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

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Senate hearing discusses GSEs’ path out of conservatorship — “The status quo is not a viable option,” said Senate Banking Committee Chairman Mike Crapo (R-ID) as he opened last Thursday’s hearing on the status of the housing finance system. Fannie Mae and Freddie Mac have been in federal conservatorship since 2008, and FHFA Director Mel Watt told the panel that the two organizations are not the same today as they were before conservatorship. He has implemented GSE reform and will continue to do so, he said, but structural changes are Congress’s responsibility. Discussion focused on the GSEs’ capital buffers, which are currently required to drop to zero by year-end; if they face quarterly shortfalls, they can draw from the Treasury. Director Watt argued that eliminating these capital buffers will create uncertainty that may destabilize the markets, while Chairman Crapo said that extending the capital buffers might slow the process of GSE reform. Responding to a question from Senator Tim Scott (R-SC), Director Watt said that the FHFA continues to work on an update to the GSEs’ credit scoring model, but that this effort had proven more complex than anticipated.

CFPB asks for data on small-business lending — The Consumer Financial Protection Bureau (CFPB) began the process of collecting information about credit availability to women-owned, minority-owned and small businesses last Wednesday, with a request for information and a field hearing in Los Angeles. The Bureau also published a white paper on the small business lending landscape, arguing for the need for “more robust small business lending data.” The Bureau’s request for information is open for comment for 60 days.

Noreika asks for input on regulatory burden relief — In brief opening remarks at last Monday’s meeting of the OCC Mutual Savings Association Advisory Committee, Acting Comptroller of the Currency Keith A. Noreika said that he was looking forward to speaking with members “about how the agency can reduce undue burden you face,” and “to learning more about what the OCC can do to ensure mutuals and federal savings associations in general remain a vibrant part of the industry.” He repeated this theme in remarks to OCC staff, saying, “Now is a good time to take stock of the rules implemented and actions taken to ensure the nation has the right sense of balance and coherence” in financial regulation.

FSOC begins Volcker Rule review — The Financial Stability Oversight Council met in executive session last Monday in closed session. Minutes will not be available until the Council’s next meeting, but a statement released immediately afterward made a point of mentioning that “the Council discussed efforts to assess the efficacy of the Volcker Rule.”

Nominations, nominations — Last week the White House sent the Senate eleven nominations, including taxation expert David J. Kautter as assistant secretary of the Treasury; disaster manager Brock Long to head the Federal Emergency Management Agency; CFTC Commissioner J. Christopher Giancarlo to chair that commission; and former Deputy Under Secretary of the Navy Marshall Billingslea to serve as Assistant Secretary of the Treasury for Terrorist Financing. The Senate voted 82-14 last Thursday to confirm Robert Lighthizer as U.S. Trade Representative. Meanwhile, news outlets reported that the White House is likely to name Brian Montgomery, Vice Chairman of The Collingwood Group, to head the Federal Housing Administration. Montgomery was Commissioner of the FHA under President George W. Bush, and served as Acting Secretary of Housing and Urban Development at the beginning of the Obama administration.

Moskowitz named SEC Chief of Staff — SEC Chairman Jay Clayton announced last Thursday that Lucas Moskowitz will be the agency’s Chief of Staff. Moskowitz, a Washington veteran, previously served at the SEC as counsel to former Commissioner Daniel Gallagher, and as an attorney in the SEC’s Division of Enforcement. He served most recently as Chief Investigative Counsel to the Senate Committee on Banking, Housing, and Urban Affairs, and had earlier been counsel to the House Financial Services Committee. Recent news reports speculate that Clayton will name Jamie Selway, Managing Director of ITG, as director of the SEC’s Trading and Markets Division.

This Week in Washington:

May 16 
Senate Committee on Banking, Housing, and Urban Affairs holds a hearing to consider the nominations of Ms. Sigal Mandelker, to be Under Secretary of the Treasury for Terrorism and Financial Crimes; Ms. Mira Radielovic Ricardel, to be Under Secretary of Commerce for Export Administration; Mr. Marshall Billingslea, to be Assistant Secretary of the Treasury for Terrorist Financing; and Mr. Heath P. Tarbert, to be Assistant Secretary of the Treasury. 10:00 a.m., SD-538 Dirksen Senate Office Building.

May 17
The Consumer Financial Protection Bureau’s Academic Research Council meets with Acting Deputy Director David Silberman to discuss the Bureau’s work. The meeting will be webcast live here. 9:00 a.m., 1275 First Street NE, Washington, DC.

May 18
House Financial Services Subcommittee on Monetary Policy and Trade holds a hearing on “Lessons from the IMF’s Bailout of Greece.” 10:00 a.m., 2128 Rayburn House Office Building.

May 18
House Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions holds a hearing on “Regulatory Barriers Facing Workers and Families Saving for Retirement.” 10:00 a.m., 2175 Rayburn House Office Building.

May 18
House Ways and Means Committee holds a hearing on “How Tax Reform Will Grow Our Economy and Create Jobs.” 10:00 a.m., 1100 Longworth House Office Building.

May 18
Senate Committee on Banking, Housing, and Urban Affairs hears testimony from Secretary of the Treasury Steven T. Mnuchin on “Domestic and International Policy Updates.” 10:00 a.m., SD-538 Dirksen Senate Office Building.

The Ellis Insight. Jim Ellis reports on political news:

> Senate

Alabama:  As we approach the final days remaining in the special candidate filing period — the deadline is May 17th — the opposition against appointed Sen. Luther Strange (R) is firming. In the past few days, two major announcements came from potential Democratic candidates, one who will run and one who won’t. Former US Attorney Doug Jones officially declared his candidacy and becomes the first major Democratic contender in the race. Conversely, state Rep. Craig Ford (D-Gadsden) says he will not enter the August 15thspecial Democratic primary. So far, none of the expected major Republican or Democratic office holders have come forward, but time remains.

Maine:  Gov. Paul LePage (R), who on several occasions had stated that he is considering challenging Sen. Angus King (I) next year, announced last week that he will not run for the Senate. Such a challenge would have been an uphill battle. Though Gov. LePage has won two elections in Maine, both times a strong Independent took enough votes away from the Democratic nominee to allow the Republican to win with under 40% of the vote. The only announced candidate against Sen. King at this time is Republican state Sen. Eric Brakey.

West Virginia:  Rep. Evan Jenkins (R-Huntington) announced his challenge to Sen. Joe Manchin (D) last week. Mr. Jenkins will depart the House for the statewide campaign after two terms. Attorney General Patrick Morrisey (R) is also expected to enter the Republican Senate primary, meaning we will see what promises to be a hotly contested GOP primary and general election.


> House

FL-27:  Candidates are quickly coming forward to declare for the open South Florida seat now that veteran Rep. Ileana Ros-Lehtinen (R-Miami) has announced her retirement. For the Republicans, Miami-Dade County Commissioner Bruno Barreiro is the first prominent office holder to announce. On the Democratic side, state Sen. Jose Javier Rodriguez, Miami Beach City Commissioner Kristen Rosen Gonzalez, and businessman and 2014 Democratic nominee Scott Furhman are all officially in the race. This seat will be hotly contested and a prime Democratic conversion opportunity.

GA-6:  Two polls were released last week, each showing a tight contest but with two different leaders. GBA Strategies, polling for the House Majority PAC a Democratic group associated with House Minority Leader Nancy Pelosi (D-CA), conducted a survey (4/29-5/1; 400 GA-6 likely special election voters) that finds Democratic candidate Jon Ossoff leading former Secretary of State Karen Handel (R), 50-48%. But, Landmark Communications, polling for WSB-TV in Atlanta (5/3-5; 611 GA-6 likely special election voters) finds almost the same margin, but in Handel’s favor. They see a 49-46% split. Interestingly, in each poll the trailing candidate leads among Independents, obviously an unusual occurrence. The special election is scheduled for June 20th.

ID-1:  With Rep. Raul Labrador (R-Eagle/Boise) declaring for the Governor’s race, the 1st District will be open for next year’s election. Within two days of Mr. Labrador’s announcement, 69-year old former Lt. Governor David LeRoy declared his candidacy for the congressional seat. This will be his second run for this district, previously losing a 1994 open seat Republican primary to conservative Helen Chenoweth, who would then clinch the general election.

IL-10:  Former Rep. Bob Dold (R-Kenilworth) announced he will not attempt to re-claim the seat he lost last November. Mr. Dold was first elected in 2010, and then defeated in 2012 after redistricting drastically changed his district to benefit the Democrats. He returned to win again in 2014, despite the lopsided voting history that was stacked against him. In the high turnout presidential election year, he again went down. Both times, he lost to current Rep. Brad Schneider (D-Deerfield) and the two faced each other in three consecutive elections. There won’t be a fourth battle, at least not in 2018. Without Mr. Dold on the Republican ballot line, Rep. Schneider becomes a strong favorite for re-election.

MN-2:  Freshman Rep. Jason Lewis (R-Woodbury/Burnsville) recorded a tight 47-45% victory over former healthcare company executive Angie Craig (D) last November, winning the right to succeed retiring Rep. John Kline (R-Burnsville). Looking at what will be a competitive re-election for Mr. Lewis, a new potential Democratic candidate is appearing on the political horizon. In addition to Ms. Craig possibly seeking a re-match, state Sen. Dan Schoen (D) confirms that he is considering entering next year’s congressional contest.

SC-5:  This week, voters will cast their ballots in the Republican run-off Tuesday choosing between state House Speaker Pro Tempore Tommy Pope and former state Representative and 2006 congressional nominee Ralph Norman. In the May 2nd GOP special primary, the two candidates were separated by only 135 votes. An outside air war has transpired with the US Chamber of Commerce running ads supporting Pope, and the Club for Growth countering in Norman’s behalf. The closeness of the primary and a Trafalgar Group poll suggests that this run-off is a pure toss-up. The winner faces Democrat Archie Parnell in the June 20th special general election.

VA-10:  Virginia First Lady Dorothy McAuliffe announced that she will not enter the Democratic congressional primary to challenge second-term Rep. Barbara Comstock (R-McLean). Last week, Ms. McAuliffe said she was seriously considering becoming a congressional candidate, which sent the local Democratic establishment scrambling since they had already recruited state Sen. Jennifer Wexton. Three other Democrats are also running. This district will feature a highly competitive general election campaign along with an active Democratic primary.


> Governor

Florida:  As expected, state Agriculture Commissioner Adam Putnam, viewed by most as the leading Republican gubernatorial contender, officially declared his candidacy last week. Mr. Putnam, who is serving his second term in his present job, was a member of the US House for ten years, and a state Representative for the previous four. He was the youngest ever person elected to the state legislature, winning his first race at 22 years of age. Putnam leads in the polls, and already has an outside support organization that has raised in upwards of $10 million. Former US Rep. Gwen Graham (D-Tallahassee), the daughter of ex-Governor and US Senator Bob Graham (D), is potentially the leading Democrat but she must battle Tallahassee Mayor Andrew Gillum and real estate investor Chris King in the Democratic primary.

Georgia:  Gov. Nathan Deal (R) is ineligible to seek a third term, thus opening a highly competitive race to succeed him. One person who won’t be in the race is Columbus Mayor Teresa Tomlinson (D), who announced last week that she will not become a gubernatorial candidate. More action is occurring in the Republican primary, which features Lt. Gov. Casey Cagle, Secretary of State Brian Kemp, and state Sen. Hunter Hill. Former US Reps. Jack Kingston and Lynn Westmoreland are also potential GOP gubernatorial candidates with the former, in particular, moving toward becoming a candidate.

Idaho:  Rep. Raul Labrador (R-Eagle/Boise) joined the open Governor’s race, and will at least face Lt. Gov. Brad Little, ex-state Sen. Russ Fulcher, and physician and real estate developer Tommy Ahlquist in the GOP primary. Republicans are favored to hold this state house in the general election, so the Republican nomination fight is key to identifying the state’s next Governor. Incumbent Butch Otter (R) is retiring after three terms.

Michigan:  A surprise announcement came from Rep. Dan Kildee (D-Flushing/Flint) who was thought to be the top Democratic contender for Governor. Mr. Kildee announced last week that he will remain in the House, and not enter the statewide campaign. This leaves former state Senate Minority Leader Gretchen Whitmer as the top Democratic candidate, at least in the short term. Other key Democrats such as University Regent Mark Bernstein, former gubernatorial nominee Geoffrey Fieger, and ex-Detroit Health Department Director and physician Abdul El-Sayed could now become major players in the Democratic nomination fight. Republicans will largely decide between Lt. Gov. Brian Calley and Attorney General and former Congressman Bill Schuette. Gov. Rick Snyder (R) is ineligible to seek a third term.

Minnesota:  Jeff Johnson, a Hennepin County Commissioner who was the 2014 gubernatorial nominee, announced he will run again next year. Mr. Johnson lost 50-44% to Gov. Mark Dayton (D) in the last election. Though Minnesota has no term limit law, Gov. Dayton has already announced his retirement. Since President Trump came within just 1.5 points from carrying traditionally Democratic Minnesota, Republican hopes are buoyed for a different result in 2018. Most of the prominent candidates, however, are on the Democratic side: Rep. Tim Walz (D-Mankato), state Auditor Rebecca Otto, and St. Paul Mayor Chris Coleman.