R-ID) told the U.S. Chamber of Commerce’s Capital Markets Summit last Thursday that the Senate is likely to address housing finance reform, then economic growth, after it finishes work on tax reform. An economic growth proposal will go beyond simple Dodd-Frank reform, he said, and he was optimistic about bipartisan cooperation on legislative changes.
Cordray acknowledges added costs of mortgage regulation — Although he pointed to “tangible progress” in protecting “consumers and honest businesses,” Consumer Financial Protection Bureau (CFPB) Director Richard Cordray told the US Chamber of Commerce last Thursday that he is aware of the “considerable implementation cost” of new regulations, even when the goal is to streamline compliance. He said that the Bureau’s next big effort would be developing new rules on debt collection practices, as authorized by Dodd-Frank. “Rulemaking is simply a tool like any other,” he said. “Clearly we can learn much from a process of vigorous engagement with all stakeholders.”
GSEs make Treasury payment as scheduled — The Federal Housing Finance Agency announced last week that Fannie Mae and Freddie Mac would be making its $10 billion payment to the Treasury, as required by the 2012 bailout deal. Although several housing and community-based lending groups had asked Secretary Mnuchin to let the housing GSEs keep that money, a bipartisan group of five Senators sent their own letter last week to FHFA Director Mel Watt, warning him that “Any unilateral step toward retaining earnings at the enterprises . . . would, in our view, undermine the emerging bipartisan consensus.”
HHS will continue ACA reform outside legislative action, Price says — At a budget hearing last Wednesday before the House Appropriations Committee, Health and Human Services Secretary Tom Price said the Trump administration remains committed to changing key provisions of the Affordable Care Act, by executive order and regulatory policy if not by legislative reform. Secretary Price said the department might reduce the scope of “essential benefits” as required by the ACA, among other changes. “Fourteen hundred and forty-two times the ACA said ‘the secretary shall’ or ‘the secretary may,’” Price said.
Gallagher moves to Mylan — Former SEC commissioner Daniel Gallagher, a Republican member of the panel from 2011-2015, will join Mylan NV as its chief legal officer next month. Mylan NV is the pharmaceutical company headed by Heather Bresch, daughter of Senator Joe Manchin (D-WV), and is best known as the manufacturer of the Epi-Pen. Gallager has been President of Patomak Global Partners since leaving the SEC.
This Week in Washington:
Senate Judiciary Committee holds a business meeting to consider the nomination of Neil Gorsuch to the Supreme Court and the nominations of Rod Rosenstein and Rachel Brand to serve as Deputy Attorney General and Associate Attorney General, respectively. 10:00 a.m., SH-216 Hart Senate Office Building.
Washington Nationals home opener vs. Miami Marlins. They’re giving away Magic 8 balls, which will undoubtedly help with political prognostications. 1:05 p.m., Nationals Park.
House Financial Services Subcommittee on Monetary Policy and Trade holds a hearing on “Examining the Federal Reserve’s Mandate and Governance Structure.” 10:00 a.m., 2128 Rayburn House Office Building.
Senate Banking Committee meets in executive session to vote on the nomination of Jay Clayton to the Securities and Exchange Commission. 10:00 a.m., SD-538 Dirksen Senate Office Building.
House Financial Services Subcommittees on Monetary Policy & Trade and Terrorism & Illicit Finance hold a joint hearing on “Increasing the Effectiveness of Non-Nuclear Sanctions Against Iran.” 2:00 p.m., 2128 Rayburn House Office Building.
House Committee on Oversight and Government Reform holds a second hearing on the Federal Emergency Management Agency’s response to the Baton Rouge flood disaster. 9:30 a.m., 2154 Rayburn House Office Building.
House Financial Services Committee holds a hearing on “The 2016 Semi-Annual Reports of the Consumer Financial Protection Bureau.” 10:00 a.m., 2128 Rayburn House Office Building.
Senate Banking Subcommittee on Electronic Policy holds a hearing on “The Current State of Retirement Security in the United States.” 3:00 p.m., SD-538 Dirksen Senate Office Building.
House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on “Examination of the Federal Financial Regulatory System and Opportunities for Reform.” 9:15 a.m., 2128 Rayburn House Office Building.
Senate Finance Committee holds a hearing on “The 2017 Tax Filing Season: IRS Operations and the Taxpayer Experience.” IRS Commissioner John Koskinen will be the only witness. 10:00 a.m., SD-215 Dirksen Senate Office Building.
The Ellis Insight. Jim Ellis reports on political news:
Maine: Independent Sen. Angus King will likely see competition come re-election time next year. Gov. Paul LePage (R) has said on several occasions that he may challenge the first-term Senator, but has done little to prepare for such a race. Last week, state Sen. Eric Brakey (R-Auburn) announced that he is filing an exploratory committee to analyze his chances in a potential pairing with Sen. King. Mr. Brakey is currently serving his second two-year term in the state Senate and, at 26, was the youngest member of the Maine Senate when originally elected in 2014. For generations, his family has owned a local energy business. Mr. Brakey represents the same legislative district as did former US Sen. Olympia Snowe (R) when she was a member of the legislature.
Rhode Island: Rhode Island ex-Supreme Court Justice Robert Flanders (D) says he will form an exploratory committee for a potential Democratic primary challenge to Sen. Sheldon Whitehouse next year. Such a contest would greatly favor Sen. Whitehouse, who was originally elected in 2006. Originally, Judge Flanders was looking at the Governor’s race, but is now apparently switching gears toward what is likely a suicide run for the Senate.
Utah: Sen. Orrin Hatch (R) is again making comments about his re-election status. In 2012, he indicated that he was running in his last election. A few weeks ago, he stated that he is seriously considering running for an eighth term. Sen. Hatch is already the second-longest serving Republican Senator (behind only South Carolina’s Strom Thurmond) in US history. He was originally elected in 1976.
Last week, the Senator indicated he would step aside if former presidential nominee Mitt Romney was interested in running but there has yet to be a forthcoming response from the latter. The Utah saga looks to contain even more twists and turns before final political decisions are made.
Texas: Rep. Beto O’Rourke (D-El Paso) announced that he will challenge Sen. Ted Cruz (R) next year. Texas hasn’t sent a Democrat to the Senate since the late Lloyd Bentsen (D) was re-elected in 1988. Additionally, no one has ever won a major Texas statewide office hailing from El Paso. Therefore, Mr. O’Rourke has many obstacles to overcome. He will be a serious candidate, but Sen. Cruz must be favored for his first re-election. The Congressman’s 16th District is heavily Democratic and the eventual party nominee will easily win election to succeed him. Rep. Joaquin Castro (D-San Antonio) who is also considering entering the Senate contest says he is still weighing his options. It had always been assumed that O’Rourke would run statewide while Castro remains in the House.
MT-AL: Apparently the Democratic Party state delegates knew what they were doing when they nominated country rock singer Rob Quist as their special election nominee instead of former US Senate nominee Amanda Curtis. Mr. Quist’s campaign issued a release saying the candidate has raised $754,307 to date for his at-large congressional effort, and will report his campaign finances to the Federal Election Commission today. Such an amount is an impressive effort in a short period for an individual not previously seeking political office. The fundraising prowess suggests that this special election campaign will likely be more competitive than first thought.
The Republicans nominated businessman Greg Gianforte who finished with 46% in the 2016 race against Gov. Steve Bullock (D), a much better performance than had been predicted. The special election is scheduled for May 25th. Former Rep. Ryan Zinke (R) is now US Interior Secretary, hence the reason for the current US House vacancy.
SC-5: In the north-central South Carolina special congressional election to replace Office of Management and Budget director Mick Mulvaney (R), candidate Ralph Norman resigned his position in the state legislature in order to campaign full time. He first ran for Congress in 2006, then, too, risking his state legislative seat. He lost that year to then-incumbent Rep. John Spratt (D-Rock Hill). Mr. Norman returned to the state House in a subsequent special election. Mr. Norman is viewed as one of three top Republican contenders. The partisan primary is scheduled for May 2nd, with a run-off, if necessary, for May 16th. The special general election is set for June 20th. The eventual Republican nominee will be heavy favorite to hold the district in the GOP column.
Alabama: Public Service Commission chair Twinkle Cavanaugh (R) announced the formation of a gubernatorial exploratory committee last week. She is expected to join what will be a crowded Republican field vying to succeed term-limited Gov. Robert Bentley (R). The race may be complicated if the Governor is impeached before his term ends due to alleged misappropriation of state funds in relation to an extra-marital affair. If the legislature removes him from office, Lt. Gov. Kay Ivey (R) will assume the Governorship, which would create an entirely new political spectrum for the impending gubernatorial campaign.
Connecticut: Potential Democratic gubernatorial candidates continue to apply pressure to Gov. Dan Malloy (D), hoping to wrest a public decision from him about whether he will run for a third term. Already Middletown Mayor Dan Drew (D) has filed an exploratory committee. State Sen. Ted Kennedy, Jr. (D), says he is “90% certain” that he will run for Governor. Now, state Comptroller Kevin Lembo (D) is declaring that he, too, will soon file a gubernatorial exploratory committee. After winning his first election in 2010 with just 49.5% of the vote, Gov. Malloy was only able to improve to 51% in 2014.
Illinois: In the face of six Democrats including businessman Chris Kennedy, the son of the late Sen. Robert F. Kennedy, already declaring their 2018 candidacies, Gov. Bruce Rauner (R) is taking to the television and Internet airwaves to boost his faltering public image. He has launched a major media drive and figures to spend even more than the $50 million his campaign operation expended in his 2014 original election. He will clearly be one of the more vulnerable Republican incumbents standing for re-election next year.
Minnesota: Rep. Tim Walz (D-Mankato), as expected, announced that he will enter the open gubernatorial campaign next year. Mr. Walz was barely re-elected to a sixth term in the House in November, scoring only 50.3% of the vote against a candidate who spent less than $370,000 and drew little to no outside party support. He joins what will be a crowded Democratic primary that already features state Auditor Rebecca Otto, state Rep. Erin Murphy, and St. Paul Mayor Chris Coleman. Other possible Democratic contenders are Attorney General Lori Swanson, Rep. Rick Nolan (D-Crosby/Duluth), and former Minneapolis Mayor R.T. Rybak. Gov. Mark Dayton (D) is ineligible to seek a third term. The eventual Democratic nominee will become the post-primary race favorite.
New Jersey: Fairleigh Dickinson University conducted a new statewide primary poll (3/22-26; 758 NJ registered voters) to find which candidates are best positioned to win their respective 2017 June 6th primary campaigns. Former US Ambassador to Germany Phil Murphy has a strong lead in the Democratic primary, while Lt. Gov. Kim Guadagno dominates the Republican side. Both show support in the mid-twenties, while no one else even reaches double-digits. Gov. Chris Christie (R) is ineligible to seek a third term. Democrats are favored to convert this office.
Virginia: Christopher Newport University, in a new statewide poll that slightly skews toward the Democrats (3/16-26; 931 VA registered voters; 391 likely Democratic primary voters; 349 likely GOP primary voters) finds Lt. Gov. Ralph Northam (D) and former US Rep. Tom Perriello (D-Charlottesville) in a deadlock for the Democratic nomination. The two are tied at 26% apiece. The slight skew makes sense considering most of the early political action is in the Democratic primary.
For the Republicans, former Republican National Committee chairman Ed Gillespie has a healthy 38-11-10% advantage over Prince William County Board chairman Corey Stewart and state Sen. Frank Wagner, respectively. Considering the slight sample skew, the fact that Gillespie leads Northam 39-38%, and is tied with Perriello in general election ballot tests is good news for the presumed GOP front-runner. Gov. Terry McAuliffe (D) is ineligible to seek a second term.
Wisconsin: State Sen. Tim Cullen (D), who several weeks ago declared his gubernatorial candidacy, announced that he is already withdrawing from the race. He sites the major fundraising commitment it would take to win the office as his main reason for deciding against running. At this point, there are no announced Democratic gubernatorial candidates. Gov. Scott Walker (R) is expected to soon declare that he will run for a third term.