June 9, 2017

June 9, 2017

Going somewhere this weekend? Before you do, you might want a look at this New York Times article about the apocalyptic ordeal of eight straight days of air travel. Amtrak’s nice this time of year, but we’ve long believed that the ability to withstand miserable journeys is a powerful evolutionary edge.

House goes for CHOICE — The House of Representatives voted in favor of H.R. 10, the Financial CHOICE Act, yesterday on a party line vote of 233-186. Rep. Walter Jones (R-NC) was the only Republican to vote against the bill. House Financial Services Committee Chairman Jeb Hensarling (R-TX) said that the bill would “end bank bailouts once and for all.” Among other provisions, the CHOICE Act would create a new chapter of the bankruptcy code for financial institutions, and would exempt financial institutions that hold a certain level of capital from many regulatory requirements. The CHOICE Act does not yet have a companion bill on the Senate side.

Fiduciary rule takes effect while DOL calls for new information — The Department of Labor’s fiduciary rule officially takes effect today, June 9, but the Department began the process of reconsidering it on Wednesday by submitting  a request for new information to OMB’s Office of Information and Regulatory Affairs for approval.  Once approved, DOL will publish the Request For Information and begin taking comments.  In testimony Wednesday before the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, Secretary of Labor Alex Acosta told members of Congress that the department had no legal basis for delaying the rule’s effective date, but reminded them that several provisions of the rule don’t take effect until January 2018. If the information collected supports changes, Acosta said, the administration will propose a new rule. “That sounds cumbersome, but it’s how the democracy works,” he said.

Isakson, Roe & Roskam introduce bills to repeal fiduciary rule — Meanwhile, yesterday Senator Johnny Isakson (R-GA) and Representatives Phil Roe (R-TN) and Peter Roskam (R-IL) introduced separate bills yesterday to block the fiduciary rule and replace it with new standards and penalties for retirement services professionals. Co-sponsors of Senator Isakson’s bill, S. 1321, include Senators Lamar Alexander (R-TN), Mike Enzi (R-WY), Orrin Hatch (R-UT), Pat Roberts (R-KS), Tim Scott (R-SC), and Todd Young (R-IN). . Isakson blasted the Department of Labor’s decision to let the rule take effect in a letter published in last Friday’s Wall Street Journal: “By allowing this Obama-era rule to move forward, the administration is abandoning its responsibility to protect the availability of retirement options for middle-class Americans.” Representatives Roe and Roskam said that their bill, H.R. 2823, represented “a more responsible solution” than the “reckless, unnecessary” fiduciary rule.

Proposed HUD budget meets bipartisan dismay — HUD Secretary Ben Carson appeared before the House Appropriations Subcommittee on Transportation, Housing and Urban Development yesterday to answer questions about the administration’s budget request for 2018. Members on both sides of the aisle were unhappy with the proposed elimination of community development block grants (CDBGs), the HOME Investment Partnerships Program, the Choice Neighborhoods program, and the Self-Help Homeownership Program (SHOP) and the Section 4 capacity-building program, all of which use federal funds to attract private-sector investment. Secretary Carson said that the CDBG program, in particular, had suffered from “mission creep,” and that the administration wants to put more responsibility in state and local hands. Secretary Carson also said that HUD hoped to be included in the administration’s infrastructure package, which is still being developed.

House Financial Services hears testimony on flood insurance reform proposals — Representatives of several nonprofit organizations and the New York City Federal Affairs Office appeared before the House Financial Services Committee on Wednesday to discuss six flood insurance reform proposals pending before the Committee. The National Flood Insurance Program (NFIP) is up for reauthorization, and currently holds nearly $25 billion in debt. While Republicans and Democrats agree on several reform measures related to mapping and mitigation, strong disagreements remain on how to treat the NFIP’s debt and how best to bring private insurers into the market. Chairman Jeb Hensarling (R-TX) noted that the program continues to run at a deficit of about $1.5 billion a year, and flood events have become more frequent and severe in recent years. The Committee will mark up these bills as early as next week, with action tentatively scheduled for Tuesday.

House panel looks at virtual currency — The House Financial Services Subcommittee on Terrorism and Illicit Finance heard testimony yesterday from five experts on virtual currency about who’s using these products and how, and what oversight may be necessary to keep these products out of the hands of terrorists and other criminals. Jerry Brito, executive director of the Coin Center, urged the OCC to pursue plans for a FinTech charter, and said that Congress should consider a federal standard that would replace state-by-state money transmitter licensing. Witnesses noted the rapid growth of Bitcoin and the dominance of Russia and China in virtual currency markets.

Energy & Commerce digs in to FinTech — The House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection held its own hearing on FinTech yesterday, hearing testimony about how FinTech services can meet the needs of the unbanked and underbanked. Christina Tetreault, an attorney for Consumers Union, said that financial technology and virtual currencies may increase consumer access to financial services and prove “both convenient and money saving.” Representatives from the private sector called again for streamlining regulation, perhaps through federal preemption of state licensing laws, and the creation of internet safe harbor laws that regulate the use of the technology, but not the technology itself.

Otting named Comptroller of the Currency — President Donald Trump nominated banker Joseph Otting as Comptroller of the Currency on Tuesday, to replace acting Comptroller Keith Noreika. Otting was most recently CEO of OneWest, the bank founded by Treasury Secretary Steven Mnuchin, but left that position in 2015 after OneWest was sold to CIT Group. He began his career at Bank of America, and spent 16 years with Union Bank of California before becoming vice chairman of U.S. Bancorp, where he was also a member of the managing committee. He is a graduate of the University of Northern Iowa.

SEC names Avakian, Peikan Co-Directors of Enforcement — Yesterday the Securities and Exchange Commission announced that Stephanie Avakian, Acting Director of the Division of Enforcement, would stay on as Co-Director with Steven Peikan, who has most recently been Managing Partner of Sullivan & Cromwell’s Criminal Defense and Investigations Group. Avakian joined the SEC in 2014 as Deputy Director of the Division of Enforcement; she had previously been a partner with Wilmer Cutler Pickering Hale and Dorr LLP. Peikan served as an Assistant U.S. Attorney in the Southern District of New York from 1996 to 2004, and was Chief of the Office’s Securities and Commodities Fraud Task Force. Avakian will work from Washington, while Peikan will split his time between Washington and New York.

Supremes say SEC must act within five years to recover stolen funds — The Supreme Court ruled Monday that the five-year statute of limitations on any “action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture,” applies to monetary civil penalties for violations of securities law. The SEC had sought in 2009 to recapture $34.9 million misappropriated by Charles Kokesh between 1995 and 2009. The Supreme Court ruled, however, that because that disgorgement operates as a penalty, any enforcement action must be taken within five years of the violation.

 

Next Week in Washington:

June 12           House Appropriations Subcommittee on Financial Services and General Government holds a hearing on the Department of the Treasury’s proposed budget. Secretary of the Treasury Steven Mnuchin will be the only witness. 4:00 p.m., 2359 Rayburn House Office Building.

June 13           House Financial Services Committee marks up pending legislation on flood insurance reform (tentative).

June 13           Senate Committee on the Budget hears testimony from Secretary of the Treasury Steven Mnuchin on the President’s FY18 Budget and Revenue Proposals. 10:00 a.m., SD-608 Dirksen Senate Office Building.

June 13           Senate Committee on Banking, Housing and Urban Affairs meets to vote on the nominations of Kevin Allen Hassett to serve as Chairman of the Council of Economic Advisers and the Honorable Pamela Hughes Patenaude to serve as Deputy Secretary of Housing and Urban Development. 10:00 a.m., SD-538 Dirksen Senate Office Building.

June 15           Senate Banking Committee holds a hearing on “Fostering Economic Growth: Midsized, Regional and Large Institution Perspective.” Witnesses include representatives of the Regional Bank Coalition, The Clearing House Association, the Midsize Bank Coalition of America, and Cornell University Law School. 10:00 a.m., SD-538 Dirksen Senate Office Building.

The Ellis Insight. Jim Ellis reports on political news:

Senate

Montana:  The Republicans’ most obvious problem in opposing Sen. Jon Tester (D) next year is that they have yet to recruit a top tier candidate. The problem grew worse this week as Attorney General Tim Fox (R), arguably the most well known available individual who could pose a viable challenge to Sen. Tester, announced that he will not run for the Senate next year. In the race are state Sen. Al Olszewski and businessman Troy Downing, but neither are considered candidates with first-tier potential.

Pennsylvania:  Energy trader and investor Paul Addis this week joined the Republican US Senate field of candidates, and he is already proving to be an unconventional candidate. In his announcement, Mr. Addis confirmed he did not vote for President Trump and believes the GOP has “lost its way.”  He also says he will “partially” fund his own campaign. Mr. Addis joins state Reps. Rick Saccone and Jim Christiana, both from the Pittsburgh suburbs, and real estate developer Jeff Bartos as Senate candidates. Rep. Lou Barletta (R-Hazelton) is a prospective contender. Sen. Bob Casey Jr. (D) is seeking a third term.

Tennessee:  In an interview this week, Sen. Bob Corker (R) ended speculation that he might run for Governor next year. While not fully committing to seeking a third term, the Senator came close to declaring for re-election. He firmly indicated, however, that he is “not interested” in running for Governor. Sen. Corker is positioned to face only minor opposition if he decides to enter the 2018 campaign.

House

CA-34:  With slightly under 33,000 voters casting ballots this past Tuesday, state Assemblyman Jimmy Gomez (D-Los Angeles) won the special election to replace former Rep. Xavier Becerra (D-Los Angeles), now California’s Attorney General. Mr. Gomez secured a 60-40% win over Los Angeles former City Planning Commissioner Robert Lee Ahn, also a Democrat. The 34th CD’s irregular vote is the third special congressional election to conclude. Mr. Gomez joins Reps. Ron Estes (R-KS-4) and Greg Gianforte (R-MT-AL) as 2017 special election winners. The Georgia and South Carolina contests will conclude June 20th. Eastern Utah voters will go to the polls in August and November to replace soon-to-be-resigned Rep. Jason Chaffetz (R-Alpine/ Sandy).

MN-1:   Action is occurring in both parties as politicos begin to vie for Rep. Tim Walz’s (D-Mankato) open southern Minnesota seat. Mr. Walz, who won re-election with only 50.3% of the vote in 2016, is an announced candidate for Governor. Defeated state Sen. Vicky Jensen became the first Democrat to enter the open seat contest. On the Republican side, state Rep. Nels Pierson is traveling the district to “listen to voters”, which is likely a prelude to him entering the campaign. Jim Hagedorn, the 2016 nominee who captured 49.6% of the vote last November, is already an announced 2018 candidate. Mr. Hagedorn’s father, Tom Hagedorn, served as a Republican Congressman for four terms in the seventies and early eighties.

MN-8:  Two-time congressional nominee Stewart Mills (R), who lost a pair of federal races by an aggregate 6,000 votes, ended speculation that he was about to enter the open Governor’s race. Mr. Mills closed the door on the statewide run, but says he is considering making a third run for the northeastern Minnesota congressional seat. Rep. Rick Nolan (D-Crosby/Duluth) also said he would not enter the Governor’s race, and is expected to seek re-election.

SC-1:  Rep. Mark Sanford (R-Charleston) who before this week had two Republican primary opponents, now finds himself currently unopposed for re-nomination. Both former fighter pilot and businessman Ted Fienning and defense analyst Tom Perez, the latter no relative of the Democratic National Committee chairman with the same name, withdrew from further campaigning. Fienning did so because of business commitments, while Mr. Perez was transferred to an overseas position.

TX-16:  El Paso County Judge Veronica Escobar (D) is reportedly moving toward seeking Rep. Beto O’Rourke’s (D-El Paso) open and safely Democratic congressional seat. Ms. Escobar is also a former state legislator. Most states refer to her present position as being a “county executive,” but Texas calls those holding her position around the state “County Judges.”  Earlier in the week, state Rep. Cesar Blanco (D), another El Paso Democrat originally looking at a congressional run instead announced plans to seek re-election to his current position.

WI-6:  Dan Kohl, nephew of former US Sen. Herb Kohl (D-WI) and ex-Assistant General Manager of the Milwaukee Bucks basketball club, a sports entity the latter Mr. Kohl owns, announced that he will challenge two-term Rep. Glenn Grothman (R-Glenbeulah/Fond du Lac) next year. The district, which sets almost halfway between Milwaukee and Green Bay in eastern Wisconsin, could become competitive despite Mr. Grothman recording two 57% wins in the most immediate past elections. Prior to Rep. Grothman coming to Washington, former GOP Rep. Tom Petri represented the district for eighteen terms.

Governor

Arizona:  State Sen. Steve Farley (D-Tucson) announced his gubernatorial campaign this week. At this point, Sen. Farley and Arizona State University professor David Garcia are the only two Democrats to step forward to challenge first-term Gov. Doug Ducey (R). The Governor enjoys strong favorability ratings, so unseating him in 2018 will be a tall order for any Democrat.

California:  The Berkeley Institute of Governmental Studies conducted a new statewide poll to test the budding 2018 open Governor’s race. The poll (5/4-29; 1,628 CA adults; 885 likely voters) finds Lt. Gov. Gavin Newsom’s (D) previous jungle primary lead dissipating with former Los Angeles Mayor Antonio Villaraigosa (D) making a major upward move. According to the results, Newsom is favored by 22% of the respondents, scoring 48% within his San Francisco base. In second, former Mayor Villaraigosa captures 17% support, with Republicans John Cox and David Hadley following with 9 and 7%, respectively. The poll reveals bad news for state Treasurer John Chiang (D), who only registers a 5% preference rating.

Hawaii:  A new Merriman River Group poll for the Civil Beat political blog (5/18-24; 956 HI registered voters) detects some weakness for Gov. David Ige (D). The pollsters only tested the Governor’s personal favorability and whether the respondents would vote for him next year. According to the results, Gov. Ige is somewhat upside down at 35:38% positive to negative. In terms of his re-elect status, only 20% say they want him to remain as Governor versus 57% who say they prefer someone else. Already, term-limited Kauai Mayor Bernard Carvalho (D) is confirming he is a potential candidate, telling a local reporter that running for Governor is among the many options he is considering, and will announce future plans shortly.

Iowa:  A great deal of action occurred in the Hawkeye State this week. New Governor Kim Reynolds (R), after succeeding former Gov. Terry Branstad (R) upon his confirmation as US Ambassador to China, has already drawn seven Democratic contenders vying for the party nomination, including two state legislators and a pair of former state party chairmen. She will also face a significant Republican primary opponent. Earlier in the week, Cedar Rapids Mayor Ron Corbett (R) confirmed that he will be announcing his gubernatorial candidacy later in the month. Gov. Reynolds is expected to seek a full term, and will likely be considered the favorite.

Kansas:  Secretary of State Kris Kobach (R) joined the growing field of candidates who are attempting to succeed term-limited Gov. Sam Brownback (R). In addition to Secretary Kobach, businessman Wink Hartman and former state Rep. Ed O’Malley are GOP contenders. Democrats feature former Wichita Mayor Carl Brewer and ex-state Agriculture Secretary Josh Svaty. The big news, however, pertains to Gov. Brownback. Rumors suggest that he may be offered a federal appointment, meaning that Lt. Gov. Jeff Colyer (R) would assume the Governorship and obviously become the favorite for next year’s election.

Maine:  Former state Human Services Commissioner Mary Mayhew (R), despite Sen. Susan Collins (R) saying she will decide in the fall about whether she will enter the gubernatorial campaign, announced her candidacy this week. Coming from the party’s conservative faction, some in Maine believe that Mayhew will be in the strongest position to receive term-limited Gov. Paul LePage’s (R) endorsement, which could be significant in a low turnout Republican primary that appeals to the base voter.

Michigan:  According to a new Mitchell Research poll for the MIRS news service (released 6/6; 435 MI likely Republican primary voters), two former US House members are at the top of a GOP primary poll. Ex-US Reps. Candice Miller (R-Macomb County) and Bill Schuette (R-Mt. Pleasant), now the state’s Attorney General, would lead a hypothetical gubernatorial nomination contest. The poll finds Ms. Miller taking 21% as compared to Mr. Schuette’s 18%. Lt. Gov. Brian Calley is third with 14% support. None of the three have announced their gubernatorial candidacies, though Messrs. Schuette and Calley appear to be sure bets to enter the race. For her part, Ms. Miller is saying that she is enjoying her new position as the Macomb County Public Works Commissioner. Gov. Rick Snyder (R) is ineligible to seek a third term.

Nevada:  Remington Research conducted a Nevada gubernatorial poll (5/23; 1,021 NV likely voters), and the results break well for Attorney General Adam Laxalt, the all-but-declared GOP gubernatorial candidate. According to the RR data, Gen. Laxalt claims 46% of the polling respondents’ support as compared to 37% for Clark County Commission chairman Steve Sisolak (D), also an unannounced gubernatorial candidate. Nevada is a toss-up state now, and solely dependent upon an inconsistent turnout model. In the last mid-term, Republicans swept the state when the turnout was extremely low. In November, Democrats rebounded strongly when the voter participation factor rose to normal presidential election heights.

New Jersey:  Voters went to the polls this past Tuesday, and to no one’s surprise former US Ambassador to Germany Phil Murphy and Lt. Gov. Kim Guadagno each won their respective Democratic and Republican nominations. Mr. Murphy scored a 48% victory in his primary, and will become a heavy favorite to succeed term-limited Gov. Chris Christie (R). Lt. Gov. Guadagno fared equally as well, notching 47% among GOP voters. The large Democratic registration advantage and Gov. Christie’s poor approval ratings make this a top conversion opportunity for Murphy and his party.

Virginia: The gubernatorial primary election is this coming Tuesday, and former Republican National Committee chairman Ed Gillespie is a virtual lock to claim the GOP nomination. The Democratic battle is closing to a toss-up rating. Lt. Gov. Ralph Northam had a substantial lead at the beginning of May according to most available polls, but it now appears that former Rep. Tom Perriello (D-Charlottesville) has strong momentum and pulled into toss-up range. The Democratic battle is a microcosm of the Hillary Clinton/Bernie Sanders presidential campaign, with the most stringent liberal activists lining up for Perriello just as they did for Sen. Sanders. The respective primary winners will advance to the general election campaign to be decided on November 6th.