August 4, 2017

August 4, 2017

Is it Friday yet? Check. The first week of August is traditionally a quiet time in Washington, but nothing about this year has been traditional, so why start now? This is, however, the last Golden Apple until September 8. You’ve been warned.

Senate Finance looks at LIHTC — The low-income housing tax credit was the focus of Tuesday’s Senate Finance Committee hearing, as five witnesses testified on the importance of the LIHTC to affordable housing. Witnesses told the committee that IRS oversight of this program has been minimal, and should be improved, but that tax reform efforts should look at ways to streamline and expand the program. Affordability models need to be updated, witnesses said. Housing shortages are most acute at levels below those covered by the LIHTC, and reward new construction in areas where rehabilitation might be preferable. The LIHTC has bipartisan support; Chairman Hatch called for proposals to improve the existing program, while Senator Maria Cantwell (D-WA) said that doing nothing on this issue would save no money.

Better information will reduce insurance fraud — The Senate Commerce Subcommittee on Consumer Protection held its first insurance-related hearing of the year this week, to discuss the many-faceted issue of insurance fraud. Representatives of state regulators, the insurance industry, and watchdog groups offered suggestions for improving information sharing and consumer awareness to identify bad actors and keep them from moving fraudulent activities across state lines. Oklahoma Insurance Commissioner John Doak, testifying on behalf of the National Association of Insurance Commissioners, told the panel about NAIC’s online fraud reporting system, its efforts to find “lost” beneficiaries of life insurance policies, and a task force that is reviewing the use of emerging technologies in fraud prevention.

Senate confirms dozens of nominees — Yesterday the Senate approved dozens of nominees to executive branch agencies by voice vote — in fact, as Senate Majority Leader Mitch McConnell noted, the Senate approved more nominations this week than they had so far this year. Among those confirmed were David Malpass as Under Secretary of the Treasury; Brent James McIntosh as General Counsel of the Treasury Department; Andrew K. Maloney as Deputy Under Secretary of the Treasury; David J. Kautter and Christopher Campbell as Assistant Secretaries of the Treasury; Mira R. Ricardel as Under Secretary of Commerce for Export Administration; Richard Ashooh as Assistant Secretary of Commerce; Peter Davidson as General Counsel for Commerce; Neal J. Rackleff and Anna Maria Farias as Assistant Secretaries of HUD; J. Christopher Giancarlo as Chairman of the CFTC; and Brian Quintenz and Rostin Behnam as Commissioners of the CFTC.

CFPB unveils new model overdraft disclosures — In response to the findings of a study released today, the Consumer Financial Protection Bureau is asking for comment on four different model disclosure forms for overdraft protection. “[F]inancially vulnerable consumers” who opt in to overdraft protection may not fully understand the risk of fees, said CFPB Director Richard Cordray. The Bureau has not yet proposed regulations on overdraft fees, but has been studying the issue since 2012. The prototypes released today are models, not requirements.

Fannie sends another $3.1 billion to Treasury — Fannie Mae announced this week that it earned $3.2 billion in the second quarter of 2017, and will send $3.1 billion of that to the Treasury next month if Federal Housing Finance Administrator Mel Watt instructs it to do so. Fannie and Freddie have sent the Treasury a total of $276 billion since its $187 billion bailout in 2008. Administrator Watt has warned Congress that the agencies’ low capitalization creates the risk that they’ll need additional taxpayer money; Senate Banking Committee Chairman Mike Crapo (R-ID) and ranking member Senator Sherrod Brown (D-OH) have said that housing finance reform is a priority for this fall.

Wagner challenges $1 billion NCUA payment to outside law firms — Rep. Ann Wagner (R-MO), who chairs the House Financial Services Subcommittee on Oversight and Investigations, has written to National Credit Union Administration Chairman Mark McWatters to ask why the agency has paid more than $1 billion to two law firms that helped recover funds for failed corporate credit unions. The two firms brought 26 lawsuits against banks that sold faulty securities to five corporate credit unions that ultimately failed; the $1 billion payments are contingency fees for more than $5 billion recovered through these suits.

Hensarling demands investigation of Cordray — House Financial Services Committee Chairman Jeb Hensarling (R-TX) wrote to the Office of Special Counsel last week to ask for an investigation of CFPB Director Richard Cordray, for possible violations of the Hatch Act. The Hatch Act generally prohibits federal employees from engaging in political activity, and specifically from using their positions to campaign for public office or raise money for political campaigns. Hensarling asked the Special Counsel to investigate reports that Cordray plans to run for the Ohio governor’s seat, and whether Cordray discussed this illegally with an Ohio Supreme Court justice.

Warner wants disclosure on Reg SCI compliance — Senator Mark Warner (D-VA) wrote to Securities and Exchange Commission Chairman Jay Clayton this week to ask for greater transparency about which market centers are subject to and complying with the SEC’s Regulation Systems Compliance and Integrity, or Reg SCI. Reg SCI took effect in November 2015, and seeks to reduce the number and effect of breakdowns in technology infrastructure. Senator Warner noted that “the SEC has not publicly disclosed which market centers have become subject to Reg SCI; nor has it required market centers to disclose whether they are or are not subject to Reg SCI.” He suggested that investment advisers and broker-dealers might want this information when evaluating best practices.

Next Week in Washington:

The House is still out. The Senate is in session pro forma, to prevent recess appointments, but no hearings are scheduled until after Labor Day, September 4. Barring unforeseen events — and assuming, of course, that the sun will return after the total eclipse on August 21 — the Golden Apple will return then, too.

The Ellis Insight. Jim Ellis reports on political news:

 
Senate

Alabama:  A new Alabama special election US Senate survey conducted for the regional Raycom News Network (Research Strategies, Inc. (Mobile, AL); 7/24; 3,000 AL registered voters) stakes appointed Sen. Luther Strange to a two-point lead over former state Supreme Court Chief Justice Roy Moore, 35-33%. Rep. Mo Brooks (R-Huntsville) trails with 16%, but his advertising campaign is just now just moving to high gear for the final push before the August 15th primary vote.

But the biggest surprise finding comes on the Democratic side. There, Naval Academy graduate and retired officer Robert Kennedy Jr. has opened up a surprising 49-28% advantage over Birmingham former US Attorney Doug Jones. If any candidate obtains majority support in the partisan primary, the winner automatically advances into the December 12th general election contest. If not, and this is likely for Republicans, the top two finishers advance to a September 26th run-off election.

Michigan:  A new Trafalgar Group survey (7/25-27; 1,078 MI likely voter respondents from more than 50,000 attempted contacts), finds entertainer Robert Ritchie, aka Kid Rock, pulling into a dead heat with Sen. Debbie Stabenow (D). According to the Trafalgar numbers, Stabenow would lead Ritchie only 43-41%. When those professing to be “leaning” to one candidate or the other are added to the tally, Ritchie actually pulls ahead, 49-46%. A Target-Insyght poll (released to the LA Times 7/31; 800 MI likely voters) finds Ritchie not doing as well as the Trafalgar poll suggests, but is still strong for a challenger candidate. According to T-I, the Senator leads Ritchie 50-42%.

Montana:  Republican leaders have been working to recruit a statewide office holder to challenge two-term Sen. Jon Tester (D), and now look to have found him. State Insurance Commissioner and Auditor Matt Rosendale (R) announced this week that he will enter the race to challenge the Democratic incumbent. Though GOP strategists will rate this as a top tier challenger race, Sen. Tester must be categorized as a distinct favorite for re-election even when considering he has failed to reach the majority support level in his two previous successful statewide runs. Sen. Tester unseated incumbent Senator Conrad Burns (R) in 2006, and then turned back six-term at-large Rep. Denny Rehberg (R-Billings) six years later.

Pennsylvania:  An Associated Press story is asserting that Rep. Lou Barletta (R-Hazelton) has decided to enter the US Senate campaign and will make a public announcement shortly. Rep. Mike Kelly (R-Butler/Erie), another House member who had been reportedly looking at the statewide campaign, has decided to remain in the House and announced for re-election. So far, state Reps. Steve Saccone and Jim Christiana are in the Senate Republican primary, but have raised little money. Businessmen Jeff Bartos and Paul Addis are also announced candidates. Mr. Bartos has raised the most campaign capital so far, holding more than $1 million in his account. The eventual Republican nominee will challenge Sen. Bob Casey Jr. (D), who has announced for a third term.

House

FL-26:  Two-term Rep. Carlos Curbelo (R-Miami), who fared poorly in the mid-decade redistricting plan the Florida state Supreme Court enacted before the last election yet still won impressively last November, has drawn his first 2018 opponent. Defeated state Senate candidate Debbie Mucarsel-Powell, a consulting firm president, announced yesterday her congressional candidacy. The Democratic nature of this South Florida district is prototypical of a seat that must be in play if the party is to have any chance of unseating the Republican majority.

MD-6:  Just before last weekend began, Maryland three-term Rep. John Delaney (D-Potomac) announced that he will run for President in 2020, and thus will not seek re-election next year. He had been considered a potential gubernatorial candidate but will not enter that race, either. Since Delaney had been speculated upon as a gubernatorial candidate, two Democratic state legislators, Majority Leader Bill Frick and state Del. Aruna Miller, had already been organizing their congressional campaigns. After Delaney made his presidential decision public, former 8th District candidate and Total Wine stores owner David Trone and state Sen. Roger Manno (D-Montgomery County) announced their 6th District congressional candidacies. Democrats are favored to hold the seat, but Delaney’s close call (50-48%) in 2014 gives Republicans some hope of becoming competitive here.

NC-9:  Charlotte pastor Mark Harris (R), who has run for both the US Senate and House, just announced that he will seek a Republican primary re-match with Rep. Bob Pittenger (R-Charlotte). When North Carolina was forced to re-draw its congressional map before the 2016 election, Rep. Pittenger found himself in a new 9th District with more than 60% new territory. Considering this, and with his business under FBI investigation, the Congressman barely slipped passed Rev. Harris with a scant 134-vote margin in the 2016 GOP primary. With the FBI dropping their active inquiry without seeking charges and Pittenger being more familiar with the district, Mr. Harris’ chances of winning in 2018 appear to be lesser. This primary, however, will be a competitive battle.

TN-2:  Veteran Rep. John J. “Jimmy” Duncan Jr. (R-Knoxville) announced that he will not seek re-election next year. The Congressman was first elected in a 1988 special election succeeding his father, Rep. John J. Duncan Sr. (R), who held the seat for 23 years until his death. The current Rep. Duncan is now serving his 15th term in Congress, a longevity record for this central-east Tennessee region. Before Mr. Duncan made public his retirement decision, Knox County Mayor Tim Burchett (R) had scheduled a political announcement for later in the week. He is expected to declare his congressional candidacy. Republicans have held what evolved into the 2nd District since 1866, and are unlikely to lose here in 2018.

TX-23:  Former Air Force intelligence officer Gina Ortiz Jones (D) announced her congressional candidacy this week. In the Democratic primary, she may well face former Rep. Pete Gallego (D-Alpine) who has lost his last two congressional contests to incumbent Rep. Will Hurd (R-San Antonio) and has already filed an exploratory committee for the coming election. It is likely we will not see much political movement here until after the next round of court-ordered redistricting changes for this district, boundaries that a three judge federal panel have already deemed unconstitutional. Currently, the seat stretches all the way from San Antonio to El Paso, and is the one swing district in the Texas delegation. Mr. Hurd defeated former Rep. Gallego, 48-47% last November, after unseating him 50-48% in 2014.

Governor

Colorado:  Donna Lynne (D), who was appointed in March of last year to replace resigned Lt. Governor Joe Garcia, yesterday declared that she will enter the crowded Democratic primary for Governor. Ms. Lynne came to the state office from her position as executive Vice President of Kaiser Foundation Health Plan, Inc., but has spent half of her professional career in the public sector. She joins US Rep. Jared Polis (D-Boulder), former state Treasurer Cary Kennedy, ex-state Sen. Mike Johnston, and businessmen Adam Garrity, Noel Ginsburg, and Erik Underwood as major Democratic primary candidates. Aurora regional District Attorney George Brauchler is the leading Republican contender.  Gov. John Hickenlooper (D) is ineligible to seek a third term.

Oregon:  State Rep. Knute Buehler, who has been raising money in a gubernatorial exploratory committee for many weeks, announced that he will seek the Republican nomination for Governor. If successful, he will undoubtedly again oppose Gov. Kate Brown (D). The two ran against each other for Secretary of State in 2012, a re-election campaign that Ms. Brown won, 51-43%. Gov. Brown ascended to her position when Gov. John Kitzhaber (D) resigned over a budding ethics scandal.

Oregon has no Lt. Governor, so the Secretary of State becomes the acting Governor if a vacancy occurs in the state’s top elected position. Ms. Brown was then elected in 2016 to serve the balance of the current term. She will be heavily favored for re-election to a full four-year term in 2018.

South Carolina:  Last week, new Lt. Gov. Kevin Bryant (R) announced that he had filed a gubernatorial committee but said he had not yet fully decided whether to run for Governor. Now, he has made such a decision. Mr. Bryant will challenge new South Carolina Gov. Henry McMaster in next year’s Republican primary. Mr. McMaster became Governor in late January when Nikki Haley was confirmed as US Ambassador to the United Nations and resigned her chief executive post. Mr. McMaster, the state’s Lt. Governor, ascended to the Governor’s position.

To replace him, the state legislature elected four-term state Sen. Bryant (R-Anderson) during the same time frame. Additionally, former Lt. Gov. Yancey McGill and state Labor Department Secretary Catherine Templeton are already in the Republican primary race. South Carolina hosts a June primary.

Tennessee:  For the second time this week, a member of the Tennessee congressional delegation announced that he or she would not seek re-election. Earlier, 15-term Rep. Jimmy Duncan (R-Knoxville) said he will not run in 2018 in order to retire from public life. Now, four-term Rep. Diane Black (R-Gallatin) is vacating her congressional post to enter the open Governor’s race.

Rep. Black, chair of the House Budget Committee, will be a strong candidate in the GOP primary, and arguably begins the campaign as the favorite. In her announcement video, she aligned herself with the party’s conservative wing, and looks to be taking strong, unequivocal positions on the campaign trail. She becomes the seventh Republican in the race. Gov. Bill Haslam (R) is ineligible to seek a third term.

West Virginia:  At a presidential rally featuring Mr. Trump, West Virginia Democratic Gov. Jim Justice announced that he is switching to the Republican Party. Mr. Justice, the state’s richest individual who made a fortune in the coal and hotel industries, ran as a conservative in the 2016 open election and defeated state Senate President Bill Cole (R), 49-42%. Gov. Justice becoming a Republican drops the Democrats to holding just 15 state chief executive positions, while the GOP now increases to 34. Alaska’s Bill Walker is the nation’s lone Independent Governor.