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

In Partnership with the Eris Group

House Financial Services Committee approves 15 bills — The House Financial Services Committee spent two days last week marking up 15 bills to reduce and streamline regulation for banks and other financial companies, ultimately approving them all for action on the floor. The Committee unanimously approved H.R. 4725, which would reduce reporting requirements for financial institutions with assets of $5 billion or less. H.R. 1264, which would exempt all banks and credit unions with less than $50 billion in assets from CFPB rules, passed by a vote of 30-25. 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, was approved by a vote of 45-10.

CFPB will reconsider payday lending rule; Mulvaney calls for evidence of agency effectiveness — Although most provisions of the Consumer Financial Protection Bureau’s final rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans will not take effect until August 19, 2019, the final rule was codified in the Code of Federal Regulations on Tuesday, and the rule sets a deadline of April 16 for applications to become a registered information system (RIS). On Tuesday, the CFPB announced its intention to reopen the rulemaking process in order to reconsider this rule, and said it would entertain requests for waivers of the RIS application rule. On Wednesday, Acting Director Mick Mulvaney said the Bureau would be publishing a series of Requests for Information (RFI), seeking public comment on enforcement, supervision, rulemaking, market monitoring, and education activities. The first RFI will ask for comment on Civil Investigative Demands (CIDs) issued during enforcement investigations.

DOJ unlikely to pursue MetLife SIFI designation case — Reports are circulating that the Department of Justice will not pursue its appeal of the District Court ruling that overturned MetLife’s designation as a systemically important financial institution (SIFI). U.S. District Court Judge Rosemary Collyer ruled in March 2016 to rescind the Financial Stability Oversight Council (FSOC)’s determination that MetLife was a SIFI, and the Justice Department immediately appealed. FSOC decided in September 2017 to end AIG’s designation as systemically important, and has said it will review Prudential’s designation later this year.

GSEs should be regulated as public utilities, Watt says — The Federal Housing Finance Administration (FHFA) submitted a proposal for GSE reform to the Senate Banking Committee on Wednesday, with a letter from Director Mel Watt laying out his views. Without giving details about what should happen to the existing GSEs, the FHFA proposes a single, government-sponsored mortgage-backed security, to be issued by shareholder-owned organizations (at least two) that are regulated like public utilities. The mortgage GSEs would operate nationwide, with pricing and returns set by a regulator. The GSEs would pay fees to fund a mortgage insurance pool in case one of the enterprises becomes insolvent, but the government guarantee would remain as a backstop.

“The time to modernize CFIUS is now,” says Cornyn — Thursday’s Senate Banking Committee hearing on the essential elements of reforming the Committee on Foreign Investment in the U.S. (CFIUS) began with Senator John Cornyn (R-TX) presenting S. 2098, the bill he and Senator Dianne Feinstein (D-CA) drafted to modernize and strengthen the organization. He noted that Secretaries Mattis and Mnuchin had both contributed to the bill, as had former agency heads, department personnel, and military experts. The bill is specifically designed to address issues of national security, including China’s ability to steal technology and intellectual property at early stages of development. Witnesses noted that the bill would considerably expand CFIUS’s mandate, would require many additional staff members, and could present additional challenges to American firms’ ability to raise venture capital. Hearings on the bill will continue this week.

Treasury, Justice see opportunities for AML reform — Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Crimes, and Acting Deputy Attorney General M. Kendall Day appeared before the Senate Banking Committee on Wednesday to present the Administration’s perspective on improving anti-money laundering enforcement. Under Secretary Mandelker said that Treasury is working with the federal banking agencies on incentives to encourage financial institutions to develop new approaches that target high-value offenders. She also noted the creation of FinCEN Exchange, a voluntary public-private initiative that offers regular briefings for financial institutions with Treasury and law enforcement agencies. Deputy Attorney General Day said that opaque corporate structures that hide the true beneficial ownership of assets is one of DOJ’s biggest challenges, and that the Department is excited about the requirements scheduled to take effect in May.

Social media will do more to fight terrorism online, say witnesses — The three largest social media platforms — Facebook, Twitter, and YouTube — have stepped up their efforts to identify and delete extremist propaganda, but will do even more, witnesses told the Senate Commerce Committee on Wednesday. Human reviewers remain the most effective tool against extremist content, often with the assistance of increasingly powerful artificial intelligence platforms. Analyst Clinton Watts of the Foreign Policy Research Institute warned against focusing too narrowly on Islamic State propaganda or Russian meddling; other malicious users have targeted American businesses and mobilized action based on false information, such as “Pizzagate.” He urged that Twitter, in particular, expand its verification process to as many users as possible.

Senate Banking moves Powell, Quarles nominations to the floor — The Senate Committee on Banking, Finance, and Urban Affairs voted to approve the nominations of Jerome Powell to serve as Chairman of the Board of Governors of the Federal Reserve System, and of Randal Quarles to serve as a member of the Board. Senator Elizabeth Warren (D-MA) was the only dissenting vote.

Mulvaney asks the Fed to give CFPB nothing — Mick Mulvaney, Director of the Office of Management and Budget and Acting Director of the Consumer Financial Protection Bureau (CFPB), submitted the CFPB’s quarterly funding request to the Federal Reserve Board last week — and asked for nothing. Mulvaney said that the Bureau’s current reserve of $177 million is sufficient to cover the $145 million budgeted for the second quarter of 2018. Instead of funding the CFPB, Mulvaney suggested that the Fed could return them to the Treasury. “[T]he men and women at the Bureau are proud to do their part to be responsible stewards of taxpayer dollars,” Mulvaney wrote in a letter to Fed Chair Janet Yellen.

This Week in Washington:

The House is in recess this week.

January 23
Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on the nominations of Jelena McWilliams to serve as Chairperson of the Federal Deposit Insurance Corporation; Marvin Goodfriend to serve as a Member of the Board of Governors of the Federal Reserve System; and Thomas E. Workman to serve as a member of the Financial Stability Oversight Council. 10:00 a.m., SD-538 Dirksen Senate Office Building.

January 25
Senate Banking Committee holds a hearing on “CFIUS Reform: Administration Perspectives on the Essential Elements.” Witnesses will be the Honorable Heath P. Tarbert, Assistant Secretary of the Treasury for International Markets and Investment Policy; the Honorable Richard Ashooh, Assistant Secretary of Commerce for Export Administration; and the Honorable Eric Chewning, Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy. 10:00 a.m., SD-538 Dirksen Senate Office Building.

The Ellis Insight. Jim Ellis reports on political news:

> Senate

Arizona:  As expected, Rep. Martha McSally (R-Tucson) announced her candidacy for the state’s open Senate seat. Ms. McSally will now challenge former Maricopa County Joe Arpaio and ex-state Sen. Kelli Ward in the August 28^th Republican primary. The winner will likely face Rep. Kyrsten Sinema (D-Phoenix) in the general election. Ms. Sinema is fast becoming the consensus Democratic candidate.

A new poll from the Arizona-based Data Orbital survey research firm (1/11-15; 500 AZ likely Republican primary voters) finds Rep. McSally leading Mr. Arpaio and Ms. Ward for the open Republican Senate primary. According to these latest numbers, Rep. McSally holds a 31-22-19% lead over Mr. Arpaio and Ms. Ward, respectively. The analysis suggests that McSally’s strong base within her Tucson congressional district is largely responsible for her statewide advantage. Sen. Jeff Flake (R) is retiring after one term.

Minnesota:  While former Gov. Tim Pawlenty (R) never expressed outright interest in running in the new special election presumably against appointed Sen. Tina Smith (D), he never firmly closed the door on entering the race, either. Now, he has. Last week, in a Fox News interview, Mr. Pawlenty said he will not become a Senate candidate, and that there are many other ways to continue his public service career. On the heels of Mr. Pawlenty firmly deciding not to run against Sen. Smith, Rep. Tom Emmer (R-Delano/ Minneapolis suburbs) then quickly followed suit. Late last week, Mr. Emmer announced that he will seek re-election to a third term from his 6^th District US House seat. For now, state Sen. Karin Housley (R-Stillwater/St. Croix River Valley) is the only announced candidate. Former US Rep. and presidential candidate Michele Bachmann is also considering the race.

Mississippi:  Public Service Commissioner Brandon Presley (D-Tupelo), a cousin of rock legend Elvis Presley, had been the national Democrats’ top choice to oppose Sen. Roger Wicker (R) this year. Now, they will have to look elsewhere. Thursday, Mr. Presley announced that he will not become a Senate candidate, at least in the regular cycle. Rumors have been rampant that health issues may force Sen. Thad Cochran (R) to resign and, if so, an appointment would be made followed by a special election to be held concurrently with the regular cycle. Mr. Presley pointedly did not rule out entering a special election, if and when such a political apparatus becomes necessary.

On the Republican side, still no word as to whether state Sen. Chris McDaniel will challenge Mr. Wicker in the GOP primary. As time progresses without indication of movement, the chances are much less that Mr. McDaniel will enter the race. In 2014, you will remember that Sen. Cochran came within a half-percentage point of losing the Republican nomination to Sen. McDaniel. The candidate filing deadline is March 1^st for the June 5^th primary.

Missouri:  Two weeks ago, Remington Research released a survey giving Attorney General Josh Hawley (R) a 49-45% lead over Sen. Claire McCaskill (D), the second time this polling firm reported such a finding. Public Policy Polling, then surveying for the liberal Majority Institute (1/8-9; 965 MO registered voters), puts McCaskill back in the lead, however, but with only the slightest of margins, 45-44%. This latter sampling universe appears to contain a Democratic skew. In a state that has lurched to the right since the turn of the century, the PPP sample actually gave the Democrats a 37-34% plurality. Together, the two polls suggest that the Senate race is clearly within the margin of polling error and should be considered a toss-up, even at this early stage of the election cycle.

Tennessee:  The first public polling for the open Volunteer State Republican Senate nomination (Triton Polling & Research; 12/12-18; 1,028 TN likely Republican primary voters) released back in December staked Rep. Marsha Blackburn (R-Brentwood) to a huge 58-11% advantage over former US Rep. Stephen Fincher (R-Crockett County). Now, WPA Intelligence, polling for the conservative Club for Growth organization, released the results of their latest survey (1/14-15; 502 TN likely Republican primary voters) and found Rep. Blackburn’s lead to be even greater: 66-13%. In fact, even when tested against two-term retiring incumbent Sen. Bob Corker (R), the Congresswoman would deny him re-nomination in a hypothetical primary race, 63-25%. Her favorability image within this polling sample is a whopping 64:12% positive to negative.

Wyoming:  Though we have heard little follow-up about potential primary challenges to Sen. John Barrasso (R), Blackwater security company founder Erik Prince is again on record saying he is still considering whether to enter the race, and promises a decision in February. Nothing more has been heard from mutual fund founder and major GOP donor Foster Friess, who also made statements about possibly opposing the Senator. Both men could easily finance their own campaigns. The candidate filing deadline is not until June 1^st for the August 21^st state primary. But, like in Mississippi, the more time that passes without challengers coming forward continues to favor the sitting incumbent.

> House

IL-3:  Marketing consultant Marie Newman is challenging veteran Rep. Dan Lipinski (D-Western Springs/Chicago suburbs) and consolidating support on the left. In addition to attracting several left-of-center groups’ support, Newman has now earned endorsements from two sitting members of the Illinois congressional delegation. In a bit of a surprise, Chicago Reps. Luis Gutierrez and Jan Schakowsky both endorsed Ms. Newman against their area colleague, though the former is not seeking re-election. The moves signal that this Democratic primary challenge will likely become a serious electoral contest. The Illinois primary is March 20^th.

IL-17:  Despite already raising more than $500,000 as a challenger opposing three-term western Illinois Rep. Cheri Bustos (D-Moline), businessman Mark Kleine (R) has decided to end his congressional campaign. He made comments suggesting that he could not raise the type of money it would take to win the race, even though he began in strong fashion. At best, the race would have been a long shot.

Though Mr. Kleine was demonstrating some strength as a candidate, the party leaders have no chance of recruiting a strong replacement since the filing deadline has already passed. Illinois has the second-earliest primary in the country (March 20). For her part, Rep. Bustos had already raised well over $1.5 million in this currently election cycle, and held over $2.3 million in her campaign account at the end of September.

NV-4:  Reports coming from Nevada indicate that Las Vegas City Councilman Stavros Anthony (R) is ending his campaign for the open 4^th Congressional District seat (freshman Rep. Ruben Kihuen (D-Las Vegas)) because of heart problems. Now that Mr. Kihuen is out of the race, former Rep. Cresent Hardy (R-Mesquite), despite him suffering his own heart attack during his one term in the House, has re-entered. Rep. Kihuen unseated Mr. Hardy in 2016, but came under fire for sexual harassment and will not to seek re-election. The 4^th CD is a marginal political seat, originally created in the 2011 reapportionment, which leans toward the Democrats but has also proven to vote Republican.

OH-12:  Now that Rep. Pat Tiberi (R-Galena/Franklin County) has officially left the House and the replacement primary election is scheduled concurrently with the state’s regular primary on May 8^th, more individuals are making political moves. Last week, Liberty Township Trustee Melanie Leneghan became the sixth Republican to declare her candidacy, while Democratic former state Rep. Jay Goyal said he will not run despite being encouraged to do so by many Democratic Party leadership figures.

So far, six Republicans and seven Democrats have entered the special election campaign. The candidate filing deadline is February 7^th. The leading Republicans are state Sens. Kevin Bacon (R-Columbus) and Troy Balderson (R-Zanesville), along with Delaware County prosecutor Carol O’Brien. For the Dems, former Franklin County Sheriff Zach Scott and and ex-Ashley Mayor Doug Wilson appear to top the field. The special general is August 7^th. Republicans are favored to hold the seat.

VA-6:  Through Virginia’s unique candidate nominating rules, each congressional district party committee can decide upon the vehicle and date to choose their candidates. The open 6^th District (Rep. Bob Goodlatte (R-Roanoke) retiring) will go to a Republican convention on May 19^th. Candidate filing closed Thursday, and eight individuals filed as congressional contenders. Three appear to be the key players: state Del. Ben Cline (R-Lexington), RNC National Committeewoman and former Texas State Board of Education member Cynthia Dunbar, and Rockingham-Harrisonburg Clerk of Court Chaz Haywood.

The 6^th District Republican Committee is organizing a bit differently for this convention. Instead of the usual process where the delegates vote until a candidate has majority support, these delegates will simply vote one time. This means the contender with mere plurality support will be nominated. At least one of the candidates, Delegate Cline, is objecting to the new procedure but there is little he can do to influence changes.

> Governor

Connecticut:  Liberal activist Ned Lamont, who upset then-Sen. Joe Lieberman (D) in the 2006 Democratic primary but fell to him in the general when the Senator attained ballot access as an Independent, announced that he will become the eighth Democrat to compete in this year’s open Governor’s race. Mr. Lamont lost the 2010 gubernatorial primary to Stamford Mayor Dan Malloy, the man who would go onto win the general election, garnering only 42% of the vote. The perennial candidate, a former Greenwich Selectman, is from the Sanders-Warren wing of the Democratic Party, and actually stands a good chance of topping a crowded primary field where no other candidate has yet to develop significant statewide name identification.