Golden Apple June 8, 2018

THE GOLDEN APPLE: Your report on the latest discord from The Eris Group

June 8, 2018

Some of us stayed up late last night celebrating the Washington Capitals’ Stanley Cup win, a first for the franchise and the first sports championship in the District since 1992. And then we woke up this morning to the sad and shocking news of Anthony Bourdain’s death. We’ll raise a few glasses this weekend, for very different reasons.

McConnell cancels recess — Senate Majority Leader Mitch McConnell (R-KY) announced this week that the Senate will not recess for the entire month of August, as usual. Instead, after a state work period the first week of August, the Senate will return for the rest of the month. McConnell blamed Senate Democrats for “historic obstruction . . . of the President’s nominees,” and said that the Senate needed to stay in session “to pass legislation, including appropriations bills, and to make additional progress on the president’s nominees.”

Volcker Rule revisions out for comment — The Federal Reserve Board was the first to propose revisions to the so-called Volcker Rule last week, followed by the FDIC, OCC, SEC and CFTC. The proposed changes would identify three categories of banking entities based on their level of trading activity: those with significant trading activity ($10 billion and more), those with moderate activity ($1 billion – $10 billion), and those with limited activity (less than $1 billion). Banks with trading activity of less than $1 billion would operate under a “rebuttable assumption of compliance,” with no obligation to affirmatively demonstrate compliance on an ongoing basis. The proposal was submitted for publication on June 6, and is open for comment for 60 days.

McWilliams takes charge at FDIC Jelena McWilliams was sworn in as the 21st Chairman of the FDIC on Tuesday, beginning a five-year term as Chairman and a six-year term as a member of the FDIC Board. She was executive vice president, chief legal officer, and corporate secretary for Fifth Third Bank at the time of her nomination, and previously served as assistant chief counsel with the Senate Small Business and Entrepreneurship Committee. Former Chairman Martin J. Gruenberg remains on the FDIC Board as a director.

SEC approves rule to allow electronic disclosure — The Securities and Exchange Commission voted on Monday to allow companies to offer a “notice and access” option to shareholders that would deliver shareholder reports by making them accessible on a website and mailing investors a paper notice of their availability. The new rule 30e-3 will take effect on January 1, 2021. The SEC also asked for comment on ways to modernize the design, delivery and content of fund information, and on the appropriate framework for any fees some intermediaries charge for delivering shareholder reports.

House Financial Services approves six reform bills — Yesterday the House Financial Services Committee voted to send six pieces of legislation to the House floor:

  • H.R. 5783, the Cooperate with Law Enforcement Agencies and Watch Act of 2018, sponsored by Rep. French Hill (R-AR), which would provide a safe harbor for financial institutions that maintain a customer account at the request of law enforcement;
  • H.R. 5877, the Main Street Growth Act, sponsored by Rep. Tom Emmer (R-MN), which would allow for the registration of venture exchanges;
  • H.R. 5054, the Small Company Disclosure Simplification Act of 2018, sponsored by Rep. David Kustoff (R-TN), which would provide a voluntary exemption from xBRL requirements for emerging growth and smaller companies;
  • H.R. 5756, to require the Securities and Exchange Commission to adjust certain resubmission thresholds for shareholder proposals, sponsored by Rep. Sean Duffy (R-WI);
  • H.R. 3861, the Federal Insurance Office Reform Act of 2017, sponsored by Rep. Sean Duffy (R-WI), which would increase the states’ role in determining national insurance policies; and
  • H.R. 4557, the Reforming Disaster Recovery Act of 2017, sponsored by Rep. Ann Wagner (R-MO), which seeks to reduce waste, fraud and abuse in the CDBG-DR program.

Chairman Jeb Hensarling (R-TX) has said that he plans to combine several of these bills into a “JOBS Act 3.0” capital markets package.

 

Bipartisan bill would clarify legality of marijuana-related transactions — Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA) and Reps. David Joyce (R-OH) and Earl Blumenauer (D-OR) introduced bills in the Senate and House this week that would affirm state authority to decriminalize marijuana, and clearly state that transactions compliant with state law are not trafficking, nor are their proceeds unlawful. The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act would end the need for legal marijuana businesses to operate in cash alone, Warren said.

 

House hearing shows bipartisan support for making CFPB a commission — Comments from Rep. David Scott (D-GA) and others at a hearing on Wednesday suggested that bipartisan support exists to change the Bureau of Consumer Financial Protection’s governance from a directorship to a commission structure. Representatives of the financial services industry and the NAACP appeared before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit to talk about reforming the Bureau to improve transparency and accountability. While the NAACP witness opposed all changes suggested by Acting Director Mick Mulvaney, the other witnesses generally endorsed proposals to subject the Bureau to the appropriations process and replace the Director with a bipartisan commission.

 

Mulvaney dissolves CFPB advisory groups — The Bureau of Consumer Financial Protection announced on Wednesday that it is reconstituting its Consumer Advisory Board, Community Bank Advisory Council and Credit Union Advisory Council with new, smaller memberships. “By both right-sizing its advisory councils and ramping up outreach to external groups, the Bureau will enhance its ability to hear from consumer, civil rights, and industry groups on a more regular basis,” the release said. The first town hall under this new outreach initiative is happening today in Kansas City.

 

SEC, CFTC will spend extra funding on IT, cyber security — The Senate Appropriations Subcommittee on Financial Services and General Government heard testimony on Tuesday from SEC Chairman Jay Clayton and CFTC Chairman Christopher Giancarlo about their FY 2019 budget requests. The regulators discussed their agencies’ agendas, and Giancarlo explained that this year’s request for a $32.5 million increase was meant to let the agency catch up from years of flat budgets and last year’s budget cuts. Both agencies are emphasizing work in IT and cyber security, and Giancarlo said they’re looking at the risk profile changes created by consolidation among clearinghouses.

 

Roisman named to succeed Piwowar at SEC — Earlier this week, President Trump nominated Elad Roisman, chief counsel to the Senate Banking Committee, to fill the vacant seat on the Securities and Exchange Commission created by the resignation of Michael Piwowar. Roisman has been with the Senate Banking Committee since 2014; he had previously served as an aide to then-SEC Commissioner Daniel Gallagher.

Bright nomination goes to Senate— The President sent his nomination of Michael R. Bright to be President of the Government National Mortgage Association (Ginnie Mae) to the Senate yesterday. The nomination had been announced last month, but became formal only this week. Bright has served as Ginnie Mae’s EVP and Chief Operations Officer since July 2017. Before that, he was a director at the Milken Institute’s Center for Financial Markets, where he led the institute’s housing program. Bright’s career also includes time on the staff of Senator Bob Corker (R-TN) and with the Office of the Comptroller of the Currency.

 

Next Week in Washington:

 

June 12           Senate Committee on Banking, Housing, and Urban Affairs meets in executive session to vote on the nominations of the Honorable Richard Clarida to be a member and Vice Chairman and Ms. Michelle Bowman to be a Member of the Board of Governors of the Federal Reserve System. 10:00 a.m., SD-538 Dirksen Senate Office Building.

 

June 12           Victory parade for the Washington Capitals. 11:00 a.m., Constitution Avenue NW, from 17th St. to 7th St.

 

June 13           House Financial Services Committee holds a hearing on “Financial Industry Regulation: the Office of the Comptroller of the Currency.” Comptroller of the Currency Joseph Otting will be the only witness. 10:00 a.m., 2128 Rayburn House Office Building.

 

June 13           House Financial Services Subcommittee on Capital Markets, Securities, and Investment holds a hearing on “Ensuring Effectiveness, Fairness, and Transparency in Securities Law Enforcement.” The hearing will focus on H.R. 2128, the Due Process Restoration Act of 2017, and H.R. 5037, the Securities Fraud Act of 2018. 2:00 p.m., 2128 Rayburn House Office Building.

 

June 14           Senate Banking Committee holds a hearing to receive an update from the Comptroller of the Currency. Comptroller of the Currency Joseph Otting will be the only witness. 10:00 a.m., SD-538 Dirksen Senate Office Building.

 

June 14           Federal Reserve Board meets to vote on the final rule establishing single counterparty credit limits for large US bank holding companies and foreign banking organizations in the US. 2:30 p.m., Eccles Building, 20th & C Sts. NW.

 

The Ellis Insight. Jim Ellis reports on political news:

 

Senate

California:  Sen. Dianne Feinstein (D) advances into the general election with a fellow Democrat, state Senator and former Senate President Kevin de Leon (D-Los Angeles). In a field of 35 candidates, Sen. Feinstein received 44% of the vote, while Mr. de Leon attracted 11% to secure second place and a general election qualifying position. Sen. Feinstein is now a heavy favorite to win re-election in November.

Mississippi:  In Tuesday’s primary, Democrats David Baria, the state House Minority Leader, and venture capitalist Howard Sherman advanced to a June 26th run-off election. The winner will face Sen. Roger Wicker (R) in November.

Montana:  State Auditor Matt Rosendale overcame three other Republicans to win the party primary earlier in the week. Mr. Rosendale now faces an uphill challenge against Sen. Jon Tester (D) in the general election.

New Jersey:  Sen. Bob Menendez (D) captured only 62% in his Democratic primary against an opponent who did nothing more than put her name on the ballot. Former Celgene pharmaceutical company CEO Bob Hugin was an easy winner in the Republican primary. This expensive general election pairing may yield more competition than originally forecast.

Ohio:  With Sen. Sherrod Brown (D) and Rep. Jim Renacci (R-Wadsworth) both winning their Democratic and Republican primaries on May 8th, Fallon Research conducted a new general election survey (5/21-25; 800 OH likely voters) that finds the incumbent holding a comfortable lead. According to Fallon, Sen. Brown records a 48-34% lead over Rep. Renacci.

Wisconsin:  According to a new Tarrance Group poll, state Sen. Leah Vukmir (R-Brookfield) has taken the lead in the US Senate Republican primary. Sen. Vukmir enjoys backing from the conservative flank of the Wisconsin party, and the survey released late this week (800 WI likely Republican primary voters) projects that she has pulled ahead of businessman and former Democrat Kevin Nicholson, 36-29%. Earlier, an American Viewpoint survey (5/29-31; 500 WI likely Republican primary voters) found Mr. Nicholson clinging to a 32-30% edge.

House

AL-5:  Rep. Martha Roby (R-Montgomery) was forced into a July 17th run-off election with former Democratic Congressman Bobby Bright, who is now a Republican. In a crowded field, Ms. Roby secured only 39% of the vote on June 5th, meaning she has vulnerability in a run-off.

California:  All seven of the competitive US House races in the top two primary format produced a Republican and a Democrat advancing into the general election. The race that is still uncalled resides in Orange County’s 48th District, where Democrats Hans Keirstead and Harley Rouda are only 129 votes apart with mail ballots still arriving. The election authorities will accept votes through midnight on Friday, June 8th. The two Democrats are vying for second place and the right to oppose Rep. Dana Rohrabacher (R-Costa Mesa) in the general election.

HI-1:  Democrat Ed Case represented Hawaii’s 2nd District for two terms, winning his first election in 2002 and leaving Congress at the beginning of 2007. He has since twice run for US Senate, once for Governor, and once in the most recent special election in the 1st District. As the candidate filing deadline expired on Tuesday, Mr. Case again has become a candidate. At the last minute, he filed for the open 1st Congressional District. He joins Lt. Gov. Doug Chin, state Sen. Donna Mercado Kim, state Reps. Beth Fukumoto, and Kaniela Ing, and Honolulu City Councilman Ernie Martin in the open August 11th Democratic primary.

Iowa:  As expected, state Rep. Abby Finkenauer (D-Dubuque) easily won Tuesday’s Democratic primary and now opposes two-term Rep. Rod Blum (R-Dubuque) in what will be a toss-up general election. In the 3rd District, high tech firm owner Cindy Axne easily won the Democratic primary and advances into an underdog challenge against two-term Rep. David Young (R-Van Meter/Des Moines).

MI-13:  Two weeks ago, John Conyers III, son of resigned Rep. John Conyers (D-Detroit), was disqualified from the regular election ballot to succeed his father in the House because he failed to submit 1,000 valid registered voter petition signatures. Late this week, it was reported that Mr. Conyers’ legal challenge to the administrative ruling was denied meaning that he will not be a candidate in the November election. Nine Democrats are on the ballot for the full term including Mr. Conyers cousin, state Sen. Ian Conyers (D-Detroit). The Democrats will hold the seat, and the crowded primary results will determine who succeeds the former Dean of the US House. John Conyers was first elected in 1964 and served until the end of last year when he resigned from office.

MN-5:  In a flurry of political activity surrounding the Democratic endorsing convention and Tuesday’s candidate filing deadline, Rep. Keith Ellison (D-Minneapolis) jumped into what is now an open Attorney General’s race after incumbent Lori Swanson (D) was denied the party endorsement. In response, Ms. Swanson abandoned her re-election bid and instead joined the Governor’s primary where she will oppose endorsed candidate Erin Murphy, a St. Paul state Representative, and US Rep. Tim Walz (D-Mankato).

Rep. Ellison vacating his safe Democratic Minneapolis congressional district gave potential candidates only hours to decide if they would run for the House. In response, eight Democrats filed to run including Rep. Ellison’s ex-wife, a former state House Speaker, three sitting state legislators, and one ex-state Senator. Three Republicans are also in the race, but the August 14thDemocratic primary will determine who wins the general election. Mr. Ellison’s departure now means 63 House seats are open (42 Republican-held; 20 Democratic; with one new seat created through Pennsylvania redistricting).

MS-3:  Local District Attorney Michael Guest and hospital system company executive Whit Hughes advance to a June 26thRepublican run-off election in the open the 3rd District. Mr. Guest is favored to win the party nomination and replace retiring Rep. Gregg Harper (R-Pearl/Jackson) in November.

Montana:  Ex-state Representative Kathleen Williams won a crowded and close Democratic primary and now advances to face freshman Rep. Greg Gianforte (R-Bozeman) in the state’s at-large general election. The Congressman is a clear favorite for re-election.

New Jersey:  Three key congressional primaries were decided on Tuesday. State Sen. Jeff Van Drew (D) is now heavily favored to convert the open 2nd District for the Democrats in November. In the competitive 7th District, former State Department official Tom Malinowski won the Democratic primary and advances to challenge five-term Rep. Leonard Lance (R-Clinton Township) in the fall. In the open toss-up 11th District, state Assemblyman Jay Webber (R-Morristown) and attorney Mikie Sherrill will square off in an expensive general election.

New Mexico:  Former state Democratic Party chair and Tribal Administrator Deb Haaland captured the Democratic congressional primary and is now heavily favored to defeat Republican Janice Arnold-Jones in the open 1st District general election. In the open 2nd District, Republican state Rep. Yvette Harrell (R-Alamogordo) advances into the general election against attorney Xochitl Torres-Small who easily won the Democratic primary. Ms. Harrell begins the general election as a slight favorite.

NY-11:  A new Siena College survey (5/29-6/3; 513 NY-11 likely Republican primary voters) turns in a surprising result. Their data projects that former US Rep. Michael Grimm (R-Staten Island) is leading incumbent Rep. Dan Donovan (R-Staten Island) by a substantial 47-37% margin. Mr. Grimm was elected to three terms in the House, resigning at the beginning of his third because of a federal tax fraud conviction. Mr. Grimm would then serve eight months in federal prison. After his release, he began campaigning to regain the seat he was forced to relinquish. Rep. Donovan, a former Staten Island District Attorney, won the special election to replace Mr. Grimm in 2015, and then clinched a 57-34% general election victory for the full term. The New York federal primary is June 26th.

NY-18:  New York is the only state in the country that has two separate primaries, one for federal offices (June 26), and another for state (September 13) elected positions. With the Attorney General’s race now open when Eric Schneiderman (D) resigned, a battle is ensuing in the state Democratic primary. Yesterday, Rep. Sean Patrick Maloney (D-Cold Spring/West Point) said he is going to enter both primaries. In June, he will seek re-nomination for his US House seat. Come September, he will run for the statewide Democratic Attorney General’s nomination. Should he win both, Mr. Maloney says he will withdraw from the congressional race. This would force the local party to name a replacement with only about seven weeks to go in the general election.

South Dakota:  Former state Public Utilities Commissioner Dusty Johnson won the at-large US House Republican primary, and now becomes the prohibitive favorite to win the open seat in the fall. Mr. Johnson is now heavily favored to defeat Democratic nominee Tim Bjorkman, a retired Circuit Court judge.

VA-5:  The 5th District Republican Party committee met last weekend to nominate a replacement for incumbent Rep. Tom Garrett (R-Scottsville/ Charlottesville) who is not seeking a second term. With a scant one-vote margin, the committee chose local businessman Denver Riggleman as the party nominee. He will face Democrat Leslie Cockburn in the general election.  This will be a competitive campaign, but Mr. Riggleman will benefit from the district’s Republican voting history.

Governor

Alabama:  Gov. Kay Ivey (R) and Tuscaloosa Mayor Walt Maddox (D) both won their respective party nominations outright, and advance into the general election. Gov. Ivey, who assumed her position when Ex-Gov. Robert Bentley (R) was forced to resign, is running for her first full term and favored in the fall campaign.

Alaska:  For months, former US Sen. Mark Begich (D) had refused to rule out that he would enter the 2018 gubernatorial race, but there appeared little in the way of positive speculation that he would actually become a candidate. With 30 minutes remaining in the candidate filing period last Friday, the former US Senator and Anchorage Mayor did submit his papers and will run for Governor. Reacting to the move, Gov. Bill Walker (I), who had indicated he would enter the Democratic primary and also run on the Independent ballot line, said he now will not compete in the August 21st Democratic primary.

The moves will produce a highly competitive three-way general election, featuring the Governor on the Independent line, very likely Mr. Begich becoming the Democratic standard bearer, and an eventual Republican nominee.

California:  Republicans achieved their goal of advancing a GOP candidate into the general election from the top two primary format. Attorney John Cox (R) placed a strong second place to Lt. Gov. Gavin Newsom (D), as the two proceed to the general election campaign. Mr. Newsom is a heavy favorite to win in November, but Republicans now at least have a candidate to rally around and help spur turnout for the down ballot races.

Colorado:  Though former state Treasurer Cary Kennedy is the endorsed Democratic Party candidate, the polling continues to find her trailing US Rep. Jared Polis (D-Boulder) as the campaign begins to kick into overdrive before the June 26th Colorado primary. According to the new Magellan Strategies survey (5/30-31; 503 CO Democratic likely primary voters), Rep. Polis now claims a 31-18% lead over Ms. Kennedy, with all other candidates, including Lt. Gov. Donna Lynne (D), registering less than 10% support.

Georgia:  Two Republican pollsters released data for the new Georgia gubernatorial run-off election that will be decided July 24th. Both polls were conducted over the same two-day period. McLaughlin & Associates (5/29-31; 500 GA likely Republican run-off voters) finds its poll sponsor, Lt. Gov. Casey Cagle, leading Secretary of State Brian Kemp, 52-42%. Public Opinion Strategies, for the Kemp Campaign, (5/29-31; 600 GA likely Republican run-off voters) found a much closer race: Cagle leading 46-45%. In the actual primary vote, Mr. Cagle placed first with 39%, followed by Mr. Kemp with 26%. Since neither came close to garnering majority support, the two were forced into the statewide run-off.

Iowa:  As expected, businessman Fred Hubbell easily won the Democratic gubernatorial primary and now challenges Gov. Kim Reynolds (R), who ascended to the position when incumbent Terry Branstad (R) became US Ambassador to China. The general election will be competitive.

Minnesota:  Usually, the Minnesota state convention process endorses individual candidates, and those not receiving said support generally unite and do not exercise their right to force a primary. Such is not the case within either party for 2018.

Last weekend in the open Governor’s race, Republicans nominated their 2014 gubernatorial standard bearer, Hennepin County Commissioner Jeff Johnson, and Democrats tabbed St. Paul state Representative Erin Murphy. Immediately, former Gov. Tim Pawlenty, who did not participate in the Republican convention, confirmed that he will challenge Mr. Johnson in an August 14thprimary election. Rep. Tim Walz (D-Mankato) followed suit, and will oppose Ms. Murphy in a forced Democratic primary. The Governor’s race is an open contest because incumbent Mark Dayton (D) is retiring.

In another key race, incumbent Attorney General Lori Swanson (D) was surprisingly denied the party endorsement in her bid for re-election. Instead, the Democratic delegates endorsed attorney Matt Pelikan. In response, AG Swanson decided to enter the gubernatorial primary since Rep. Tim Walz (D-Mankato) is already forcing a vote against Ms. Murphy. The Attorney General, though rebuked by the party activists in her own party, is a popular statewide official and her entry into the Governor’s race drastically changes the Democratic outlook.

New Mexico:  As expected, US Rep. Michelle Lujan Grisham (D-Albuquerque) won a landslide Democratic gubernatorial primary and now will oppose her congressional colleague, Rep. Steve Pearce (R-Hobbs), in the general election. The general election winner replaces term-limited Gov. Susana Martinez (R). New Mexico tends to lean Democratic, but the fall campaign will be competitive.

Ohio:  As reported above (see Ohio Senate), Fallon Research conducted a new post-primary survey of the statewide campaigns. While Democratic Senator Sherrod Brown holds the lead in his re-election campaign, it is Republican Attorney General Mike DeWine, a former US Senator, who is staked to a 40-34% advantage over ex-state Attorney General Richard Cordray (D). This race is expected to be as close as the 2010 state Attorney General’s race when Mr. DeWine unseated Mr. Cordray, 47-46%.

South Carolina:  Two polls conducted over the same May 29-31 period draw largely the same conclusions. First, that the Republican race will advance to a June 26th run-off election, and second, that businessman and military veteran John Warren is making a serious come-from-behind bid for second place. According to the Fabrizio Lee polling firm (500 SC likely Republican primary voters), Gov. Henry McMaster leads Mr. Warren and former Nikki Haley Administration cabinet official Catherine Templeton, 33-19-17%. Target Insyght (400 SC likely Republican primary voters) finds a similar result, but with a different order. They see Gov. McMaster leading 37-25-20% over Ms. Templeton and Mr. Warren, respectively. The South Carolina primary is Tuesday.

South Dakota:  In a race that was not as close as polling indicated, at-large Rep. Kristi Noem (R-Castlewood) easily won the open Republican primary and is now poised to succeed term-limited Gov. Dennis Daugaard (R). She faces new Democratic nominee Billie Sutton, the state House Minority Leader in the fall campaign.