Your Weekly Report on the Discord from Washington, D.C.
In Partnership with the Eris Group
We took a break from real-life politics last Monday to host a book party for Joseph Finder, who consulted Doyle, Travis and some of our friends on Capitol Hill as sources for his new thriller, THE SWITCH. Of course, real life these days can be stranger than fiction, something Joe noted in a column in Friday’s Washington Post.
Regulators make relief recommendations to Senate Banking — Tailoring regulatory requirements, lowering the threshold for SIFI designation, adjusting the Volcker Rule and reducing the complexity of capital rules for smaller banks were among the suggestions federal and state regulators made at last Thursday’s Senate Banking Committee hearing. In response to a question from Senator Sherrod Brown (D-OH), the committee’s ranking members, all the regulators vowed independence from political influence, and pledged to speak out if they saw any policies endangering the financial system. Federal Reserve Governor Jerome H. Powell and FDIC Chairman Martin Gruenberg both said they do not support the Administration’s proposal to zero out the CDFI fund. Acting Comptroller Keith Noreika suggested a “statutory traffic light system” that would forestall other regulators from acting against an institution after one regulator has moved on an issue.
Senate Finance focuses on NAFTA — The renegotiation of the North American Free Trade Agreement was the focus of last Wednesday’s Senate Finance Committee hearing on the President’s trade agenda. U.S. Trade Representative Robert Lighthizer said that NAFTA renegotiating rounds may begin as soon as August 16. The Administration’s overarching goal is to minimize the trade deficit, which Lighthizer said may reflect structural problems in global trade. Patents and intellectual property are especially important issues, Lighthizer said, and he hopes to negotiate a “model agreement” in these areas as part of the new NAFTA. Lighthizer said that he saw currency manipulation as another area for a possible model agreement, though it is not now an issue with Mexico or Canada.
House committee finishes work on flood insurance — The House Financial Services Committee met last Wednesday to discuss and pass five more bills to reform and reauthorize the National Flood Insurance Program, which will expire on September 30. The panel approved three of these bills unanimously or by voice vote, but clashed on HR 2246, the Taxpayer Exposure Mitigation Act of 2017, and HR 2565, which would require the use of replacement cost value in determining premium rates for flood insurance coverage. HR 2246 would repeal the mandatory flood insurance requirement for commercial and multifamily properties located in flood hazard areas, and provide for greater transfer of risk to private capital and reinsurance markets. The Committee approved HR 2246 by a vote of 36-24, and HR 2565 by a vote of 34-25.
Fed stress tests show strong capital, resilience — The nation’s largest banks are well capitalized enough to be able to lend even in the most severe recession, according to the results of the Federal Reserve’s seventh round of stress testing as required by Dodd-Frank. The 34 bank holding companies subject to stress testing hold more than 75 percent of the assets in all domestic bank holding companies. These firms have added more than $750 billion in common equity capital since 2009, and held aggregate Tier 1 capital equal to 12.5 percent of risk-weighted assets at the end of 2016. Governor Jerome H. Powell said that these levels are enough “to lend through the economic cycle, and support households and businesses when times are tough.”
Trade groups ask Congress to include CFPB commission in budget — Twenty-two organizations representing lenders, real estate businesses, and other small businesses wrote the leaders of the House and Senate Appropriations Subcommittees on Financial Services & General Government last week to ask them to include language that would change the Consumer Financial Protection Bureau’s governance structure from a single director to a five-person bipartisan commission. “The current single director structure leads to regulatory uncertainty and instability for consumers, industry, and the economy, leaving vital consumer financial protection subject to dramatic political shifts,” the groups wrote. They noted that the House Subcommittee on Financial Services & General Government included similar language in last year’s appropriations bill.
Mandelker, Billingslea confirmed to Treasury — The Senate voted 96-4 last Tuesday to confirm Sigal Mandelker as Under Secretary of the Treasury for Terrorism and Financial Crimes, and 65-35 to confirm Marshall Billingslea as Assistant Secretary for Terrorist Financing.
Garrett, Bachus nominations to Ex-Im Bank are official — Last week President sent his nominations of former Rep. Scott Garrett (R-NJ) to serve as President of the Export-Import Bank, and of former Rep. Spencer Bachus (R-AL) to serve as a Director of the Export-Import Bank.
This Week in Washington:
House Financial Services Subcommittee on Capital Markets, Securities, and Investment holds a hearing on “U.S. Equity Market Structure Part I: A Review of the Evolution of Today’s Equity Market Structure and How We Got Here.” The two-panel hearing will include representatives of trading and brokerage firms and the major equity exchanges. 10:00 a.m., 2128 Rayburn House Office Building.
House Financial Services Subcommittee holds a hearing on “The Federal Reserve’s Impact on Main Street, Retirees, and Savings.” Witnesses include representatives of the Heritage Foundation, the American Enterprise Institute, the Peterson Institute for International Economics, and the R Street Institute. 10:00 a.m., 2128 Rayburn House Office Building.
House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on “Examining the BSA/AML Regulatory Compliance Regime.” 2:00 p.m., 2128 Rayburn House Office Building.
Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on Principles of Housing Finance Reform. Witnesses will be the Honorable David H. Stevens, President and CEO of the Mortgage Bankers Association; Edward J. DeMarco, President of the Housing Policy Council of the Financial Services Roundtable; and Michael D. Calhoun, President of the Center for Responsible Lending. 10:00 a.m., SD-538 Dirksen Senate Office Building.
The Ellis Insight. Jim Ellis reports on political news:
Nevada: Democrats have been searching for a candidate to oppose Sen. Dean Heller (R) next year, and it appears they have found one. Freshman Rep. Jacky Rosen (D-Henderson), who won her congressional seat in November with only 47% of the vote over perennial Republican candidate Danny Tarkanian, confirms that she will announce her Senate campaign this week. Sen. Heller is widely considered the most vulnerable Republican incumbent standing for re-election next year, but the Democrats had been, heretofore, unsuccessful in convincing a strong contender to enter the race. Rep. Rosen drew mixed reviews in her first run on the campaign trail but did win a district that had been in Republican hands. Three-term Rep. Joe Heck (R-Henderson) vacated the seat to run unsuccessfully for Senate.
Wisconsin: Lt. Gov. Rebecca Kleefisch (R), on the list as a potential Senatorial candidate but never viewed as particularly serious about running, confirmed last week that she will not enter the federal statewide race next year. Instead, she plans to seek re-election to her current position, and will join the Walker for Governor ticket for the third time next year. Republicans have yet to field a significant candidate against Sen. Tammy Baldwin (D).
GA-6: Election Day came and went in this mega-special election earlier last week, and Republican former Secretary of State Karen Handel defeated Democrat Jon Ossoff, 52-48%, in a contest that set an all-time spending record. When all accounting is completed and published, the aggregate spending factor will likely exceed an incredible $50 million, about ten times the amount the players in a major open congressional race usually spend. Most of the expenditures were for Ossoff. Reports indicate his post-election Federal Election Commission filing could show as much as $33 million raised for this campaign . . . all in a losing effort.
Turnout was extremely high, seeing 259,622 people cast ballots either in early voting or at the polls on June 20th. This compares with almost 194,000 for the primary election, and just over 210,000 for the 2014 regular mid-term election. The presidential election drew 326,005 voters. Democrats had basically put all of their special election cycle resources in this one district and came up empty, which is obviously a crushing defeat. On the other hand, while Republican Handel survived in a close election, this district that hasn’t elected a Democrat since Newt Gingrich first won the seat back in 1978.
NE-2: Former Rep. Brad Ashford (D-Omaha) announced that he will seek a re-match with the man who unseated him last November, current incumbent Don Bacon (R-Papillion). Two years before, in the 2014 election, Mr. Ashford upended veteran Rep. Lee Terry (R-Omaha). All of the races have been close in this marginal district that leans slightly Republican, and we can expect another close battle here next year.
NV-3: With it becoming known that freshman Rep. Jacky Rosen (D-Henderson) will announce for the Senate this week, action will begin occurring in what will be an open marginal 3rd District, a seat fully contained in Clark County. The district encompasses the southern tip of the state including south Las Vegas. State Sen. Scott Hammond (R), who was looking to challenge freshman Rep. Ruben Kihuen (D-Las Vegas) in the 4th District, is now confirming that he will likely run in the open 3rd. Very little of his current state Senate district is in NV-3, however, so it remains to be seen how strong a candidate Mr. Hammond will be in what will likely be virgin territory for him. All eyes will turn to former Rep. Joe Heck (R-Henderson) to see if he will make a comeback after losing last year’s Senate race. He will clearly be the Republicans’ first choice to run.
NJ-3: Largely due to his work in salving the Republican healthcare bill just before the House floor vote, Rep. Tom MacArthur (R-Toms River) has drawn opposition. Former Obama Administration National Security Council member Andrew Kim (D) announced his challenge to Rep. MacArthur last week. Mr. Kim will have the wherewithal to become a credible, well financed candidate, but district Republicans have fared well in this region since the 1978 election, losing only one time during that entire stretch. This south-central New Jersey area electorate has voted Democrat in presidential and statewide races several times, but consistently chose Republican congressional candidates in eighteen of the last nineteen elections.
NY-19: Freshman Rep. John Faso (R-Kinderhook) is another GOP incumbent who has drawn a crowd of potential opponents. Last week, former CIA intelligence officer Jeff Beals (D) joined the growing number of Democratic candidates who will be vying for the nomination. Mr. Beals becomes the seventh Democratic congressional candidate, none of whom have ever served in an elected office.
SC-5: Former state Representative Ralph Norman (R) claimed the central-South Carolina special congressional election, but with a surprisingly close 51-48% victory margin. In fact, spending only about 3% of Jon Ossoff’s (D) record total in the Georgia special election, Democratic nominee Archie Parnell, a former Wall Street executive, came close to scoring a major upset victory.
The Democratic leadership sent only perfunctory funding to the district, and never believed Parnell had a legitimate chance to win. Had they emphasized this district a bit more, and the Ossoff GA-6 race somewhat less, the result could possibly have turned out differently. Mr. Norman barely came through the Republican primary and run-off, and turnout was low (just under 88,000 voters), two components that would have contributed to a possible Democratic upset. Since Rep-elect Norman now has some time to solidify himself in this seat, it is likely the new Congressman has just experienced what will prove to be his tightest election in what is normally a reliable Republican CD.
UT-3: Two weekends ago, Utah Republican delegates met in convention to endorse one candidate to advance to the primary election. Convention attenders chose former state Rep. Chris Herrod as their official primary contender. He defeated state Senator Deidre Henderson and eight other Republicans to win the party endorsement. Mr. Herrod advances to the August 15th primary election where he will face Provo Mayor John Curtis and businessman Tanner Ainge. Both of the latter men successfully qualified for the primary ballot via 7,000 valid petition signatures. This process allows candidates who can complete the onerous signature-gathering task to gain direct primary ballot access and by-pass the nominating convention.
The primary winner advances to the November 7th special general election. The new Democratic nominee is physician Kathryn Allen, who had announced against resigning Rep. Jason Chaffetz (R-Alpine/Sandy) and already raised over $500,000 for such an effort. She easily won the party nomination outright in last Saturday’s Democratic convention. The eventual Republican nominee will be the heavy favorite to win this seat in the fall.
Iowa: Cedar Rapids Mayor Ron Corbett became the first Republican to declare a primary challenge to new Governor Kim Reynolds. Mr. Corbett, a former state House Speaker, says there is a “lack of leadership in state government,” meaning we can expect the Mayor to implement a contrast strategy here if he can raise sufficient funds to wage a strong primary campaign. The Iowa GOP electorate is conservative, so Corbett coming out swinging against both Reynolds and former Gov. Terry Branstad, now the new US Ambassador to China, may not be the wisest early strategy.
Kansas: Developments are unfolding in what will be the Kansas open Governor’s race. Former state Sen. Jim Barnett, who was the 2006 Republican nominee against then-Gov. Kathleen Sebelius (D) and was beaten 58-40%, announced that he will return for the 2018 contest. Lt. Gov. Jeff Colyer (R), who is also expected to run for Governor, hinted last week that his formal announcement will come soon after the 4th of July holiday break.
Already in the GOP race are Secretary of State Kris Kobach, oil company executive Wink Hartman, and former state Rep. Ed O’Malley. For the Democrats, ex-Wichita Mayor Carl Brewer and former state Agriculture Secretary Joshua Svaty are the to-date announced contenders. Gov. Sam Brownback (R) is ineligible to seek re-election. Rumors persist that Mr. Brownback will receive an Administration appointment, thus meaning Lt. Gov. Colyer could soon find himself as the new incumbent. Should the succession happen, the primary race dynamics will greatly change.
Maryland: Prince Georges County Executive Rushern Baker joined the Democratic primary for Governor last week. Already in the race are NAACP former president Ben Jealous, state Sen. Rich Madaleno, Maryland University Regent Jim Shea, and technology executive Alec Ross. The primary field will get a further jolt if US Rep. John Delaney (D-Potomac) decides to run. Mr. Delaney seemed poised to do so earlier, but has been quiet lately and particularly so as more individuals become candidates. The Democratic winner will face Gov. Larry Hogan (R) in the general election. Though Maryland is heavily Democratic, Gov. Hogan enjoys some of the strongest job approval ratings of any state chief executive.
Virginia: Quinnipiac University released their new poll of the Virginia Governor’s race, and it brings good news for Lt. Gov. Ralph Northam (D). According to the survey (6/15-20; 1,145 VA registered voters), Mr. Northam leads former Republican National Committee chairman Ed Gillespie, 47-39%, a major difference when comparing to Harper Polling’s post-primary survey (6/14-16; 500 VA registered voters) that found the two candidates tied at 46%. We can expect a steady polling stream coming for this competitive race throughout the November general election.