Your Weekly Report on the Discord from Washington, D.C.
In Partnership with the Eris Group
The original plan for this week’s opening paragraph was to pay tribute to Adam West, TV’s Batman, who died Sunday at the age of 88. But then a crazy man shot up the Congressional Republicans’ baseball practice on Wednesday morning, and we saw the real heroism of Capitol Police officers David Bailey and Crystal Griner. We extend our fervent best wishes to Rep. Steve Scalise (R-LA) for a complete and speedy recovery, and our sympathies to all the offices and families affected by Wednesday’s shooting.
Treasury publishes recommendations for regulatory reform — Secretary of the Treasury Steven Mnuchin unveiled a 150-page report late last Monday that lays out general principles for reducing regulatory burden on U.S. financial institutions, particularly community banks and credit unions. The report calls for eliminating “regulatory fragmentation, overlap, and duplication” among regulatory agencies, possibly through consolidation; tailoring regulatory approaches based on size and complexity; adjusting regulatory requirements for banks that maintain a certain capital ratio; and restructuring the CFPB. In comments Monday afternoon, Secretary Mnuchin said that the administration generally supports the provisions of the House-passed Financial CHOICE Act, but is eager to roll back burdensome regulations that may not need legislative changes.
Mnuchin defends cuts to CDFI, calls for quick action on debt ceiling — Immediately before the release of Treasury’s regulatory burden relief plan, Secretary Mnuchin appeared before the House Appropriations Subcommittee on Financial Services and General Government to talk about the administration’s budget proposal for the Treasury Department. He stressed the need for Congress to act to raise the debt ceiling before leaving for its August recess, saying that this was not a partisan issue: “We have spent the money, and we need to fund the government.” He defended the plan to eliminate the Community Development Financial Institutions Fund, saying that not enough of this money was going to communities, and that a CDFI bond program and new market tax credits would continue to encourage community development lending. Responding to a question from Rep. Kevin Yoder (R-KS), Secretary Mnuchin said that he could not comment on the pending Chinese application to purchase MoneyGram, but that national security was the top priority of the Committee on Foreign Investment in the United States (CFIUS), which is reviewing the application.
Size alone should not impose new burdens, bankers tell Senate panel — The Senate Banking Committee continued its hearings on fostering economic growth last week with testimony from representatives of regional banks and an expert on banking law. Industry witnesses agreed that the use of asset size to impose certain reporting requirements or designate institutions as systemically important has been unnecessarily costly, frustrating, and confusing. Senate Banking Committee Chairman Mike Crapo (R-ID) said that stress testing and the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) are too burdensome for regional banks and smaller institutions, and the Volcker Rule is unnecessarily complex. Senator Sherrod Brown (D-OH), the committee’s ranking member, said that he too would support a “modified regime” to oversee regional banks, as long as nothing compromises safety, soundness, or consumer protections.
House panel approves first flood insurance bills — The House Financial Services Committee began work on a package of flood insurance bills last Thursday, approving two before breaking to resume work this week. The committee voted unanimously to approve H.R. 2868, which would protect national flood insurance program (NFIP) policyholders from unreasonable premium increases, and require a FEMA study of flood insurance coverage in urban areas. H.R. 2874, Rep. Sean Duffy’s 21st Century Flood Reform Act of 2017, passed on a party-line vote of 30-26. The bill calls for new and better mapping of flood areas, and enhanced roles for private providers in the management of flood insurance risk.
CFPB seeks comment on proposed changes to prepaid rule — The Consumer Financial Protection Bureau asked for comment last Thursday on a proposed update to its rules on prepaid accounts under the Electronic Fund Transfer Act (Regulation E) and Truth in Lending (Regulation Z). The prepaid accounts rule, which was finalized last October, is scheduled to take effect on April 1, 2018. The CFPB is asking for comment on whether adjustments are needed to revise the rule’s error resolution and limited liability provisions; to create a limited exception to the credit-related provisions of Reg. Z for credit card accounts linked to digital wallets; and to make minor clarifications or adjustments to the rule’s definitions. Comments are due to the Bureau in 45 days.
Clinger named to chair FDIC — Late last Friday, the President announced his intention to nominate longtime Capitol Hill staffer James Clinger to the board of the Federal Deposit Insurance Corporation, to succeed Martin Gruenberg as Chair when Gruenberg’s term expires in November. Clinger most recently served as chief counsel to the House Financial Services Committee, and was deputy assistant attorney general from 2005-07.
Senate Finance approves Treasury nominations — The Senate Finance Committee voted last Wednesday to approve the nominations of David Malpass to serve as Under Secretary of the Treasury, Andrew K. Maloney to serve as Deputy Under Secretary of the Treasury, and Brent James McIntosh to serve as General Counsel of the Department of the Treasury. Nominees must still be approved by the complete Senate.
More nominations — Last week President Trump announced the nomination of Isabel Marie Keenan Patelunas, a career intelligence operative, to serve as Assistant Secretary of the Treasury for Intelligence and Analysis. Multiple news sources reported that the President plans to name Brian Brooks, general counsel of Fannie Mae, as Deputy Secretary of the Treasury, but the nomination was not yet official on Friday afternoon.
FDIC names new ombudsman — The Federal Deposit Insurance Corporation (FDIC) announced Friday that veteran examiner M. Anthony Lowe, who has served as Chicago Regional Director of Risk Management Supervision and Depositor and Consumer Protection since 2008, will become the agency’s new ombudsman on July 2. Lowe replaces Cottrell Webster, who retired from the FDIC last year. He joined the FDIC in 1985 as an examiner in the Shreveport, Louisiana territory. Kansas City Regional Director James D. LaPierre will serve as acting Regional Director in Chicago until a permanent replacement is named.
This Week in Washington:
June 21
House Committee on Financial Services continues its markup of flood insurance-related bills (H.R. 1422, H.R. 1558, H.R. 2246, H.R. 2565, and H.R. 2875). 10:00 a.m., 2128 Rayburn House Office Building.
June 21
Senate Committee on Homeland Security and Governmental Affairs holds a hearing on Cybersecurity Regulation Harmonization. Witnesses include Christopher F. Feeney, President, BITS/Financial Services Roundtable; Dean C. Garfield, President and CEO, Information Technology Industry Council; Daniel Nutkis, Founder and CEO, Health Information Trust Alliance; and James “Bo” Reese, Vice President, National Association of State Chief Information Officers and Chief Information Officer, Office of Management and Enterprise Services. 10:30 a.m., SD-342, Dirksen Senate Office Building.
June 22
Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Fostering Economic Growth: Regulator Perspective.” Witnesses include Federal Reserve Board Governor Jerome H. Powell, FDIC Chairman Martin J. Gruenberg, Acting Comptroller of the Currency Keith A. Noreika, Texas Banking Commissioner Charles G. Cooper, and Acting NCUA Chairman J. Mark McWatters. 10:00 a.m., SD-538 Dirksen Senate Office Building.
June 23
House Financial Services Subcommittee on Terrorism and Illicit Finance holds a hearing on “The Exploitation of Cultural Property: Examining Illicit Activity in the Antiquities and Art Trade.” 9:15 a.m., 2128 Rayburn House Office Building.
The Ellis Insight. Jim Ellis reports on political news:
> Senate
Michigan: Former state Supreme Court Judge Robert Young (R) is expected to announce his challenge to Sen. Debbie Stabenow (D) early this week. Judge Young served on the state high court for just about twenty years, winning several statewide confirmation elections. Republicans have so far lacked a prominent opponent for Sen. Stabenow, and have greater hopes of being competitive here after President Trump scored his upset victory here over Hillary Clinton last November.
> House
AZ-2: Former state Rep. Matt Heinz (D), who didn’t fare particularly well against Rep. Martha McSally (R-Tucson) last year (losing 57-43%), announced that he will seek a re-match next year. He will first have to battle five other Democrats for the party nomination, including former state Rep. Bruce Wheeler (D-Tucson), and businessmen Billy Kovacs and Jeff Latas. The southeastern Arizona 2nd District is a politically marginal seat.
CA-48: California Rep. Dana Rohrabacher (R-Costa Mesa) has represented western Orange County since his first election in 1988 and he just drew a significant opponent late last week. Stem Cell scientist Hans Keirstead (D) announced that he will attempt to qualify for the general election in California’s jungle primary system. Dr. Keirstead, who reportedly sold his stem cell research company for more than $120 million, says he won’t self-fund his congressional campaign, but it is likely he will add resources to his campaign treasury when needed. Five other Democrats had previously announced. Former state Assemblyman Scott Baugh (R) is also talking about hopping into the race, which could potentially create problems for the Congressman within his GOP base. Mr. Rohrabacher was re-elected to a 15th term last November with a 58-42% margin.
FL-23: Law professor Tim Canova (D), who drew national attention and a Bernie Sanders endorsement for challenging Rep. Debbie Wasserman Schultz (D-Weston) in 2016, announced that he will return for a re-match next year. He had also flirted with a primary challenge to Sen. Bill Nelson (D), but has decided on another House contest. Despite raising almost $3.9 million for his primary challenge to the then-sitting Democratic National Committee chair, the final margin was not as close as many believed. The Congresswoman won a 57-43% re-nomination victory. Mr. Canova will be hard-pressed to raise as much money as he did two years ago, and Ms. Wasserman Schultz seemed to be at her most vulnerable point in the last election. Therefore, the chances of denying her re-nomination this year appear very slim.
GA-6: Several polls have been released as we turned toward the last week of this expensive special election campaign featuring Democrat Jon Ossoff and Republican former Secretary of State Karen Handel.
The latest data to reach the public domain comes from the Trafalgar Group, the only pollster to correctly predict the Great Lakes region swinging to President Trump. Their poll (6/8-10; 60,000 contacts through automated devices) finds Ossoff leading Handel, 50-47%.
Survey USA (6/7-11; 700 GA-6 registered voters; 503 likely or early voters) actually found Handel tracking back from the soon-to-be-mentioned Abt Associates survey, and into a dead heat at 47-47%. Abt Associates, for the Atlanta Journal Constitution (6/5-8; 1,000 GA-6 likely voters) found Ossoff expanding to a 51-44% advantage, but the respondent group included too many Democrats because it appeared to over-emphasize the 2016 presidential race. Doing so fails to take into account the long-term Republican vote history from this northern Georgia region.
Just before the Abt results were released, the race’s most prolific pollster, Landmark Communications for WSB-TV in Atlanta (5/30-31; 500 GA-6 likely voters), found a 49-48% split in Ossoff’s slight favor.
The polling stats, with both candidates running so closely together, suggests either can win, and voter turnout will be the determining factor. Early voting is already running well ahead of the 55,000 pace realized in the special primary. As early voting was closing, more than 102,000 ballots had already been cast. Election Day is Tuesday.
ID-1: State Sen. Russ Fulcher (R), who had been actively campaigning for Governor, has quickly switched gears. With Rep. Raul Labrador (R-Eagle/Boise) moving into the open Governor’s race, Sen. Fulcher has decided entering the vacated congressional race would be the smarter move instead of remaining in a race where he was a decided underdog. So far, the only Republicans to announce for Congress are former Lt. Gov. David LeRoy and ex-Idaho County Commissioner James Rockwell.
SC-5: Lost in the hoopla of the GA-6 special, the north-central South Carolina vacant seat will also be decided on Tuesday night. Republican former state Representative Ralph Norman is poised to defeat Democratic nominee Archie Parnell, a former Wall Street executive. The Democrats have paid little attention to this campaign, and invested only nominally, thereby virtually conceding the contest to Mr. Norman. The winner replaces former Rep. Mick Mulvaney (D-Lancaster/Rock Hill) who is now the Director of the Office of Management & Budget.
> Governor
Alabama: Democrats recruited their first major candidate for the 2018 Governor’s race, as former state Supreme Court Judge Sue Bell Cobb announced that she will enter the race. New Gov. Kay Ivey (R), who succeeded resigned Gov. Robert Bentley (R), has yet to make a decision about running in 2018. Largely due to the Governor’s ambivalence, five Republicans have come forward to declare their candidacies, including state Auditor John McMillan, and Huntsville Mayor Tommy Battle.
California: A new Goodwin Simon Strategic Research survey (5/30-6/5; 602 CA likely primary voters) conducted for State Treasurer John Chiang’s (D) campaign brings much better news for the poll sponsor than did a University of California at Berkeley poll released two weeks ago. According to the Goodwin data, though the sample size is low for a state the size of California, Lt. Gov. Gavin Newsom (D) leads the field of jungle primary candidates with 26%. The remaining three contenders are closely bunched: former Los Angeles Mayor Antonio Villaraigosa (12%), Republican John Cox (11%), and Chiang (10%). The Cal Berkeley survey, from the Berkeley Institute of Governmental Studies with 885 likely voters, reported a similar order but with Mr. Chiang all the way down at the 4% support level.
Minnesota: State Representative and former Speaker and Minority Leader Paul Thissen officially joined the Democratic gubernatorial primary, vying for the opportunity to succeed retiring Gov. Mark Dayton (D). The Democratic primary now has six candidates, including US Rep. Tim Walz (D-Mankato), state Auditor Rebecca Otto, St. Paul Mayor Chris Coleman, and state Representatives Tina Liebling and Erin Murphy. Hennepin County Commissioner and 2014 gubernatorial nominee Jeff Johnson leads the Republican field.
New Jersey: A new Quinnipiac University poll (6/7-12; 1,103 NJ registered voters) found former US Ambassador to Germany Phil Murphy jumping out to a huge 55-26% lead over Lt. Gov. Kim Guadagno in the first poll of the 2017 gubernatorial general election. Mr. Murphy is riding a negative Republican wave that finds President Trump with a poor 28:66% job approval rating, and a record low 15:81% favorability index for outgoing Gov. Chris Christie (R).
New York: Marist College just completed a New York state poll with NBC 4 New York (6/6-10; 839 NY adults; 703 registered voters), testing Gov. Andrew Cuomo (D) and projecting how he might do in running for a third term. The job approval rating, which the Marist pollsters say is an improvement over past showings, found him with 43% excellent or good ratings, and 48% fair or poor. Though tested in hypothetical head-to-head match-ups, the Governor performs exceedingly well. None of the four Republicans sampled, including Donald Trump Jr., even reaches 28%. Cuomo averages 59% against the most prominent Republicans. He appears to be an early lock for re-election.
Virginia: Lt. Gov. Ralph Northam (D) and former Republican National Committee chairman Ed Gillespie won their respective gubernatorial nomination battles, though the end result contained many surprises. The Democratic battle was supposed to be close, with Northam pitted against former Rep. Tom Perriello (D-Charlottesville), and some even believed an upset was possible, but the final tally proved to be a landslide. Mr. Northam claimed a 56-44% win, and scored big margins in the vote-rich territory of northern Virginia, Richmond, and the Tidewater region.
For the Republicans, we saw the opposite scenario. This race was supposed to be an easy run for Mr. Gillespie, but he only managed to squeak out a 44-43% win over Prince William County Board chairman Corey Stewart. The primary results make Northam the favorite in November. Gillespie’s best scenario was to start with a strong Republican win, while Northam struggled against Perriello. With the close Republican finish, Gillespie now must tack to the right in order to secure his base, thus leaving the center for Northam to occupy. Considering Virginia’s voting history, this race now clearly favors the Democrats to hold the seat being vacated by term-limited Gov. Terry McAuliffe (D).