December 14, 2018

December 14, 2018

Not bragging or anything, but The Hill newspaper released its annual list of Washington’s Top Lobbyists yesterday, and once again it included Eris’s own Doyle Bartlett. Asked for comment, he said only, “Team effort.

This New Year’s Eve, we’ll be missing Nancy Wilson — At 81, the legendary jazz vocalist Nancy Wilson had a great, long life, but it still feels too soon to lose her. Some of us were already listening to her Christmas album this week. If you have the time, listen back to her 1993 interview with pianist Marian McPartland for NPR’s Piano Jazz. It will improve your day.

Senate Banking Democrats add members, plan agenda — Senators-elect Kyrsten Sinema (D-AZ) and Tina Smith (D-MN) will join the Senate Banking Committee next year, Minority Leader Chuck Schumer (D-NY) announced yesterday. Sinema has been a member of the House Financial Services Committee. The two will fill vacancies left by departing Senators Heidi Heitkamp (D-SD) and Joe Donnelly (D-IN). Separately, returning Senate Banking Committee members Elizabeth Warren (D-MA) and Chris Van Hollen (D-MD) wrote to Chairman Mike Crapo (R-ID) to ask for a bipartisan investigation into Deutsche Bank AG’s compliance practices, “with a focus on its correspondent banking operations and vulnerabilities to money laundering.” Rep. Maxine Waters (D-CA), who will chair the House Financial Services Committee next year, has already said she plans to investigate Deutsche Bank.

Clayton worries about cybersecurity, Brexit — SEC Chairman Jay Clayton told the Senate Banking Committee on Tuesday that the risks he’s paying closest attention to are cybersecurity issues, both systemic and entity-specific; the potential effects of Brexit on US companies and investors and the global market; managing the transition from LIBOR (the London Inter-bank Offered Rate) to SOFR (the New York Fed’s Secured Oversight Financing Rate); and the development of the consolidated audit trail (CAT), which is 16 months behind schedule and does not yet offer a satisfactory plan for protecting personally identifiable information (PII).

House subcommittee hears testimony on CECL — The Financial Accounting Standards Board (FASB)’s Current Expected Credit Loss (CECL) accounting standard will accelerate and aggravate financial downturns, and does not align with regulatory capital requirements, industry representatives told the House Financial Services Subcommittee on Financial Institutions and Consumer Credit on Tuesday. Subcommittee Chairman Blaine Luetkemeyer (R-MO) said that the proposal was advertised as an investor protection measure, but would apply to private companies as well as publicly traded institutions. He noted that FASB had not followed its own rules, which require a cost-benefit analysis, in promulgating the standard. The Federal Reserve has said it will allow a three-year phase-in for the new standard.

Equifax breach was preventable, House Oversight report says — The House Committee on Oversight and Government Reform’s majority staff report on the Equifax data breach, released Monday, found that “a lack of accountability and no clear lines of authority in Equifax’s IT management structure” led to execution gaps that exposed confidential consumer data. “Equifax failed to fully appreciate and mitigate its cybersecurity risks,” the report said, and was “unprepared to support the large number of affected consumers.”

BCFP proposes regulator sandbox, seeks comment on no-action letters — Observing that it has issued only one no-action letter since adopting its policy in 2016, the Bureau of Consumer Financial Protection (BCFP) is trying a more encouraging approach to innovation in consumer financial services. It has requested comment on a proposed revision to its policy on no-action letters, and is proposing to create a “BCFP Product Sandbox” that would grant approval relief and exemption relief to new products for a limited period of time, most likely two years. Comments are due to the Bureau by February 11.

US, UK announce covered agreement on insurance and reinsurance — Treasury Secretary Steven T. Mnuchin and US Trade Representative Robert Lighthizer informed the Senate this week that they had reached a final agreement with the UK to ensure that US insurance and reinsurance companies can continue to operate in the UK, and vice versa. The new Covered Agreement addresses the same three areas as the US-EU Covered Agreement—group supervision, reinsurance, and the exchange of information among supervisors—and is necessary because the UK is scheduled to leave the EU on March 29, 2019.

SEC will vote on hedging disclosure rule, propose rules on risk mitigation for swaps — The Securities and Exchange Commission will meet next Wednesday with an agenda that includes a request for comment on the nature of quarterly earnings reports; a new Rule of Practice on applications for statutorily disqualified persons to be involved in security-based swaps; proposed rules that would require risk mitigation techniques for uncleared security-based swaps; the final rule on disclosures for hedging ability granted to employees and directors; and a proposed rule to allow funds to acquire shares of other funds.

Calabria named to head FHFA — The President announced on Wednesday that he will nominate Mark Calabria to head the Federal Housing Finance Agency, succeeding Director Mel Watt. Calabria is currently chief economist to Vice President Mike Pence. He previously held positions at the National Association of Home Builders, the National Association of Realtors, and Harvard’s Joint Center for Housing Studies. As a senior Senate Banking Committee staffer, Calabria was one of the drafters of the Housing and Economic Recovery Act of 2008, which created the FHFA. He has been vocal in urging an end to the conservatorship of Fannie Mae and Freddie Mac.

Tarbert nominated as CFTC Chairman — Dr. Heath Tarbert, currently Assistant Secretary of the Treasury for International Markets, has been nominated to chair the Commodity Futures Trading Commission after J. Christopher Giancarlo’s term ends next April. Tarbert, an attorney and accountant, has also been serving as policy chair of the Committee on Foreign Investment in the United States, and as acting Assistant Secretary of the Treasury for Investment Security.

More confirmations, appointments, and departures — Kathy Kraninger was sworn in as the new Director of the Bureau of Consumer Financial Protection. The Senate voted 55-44 on Tuesday to confirm Justin Muzinich to serve as Deputy Secretary of the Treasury. SEC Commissioner Kara Stein, whose term officially expired last year, will leave the agency at year-end; Jeffrey Minton, the longtime Chief Counsel to the SEC’s Office of the Chief Accountant (OCA), will retire from that post in January.

Next Week in Washington:

December 18 at 10:00 a.m. — House Financial Services Committee will hold a hearing on “The National Debt: Washington, We Have a Spending Problem.” This hearing had originally been scheduled for December 11.

December 18 at 2:00 p.m. — The FDIC, OCC, and Federal Reserve will conduct an interagency conference call for bankers to discuss the optional community bank leverage ratio (CBLR) framework. No prior registration is required.

December 19 at 9:00 a.m. — The Securities and Exchange Commission will hold an open meeting. The agenda includes proposed rules on risk mitigation techniques for uncleared security-based swaps, and a vote on the Dodd-Frank rules that require disclosure of hedging ability granted to a company’s employees or directors. The meeting will stream online at SEC.gov.

December 19 at 2:30 p.m. — Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights holds a hearing on “A Comparative Look at Competition Law Approaches to Monopoly and Abuse of Dominance in the US and EU.” Witnesses are trade experts and academics. SD-226, Dirksen Senate Office Building.

December 19, time TBA — The December meeting of the Federal Open Market Committee will end with a Chairman’s press conference.

December 21 — Continuing resolution to fund the federal government expires.

The Ellis Insight. Jim Ellis reports on political news:

President

Castro Announcement:  Former Obama Administration Housing & Urban Development Secretary Julian Castro (D) officially formed a presidential exploratory committee, but apparently won’t spend too much time assessing his chances. Mr. Castro has scheduled an announcement for January 12th, at which time he is expected to formally enter the national race. The former Secretary’s lone electoral experience is successfully running for Mayor of San Antonio, TX.

MoveOn Straw Poll:  The 2020 presidential campaign is unofficially launched now that we have a straw poll to report. The leftward MoveOn.org group released the results of their first straw poll, testing for preference among the plethora of Democratic candidates.

In a bit of a surprise, Texas Rep. Beto O’Rourke (D-El Paso), fresh from his US Senate defeat at the hands of Sen. Ted Cruz (R), led all the candidates with 15.6% support. Closely behind in second place was former Vice President Joe Biden (14.9%), Vermont Sen. Bernie Sanders (13.1%), and California Sen. Kamala Harris (10.0%).

In the second tier were Sen. Elizabeth Warren (6.4%) with a rather poor showing, Sens. Sherrod Brown (2.9%) and Amy Klobuchar (2.8%), former New York City Mayor Michael Bloomberg (2.7%), and New Jersey Sen. Cory Booker (2.6%), consecutively. The poll is not statistically significant but does give us an idea that the party’s most hardened ideological faction is almost evenly split.

Senate

Tennessee:  Sen. Lamar Alexander (R) has not yet committed to running for a fourth term but releasing his new North Star Opinion Research poll (11/26-29; 600 TN likely voters) provides a good indication that he is looking to do so. According to the new survey, the Senator’s favorability index, the only numbers placed in the public domain, finds him at a very high 65:22% favorable to unfavorable. In the eastern Tennessee region, his ratio soars even higher to 72:18%. The third quarter Morning Consult approval ratings, however, posted Mr. Alexander to only a 43:33% overall positive rating.

The 78-year old Senator says he will make his political plans public before the end of this year. In 2014, he won re-nomination over state Rep. Joe Carr (R), 50-41%, and secured a landslide 62-32% victory in the 2014 general election.

Texas:  A local Austin political blog suggested that Lt. Gov. Dan Patrick (R) might be considering developing a campaign to challenge Sen. John Cornyn in the 2020 Republican primary. Similar rumors surrounded Patrick two years ago in conjunction with a potential 2018 primary challenge to Gov. Greg Abbott. At that time, Mr. Patrick quickly ended such speculation when he responded by publicly endorsing the Governor for re-election.

Now, the Lt. Governor again finds himself immediately quashing rumors about running for another office. As he did before, Mr. Patrick reiterated that he has no intention of challenging Sen. Cornyn and issued a public endorsement of the three-term incumbent.

House

CO-6:  Outgoing US Rep. Mike Coffman (R-Aurora), who lost his seat in November to Democrat Jason Crow, says he will not again seek partisan public office. He has, however, left open the possibility of running for Mayor of Aurora, which is elected on a non-partisan basis.

Mr. Coffman has been in public office since his first election to the state House of Representatives in 1988. He then served in the state Senate, as state Treasurer, Secretary of State, and will complete five terms in the US House of Representatives.

ME-2:  Rep. Bruce Poliquin (R-Oakland/Bangor), who placed first on election night by 1,910 votes but lost Maine’s Ranked Choice Voting run-off system that allows people who vote for losing candidates to have a second and possibly third vote count toward the ultimate election, lost his seat to Democrat Jared Golden (D-Lewiston) as a result of the unique system.

After the election, Mr. Poliquin sued in federal court claiming the system is unconstitutional, but late this week the judge rejected his case. Thus, constitutionality of the RCV system was upheld even though the Maine Supreme Court has ruled it unconstitutional for state races. It is unclear if Mr. Poliquin will appeal yesterday’s ruling.

MA-6:  Massachusetts state Sen. Barbara L’Italien (D-Andover), who placed a distant third in the crowded open 3rd Congressional District Democratic primary back in September, says she is considering challenging 6th District Rep. Seth Moulton (D-Salem) because he is a key leader of the movement to deny Nancy Pelosi from becoming Speaker.

NM-2:  Rep. Steve Pearce (R-Hobbs) just lost the Governor’s race in November, but he has already made a political comeback of sorts. Last weekend he was elected as chairman of the New Mexico Republican Party and will attempt to rebuild the party, which now has no GOP officials either in statewide or federal office.

Mr. Pearce has also not ruled out attempting to re-gain his House seat after Democratic attorney Xochitl Torres-Small converted the seat in the general election. As party chairman, however, it may be difficult for him to devote time to his new responsibilities and simultaneously prepare for another congressional campaign against a freshman Democratic member.

NC-9:  North Carolina Republicans appear resigned to the eventuality that the 9th District will host a new election. Considering the election fraud allegations that kept GOP candidate Mark Harris’ 905-vote victory on November 6th from being officially certified, the Republican nominee’s standing has clearly been damaged. Therefore, a rerun campaign featuring himself, Democrat Dan McCready, and Libertarian Jeff Scott, would likely result in another GOP loss.

In a deal with the Democrats to restore some of Gov. Roy Cooper’s (D) appointment powers, Republicans in the state legislature passed a new election law that will allow an open special election partisan primary and run-off as part of a broad legislative package to reform the controversial State Board of Elections. With bipartisan approval (79-19 in the House and 34-3 in the Senate), the bill has a good chance of winning Gov. Roy Cooper’s (D) support but the state chief executive has not yet signaled he will sign the bill. With such margins, however, even a Cooper veto might not stop the legislation from becoming law.

NV-4:  First-term Rep. Ruben Kihuen (D-Las Vegas), who did not seek re-election after being publicly accused of sexual harassment, is apparently not done with running for office. Mr. Kihuen has already filed to run for Las Vegas City Council next year, so it will be interesting to see if the controversy that cost him his congressional career will be a factor in a local Las Vegas city race.

TN-6:  Rep-Elect John Rose (R-TN) announced this week that former Congressman Van Hilleary (R-TN) has agreed to serve as his first chief of staff. Mr. Hilleary was originally elected to the House in 1994 and served four terms before running unsuccessfully for Governor in 2002, losing a tight 51-48% contest to former Nashville Mayor Phil Bredesen. As we will remember, Mr. Bredesen ran for Senate this year and fell to Rep. Marsha Blackburn (R-Brentwood). Mr. Hilleary also became a US Senate candidate in 2006 but lost the Republican primary to future Sen. Bob Corker (R).

Interestingly, Mr. Hilleary is the second former Congressman returning in a staff role for the next session. Earlier, incoming Rep. Ann Kirkpatrick (D-AZ) announced that she has hired former Rep. Ron Barber (D-AZ) to run her district office program.

Governor

Louisiana:  A great deal of action has already occurred in preparation for next year’s Louisiana Governor’s campaign. Earlier this week, state Treasurer John Schroder (R), who confirmed he was considering entering the Governor’s race, announced that he would not challenge Democratic incumbent John Bel Edwards.

Now that two Republicans, US Rep. Ralph Abraham (R-Alto/Monroe) and developer Eddie Rispone (R), are formally opposing Gov. John Bel Edwards (D), Remington Research went into the field to test where the contenders currently stand. The survey (12/11-12; 1,680 LA likely 2019 gubernatorial election voters) finds Gov. Edwards holding a jungle primary lead over both Republicans. But, advancing to a run-off election should no candidate score majority support suggests the final outcome could be very close.

With all individuals appearing on the ballot for the original vote, which will come next October 12th, Gov. Edwards would lead Rep. Abraham and Mr. Rispone, 43-31-9%. But, the mid-40s may be at least an early ceiling for Mr. Edwards. If he and Rep. Abraham advanced to a November 16th run-off, the two would tie at 44% apiece. If Mr. Rispone finished second in the original election, Gov. Edwards would top him in the run-off, but only by a 46-39% margin.

Mississippi:  During the week, first-term conservative state Representative Robert Foster (R-DeSoto County), also known as “Farmer Bob,” announced he is entering the 2019 open Governor’s race. Rep. Foster will soon be opposed by Lt. Gov. Tate Reeves (R) who promises to announce his intention to run before the new state legislative session commences on January 8th.

For the Democrats, four-term Attorney General Jim Hood is already an official candidate. He has run very well in his four statewide races and will be a formidable contender even in this strongly Republican state. Gov. Phil Bryant (R) is ineligible to seek a third term.

Virginia:  Virginia is the only state in the country that limits its Governors to only one term in office. Therefore, despite Gov. Ralph Northam (D) only being in office for one year, he is already a lame duck. For the open 2021 campaign, Attorney General Mark Herring (D) yesterday announced that he will be a gubernatorial candidate. He may be jumping into the race so quickly in order to earn an advantage over Lt. Gov. Justin Fairfax (D), who also has reported interest in succeeding Gov. Northam.