Your Weekly Report on the Discord from Washington, D.C.
In Partnership with the Eris Group
Let the technical corrections begin — The House and Senate voted along party lines on Tuesday — and then the House voted again on Wednesday, to correct a procedural error — to approve H.R. 1, the Tax Cuts and Jobs Act. The bill, which the President signed into law this morning, replaces the seven existing tax brackets for individuals with four. It raises the standard deduction, eliminates the deduction for personal exemptions, and repeals the deductions for medical and educational expenses. It reduces the corporate tax rate from 35% to 20%, or 25% in the case of personal services corporations. Complete text of the bill as finally approved is here.
House approves bill to change systemic risk designation — H.R. 3312, Rep. Blaine Luetkemeyer’s Systemic Risk Designation Improvement Act, passed the House on Tuesday by a vote of 288-130. The bill would remove the $50 billion asset threshold for designation as a systemically important financial institution, instead leaving that designation to regulators’ discretion. The Senate has not acted on the companion bill, S. 1893, introduced by Senator Claire McCaskill (D-MO); instead, the Senate Banking Committee has passed S. 2155, which would raise the threshold for systemic importance to $250 billion in assets.
House votes to require SEC registration for proxy advisory firms — The House of Representatives voted on Wednesday to approve H.R. 4015, the Corporate Governance Reform and Transparency Act of 2017, sponsored by Rep. Sean Duffy (R-WI). H.R. 4015 would require proxy advisory firms to register with the Securities and Exchange Commission (SEC), disclose potential conflicts of interest, and make their methodologies for formulating recommendations publicly available. The bill passed 238-182, with Democrats arguing that the bill would interfere with shareholders’ access to impartial information.
Senate Banking Committee rejects Garrett for Ex-Im — President Trump’s nomination of former Rep. Scott Garrett (R-NJ) to head the Export-Import Bank failed by a vote 13 to 10 in the Senate Banking Committee on Tuesday. Senators Mike Rounds (R-SD) and Tim Scott (R-SC) broke party ranks to vote against the nomination. Ranking Senate Banking Committee member Sherrod Brown noted that Mr. Garrett had led the effort to shut down the Ex-Im Bank, and “did not and could not answer the key question posed by several of us — what has changed?” White House spokeswoman Sarah Huckabee Sanders said the Administration was “certainly very disappointed,” and would work with the Committee to identify the next steps.
CFPB will reconsider HMDA rule, assess no penalty for 2018 reporting errors — The Consumer Financial Protection Bureau announced yesterday that it will not assess penalties for errors in data collected under HMDA reporting requirements in 2018, nor will it require resubmission of data “unless data errors are material.” The agency said that it will open rulemaking “to reconsider various aspects of the Bureau’s 2015 HMDA rule, such as the institutional and transactional coverage tests and the rule’s discretionary data points.” Examinations of data submitted in 2018 will be “diagnostic,” to help identify areas for remedy, and the Bureau “will credit good-faith compliance efforts.”
CFPB likely to extend effective date on prepaid rule — The Bureau also announced yesterday that it will issue a revised final rule on prepaid accounts next year, taking into consideration comments received over the summer. Based on those comments, the CFPB said it expects “to further extend the effective date of the 2016 rule to allow additional time for implementation of the final rule.”
FHFA reinstates capital reserve for GSEs — Federal Housing Finance Administrator Mel Watt announced Thursday that FHFA and the Treasury had agreed to reinstate a $3 billion capital reserve for Fannie Mae and Freddie Mac, beginning in this quarter. Watt foresees dividends in the future: “While it is apparent that a draw will be necessary for each Enterprise if tax legislation results in a reduction to the corporate tax rate, FHFA considers the $3 billion capital reserve sufficient to cover other fluctuations in income in the normal course of each Enterprise’s business,” he said.
Hurricanes boost foreclosure preventions — GSE dividends will, of course, depend on “the absence of exigent circumstances,” and hurricanes count as exigent circumstances. Yesterday FHFA announced a 25% rise in the number of early-stage delinquencies in the third quarter, mainly because of Hurricanes Harvey, Irma, and Maria. The seriously delinquent rate stayed flat at 0.95%, and the GSEs conducted more than 41,000 foreclosure prevention actions in the third quarter.
Fed passes all eight “living wills,” but asks four banks for more — The Federal Reserve Board and FDIC announced Tuesday that the resolution plans submitted by the eight largest and most complex financial institutions had no weaknesses serious enough to require resubmission. They did, however, cite shortcomings in the plans submitted by Bank of America, Goldman Sachs, Morgan Stanley, and Wells Fargo, and asked for additional information in future plans.
FDIC announces further cuts to operating budget — The Federal Deposit Insurance Corporation (FDIC) Board met Tuesday to approve next year’s operating budget of $2.09 billion, a three percent reduction from last year’s. The FDIC Board also approved a staff reduction of 4.5% from 2017. The budget for 2018 is 48% lower than the FDIC’s budget in 2010, and next year’s staff will be 34% lower than the peak in 2011. “These reductions are made possible by continuing steady improvement in the health of the U.S. banking industry as well as the FDIC’s efforts to carefully manage resources,” said outgoing Chairman Martin J. Gruenberg.
Next Week(s) in Washington:
Things should be quiet around here next week, with federal holidays on December 25 and January 1. If we have news to report, you’ll see the next issue of The Golden Apple on January 5, 2018.
January 3
House and Senate reconvene.
The Ellis Insight. Jim Ellis reports on political news:
> Senate
Minnesota: Sen. Al Franken (D) has announced that he will leave office on January 2nd, after previously saying “sometime in January.” Lt. Gov. Tina Smith (D), Gov. Mark Dayton’s (D) pick to succeed Mr. Franken, will be sworn into the Senate on January 3rd. She will serve until the 2018 special election is held (concurrently with the regular election cycle), and has already announced her candidacy to fill the balance of the current term.
State Sen. Karin Housley (R-St. Mary’s Point/Washington County) also says she will enter the special election contest. Sen. Housley’s husband is Phil Housley, the head coach of the Buffalo Sabres NHL hockey club. As a player whose career spanned 20 seasons, Mr. Housley was inducted into the Hockey Hall of Fame as the second highest scorer of all-time among American players. Sen. Housley was first elected to the legislature in 2012, won a second term last year, is a realtor, and hosts her own radio program.
Other Republicans who might be interested include former Gov. Tim Pawlenty and US Reps. Erik Paulsen (R-Eden Prairie) and Tom Emmer (R-Delano), along with state House Speaker Kurt Daudt (R-Crown).
Tennessee: Triton Research conducted a survey of Tennessee voters (12/12-18; 1,028 likely primary voters via interactive voice response systems), and finds Rep. Marsha Blackburn (R-Brentwood) jumping out to a massive lead over former US Rep. Stephen Fincher (R-Crockett County). According to the data, the eight-term west Tennessee Congresswoman would lead Mr. Fincher by a whopping 58-11% among the self-identified Republican primary voters.
Much of her margin could be attributable to Ms. Blackburn’s strong name identification and positive image. Her favorability ratio is 62:14% positive to negative with an 86% recognition factor, as compared to Mr. Fincher’s 16:8%, meaning only 24% of the statewide Republican electorate say they are familiar with him. The eventual Republican nominee will almost assuredly face former two-term Gov. Phil Bredesen.
> House
HI-1: As expected, Attorney General Doug Chin (D) officially became a congressional candidate in the open 1st District earlier this week. Mr. Chin made national headlines when he sued the Trump Administration over the travel ban Executive Order that the President issued early in his tenure. Mr. Chin has never run for elective office, however, as the AG is an appointed position in Hawaii. He previously served as Honolulu’s City Manager, and as a prosecuting attorney. Currently in the Democratic primary are state Sen. Donna Mercado Kim (D-Moanalua), state Rep. Kaniela Ing (D-Kihei), and Honolulu City Councilman Ernie Martin. Rep. Colleen Hanabusa (D-Honolulu) is leaving the seat to challenge Gov. David Ige in the Democratic primary.
IN-6: Greg Pence (R), older brother of Vice President Mike Pence, just saw his bid to win the seat his sibling previously represented grow stronger. State Sen. Mike Crider (R-Jackson Township) has withdrawn from the congressional contest meaning that no elected official is currently challenging Mr. Pence in the Republican primary. Candidate filing closes February 9th for the May 8th state primary. At this point, it appears Mr. Pence is becoming the prohibitive favorite to succeed Rep. Luke Messer (R-Greensburg/Muncie). The Congressman is running for the Senate and has endorsed the Vice President’s brother in the open congressional race that he leaves behind.
MA-3: The Massachusetts candidate filing deadline is still over six months away, but already 13 Democrats have announced for the party nomination to run in the open 3rdDistrict. The field includes businessman Keith St. John, who is the latest to declare his candidacy. In August, Rep. Niki Tsongas (D-Lowell) announced that she would not seek a seventh term, which set the political machinations into motion. The field includes Daniel Koh, the former chief of staff to Boston Mayor Marty Walsh, state Sen. Barbara L’Italien (D-Andover), state Rep. Juana Matias (D-Lawrence), ex-Ambassador Rufus Gifford, and nine businessmen, local officials, and activists. Democrats will are heavily favored to hold the seat, but the September 18th primary will be a free-for-all.
MA-7: Earlier in the year, Massachusetts Rep. Mike Capuano (D-Somerville/Cambridge) drew a Democratic primary challenge from Cambridge City Councilman Nadeem Mazen, but that threat ended when the latter man hopped into the open 3rd District race. Now, Rep. Capuano may face a new primary opponent. According to a Politico publication story, Boston City Councilwoman Ayanna Pressley, who is elected citywide as one of four at-large members, is seriously considering challenging Mr. Capuano next year. The Massachusetts candidate filing deadline isn’t until June 5th for the late September 18th state primary, so plenty of time remains for many political moves to occur.
MN-7: State. Rep. Tim Miller (R-Prinsburg), who had been forecast as a legitimate challenger to veteran Minnesota Rep. Collin Peterson (D-Detroit Lakes), withdrew from the congressional campaign this week citing early fundraising difficulties. He will instead seek re-election to the state House. The move leaves 2016 challenger David Hughes and businessman Matt Prosch as announced Republican candidates. Mr. Hughes held Rep. Peterson to a 52-47% victory, but spent just under $20,000 in doing so.
NV-4: Nevada Rep. Ruben Kihuen (D-Las Vegas) is one of several members succumbing to pressure from multiple sexual harassment accusations against him and announced that he will not seek a second term next year. Mr. Kihuen had previously said he would not resign when one woman came forward to levy her allegations. Now that at least two more have done so, he has decided to end his current congressional tenure after this legislative session adjourns. The 4th District occupies northern Clark County and six other central rural Nevada counties. The seat leans Democratic, but Republicans have proven success in the region, as well.
NJ-11: New Jersey Rep. Rodney Frelinghuysen (R-Morristown), chairman of the House Appropriations Committee, figures to be a Democratic conversion target next year and now his general election opponent may be identified. Last week, Passaic County Freeholder John Bartlett (D), despite already raising more than $230,000 for his budding congressional campaign, withdrew from the federal race and instead will seek re-election to his local position.
Former federal prosecutor Mikie Sherrill, who has already raised just about three-quarters of $1 million and had just under $500,000 in her campaign account at the September 30th financial disclosure deadline, has now attracted the official endorsement of all four Democratic county party organizations in New Jersey’s 11th CD. This guarantees Ms. Sherrill the first ballot position throughout the district for the party primary election, which is a proven major advantage in this state. Remaining in the Democratic primary are businesswoman Tamara Harris, attorney Mitchell Colbert, and college professor Mark Washburne.
PA-7: Pennsylvania Democratic state Sen. Daylin Leach (D-King of Prussia) now finds himself hit with sexual harassment allegations from several women, which is affecting his congressional campaign. As a result of the controversy, Sen. Leach announced he is “taking a step back” from his federal challenge to four-term Rep. Pat Meehan (R-Chadds Ford). Mr. Leach was viewed as the Democrats’ strongest congressional challenger, but the chances of him continuing the race are slim. In fact, even his days in the legislature may be numbered. Democratic Gov. Tom Wolf has already publicly called upon him to immediately resign from the state Senate. Four Democrats remain in the race against Rep. Meehan, but none appears particularly strong at this point in time.
TN-7: Just a month after songwriter Lee Thomas Miller (R) announced for Rep. Marsha Blackburn’s (R-Brentwood) open Nashville suburban congressional seat, he ended his fledgling campaign. This leaves state Senator and physician Mark Green (R-Clarksville) as the leading contender. Sen. Green was President Trump’s choice for US Army Secretary, but was forced to withdraw when it appeared his nomination had confirmation trouble. When Rep. Blackburn decided to run for the Senate, Dr. Green then hopped into the open House race and is becoming the early prohibitive favorite.
TX-27: Late this week, the Texas Republican Party asked a court to intervene about whether Rep. Blake Farenthold’s (R-Corpus Christi) name should appear on the ballot since he has withdrawn from further 2018 political competition. The Texas Secretary of State indicated the name remains in place because Farenthold filed for re-election. The court agreed with the Republican argument that the entire filing process had not been completed; hence, Mr. Farenthold’s name will be removed from the 2018 ballot.
Democrats immediately initiated a lawsuit against the judge’s ruling, but later in the day backed away from taking any further legal action. The state apparatus also said the candidate filing deadline will not be re-opened even though the incumbent did not seek re-election. Normally, such deadlines are extended one week once the current office holder officially decides not to run. Because six candidates filed before the deadline, the authorities believe a filing deadline extension is unwarranted.
> Governor
Alabama: In a move that strengthens new Gov. Kay Ivey’s (R) position, state Agriculture & Industries Commissioner John McMillan (R), who had entered the Republican gubernatorial primary even before Gov. Robert Bentley (R) was forced to resign, has changed his 2018 electoral plans. With Gov. Ivey running for a full term after ascending to the position from her Lt. Governor’s post once Mr. Bentley departed, Commissioner McMillan announced that he is withdrawing. Instead, he will run for the open state Treasurer’s position. The current Treasurer, Republican Young Boozer, is ineligible to seek a third term.
Maine: Five-term US Rep. Chellie Pingree (D-North Haven/Portland) had been publicly toying with the idea of entering the open Maine Governor’s race next year, and promised a decision before the end of this year. In keeping true to her word, Rep. Pingree announced this week that she will focus on her career in Congress and seek a sixth term from her 1st Congressional District.
The Democratic gubernatorial field already numbers 11 candidates, including Attorney General Janet Mills, state Sen. Mark Dion (D-Westbrook), former state House Speaker Mark Eves, two former state legislators, and a combination of business people, educators, and political activists. Five Republicans, including state Senate President Mike Thibodeau (R-Liberty), Senate Majority Leader Garrett Mason (R-Lisbon), and state House Minority Leader Ken Fredette (R-Newport), are in the GOP primary. Gov. Paul LePage (R) is ineligible to seek a third term.
South Carolina: Mason-Dixon Polling & Research conducted a survey of the South Carolina GOP gubernatorial primary whesre new Governor Henry McMaster is gearing up for a challenge from three fellow Republicans. According to the M-D data (12/6-10; 625 SC registered voters; 400 Republican regular primary voters), Gov. McMaster would lead former state cabinet secretary Catherine Templeton, 51-21%, while Lt. Gov. Kevin Bryant garners only 8% support, and former Lt. Gov. Yancey McGill secures just 1% backing. The South Carolina primary is June 12th, with a June 26th run-off if no candidate secures a majority vote.