December 8, 2017

December 8, 2017

Senate Banking Committee approves reform bill — At the end of a markup that went into the evening, the Senate Committee on Banking, Housing and Urban Affairs voted 16-7 on Tuesday to approve S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. Among other provisions, the bill simplifies capital standards and reporting requirements for community banks; raises the threshold for enhanced prudential standards for bank holding companies from $50 billion to $250 billion; expands the definition of “qualified mortgage” under Truth in Lending to include all mortgages held in portfolio by banks and credit unions under $10 billion; and requires studies on cyber threat risks, algorithmic trading, and the consumer reporting industry. Senate Banking Committee Chairman Mike Crapo said he hoped the bill could go to the Senate floor in January.

Conferees named for tax bill — The House and Senate will go to conference on the tax bill, and leaders named members of the conference committee this week. Republican House members are Rep. Kevin Brady (R-TX), who will chair the conference; Rep. Devin Nunes (R-CA), Rep. Peter Roskam (R-IL), Rep. Diane Black (R-TN), Rep. Kristi Noem (R-SD), Rep. Rob Bishop (R-UT), Rep. Don Young (R-AK), Rep. Greg Walden, and Rep. John Shimkus (R-IL). Democratic House members are Rep. Richard Neal (D-MA), Rep. Sander Levin (D-MI), Rep. Lloyd Doggett (D-TX), Rep. Raúl Grijalva (D-AZ), and Rep. Kathy Castor (D-FL). The Senate Republican conferees are Senate Finance Committee Chairman Orrin Hatch (R-UT), Budget Committee Chairman Mike Enzi (R-WY), Energy and Natural Resources Committee Chair Lisa Murkowski (R-AK), Sen. John Cornyn (R-TX), Sen. John Thune (R-SD), Sen. Rob Portman (R-OH), Sen. Tim Scott (R-SC), and Sen. Pat Toomey (R-PA). Senate Democratic conferees are Sen. Ron Wyden (D-OR), ranking member of the Senate Finance Committee; Sen. Bernie Sanders (I-VT), ranking member of the Senate Budget Committee; Sen. Maria Cantwell (D-WA), ranking member of the Senate Energy and Natural Resources Committee; and Senators Debbie Stabenow (D-MI), Robert Menendez (D-NJ), Tom Carper (D-DE), and Patty Murray (D-WA).

 

Senate Banking overwhelmingly approves Powell as Fed chair — The Senate Banking Committee voted 22-1 on Tuesday to send Jerome Powell’s nomination as Chairman of the Federal Reserve Board to the Senate floor. Senator Elizabeth Warren (D-MA) was the only “no” vote, expressing concern that Powell will roll back regulations.

Hensarling endorses DeMarco-Bright proposal for housing finance reform — “It cannot be saved, it cannot be salvaged, it must not be resurrected, and needs to be scrapped,” House Financial Services Committee Chairman Jeb Hensarling (R-TX) told a conference on the future of the U.S. housing market Wednesday, talking about the current housing finance system. He said that the PATH Act, which the committee passed in the 113th Congress, was still the best way forward, but acknowledged it was probably not politically feasible in this Congress. Nevertheless, “we must look for a more logical, smaller and safer government guarantee than the one we have today,” he said, adding that the “DeMarco-Bright proposal provides a credible, implementable, battle-tested way to create a new, limited government guarantee in a post-GSE housing finance system.”

 

House panel discusses credit risk management for GSEs — The DeMarco-Bright proposal came up at a hearing of the House Financial Services Subcommittee on Housing and Insurance on Wednesday, when witnesses presented a private-sector perspective on credit enhancements and credit risk transfers. Witnesses noted that FHFA’s 2013 requirement that the GSEs implement a credit risk program was a step in the right direction, but called for a greater role for private capital in credit risk transfer.

Ginnie Mae cracks down on churning VA mortgages — Ginnie Mae announced yesterday that as of April 1, 2018, it will no longer pool streamline and cash out refinance loans unless at least six monthly payments have been made on the underlying loan and the refinance occurs at least 210 days after the first payment has been made. Ginnie Mae will actively monitor the activity of lenders that appear to violate these rules, and is increasing its tracking and analysis of prepayment rates. Ginnie Mae EVP and COO Michael Bright had expressed concern about predatory refinancing activities in VA mortgages, and created a Joint Ginnie Mae-VA Refinance Loan Task Force in October.

FHA raises loan limits for 2018 — Reflecting rising housing costs around the country, the Federal Housing Administration announced yesterday that its loan limit ceilings and floors will rise in 3,011 counties, while remaining unchanged in 223 counties. FHA loan limits are set at 115% of median house prices, subject to a floor and ceiling. The new ceiling in high-cost areas of the country will be $679,650, up from $636,150; the new floor in high-cost areas will be $294,515, up from $275,665. The new ceiling for reverse mortgages nationwide will also increase from $636,150 to $679,650; that number does not vary by county or MSA.

Overregulation is shrinking financial services, says Luetkemeyer — Regulations adopted in the wake of the 2008 financial crisis are forcing banks to merge, exit certain lines of business, and discontinue services, said Chairman Blake Luetkemeyer (R-MO) yesterday at a hearing of the House Financial Services Subcommittee on Financial Instituions and Consumer Credit. Anthony Cimino, testifying for the Financial Services Roundtable, urged the Committee to approve H.R. 3179, which would make it easier to exempt U.S. financial companies from European “gold-plating” standards, and H.R. 3746, which would curb the Consumer Financial Protection Bureau’s “mission creep” into the insurance industry. Christopher M. George, testifying for the Mortgage Bankers Association, endorsed H.R. 2570, which would prevent the double counting of fees on loans originated by mortgage brokers, and the Comprehensive Regulatory Review Act of 2017, introduced by Rep. Barry Loudermilk (R-GA), which would speed up the regulatory review cycle required by EGRPRA.

International regulators agree on Basel III standards — Meanwhile, the world’s financial regulators finalized their recommendations for Basel III regulatory reforms this week. The reforms include a new emphasis on Common Equity Tier 1 (CET1) capital, to ensure that banks can remain going concerns despite losses; adjustments to risk weighting, including new global standards for market risk, counterparty credit risk, and securitization; and the introduction of a new international framework for liquidity coverage and net stable funding. The 28 member countries of the Basel Committee on Banking Supervision agree to implement these reforms through legislation and regulation. A joint release from the U.S. federal banking agencies said that they would “consider how to appropriately apply these revisions to the Basel III reform package in the United States, and any proposed changes based on this agreement will be made through the standard notice-and-comment rulemaking process.”

Conyers steps down — Rep. John Conyers Jr. (D-MI), who was first elected to the House of Representatives in 1964, announced his immediate retirement on Tuesday. Conyers, 88, had been accused of multiple instances of inappropriate behavior and sexual harassment. Michigan Governor Rick Snyder can call a special election to replace Rep. Conyers, but is under no time deadline to do so.

Franken, Franks announce imminent departures — Senator Al Franken (D-MN) and Rep. Trent Franks (R-AZ) also announced their resignations this week. Franken did not set a date for his departure, but Franks announced late today that his resignation would take effect immediately. Governor Mark Dayton (D-MN) will appoint a successor to Senator Franken until a special election is held for a Senator to serve out the remainder of Franken’s term, which expires at the end of 2020. Arizona Governor Doug Ducey will schedule a special election to replace Rep. Franks.

Jelena McWilliams named to FDIC Chair — President Trump has nominated Jelena McWilliams, chief legal officer of Fifth Third Bank, to chair the Federal Deposit Insurance Corporation. McWilliams was a senior attorney for the Senate Banking Committee for five years before joining Fifth Third in January 2017. She had previously served as assistant chief counsel to the Senate Small Business Committee, and as an attorney for the Federal Reserve Board.

HUD Chief of Staff moves to CFPB — Sheila Greenwood, a Bush administration veteran of the Department of Housing and Urban Development who currently serves as the agency’s Chief of Staff, will move to the Consumer Financial Protection Bureau next week for a 90-day assignment.

 

Next Week in Washington:

December 12             House Committee on Financial Services marks up 15 bills intended to reduce unnecessary regulatory burden. 10:00 a.m., 2128 Rayburn House Office Building.

December 13             House Ways and Means Subcommittee on Oversight holds a hearing on “IRS Reform: The Taxpayer Experience.” 10:00 a.m., 1100 Longworth House Office Building.

December 14             House Financial Services Subcommittee on Monetary Policy and Trade holds a hearing on “Examining the Operations of the Committee on Foreign Investment in the United States (CFIUS).”

 

The Ellis Insight. Jim Ellis reports on political news:

Senate

Alabama:  The special election is fast approaching next Tuesday, and the prevailing opinion now seems to suggest that former state Supreme Court Chief Justice Roy Moore (R) will defeat ex-US Attorney Doug Jones (D). Two new surveys were released that produced split results. The Washington Post/Schnar poll (11/27-30; 1,304 adults; 1,110 self-identified AL registered voters; 739 self-identified AL likely voters) reverses the trend of the previous six polls and finds Democratic leading former state Supreme Court Chief Justice Roy Moore (R), 50-47%. But a further examination of the respondent universe suggests that this survey is likely within the same realm as the others. The Post/Schnar poll undercuts the number of Republicans in the sampling universe, thus likely providing Mr. Jones with a false margin.

Conversely, the CBS News/YouGov data (11/28-12/1; 1,067 AL registered voters, 68% of whom say they will “definitely” vote in the special Senate election) finds Moore leading 49-43%, which is more in line with the six polls published before the Post/Schnar effort. In this survey, the party division is 51R-36D, and better aligned with Alabama voting history. This state does not register voters by political party, so determining partisan division is relegated to estimation. Mr. Jones maintains a wide lead in fundraising and airing ads, and the resignation climate in Washington, DC could certainly adversely affect Judge Moore’s candidacy. Therefore, it is still possible the Democrat could score an upset here on Tuesday night.

Florida:  A new St. Leo University poll (11/19-24; 500 FL “residents”) finds Florida Governor Rick Scott (R), an unannounced US Senate candidate, taking a substantial lead over Sen. Bill Nelson (D), 42-32%. The sample size is small, however, 500 respondents culled through a large number of online groups, and the methodology does not specifically indicate that all of the respondents are registered voters. Several other September and October surveys, show a virtual tie.  This race is likely to become a top-three national campaign next year, and provides the Republicans with a serious conversion opportunity.

Minnesota:  Sen. Al Franken (D-MN) announced on Thursday from the Senate floor that he will resign “in the next several weeks.”  Gov. Mark Dayton (D) is now tasked with appointing a successor. Early speculation suggested that he would choose Lt. Gov. Tina Smith (D) and name her immediately upon Franken’s resignation, but the Governor said yesterday that he would make the decision in the “next few days.”

The seat will now come before the voters in 2018 to fill the remaining two years of the term Sen. Franken was elected to in 2014. The special election winner will then be eligible to seek a full six-year term in 2020. Early reports also suggested that if Ms. Smith is appointed, she would only serve as a caretaker, retiring after the electorate chooses a permanent replacement. Both parties will effectively nominate their candidates in convention. Already, Republicans are mentioning former Gov. Tim Pawlenty as a potential Senate candidate.

North Dakota:  State Treasurer Kelly Schmidt (R) stated publicly at the beginning of the week that she will not enter the US Senate race next year. Currently, only state Sen. Tom Campbell (R-Grafton) is a declared candidate lining up to oppose Sen. Heidi Heitkamp (D). At-large US Rep. Kevin Cramer (R-Bismarck) remains a potential contender, but says he will not make a decision until next year. Former at-large Rep. Rick Berg (R) also refuses to close the door on running.

Tennessee:  Former Gov. Phil Bredesen, who is clearly the Democrats’ best possible open seat Senate candidate, surprised many in the political world late this week by releasing an announcement video. The 74-year old former Governor, Nashville Mayor, and CEO originally said he would not enter the open seat campaign, but then agreed to reconsider when the national party leadership asked him to do so. Apparently, the recruitment pitch was persuasive because Mr. Bredesen is now in the race.

Republicans look to be heading to a race featuring Rep. Marsha Blackburn (R-Brentwood) and ex-Rep. Stephen Fincher (R-Crockett County). Though the eventual Republican nominee should still begin the general election as the favorite, a Bredesen candidacy is a critical development toward increasing Democratic majority prospects in the 2018 cycle. Where this seat was safely Republican, we will now see legitimate competition developing in this race.

House

AZ-8:  Out of nowhere, eight-term US Rep. Trent Franks (R-Peoria) announced on Thursday night that he, too, will resign from Congress due to “inappropriate behavior.”  Arizona’s 8th District is a safe Republican seat, located just north of Phoenix, including part of the city of Glendale, along with the Peoria, Sun City, West Sun City, and Surprise communities. The astonishing nature of this latest development will cause many people from both parties to begin considering their own congressional prospects. Gov. Doug Ducey (R) will schedule the special election upon the seat becoming vacant.

IL-3:  The Democratic primary race against Rep. Dan Lipinski (D-Western Springs/Chicago suburbs) looks to have the potential of becoming a serious contest. Mr. Lipinski’s nomination opponent is media consultant Marie Newman, a first-time candidate but one who has support from many liberal ideological groups particularly those on the social issues front. Rep. Lipinski has a large resource advantage to begin the campaign. Ms. Newman had already raised over $270,000 at the end of September, but had also spent well over half of her treasury.

KY-6:  Though his political intentions remained unclear for several months, Lexington Mayor Jim Gray (D) announced this week that he will challenge three-term Rep. Andy Barr (R-Lexington). Three other Democrats are already in the primary campaign, including state Sen. Reggie Thomas (D-Lexington) and Iraq/Afghanistan War veteran Amy McGrath, a retired Marine Lt. Colonel. Mr. Gray challenged Sen. Rand Paul (R) in the 2016 Senate race and lost, 43-57%. Rep. Barr unseated then-Rep. Ben Chandler (D) in 2012, by a 51-47% margin. He then averaged 60.5% in his two re-election bids.

MI-9:  Rep. Sander Levin (D-Royal Oak/Wayne County), who will complete his 18th term in the House at the end of this congressional session, announced he will not seek re-election next year. The 86-year old Congressman’s retirement will create what should be a crowded Democratic primary in a seat that supported Hillary Clinton with a 51-44% vote spread. In 2012, this district’s electorate gave President Obama a more substantial 57-42% victory margin. The Congressman’s son, attorney Andy Levin, and Democratic state Sen. Steve Bieda (D-Warren) both immediately announced their candidacies.

MI-13:  Rep. John Conyers (D-Detroit), the Dean of the US House elected in 1964, resigned his seat amid multiple sexual misconduct allegations and endorsed his son, John Conyers III, as his successor in a soon-to-be-called special election. The younger Conyers, who was arrested earlier in the year for domestic violence but saw the charges dropped, said he has not fully decided to enter the contest. Another Conyers relative, the Congressman’s nephew, state Sen. Ian Conyers (D-Detroit), also declared his own candidacy for the 13th District. Former two-term Rep. Hansen Clarke (D) is also a potential candidate.

The seat’s electorate, which voted 79% for Hillary Clinton and supported President Obama in 2012 with an 85.2 vote percentage, will remain in Democratic hands regardless if a Conyers family member or another future candidate secures the special election party nomination.

NV-4:  Rep. Ruben Kihuen (D-NV), also under attack for inappropriate sexual behavior, says he won’t voluntarily leave Congress. Mr. Kihuen, a Las Vegas area freshman House member after defeating Rep. Cresent Hardy (R-Mesquite) in 2016, has seen Minority Leader Nancy Pelosi (D-CA) and Democratic Congressional Campaign Committee (DCCC) chairman Rep. Ben Ray Lujan (D-NM) call for his resignation. Should he remain and seek re-election, we can expect another competitive campaign in the Clark County/Central Nevada CD.

Now, former Rep. Hardy is said to be reconsidering his position not to seek a re-match next year. Las Vegas City Councilman and former police captain Stavros Anthony (R) announced his congressional candidacy in July, and the latest developments certainly strengthen his challenge.

OH-12:  Rep. Pat Tiberi (R-Galena/Franklin County) will resign his House seat by January 31st in order to accept a position in the private sector. Therefore, candidates are beginning to come forward for what will be a special election, possibly one concurrent with the regular cycle. Gov. John Kasich (R) will schedule the election once Mr. Tiberi officially leaves office. This week, former Franklin County Sheriff Zach Scott (D) declared his candidacy, joining four other Democrats who have done likewise.

Surprisingly, there is more action on the Democratic side in the early going, even though the 12th is a safe Republican district. The only announced Republicans are Delaware County prosecutor Carol O’Brien and Iraq War veteran Brandon Grisez. The Republican activity will increase once the vacancy date becomes more certain.

Governor

Kansas:  Greg Orman was the Independent candidate who held Sen. Pat Roberts (R) to a 53-43% win in 2014. Since the Democrats did not file a candidate in that race, Mr. Orman became the de facto opposition nominee. Late this week, the ex-Senatorial candidate announced that he is forming a gubernatorial committee, and will again run as an Independent.

Six Democrats have declared their intention to run – candidate filing isn’t until June 1st, so much can still happen irrespective about what people say they are doing in the early going – including former Wichita Mayor Carl Brewer, ex-state Agriculture Secretary Josh Svaty, and state House Minority Leader Jim Ward (D-Wichita). Seven significant Republicans have announced, including Lt. Gov. Jeff Colyer, Secretary of State Kris Kobach, and several former state legislators. Assuming Gov. Sam Brownback (R) is confirmed for the federal faith based position to which he has been nominated, Mr. Colyer will assume the Governorship, which will allow him to run as a quasi-incumbent.

Ohio:  Previously, former Consumer Financial Protection Bureau director Richard Cordray (D) was expected to announce his gubernatorial campaign last September, but postponed it until this week. Mr. Cordray, a former Ohio Attorney General and Treasurer, officially joins the Democratic field that includes former US Rep. Betty Sutton, Dayton Mayor Nan Whatley, state Senator and former Minority Leader John Schiavoni (D-Mahoning County), and former state Rep. Connie Pillich.

The top Republican gubernatorial candidates are Attorney General and former US Senator Mike DeWine, who is now running as a team with Secretary of State Jon Husted, Lt. Gov. Mary Taylor, and US Rep. Jim Renacci (R-Wadsworth). The seat is open because Gov. John Kasich (R) is ineligible to seek a third term.  The general election is expected to begin as a toss-up contest.

Rhode Island:  This week, former state Rep. Joe Trillo, the 2016 Rhode Island state chairman for President Trump, announced that he will enter next year’s Governor’s race as an Independent. Immediately, Republican Party officials called on Trillo, a former Republican National Committee member, to change his mind arguing that such a three-way race would allow Gov. Gina Raimondo (D) to be re-elected without attracting a majority vote since the conservative/ Republican constituency would be split.

Gov. Raimondo’s job approval ratings are upside down and former gubernatorial nominee and Cranston Mayor Allan Fung (R) was thought to have a legitimate chance of carrying the heavily Democratic state. Expect further Republican efforts to convince Trillo to drop his newly announced campaign.

Texas:  With the Texas candidate filing deadline approaching on Monday, Gov. Greg Abbott (R) now has two credible Democratic opponents. Dallas County Sheriff Lupe Valdez and businessman Andrew White, son of the late former Gov. Mark White (D), both announced that they will run for Governor. First-term incumbent Abbott will begin the race as a prohibitive favorite, but at least now will have some competition in the November general election.