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

In Partnership with the Eris Group

Eris announces strategic alliance with Michele Lieber, BluePoint DC – We started 2018 by welcoming Michele Lieber, President of BluePoint DC, into the Eris family. Michele’s years of expertise in advocacy for financial services, fintech and the automotive industry will prove invaluable to Eris’s clients. She was most recently chief public policy officer of Ally Financial, where she spearheaded coalition-building efforts and oversaw integration between public policy efforts and company business operations. She previously led financial services and policy development efforts for General Motors and Zurich Financial Services Group. Michele holds a law degree from the University of Pittsburgh. We are delighted to have her with us.

House panel collects more testimony on regulatory relief before action this week – Representatives of community bankers, manufactured housing providers, the American Legion and consumer groups appeared before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit on Tuesday to talk about five bills that would relieve regulatory burden on small lenders and exempt VA-backed medical debt from veterans’ credit reports. Rep. Tom Emmer (R-MN), sponsor of a bill to give community banks more time to comply with HMDA requirements, noted that a third of all counties in the U.S. have no locally-based financial institutions. The full committee will consider these bills and more in a marathon markup scheduled to start this Wednesday (see the calendar for more).

Risk, not rules should drive anti-money laundering efforts – The current government structure for fighting money laundering and related financial crimes misses some offenders by focusing more on rules than on risk, witnesses told the Senate Banking Committee at a hearing on Tuesday. Committee Chairman Mike Crapo (R-ID) noted that the Bank Secrecy Act is almost 50 years old, and while it has evolved with the industry, it may require further reform. Sen. Sherrod Brown (D-OH), ranking member of the committee, called for new measures to require “beneficial ownership” information for companies organized in the United States. Clearing House Association President Greg Baer, former regulator Dennis Lormel, and Global Financial Integrity counsel Heather Lowe agreed in principle on the need for this beneficial ownership information. All said that efforts would benefit from greater information-sharing between law enforcement and financial institutions, and that regulators’ focus on compliance can divert banks’ efforts from more effective anti-money laundering measures.

Warren, Warner introduce bill to punish credit report breaches – The Data Breach Prevention and Compensation Act, introduced Wednesday by Senators Elizabeth Warren (D-MA) and Mark Warner (D-VA), would give the Federal Trade Commission (FTC) new authority to supervise consumer reporting agencies through an Office of Cybersecurity. The bill directs the Office of Cybersecurity to set security standards for these reporting agencies, and to impose penalties for breaches that put sensitive customer information at risk.

Jones, Moran join Senate Banking Committee – New Senator Doug Jones (D-AL) and second-term Senator Jerry Moran (R-KS) have been named to the Senate Committee on Banking, Housing and Urban Affairs. Jones was recently elected to fill the unexpired term of Attorney General Jeff Sessions, which ends in 2021; early in his career, he served as staff counsel to Senator Howell Heflin (D-AL) on the Senate Judiciary Committee. Moran, a former banker, served on the Banking Committee in the last Congress.

Treasury plans CRA revisions – Comptroller of the Currency Joseph Otting told the Wall Street Journal that he has “a very strong viewpoint” about how to change the Community Reinvestment Act (CRA), and the Treasury plans to introduce changes that would update the law and make it more transparent and consistent. Otting said in December that he plans to circulate a proposal to the other banking agencies within 60 days.

Court denies bid to block Mulvaney at CFPB – “[T]here is a public interest in clarity here, but it is hard to see how granting English an injunction would bring about more of it,” Judge Timothy J. Kelly ruled Wednesday in the case of English v. Trump et al. Leandra English, who became acting director of the Consumer Financial Protection Bureau after Richard Cordray’s resignation, had asked for a preliminary injunction to block President Trump’s appointment of OMB Director Mick Mulvaney as interim director. English argued that Dodd-Frank does not allow the President to appoint an acting director, while the President’s attorneys argued that he does have this authority under the Federal Vacancies Act. Judge Kelly did not rule on the underlying case, but said that English had failed “to show a likelihood of success on the merits.”

This Week in Washington:

Today, January 15 is the federal holiday in honor of Dr. Martin Luther King, Jr., and Eris’s offices are closed.

January 16
House Rules Committee meets to consider rules on three bills, including H.R. 2954, the Home Mortgage Disclosure Adjustment Act, which would exempt lenders from HMDA requirements if they make no more than 500 closed-end mortgage loans or issue no more than 500 open-ended lines of credit in any two-year period. 10:00 a.m., H-313 The Capitol.

January 17
House Financial Services Committee will mark up 17 bills to reduce and streamline regulation for banks and other financial companies. Bills to be considered include H.R. 1264, which would exempt all banks and credit unions with less than $50 billion in assets from CFPB rules; H.R. 4725, which would reduce reporting requirements for financial institutions with assets of $5 billion or less; H.R. 4061, which would require the Financial Stability Oversight Council to consider the appropriateness of heighted prudential standards instead of other supervisory measures for systemically important financial institutions; and the “Volcker Rule Regulatory Harmonization Act,” which would clarify that the Federal Reserve has rulemaking authority, but only the FDIC and OCC have examination and supervision authority. The markup will continue on consecutive days if necessary. 10:00 a.m., 2128 Rayburn House Office Building.

January 17
Senate Committee on Banking, Housing, and Urban Affairs will vote on the nominations of Jerome H. Powell to serve as Chairman of the Federal Reserve Board, and Randal Quarles to serve as a member of the Federal Reserve Board. Immediately afterwards, the Committee will hold a hearing on Administration perspectives on reforming and strengthening Bank Secrecy Act enforcement. 10:00 a.m., SD-538 Dirksen Senate Office Building.

January 18
Senate Banking Committee holds a hearing on “CFIUS Reform: Examining the Essential Elements,” with testimony from private sector witnesses. 10:00 a.m., SD-538 Dirksen Senate Office Building.

The Ellis Insight. Jim Ellis reports on political news:

> Senate

Arizona:  Former Maricopa County Sheriff Joe Arpaio (R), who was defeated for re-election in 2016, announced he is entering the open Senate Republican primary. If he were to be elected at 85 years of age, he would become the oldest freshman Senator in American history. Rep. Martha McSally (R-Tucson) has scheduled a series of appearances around the state for today that Arizona politicos report will become her Senate announcement tour. Rep. McSally and Sheriff Arpaio will join former state Sen. Kelli Ward in the Republican primary. The winner will likely face Rep. Kyrsten Sinema (D-Phoenix) in the general election. Ms. Sinema is becoming the consensus Democratic candidate. Sen. Jeff Flake (R) is not seeking a second term. The Arizona primary is not until August 28th, with candidate filing closing May 30th.

The OH Predictive Insights polling firm conducted a flash interactive voice response poll for Arizona ABC affiliate Channel 15. The survey (1/9; 504 AZ likely Republican primary voters) finds Rep. McSally moving into first place with 31% followed closely by Sheriff Arpaio who captures 29%. Former state Sen. Kelli Ward drops to 25% support.

Missouri:  Remington Research again tested the tight Missouri Senate race with their latest survey (1/3-4; 1,122 MO likely voters), and once more found the challenger leading Democratic Sen. Claire McCaskill. Attorney General Josh Hawley (R) continues to maintain a small advantage against the sitting two-term incumbent. On this ballot test, Mr. Hawley holds a 49-45% edge over Ms. McCaskill. The Missouri race has clearly moved into position as the Republicans’ best national conversion opportunity.

Ohio:  State Treasurer Josh Mandel (R), who appeared to have the inside track toward facing Sen. Sherrod Brown (D) in what would be a re-match of their 2012 campaign (Brown: 51-45%), has reversed course. Mr. Mandel announced that he will not be filing as a Senate candidate, saying his wife has been recently diagnosed with a “health situation.” Investment banker Michael Gibbons has been in the race and was expected to battle Mandel for the nomination. He will remain a candidate. Rep. Jim Renacci (R-Wadsworth) announced late last week that he is switching from the gubernatorial race to the Senate campaign with the hope of now challenging two-term incumbent Brown.

> House

CA-39: Veteran California Congressman Ed Royce (R-Yorba Linda/Fullerton), who was first elected in 1992 after spending ten years in the California Senate, declared his intention to retire last Thursday despite holding $3.5 million in his campaign account. Up until now, it appeared Mr. Royce was preparing for what was promising to be a highly competitive campaign in a district that is moving leftward and undergoing drastic demographic changes.

Rep. Royce, chairman of the House Foreign Affairs Committee, is the seventh committee chairman to announce his retirement. Five of the seven are ending their allotted tenure on their respective policy panels. Unlike most of the Republican open seats, this southern California district will provide the Democrats with a prime conversion opportunity. Hillary Clinton carried the seat by a 51-43% spread. Already six Democrats had announced their candidacies, and others are now expected to jump into the race now that the seat is open.

On the Republican side, Rep. Royce announced that he will be supporting former Assemblyman Young Kim as his replacement. Earlier, Ms. Kim was a member of the Congressman’s staff. Former state Senate Minority Leader Bob Huff (R-Diamond Bar), Orange County Supervisor and former Fullerton Mayor Shawn Nelson, and La Mirada City Councilman Andrew Sarega also declared their candidacies.

CA-49:  California Rep. Darrell Issa (R-Vista) announced last week that he will not run for a tenth term later this year. Mr. Issa becomes the 48th House member who will not return to the House for the succeeding Congress, although he would apparently consider running in adjacent District 50 should embattled Rep. Duncan Hunter (R-Alpine) be forced to resign. Rep. Issa scored the closest re-election of any incumbent in 2016, winning the race with only a 50.3% margin. Several Democrats have been running for months, including retired Marine Corps Col. Doug Applegate, the man who came close to upsetting Mr. Issa in the last election.

We can continue to expect a highly competitive 2018 campaign in a San Diego/Orange County coastal district that typically votes Republican but switched to Hillary Clinton in the presidential race and came close to sending a Democrat to the House. In addition to the three-person Democratic field that has already formed, Republican Board of Equalization member Diane Harkey, a former Orange County state legislator, and state Assemblyman Rocky Chavez (R-Oceanside) became Republican candidates. Rep. Issa then quickly endorsed Ms. Harkey as his successor.

IL-4:  When Rep. Luis Gutierrez (D-Chicago) announced his retirement earlier in the year, he said it was only because Cook County Commissioner Jesus “Chuy” Garcia had agreed to run to succeed him. With the blessing of the local Democratic machine, Commissioner Garcia obviously became the man to beat, but the early endorsements didn’t stop Chicago Alderman Carlos Ramirez-Rosa from joining the Democratic primary battle. Yet, the Alderman’s campaign proved short-lived. Late last week, he dropped his congressional effort, thus making Mr. Garcia’s nomination, and therefore election, a virtual certainty. In fact, as part of his announcement, Mr. Ramirez-Rosa even endorsed Commissioner Garcia. Four other Democrats remain in the race, including two other Chicago Aldermen, but Mr. Ramirez-Rosa appeared to be the most serious challenger.

North Carolina:  A Tar Heel State federal judge again ruled the North Carolina congressional lines unconstitutional, though whether the map will again be re-drawn is unclear. Should the US Supreme Court uphold the Wisconsin map in the political gerrymandering case that the Justices are currently reviewing, this North Carolina ruling will become moot.

OH-12:  With Rep. Pat Tiberi (R-Galena/Franklin County) announcing that he will leave the House on January 15th, Gov. John Kasich (R) has set the replacement election schedule. According to the public timeline, the special primary election will run concurrently with the regular primary schedule. This means a nomination election on May 8th. The special general will then follow on August 7th, with the winner serving the balance of the current term.

State Sens. Kevin Bacon (R-Blendon Township) and Troy Balderson (R-Zanesville), along with Delaware County prosecutor Carol O’Brien, appear to be the leading Republican candidates. Former Franklin County Sheriff Zach Scott and ex-Ashley Mayor Doug Wilson are the top Democrats. Others still have a month to enter the race. The eventual GOP nominee will be favored to hold what was designed to be a safely Republican seat. President Trump scored a 53-42% win over Hillary Clinton here in 2016.

> Governor

California:  Former Congressman Doug Ose (R-Sacramento), who served three terms in the House before departing in 2004 because he self term-limited, announced that he will become a gubernatorial candidate. He is the first credible Republican to enter the open statewide campaign. Though the Governor’s race looks to be a suicide run for any Republican in heavily Democratic California, his chances of coalescing the GOP vote to send him into the general election from the jungle primary may be quite good. Having a Republican on the ballot for the general election, thus avoiding a double-Democratic November campaign should help generate GOP turnout for the down ballot races. This could be a significant plus for the targeted seven Republican House incumbents.

Florida:  Rep. Ron DeSantis (R-Palm Coast/Daytona Beach) had long been considered a likely gubernatorial candidate and has now officially joined the race. An outside PAC has already raised enough to put $2 million in an account to help elect the three-term Congressman to statewide office. But, he starts out considerably behind the top Republican fundraiser, Agriculture Commissioner and former Congressman Adam Putnam (R-Lakeland). The latest Florida financial disclosure reports find Mr. Putnam holding more than $15 million in a connected PAC. But, a new poll from the Florida Chamber of Commerce (1/2-5; 600 FL likely and newly registered voters; 235 Democratic primary voters; 259 Republican primary voters), only slots him five points behind Mr. Putnam, 23-18%. For the Democrats, ex-US Rep. Gwen Graham (D-Tallahassee) places first, but with only 14% voter preference.

Maryland:  Gonzales Research & Media Services, a Maryland-based survey research firm, last Thursday released the results of their year-end Democratic gubernatorial primary poll (12/27-1/5; 501 MD likely Democratic primary voters) and found Prince George’s County Executive Rushern Baker jumping out to an early advantage. According to the Gonzales data, Mr. Baker would capture 24% support, followed by Baltimore County Executive Kevin Kamenetz and ex-NAACP national president Ben Jealous with 14% apiece, while state Sen. Rich Madaleno (D-Montgomery County) tallies five percent. Four minor candidates all recorded support factors of less than two percent. The eventual Democratic nominee will face incumbent Gov. Larry Hogan (R) in the fall election.

Ohio:  Just after former Congressman and Cleveland Mayor Dennis Kucinich joined the Democratic gubernatorial primary former Attorney General Richard Cordray and ex-US Rep. Betty Sutton have agreed to form a Democratic ticket. Ms. Sutton will now drop her gubernatorial campaign and file for Lt. Governor. The move prompted Dayton Mayor Nan Whatley to schedule an announcement for last Friday in which she will also drop out of the Governor’s race and endorse the new Cordray-Sutton ticket. State Sen. Joe Schiavoni (D-Mahoning Valley), state Supreme Court judge Bill O’Neill, and ex-state Rep. Connie Pillich (D-Cincinnati) remain in the race along with ex-Rep. Kucinich.

The Democrats’ move is similar to one Republicans made in late November. There, Secretary of State Jon Husted dropped his gubernatorial effort to run as Attorney General and former US Senator Mike DeWine’s running mate. That move now isolates Lt. Gov. Mary Taylor as DeWine’s only primary opponent, since Rep. Jim Renacci (R-Wadsworth) has bolted for the Senate race.

> State Legislature

Virginia:  The Virginia House of Delegates’ majority looks finally to be settled as the members were sworn into office last week. After Republican Delegate David Yancey (R-Newport News), won the lottery pick after he and Democrat Shelly Simonds ended in a tied result, his opponent decided to end the race by not asking for a further recount or filing further legal challenges. Ms. Simonds did pledge to run again in the 2019 House of Delegates election. This result, plus the Republicans receiving a favorable court ruling in another contested outcome, gives the GOP a 51-49 majority in the new House of Delegates and ends one of the closest political scenarios in American electoral history.