Fed is focused on CBDC implications for community banks
Federal Reserve Board Vice Chair Lael Brainard to talk about the Fed’s work on a central bank digital currency (CBDC). The Fed issued a for public comment in January, and the Federal Reserve Bank of Boston has been working with the Digital Currency Initiative of the MIT Media Lab on , to develop a hypothetical CBDC. The Fed said in January that it would need guidance from Congress and the executive branch before making any moves to develop a real CBDC, and an directed the Fed, Treasury, and the Department of Justice to report by September 9 on what legislative changes would be necessary.
Committee Republicans warned the Federal Reserve not to act without explicit legislative direction, and members on both sides of the aisle expressed concern about whether a CBDC would siphon deposits from the system that community banks and credit unions use to make loans. Brainard said that preserving a role for banks in general, and for community banks in particular, was a priority for the Fed as it considers a CBDC design. Any CBDC would be part of an intermediary payment system, she said, and she envisions a system where it might operate alongside private stablecoins, traditional demand deposits, and cash.
Biden’s China policy: “Invest, align, compete”
Laying out the Biden administration’s approach to the People’s Republic of , Secretary of State Antony Blinken stressed that they “do not see conflict” with China. Rather, the administration’s strategy for countering China’s quest for dominance will focus on investing in competitiveness, innovation, and democracy at home; aligning with international allies and partners; and competing with China to build a vision for the future. Blinken said the U.S. would “push back on market-distorting policies and practices” such as government subsidies and barriers to markets, but did not identify any specific tactics. He hailed the newly announced Indo-Pacific Economic Framework, saying it would renew and adapt American economic leadership for the 21st century. Blinken also pledged to “work with Beijing where our interests come together,” particularly on climate issues.
SEC proposes ESG reporting changes
Last week the Securities and Exchange Commission (SEC) proposed intended to give investors more, better, and more comparable information about funds’ and advisers’ pursuit of environmental, social, and governance (ESG) goals. Funds and advisers that promote their ESG strategies would be about the effects they’re trying to achieve and their success in meeting those goals; for example, funds focused on environmental responsibility would have to disclose the greenhouse gas emissions associated with their portfolio. The proposal will be open for comment for 60 days after publication in the Federal Register.
Lenders must explain algorithmic credit denials, says CFPB
The Consumer Financial Protection Bureau (CFPB) to confirm that lenders using black-box algorithms to make credit decisions must still comply with the Equal Credit Opportunity Act’s requirement to provide specific reasons for adverse actions. “The adverse action notice requirements of ECOA and Regulation B, however, apply equally to all credit decisions, regardless of the technology used to make them,” the circular said. In a announcing the circular, the Bureau encouraged tech workers who find companies using technology in ways that violate ECOA to report those violations through the CFPB’s Whistleblower Program. The Bureau said it was also looking at other consumer protection risks associated with decision-making technology, including the use of automated valuation models in the home appraisal process.
CFPB launches Office of Competition and Innovation
The CFPB that it is replacing its Office of Innovation, “which focused on an application-based process to confer special regulatory treatment on individual companies,” with a new Office of Competition and Innovation, which “will focus on how to create market conditions where consumers have choices, the best products win, and large incumbents cannot stifle competition by exploiting their network effects or market power.” The new department will specifically look at barriers to consumers switching easily to new providers, structural problems that create obstacles to innovation, and the unfair advantages of scale. The OCI plans to host “events such as open houses, sprints, hackathons, tabletop exercises, and war games” to bring entrepreneurs, small business owners, and technology professions together to innovate.
Confirmations, Nominations, Departures
The Securities and Exchange Commission has appointed as Director of its Division of Examinations. Best had been Director of the SEC’s New York Regional Office before assuming the role of Acting Director of Examinations in March.
The Week Ahead in Washington
GrayRobinson’s offices were closed Monday, May 30 in recognition of Memorial Day. The House and Senate are in district work periods until June 7, with no hearings scheduled. Unless something unexpected happens, The Golden Apple will not publish on Friday, June 3, but will return on June 10.
The Ellis Insight
Jim Ellis on Political News
Primaries – May 24 Results
Alabama: Rep. Mo Brooks (R-Huntsville), of whom former President Trump rescinded his endorsement because he viewed the Brooks campaign as going nowhere, rebounded to capture second position (29.2%) in the open US Senate Republican primary and advanced to the June 21 runoff election. The first place finisher is former Business Council of Alabama President & CEO Katie Britt (44.7%). Both defeated retired “Black Hawk Down” pilot Mike Durant (23.3%), whose self-funded campaign fell short of the mark in what was an expensive three-way race.
In the contested Republican gubernatorial primary, Alabama Gov. Kay Ivey (R) won re-nomination with 54% of the vote against eight Republican opponents. GOP turnout was much higher than the Democrats, over 645,000 as compared to 168,000+.
Arkansas: Sen. John Boozman turned back three Republican challengers to win his re-nomination outright with 58% of the vote. All four GOP US House members were also re-nominated, though 2nd District Rep. French Hill (R-Little Rock) posted a surprisingly low 58.5%.
The open Governor’s race produced no surprise. Former Trump Press Secretary and daughter of ex-Governor Mike Huckabee, Sarah Huckabee Sanders, won a landslide Republican nomination with 83.2% of the vote. She is now a lock to replace term-limited Gov. Asa Hutchinson (R) in the Autumn election.
Georgia: Gov. Brian Kemp turned back former Sen. David Perdue with a surprising landslide of 74% in what was clearly the most anticipated race of the evening. While polling showed that the Governor would be re-nominated, a huge 74-22% vote spread was unforeseen. Considering where Gov. Kemp started after the 2020 election and former President Donald Trump piling on him up until the day of this vote, Mr. Kemp’s win was extraordinary. This, within a primary turnout of just over 1.2 million GOP voters, the size of which has not been previously seen.
Also scoring big was former University of Georgia football star and NFL player Herschel Walker in the US Senate Republican primary. He won with over 68% of the vote and now advances to face Sen. Raphael Warnock (D) in the general election. Sen. Warnock had only minor opposition in the Democratic primary and captured 96% of the 725,000+ Democratic votes that have been recorded.
In the 7th CD Democratic incumbent pairing contest, Rep. Lucy McBath (D-Marietta) scored a huge 63-31% victory over freshman Rep. Carolyn Bourdeaux (D-Suwanee). The two incumbents became paired when the Republican map drawers decided to make the new 6th District safely Republican, thus forcing Ms. McBath to compete in the adjoining 7th CD.
Texas: The Bush Texas political dynasty may have come to an end. Attorney General Ken Paxton swamped Land Commissioner George P. Bush in the AG runoff election. His margin was 68-32%, a better than 2:1 majority. This, despite Mr. Paxton still being under a SEC indictment that has not moved since 2015, having been exposed with an extra-marital affair, and former staff members accusing him of accepting bribery payoffs.
Two electoral contests remain uncalled and are very tight. In the 28th District, Rep. Henry Cuellar (D-Laredo) holds only a 177 vote run-off lead over opponent Jessica Cisneros (D). The Secretary of State’s released results show all precincts reporting, meaning ancillary votes arriving in the mail and provisionals likely being all that remains. A recount will probably be requested, but based upon the trends of where the uncounted ballots lie, it appears that Rep. Cuellar’s slim advantage will likely grow.
Staying in South Texas, the Democratic 15th District runoff between businesswoman Michelle Vallejo and attorney Ruben Ramirez leans toward the former by just 23 votes. The voter pool at this point, however, is just over 12,000 individuals, an extremely low participation total. The final ballots can clearly tip this race to either candidate. The eventual winner will face Republican 2020 nominee Monica de la Cruz. The general election campaign will likely begin as a toss-up. The FiveThirtyEight data organization’s partisan rating for TX-15 is even.
Arizona: Democratic pollster Blueprint Polling ran a survey of the Arizona electorate (5/12-16; 608 AZ registered voters; live interview), testing the top three Republican candidates against Sen. Mark Kelly (D). They find the Senator leading each member of the trio by almost identical substantial margins. Against Attorney General Mark Brnovich, Sen. Kelly posts a 50-33% advantage. Venture capitalist Blake Masters similarly trails, 49-32%. Former solar energy company owner Jim Lamon is in the same realm, behind the Senator 48-34%.
Missouri: The Trafalgar Group joined the firms who have tested the Missouri Republican primary and just released their survey results (5/16-18; 1,065 MO likely Republican primary voters; live interview; text; online). They find scandal-tainted resigned Gov. Eric Greitens returning to first place, this time with 26%. In this poll, US Rep. Vicky Hartzler (R-Harrisonville/Columbia) is a close second with 23%, and Attorney General Eric Schmitt with 19%. US Rep. Billy Long (R-Springfield) leads the also-ran tier with 9%. The candidates have bounced around in various polls, but no one reaches the 30% mark. Expect someone to break from the pack before the August 2 statewide primary election.
North Carolina: East Carolina University released the results of their post-primary statewide survey (5/19-20; 635 NC registered voters; SMS text) that shows US Rep. Ted Budd (R-Advance) opening the general election campaign with a substantial 47-39% advantage over former state Supreme Court Chief Justice Cheri Beasley (D) as the two battle in the open Senate campaign.
President Biden fares poorly on the job approval question. He is a full 20 points upside down in North Carolina, 35:55% favorable to unfavorable. Republicans, according to this survey, are up 47-44% on the generic question. Incumbent Sen. Richard Burr (R) chose not to stand for a fourth term.
Pennsylvania: A three judge federal panel sitting in Harrisburg issued a ruling on a 2021 Lehigh Valley case that relates to the current vote counting situation. The judicial action mandated the counting of mail ballots where no date appears on the carrier envelope. PA ballot procedure requires the voter to date the envelope before mailing. Immediately upon the ruling being announced, the Dave McCormick for Senate campaign sent a letter to all 67 county chief election officials reiterating the decision.
The primary election and still no declared winner in the Senate primary, Pennsylvania election authorities have already ordered county election officials to begin the inevitable recount. Officials know the final unofficial count, which will be coming soon, is surely to fall within the 1/2 percent that triggers an automatic recount.
The current totals find Dr. Mehmet Oz leading former hedge fund CEO David McCormick by 902 votes from more than 1.3 million ballots cast. It is being reported that this is the closest primary in Pennsylvania’s modern political era.
IL-6: An internal Garin Hart Yang Research Group poll conducted for Illinois Rep. Sean Casten’s (D-Downers Grove) campaign (5/12-16; 402 IL-6 likely Democratic primary voters; live interview) finds the poll sponsor developing a substantial lead over his paired Democratic incumbent opponent, freshman Rep. Marie Newman (D-La Grange). The GHY results give Rep. Casten a 36-27% lead heading toward the June 28 primary. According to the poll analysis, Rep. Casten has an all-encompassing edge over Ms. Newman, including men, women, progressives, liberals, and moderate/conservatives.
NY-17: After state Sen. Alessandra Biaggi (D-Bronx) announced her Democratic primary challenge to Democratic Congressional Campaign Committee chair Sean Patrick Maloney (D-Cold Spring), two Republicans have jumped into the new 17th District campaign: state Assemblyman Matt Lawler (R-Pearl River) and Rockland County Legislator Charles Falciglia.
The new 17th is rated D+7 through the FiveThirtyEight data organization’s calculations. While the seat clearly leans Democratic, Rep. Maloney has attracted a great deal of attention since he announced against freshman Rep. Mondaire Jones (D-Westchester County) instead of running just to the north in what is now the open 18th CD. For his part, Mr. Jones has entered the Democratic primary for the southwestern Manhattan/Brooklyn new 10th District.
OR-5: Oregon’s 5th District ballot counting has ground to a halt because of a major malfunction in one of the district’s anchor areas, Clackamas County. Due to a reported bar code error on the printed ballots, election officials are having to record the votes of every ballot individually, punching a new ballot for each with the correct bar code. Hence, only about two-thirds of the expected vote has been reported.
Rep. Kurt Schrader (D-Canby) is trailing badly, 58-42%, in the Democratic primary to former local city manager Jamie McLeod-Skinner. The Congressman’s base is Clackamas County, but it appears, according to currently recorded votes, that he won’t likely have enough support there to fully overcome his opponent’s large early advantage. If Mr. Schrader does lose, he will be the fourth House incumbent who fails to secure re-nomination, joining Reps. David McKinley (R-WV), Madison Cawthorn (R-NC), and Carolyn Bourdeaux (D-GA).
PA-12: In another Keystone State contest that went into political overtime, state Rep. Summer Lee (D-Braddock) was officially projected the open Democratic primary winner. Ms. Lee defeated lobbyist Steve Irwin (D), 41.9 – 41.0%, a difference of 978 votes from just under 115,000 cast ballots. As a result, she becomes the prohibitive favorite for the general election over Republican Mike Doyle, and will replace retiring Rep. Mike Doyle (D-Pittsburgh), no relation to the new Republican nominee, from the downtown Pittsburgh anchored district.
PA-17: The Democratic Congressional Campaign Committee is already out with a new poll of the open PA-17 CD taken before the May 17 primary (5/9-10; 494 PA-17 likely voters; live interview & text). They project a 44-41% lead for their new nominee, election law attorney Chris Deluzio (D) over former local official Jeremy Shaffer, the new GOP nominee.
When the DCCC first started releasing polling several years ago, the data was heavily slanted in their candidates’ favor, thus forfeiting credibility. In the last several years, however, their results have been closer to the mark, but still slightly slanted. Therefore, a DCCC poll finding Mr. Deluzio only ahead three points is a clear indication this race already begins in the toss-up realm.
New Hampshire: The New Hampshire legislature adjourned sine die, but passed another congressional redistricting map and again sent it to Gov. Chris Sununu (R), who, once more, says he will veto the bill. The Governor’s action means the redistricting process will move to the state Supreme Court. The Justices had previously said they will adopt a “least change” map, meaning both seats will lean toward the Democrats.
Republicans were fighting to make the swing 1st District more Republican while conceding the 2nd District to incumbent Rep. Annie Kuster (D-Hopkinton). Gov. Sununu said he wanted both districts to be competitive. The move will likely cost the Republicans a seat, thus handing Rep. Chris Pappas (D-Manchester) a new district that he can again win.