February 23, 2018
Yes, we know we said we weren’t going to publish one of these this week. But what can we say? We missed you. And some people in Washington did not get the message that this was supposed to be a slow week.
SEC pushes back effective date of liquidity rule’s classification requirement — Yesterday the Securities and Exchange Commission voted to extend the deadline for part of its liquidity risk management rule for open-end funds by six months. While funds will still be required to adopt a liquidity risk management program and limit illiquid investments to 15% of a fund’s portfolio by December 1, 2018 (for larger fund groups) or June 1, 2019 (for smaller groups), these groups will have until June 1, 2019 or December 1, 2019 to comply with the classification requirement and other classification-related elements. The SEC also published answers to frequently asked questions about the new rule.
SEC approves cybersecurity disclosure guidance — The SEC voted unanimously on Tuesday to approve a statement and interpretative guidance to help public companies inform investors, customers and the public about cybersecurity breaches. “[I]t is critical that public companies take all required actions to inform investors about material cybersecurity risks and incidents in a timely fashion,” the SEC said, regardless of whether the companies have already been the victims of a hack. Furthermore, the SEC specifies that insiders may not trade a public company’s securities if and when they have information about cybersecurity breaches that is not available to the general public. SEC Chairman Jay Clayton specifically urged public companies to consider their reputation risk as well as compliance and financial risks in developing controls and procedures.
Supreme Court refuses to review decision on Fannie, Freddie sweeps — On Tuesday, the Supreme Court declined to review appeals court decisions that allow the Federal Housing Finance Administration to transfer Fannie Mae and Freddie Mac’s quarterly profits to the U.S. Treasury. The Department of Justice had argued that federal law prohibits any court from interfering with FHFA’s conservatorship powers, and that FHFA as conservator had assumed all shareholder rights.
Whistleblower protection applies only to government reports, Supreme Court rules — The Supreme Court ruled on Wednesday, in Digital Realty Trust v. Somers, that the SEC whistleblower protections established by Dodd-Frank protect only employees who report violations to the SEC. The ruling reverses an earlier decision by the U.S. Court of Appeals for the Ninth Circuit.
DOJ charges 200 in elder fraud sweep — Yesterday the FBI, U.S. Postal Inspectors, the FTC, and state attorneys general coordinated actions against more than 250 defendants around the country who have been charged with defrauding the elderly. Of these, 200 face criminal charges; actions included civil measures and forfeitures as well, in more than 50 federal districts. Mass-mailing fraud operators were a major target, with 43 operators raided and six individuals charged. The sweep also took in lottery phone scams, grandparent scams, romance scams, IRS imposture schemes, and guardianship schemes. DOJ is partnering with Senior Corps on education initiatives aimed at preventing elder abuse.
FHA expands foreclosure relief for disaster victims — The Federal Housing Administration (FHA) announced yesterday that it is instructing mortgage servicers in areas affected by last year’s natural disasters in California, Florida, Georgia, Louisiana, Puerto Rico, South Carolina, Texas, and the US Virgin Islands to offer additional payment options to struggling homeowners. The FHA introduced a new “Disaster Standalone Partial Claim Option” that covers up to 12 months of missed mortgage payments via an interest-free second mortgage for eligible borrowers.
Mulvaney fires back at Warren — OMB Director Mick Mulvaney, in his capacity as acting director of the Consumer Financial Protection Bureau (CFPB), sent a sharp reply last week to a January 31 letter from Senator Elizabeth Warren (D-MA), Rep. Maxine Waters (D-CA) and four colleagues. The letter from Senator Warren and Rep. Waters demanded explanations for “the sudden reversal of the CFPB’s position on the Payday Rule, the payday lending case and the installment loan investigation.” It also noted that Director Mulvaney had “not yet answered Senator Warren’s November 28th inquiry about his ethics arrangements and recusals.” In his February 15 letter to Senator Warren, Mulvaney rejected the “insinuation . . . that my actions as Acting Director are based on considerations other than a careful examination of the law and facts.” Civil discourse, he continued, must be based on an assumption of mutual commitment to the public good: “Prior to receiving your letter, I would never have thought to consider, for instance, whether your vote against repealing the Bureau’s arbitration rule was influenced by campaign donations you may have received from trial lawyers.”
Next Week in Washington:
If it’s not already on your calendar, February 26-March 3 is America Saves Week.
February 26 House Rules Committee considers rules on H.R. 4296, on capital requirements for operational risk; H.R. 4607, the Comprehensive Regulatory Review Act; and H.R. 1865, the Allow States and Victims to Fight Online Sex Trafficking Act of 2017. 5:00 p.m., H-313 The Capitol.
February 27 House Financial Services Committee holds a hearing on “Monetary Policy and the State of the Economy.” Federal Reserve Chairman Jerome H. Powell will be the only witness. 10:00 a.m., 2128 Rayburn House Office Building.
February 27 House Small Business Subcommittee on Economic Growth, Tax, and Capital Access holds a hearing on “Occupational Hazards: How Excessive Licensing Hurts Small Business.” Witnesses are C. Jarrett Dieterle of the R Street Institute, Keith Hall of the National Association for the Self-Employed, and Frank Zona on behalf of the Professional Beauty Association. 10:00 a.m., 2360 Rayburn House Office Building.
February 27 House Small Business Committee holds a hearing on “How Red Tape Affects Community Banks and Credit Unions: A GAO Report.” Michael Clements, Director of Financial Markets and Community Investment for the GAO, will be the only witness. 2:00 p.m., 2360 Rayburn House Office Building.
The Ellis Insight. Jim Ellis reports on political news:
Maryland: A new Goucher Poll (2/12-17; 800 MD adults; 658 MD registered voters) finds Sen. Ben Cardin (D) crushing convicted US spy Chelsea Manning in the upcoming June 26th Democratic primary. According to the Goucher data, Sen. Cardin begins the race with a 61-17% advantage, which is likely an insurmountable margin for the flawed challenger to overcome. Sen. Cardin is seen as a sure bet to be re-nominated and win a third term in the general election.
Mississippi: JMC Analytics & Polling surveyed the Mississippi Republican electorate to determine Sen. Roger Wicker’s (R) strength for re-nomination. State Sen. Chris McDaniel (R-Ellisville), who came close to upending Sen. Thad Cochran (R) in the 2014 nomination process, still has not ruled out running this year.
JMC tested the Senator and Mr. McDaniel in their latest survey (2/15-17; 500 MS potential Republican primary voters) and found the incumbent leading his potential challenger, 38-20%. Though Sen. Wicker has a large lead among those decided, 42% reporting that they are undecided is a large number for a race involving a multi-term incumbent. Time, however, is running out. The candidate filing deadline is March 1st, in preparation for the June 5th primary election.
Tennessee: With early polling showing him faring poorly against Rep. Marsha Blackburn (R-Brentwood) in the August Republican primary, former Rep. Stephen Fincher (R-Crockett County) decided to end his statewide effort. In doing so, Mr. Fincher publicly encouraged Sen. Bob Corker (R) to run for re-election. The Senator, publicly reconsidering whether to reverse his retirement decision, promises to make an announcement about his future political plans very shortly.
WPA Intelligence, polling for the Defend the President PAC (2/13-15; 500 TN likely voters; 400 over-sample of Republican likely primary voters) finds Rep. Blackburn crushing Sen. Corker, 55-26%, in a head-to-head GOP contest. In terms of favorability, Sen. Corker scored an upside down 43:47% positive to negative rating among Republicans, while Rep. Blackburn recorded a 40:26% ratio. In an early general election pairing with presumed Democratic nominee Phil Bredesen (D), the state’s former Governor and Nashville ex-Mayor, Ms. Blackburn seizes a 44-39% edge.
CA-25: A new ALG Research survey (2/11-15; 500 CA-25 likely jungle primary voters) finds Rep. Steve Knight (R-Palmdale) placing first in the upcoming June 5th jungle primary with 43% voter preference. Attorney Bryan Caforio (D), who lost to Mr. Knight 53-47% in the 2016 general election despite Hillary Clinton carrying the seat by almost seven percentage points, places second with 19%. Non-profit group executive Katie Hill (D) is next with 10%, followed by geologist Jess Phoenix (D) at 7 percent. Under California election law, the top two finishers regardless of political party affiliation advance to the general election.
CA-50: With Rep. Duncan Hunter (R-Alpine/San Diego County) under a FBI investigation for misuse of campaign funds, a new Republican candidate announced that he is entering the congressional campaign and will compete in the June jungle primary. El Cajon Mayor Bill Wells (R) is now in the race, obviously attempting to position himself in case the legal system soon strikes at Rep. Hunter. Four Democrats have declared, two of whom have raised more than $450,000.
The 50th District is safely Republican, but that could change if Rep. Hunter soon faces a federal indictment. Retiring Rep. Darrell Issa (R-Vista) is a possible GOP candidate here, should Mr. Hunter not file. So is former San Diego City Councilman and ex-Mayoral and congressional candidate Carl DeMaio.
FL-17: On the heels of Rep. Kevin Cramer (R-ND-AL) eschewing re-election to challenge Sen. Heidi Heitkamp (D) and becoming the 55th House member not to run for another term, Florida Rep. Tom Rooney (R-Okeechobee) added his name to the burgeoning retirement list with his announcement that he won’t run for a sixth term. President Trump carried this district, 62-35% in the 2016 campaign, and Mr. Rooney has averaged 61.2% of the vote since the expansive central-south district was reconfigured in its present form. The Florida candidate filing deadline is not until May 4th in preparation for the August 28th primary election, so much time remains for political maneuvering in what should be a safe Republican district.
NJ-11: State Assemblyman Tony Bucco (R-Boonton Township) announced this week that he will not enter the open northern New Jersey congressional race that House Appropriations Committee chairman Rodney Frelinghuysen (R-Morristown) is vacating. Instead, Mr. Bucco endorsed fellow Assemblyman Jay Webber (R-Parsippany). In another part of the district, however, investment banker Antony Ghee, with the support of key Republican Party leaders in Passaic and Essex County, announced that he would run. The 11th District race is expected to be hotly contested in November. Two Democrats appear as the leading candidates in their party primary. Attorney Mikie Sherrill and businesswoman Tamara Harris have each amassed a sizable campaign treasury.
ND-AL: With at-large Rep. Kevin Cramer (R-Bismarck) reversing course and joining the Senate race, state Sen. Tom Campbell (R-Grafton) has now also changed political direction. As expected, Mr. Campbell, who had been campaigning for the Senate nomination for the better part of a year, will now enter the open at-large House campaign, attempting to succeed Rep. Cramer. Former state Republican Party chairman Gary Emineth, who briefly became a Senate candidate before receiving information that Rep. Cramer would himself run, will not enter the open House race. The April state party endorsement convention will go a long way toward deciding who competes in the November open seat campaign.
Pennsylvania: The Pennsylvania state Supreme Court released its new congressional map and, as expected, legal challenges are already emerging. The Republicans are launching a federal lawsuit against this new draw in an attempt to attract the US Supreme Court’s involvement. The high court failed to previously involve itself because the Democrats’ lawsuit was filed against the Pennsylvania Constitution. Now that a different map has been set in place, a new set of legal challenges can begin. The Supreme Court has stayed similar recent redistricting cases in Michigan, North Carolina, and Texas, all awaiting a decision on the Wisconsin political gerrymandering case, so Pennsylvania Republicans are launching a similar appeal in hopes of receiving similar consideration.
Ironically, two organizations that were prominent in urging the state Supreme Court to overturn the Pennsylvania congressional districts now also may file lawsuits over the replacement map. Representatives from both Common Cause and the NAACP are objecting to minorities being packed into one Philadelphia district when they currently have majority minority status in two under the invalidated plan.
The new map appears to have eight safe Republican and five clear Democratic districts. The remaining five seats are highly competitive, and each could become toss-up campaigns. The incumbents with the most difficult draws are Reps. Ryan Costello (R-West Chester), Brian Fitzpatrick (R-Levittown), Keith Rothfus (R-Sewickley), and Matt Cartwright (D-Moosic/ Scranton). The new 7th District of retiring Rep. Charlie Dent (R-Allentown) is also a pure toss-up.
Kansas: Prominent oil businessman and former congressional candidate Wink Hartman (R) withdrew from the Republican gubernatorial primary yesterday and endorsed Secretary of State Kris Kobach. The two, and several others, are opposing new Gov. Jeff Colyer (R), who replaced former Gov. Sam Brownback (R) who accepted a federal appointment. Mr. Hartman said he is leaving the race in order to help avoid splitting the primary vote that would allow Gov. Colyer to win the nomination with only plurality support.
Illinois: The Global Strategy Group conducted a new poll for venture capitalist J.B. Pritzker (2/9-13; 802 IL likely Democratic primary voters), who has already invested a reported $56 million into his gubernatorial campaign. According to these results, Mr. Pritzker holds a 37-23-21% lead over businessman Chris Kennedy, son of former Attorney General and US Senator Robert F. Kennedy, and state Sen. Daniel Biss (D-Chicago).
Afterward, Sen. Biss released his ALG Research survey (2/6-11; 500 IL likely Democratic primary voters), which presents results that aren’t too different from Pritzker’s release. According to ALG, Mr. Pritzker leads Sen. Biss and Mr. Kennedy, 32-24-24%. Thus, we have two candidate polls both showing the race getting tighter despite heavy spending from Pritzker, but with the leader maintaining a significant edge. The Illinois primary is March 20th, so this campaign is just entering the prime time phase.
Maryland: The same Goucher Poll cited above in the Maryland Senate section also tested the upcoming Governor’s race. Incumbent Republican Larry Hogan, despite representing one of America’s most Democratic states, still enjoys a strong 61% positive favorability rating. In the race for the Democratic nomination, three candidates are bunched near the top, but no one with clear strong support.
Prince Georges County Executive Rushern Baker is first with 19%, followed by Baltimore County Executive Kevin Kamenetz who registers 12% backing. Trailing both is former NAACP president Ben Jealous at 10 percent. No other candidate even reaches the 4% plateau. Clearly, this Democratic primary contest is wide open.
Missouri: Gov. Eric Greitens (R) was indicted on one felony count of invasion of privacy in relation to transmitting via a computer a non-consented upon photo of a partially nude woman with whom he was engaged in an extra-marital affair. If convicted, the Class E felony could carry a maximum four-year prison sentence. Gov. Greitens vows to fight the charge. His next court appearance is March 16th. If convicted or forced to resign as part of a plea bargain, Lt. Gov. Mike Parson (R) will assume the office. He would serve the balance of the term that will extend through 2020.
Texas: The Texas Tribune sponsored a primary election poll in anticipation of the state’s first-in-the-nation midterm primary scheduled for March 6th. According to the survey (YouGov; 2/1-12; 1,200 TX adults; 633 modeled Republican primary voters; 517 modeled Democratic primary voters; an over-sample of 424 confirmed primary voters were added to the respective party samples; weighted sampling universe), Dallas County Sheriff Lupe Valdez has opened a 43-24% lead over businessman Andrew White, son of former Gov. Mark White, in the Democratic gubernatorial primary. The winner faces an uphill battle against first-term incumbent Gov. Greg Abbott (R).