So close, so far
It’s rare to find something as universally supported as the Paycheck Protection Program, created by the CARES Act earlier this year. As Senate Small Business Committee Chairman Marco Rubio (R-FL) said at a hearing last week, the PPP has been the single most effective part of the CARES Act, and one of the most effective federal fiscal programs in US history. More than 5.2 million small businesses and nonprofits received PPP loans, and the US Census Bureau reported that more than 70 percent of US small businesses had received PPP loans by the end of May.
Everyone — and we mean everyone — agrees on the need to fund a second, targeted round of PPP relief before the end of the year, when most of the CARES Act expires. Everyone agrees on the need to simplify and streamline the forgiveness process for the smallest businesses and their lenders. At last weeks hearings, witnesses asked for clarification about the tax treatment of PPP loans and a change to the treatment of Economic Injury Disaster Loan (EIDL), so small businesses don’t face obligations they didn’t realize they were taking on. Members were receptive to these requests, and seemed to share a real sense of urgency about getting something done quickly.
At this writing, however, negotiations continue on both a COVID-19 relief package and broader legislation to fund the federal government. The House and Senate approved stop-gap funding this week to keep government going until this Friday, December 18. One way or another, we’ll have more to tell you then.
House, Senate approve new money laundering laws as part of defense package
The House and Senate both voted last week to approve the conference report on the National Defense Authorization Act (HR 6395). The legislation includes a package of reforms to the Bank Secrecy Act and federal anti-money laundering laws, most significantly a requirement sponsored by Rep. Carolyn Maloney (D-NY) that would require companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) at the time of incorporation. Maloney first introduced beneficial ownership legislation in 2009; Senator Mark Warner (D-VA) sponsored the Senate companion in this Congress. President Trump has threatened to veto the NDAA, but votes in the House (335-78) and Senate (84-13) suggest legislators would override the veto.
CFPB approves final rules on Ability to Repay/Qualified Mortgage
Last week the Consumer Financial Protection Bureau approved new final rules that change the general definition of “qualified mortgage (QM)” and create a new category of qualified mortgages, the Seasoned QM. The Bureau’s Ability to Repay/Qualified Mortgage (ATR/QM) rule generally requires lenders to make a determination that a borrower can repay a resident mortgage loan, and offers liability protections for loans that meet these standards (QMs). The standard for QMs had been that a customer’s total monthly debt to income (DTI) ratio must not exceed 43 percent; the Bureau had also been giving QM status to mortgages eligible for purchase or guarantee by Fannie Mae or Freddie Mac, the so-called “GSE patch.” The new rule replaces the DTI limit with price-based thresholds that vary according to the amount of the loan. It provides flexibility for lenders to consider other factors they deem relevant in determining the borrower’s ability to repay, but lenders must maintain written policies that lay out how they make those determinations. Certain fixed-rate loans held in portfolio for at least 36 months may qualify as “Seasoned QMs,” even if they are higher-priced than the General QM standard would allow. The new rules take effect 60 days after publication in the Federal Register, but the new QM standard become mandatory on July 1, 2021.
Biden announces picks for HHS, Agriculture, HUD, VA, USTR and more
President-Elect Joe Biden added several names to his slate of Cabinet appointees last week, announcing plans to nominate California Attorney General Xavier Becerra as Secretary of Health and Human Services, retired General Lloyd Austin as Secretary of Defense, former Secretary of Agriculture and Iowa Governor Tom Vilsack to another term in that role, Rep. Marcia Fudge (D-OH) as Secretary of Housing and Urban Development, Denis McDonough as Secretary of Veterans Affairs, House Ways and Means Committee counsel Katherine Tai as US Trade Representative, and Ambassador Susan Rice as Director of the Domestic Policy Council. All nominations will require Senate confirmation, except for Susan Rice’s.
Senate hearing highlights consensus on retirement savings reform
A hearing of the Senate Finance Subcommittee on Social Security, Pensions, and Family Policy last week explored bipartisan proposals to make it easier for small businesses to offer defined contribution retirement plans to their employees, and easier for workers to take advantage of those programs. Subcommittee Chairman Rob Portman (R-OH) and Senator Benjamin Cardin (D-MD) introduced legislation that has been largely incorporated into the “SECURE 2.0” bill introduced by House Ways and Means Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) in October. Bipartisan provisions include a proposal to make the so-called “saver’s credit” refundable, allow matching retirement contributions for recent college graduates as they repay student loans, make it easier for employers to offer auto-enrollment programs, and postpone the required minimum distribution age to 75. The legislation would also allow larger contributions to retirement funds for those 60 and older. It is highly unlikely that Congress will act on these provisions before the end of the year, but Portman said it would be a priority for next year, when Congress will also need to address the financial distress of the multi-employer pension system.
Confirmations, Nominations, Departures
SEC Division of Enforcement Director Stephanie Avakian announced last week that she will leave the agency at the end of the year, after four years as Co-Director, then Director of the Division. Deputy Director Marc P. Berger will serve as Acting Director until a permanent successor is named.
The Week Ahead in Washington
This week should be the last week of the 116th Congress. The Senate is scheduled to adjourn sine die on the 18th; the House was scheduled to leave town, but remains in session for as long as it takes to pass a bill that funds the government through the end of the year. Negotiations continue on a COVID-19 relief bill as well.
December 15 at 10:00 a.m. Senate Commerce Subcommittee on Manufacturing, Trade, and Consumer Protection holds a hearing to examine the effects of COVID-19 on the live event entertainment industry.
December 15 at 10:00 a.m. The Federal Deposit Insurance Corporation Board of Directors meets to consider final rules on brokered deposits and interest rate restrictions, and parent companies of industrial banks and industrial loan companies.
December 15 at 2:30 p.m. Senate Commerce Subcommittee on Communications, Technology, Innovation, and the Internet holds a hearing to examine American entrepreneurship outside traditional hubs.
December 16 at 9:30 a.m. Senate Banking Subcommittee on Economic Policy holds a hearing to examine the United States and China, focusing on winning the economic competition.
December 16 at 10:00 a.m. Securities and Exchange Commission holds an open meeting to consider new disclosure rules for resource extraction issuers, amendments to update rules governing investment adviser marketing, and a proposed NYSE change to its rule on direct listings.
December 18 at 4:30 p.m. Federal Reserve Board announces results from second round of bank stress tests.
The Ellis Insight
Jim Ellis reports on political news
Quinnipiac Poll: Quinnipiac University released its new national poll (12/1-7; 978 US registered voters; live interview via landlines and cell phones) to test attitudes and perceptions about President-Elect Joe Biden as he prepares to assume office. The results suggest Mr. Biden has work to do to improve his image even on the first day of taking his new position.
His favorability index is a weak 45:44% positive to negative, though the sample size does appear to skew slightly Republican as its composition is reported to split 31% Democratic, 29% Republican, and 31% Independent. The Republican number is several points higher than what is typically believed to be a national GOP loyalty factor.
On the question as to whether the respondents believed there was widespread voter fraud in the 2020 election, by a margin of 58-38%, the individuals comprising the sample said no. Still, well over a third of the polling universe, including 35% of Independents, answered affirmatively. Additionally, when asked whether the group expected the country to remain divided or if the citizenry could re-unite, the respondents believe, in just a 49-45% break, that the nation will again come together.
On the positive front for Mr. Biden, by a 56-37% margin, the respondents feel optimistic about his impending presidency. Conversely, regarding whether his economic policies are perceived to help or hinder the economy, the answers respectively broke in only a 39-38% split.
Georgia: The Trafalgar Group and RMG Research just released early December/late November polls for the two Georgia runoff Senate races. While the two pollsters found the same result for the Sen. David Perdue/Jon Ossoff race, there is wide disparity in the Sen. Kelly Loeffler/Raphael Warnock contest.
Both Trafalgar (12/1-3; 1,083 GA likely voters; online and interactive voice response system) and RMG Research (11/19-24; 1,083 GA likely voters; online and text) find Mr. Ossoff holding a 48-47% lead over Sen. Perdue, which is obviously a statistical tie.
The special election came out quite differently, however, and the difference in when the polls were taken (RMG before Thanksgiving; Trafalgar after) could partly explain the polling range. Trafalgar sees Sen. Loeffler holding a 50-45% lead over Rev. Warnock in the later poll, while RMG detected a two-point Warnock edge, at 48-46% in the pre-holiday study.
CA-21: Former US Rep. David Valadao (R-Hanford), fresh from ousting the man who defeated him in 2018, Rep. T.J. Cox (D-Fresno), has drawn a potential new opponent for 2022. Former state Assemblywoman Nicole Parra (D-Bakersfield) wasted no time in filing a 2022 congressional campaign committee with the Federal Election Commission, doing so late this week. Mr. Valadao scored a 50.5 – 49.5% re-match victory in November, a margin of 1,522 votes in a district that ranked the lowest in turnout (170,334 votes cast) of California’s 53 congressional seats.
CA-48: California freshman Rep. Harley Rouda (D-Laguna Beach) is already taking steps to begin a re-match campaign with the woman who unseated him in November, Rep-Elect Michelle Steel (R).
Last week, Mr. Rouda filed a 2022 congressional campaign committee and, while stopping short of committing to run in two years, was quoted as saying, “while one campaign ends today, another is just beginning. I look forward to having voters compare my opponent’s two years in Congress with my accomplishments on November 8, 2022.” Ms. Steel, an Orange County Supervisor, defeated Rep. Rouda, 51.1 – 48.9%, a difference of just under 8,400 votes.
LA-5: Former congressional staffer Luke Letlow, capitalizing on his time running 5th District Congressman Ralph Abraham’s (R-Alto) office, easily won the double-Republican runoff election. Mr. Letlow defeated state Rep. Lance Harris (R-Alexandria), 62-38%, which was similar to the ratio that he recorded in the original blanket primary election held November 3rd.
NY-22: New York Supreme Court Justice Scott DelConte, who now has jurisdiction over the unresolved NY-22 congressional election, issued a ruling mid-week. This is the last uncertified or conceded House election in the country, and it appears it will be at least another couple of weeks before a winner is declared. The current count shows former Rep. Claudia Tenney (R) leading freshman Rep. Anthony Brindisi (D-Utica) by a scant 12 votes from more than 317,000 ballots cast.
The canvass process has discovered as many as 1,400 – 1,700 uncanvassed and possibly uncounted ballots, which could obviously change the outcome. Justice DelConte cited seven of the eight counties that comprise the 22nd District for not following New York election law regarding the counting of the early, mail and affidavit ballots. Therefore, he ordered a re-canvassing of the disputed ballots. He further ordered the counties to report back to him on December 18th. Therefore, it is possible we will not see a winner by the time the new Congress takes office on January 3, 2021.
OH-11: President-Elect Joe Biden announced that he will nominate Ohio US Rep. Marcia Fudge (D-Warrensville Heights/Cleveland) as the Department of Housing and Urban Development Secretary. This means another member will resign from the House in order to accept a new position. Previously, Rep. Cedric Richmond (D-LA) announced that he will resign before January 20th in order to head the Office of Public Engagement at the White House.
Like the LA-2 district, the OH-11 seat that stretches from downtown Cleveland to downtown Akron is safely Democratic. Gov. Mike DeWine (R) will be tasked with scheduling a special election upon Ms. Fudge’s official resignation. Cuyahoga County Commissioner and local Democratic Party chair Shontel Brown and former state Senator and Bernie Sanders for President national co-chair Nina Turner announced their congressional candidacies and are the first to begin forming the Democratic special election contender field.
OR-5: Businesswoman Amy Ryan Courser (R), who lost to veteran Rep. Kurt Schrader (D-Canby/Salem), 52-45% in November, filed a 2022 congressional committee with the Federal Election Commission thus taking the first step toward a re-match. Ms. Courser came within seven percentage points of the Congressman despite spending only $215,000 on her campaign in a non-targeted race.
Kansas: Names are surfacing for the 2022 Jayhawk State Governor’s race, as first-term incumbent Laura Kelly (D) looks to run for re-election after winning her office in 2018 after consecutive terms of Republican leadership. The biggest news of the past few days is that US Secretary of State, and former Kansas Congressman, Mike Pompeo (R) not ruling out a run for his state’s top office.
Former Gov. Jeff Colyer (R), who ascended to the top office when then-Gov. Sam Brownback (R) resigned to accept a position in the Trump Administration but would lose the 2018 Republican gubernatorial primary to then-Secretary of State Kris Kobach, is clearly making moves to enter the 2022 statewide campaign. Attorney General Derek Schmidt (R), who eschewed a previous opportunity to run for the US House, is another potential gubernatorial candidate who is not denying his interest in entering the race.
Nevada: Northern Nevada US Rep. Mark Amodei (R-Carson City), the state’s lone federal delegation Republican representative, confirmed in an interview that he will “look at” potentially challenging first-term Gov. Steve Sisolak (D) when the latter man seeks a second term in 2022. Prior to his election as Governor, Mr. Sisolak was a member of the Clark County Board of Commissioners.
New Jersey: State Republican Party chairman and former local Mayor Doug Steinhardt declared his gubernatorial candidacy yesterday for the 2021 campaign. He joins a Republican primary field that includes former state Assemblyman Jack Ciattarelli and businessman and former congressional candidate Hirsch Singh. The eventual Republican nominee will challenge first term Gov. Phil Murphy (D) in November of next year.
Rhode Island: Lt. Gov. Dan McKee (D), who has virtually no role in the Raimondo Administration despite being a member of the same party, confirms that he will become a gubernatorial candidate in 2022 when the position is open. The incumbent, Gov. Gina Raimondo (D) is ineligible to seek a third term. Much Rhode Island press attention has been given to the fact that a major rift exists between the two office holders.
A crowded field is expected in the Democratic primary, in which claiming victory is virtually tantamount to winning the general election. Another key figure considering running is ten-term US Rep. Jim Langevin (D-Warwick). Rhode Island is likely to be reduced to at-large status in the next congressional reapportionment, meaning Rep. Langevin would at least face a Democratic primary with fellow Rep. David Cicilline (D-Providence) if he chooses to continue seeking public office. Therefore, he is not ruling out a run for Governor.
South Carolina: First Congressional District Representative Joe Cunningham (D-Charleston), who Republican Nancy Mace unseated in November, while saying he is not making any further political decision at the present time, did not rule out a bid against Gov. Henry McMaster (R) when the incumbent seeks a second full term in 2022. Rep. Cunningham lost his re-election to Ms. Mace, a state Representative, 50.6 – 49.4%, a margin of 5,415 votes.
Virginia: The Virginia Republican Party executive committee met and voted to again nominate their slate of statewide candidates through the convention process and not a direct primary election. State Sen. Amanda Chase (R-Midlothian), who had already announced her candidacy for the party’s gubernatorial nomination in anticipation of a primary, now says she will run in the general election as an Independent. Sen. Chase understands that she would not secure the party nod in the convention process.
As expected, former Virginia Governor and ex-Democratic National Committee chairman Terry McAuliffe announced in an email message last week that he is going to seek another term as Governor in 2021. Mr. McAuliffe promises that he will, “think big, be bold, and approach our challenges [as] never before if we’re going to move the Commonwealth forward.”
Also, already in the Democratic primary are Lt. Gov. Justin Fairfax, state Sen. Jennifer McClellan (D-Richmond), and state Delegate Jennifer Carroll Foy (D-Woodbridge). The leading Republican is expected to be state Delegate and former House Speaker Kirk Cox (R-Colonial Heights).
Detroit: Two-term incumbent Mayor Mike Duggan, who won office in 2013 in the depths of the city’s economic calamity, announced last week that he will run for a third term next year. Mr. Duggan will be a heavy favorite for re-election as, to date, no one has yet come forward to announce a challenge.
New York City: The 2021 open New York City Mayor’s race is going to attract a great deal of political attention, and former presidential candidate Andrew Yang is now reportedly testing the waters for his own candidacy.
A new Slingshot Strategies survey (11/30-12/6; 1,000 likely 2021 NYC voters) finds Mr. Yang actually leading the field with 20% support. Brooklyn Borough President Eric Adams is second with 14%, while City Comptroller Scott Stringer, often characterized as one of the leading candidates, falls back to just 11% support. Former NYC Council President Christine Quinn records 7% and defeated Congressman Max Rose (D-Staten Island) posts 6% preference.