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THE GOLDEN APPLE: Your report on the latest discord from The Eris Group
September 14, 2018

Florence, you’re not welcome — It’s been downgraded to a tropical storm, but Florence still threatens to make much of the southeast miserable over the next several days. We hope everyone is safe and dry. The federal banking agencies have published guidance for the financial institutions in the storm’s path, asking that they “work constructively” with borrowers affected by Florence, and promising expedited consideration of requests for temporary facilities or other storm-related business changes.

Senate, House agree on a stopgap funding plan — The Senate and House of Representatives have agreed to a spending agreement that will prevent a government shutdown. The “patch” that provides funding for the rest of the government through December 7 is expected to be included in a bill that also funds the Departments of Defense, Health and Human Services, and Education; the House should pass it when they return the week of September 24. Separately, “minibus” legislation approved on Wednesday in the Senate and on Thursday in the House includes FY 2019 appropriations for the Departments of Energy and Veterans Affairs, and for the legislative branch.

Guidance is nonbinding, regulators affirm — The Bureau of Consumer Financial Protection, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the National Credit Union Association, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission all issued statements this week to stipulate that regulatory guidance is “nonbinding and create no enforceable legal rights or obligations” of the agency or other parties. The banking agencies clarified the difference between supervisory guidance and laws or regulations; going forward, they said, they will limit the use of numerical thresholds or other “bright lines” in describing expectations. Financial institutions will not be criticized for “violations” of supervisory guidance.

House approves bills on insurance regulation, FinCEN improvement — On Wednesday, the House of Representatives passed by voice vote H.R. 5059, the State Insurance Regulation Preservation Act introduced by Rep. Keith Rothfus (R-PA), which would create the insurance savings and loan holding company and clarify that states would retain primary regulatory authority over those businesses. The House also approved H.R. 6411, the FinCEN Improvement Act of 2018, sponsored by Rep. Ed Perlmutter (D-CO), which would require the Financial Crimes Enforcement Network (FinCEN) to work with foreign financial intelligence units to thwart the use of virtual currencies by terrorist groups for illicit activity and money laundering.

House Ways and Means approves “Tax Reform 2.0” — The House Ways and Means Committee voted along party lines on Thursday to approve three bills Chairman Kevin Brady (R-CA) described as “Tax Reform 2.0.” The bills are H.R. 6760, the Protecting Family and Small Business Tax Cuts Act of 2018, which would make permanent the tax cuts for individuals and small businesses that were included in the first tax reform bill; H.R. 6757, the Family Savings Act of 2018, which would allow small businesses to join together to form 401(k) plans, and eliminate age limits on IRA contributions; and H.R. 6756, the American Innovation Act, which would let startups bring in new investors without triggering limits on tax benefits.

House Financial Services Committee passes 12 bills — On Thursday the House Financial Services Committee marked up and approved 12 additional bills to fight money laundering, reduce unnecessary regulatory burden, and make technical corrections. The legislation included H.R. 6743, the Consumer Information Notification Requirement introduced by Rep. Blaine Luetkemeyer, which would require the federal banking agencies to set a standard for financial institutions to notify customers of data breaches; H.R. 6741, the Federal Reserve Reform Act of 2018 introduced by Rep. Andy Barr (R-KY), which would require the Fed to adopt an annual monetary policy strategy and issue up to three reference rules to increase transparency; and H.R. 5534, the GUIDE Compliance Act introduced by Rep. Sean Duffy (R-WI), which would create a safe harbor for good faith reliance on guidance issued by the Bureau of Consumer Financial Protection.

SEC, FINRA crack down on virtual currency — On Monday the Securities and Exchange Commission settled charges against “ICO Superstore” TokenLot LLC for acting as an unregistered broker-dealer. TokenLot’s website promoted sales of digital tokens during initial coin offerings (ICOs) and offered secondary trading services. Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, encouraged those developing digital asset trading businesses to contact the SEC staff for help in determining registration and compliance requirements. Separately, the Financial Industry Regulatory Authority (FINRA) charged a Massachusetts broker with securities fraud and the unlawful distribution of an unregistered cryptosecurity called HempCoin.

SEC withdraws “no action” letters on proxy advisory firms — The SEC announced this week that, in light of an upcoming Roundtable on the Proxy Process, it is withdrawing the no-action letters sent to Egan-Jones Proxy Services and Institutional Shareholder Services in 2004, addressing the firms’ possible conflicts of interest. House Financial Services Committee Chairman Jeb Hensarling praised the decision, saying, “The proxy advisory firm duopoly is in serious need of reform and SEC attention.”

FSOC considers focusing on risky activities, not institutions — Craig Phillips, counselor to Secretary of the Treasury Steven Mnuchin, told a group of Washington bank industry advocates this week that the Financial Stability Oversight Council is planning to act on a Treasury recommendation that the group focus on high-risk activities, rather than on individual financial services companies. Speaking at an Exchequer Club luncheon, Phillips said that FSOC hopes to publish a proposal in December that would include “an activities-based approach to designations.”

House, Senate Democrats urge SEC to revise proposed Regulation Best Interest — The ranking members of the House Financial Services Committee and Senate Banking Committee led more than 30 of their colleagues in a letter to SEC Chairman Jay Clayton this week, asking the SEC to strengthen its proposed Regulation Best Interest, which would set the standard of care for broker-dealers who provide recommendations to retail investors. “While we are pleased that the SEC is finally acting to address this issue, Regulation BI falls woefully short,” Rep. Maxine Waters (D-CA) and Senator Sherrod Brown (D-OH) wrote. “The best way for the SEC to protect investors and reduce confusion is require all brokers and advisers, regardless of their titles, to comply with the same fiduciary standard that puts their clients’ interests first.”

FDIC begins rulemaking on reciprocal deposits — As directed by the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Federal Deposit Insurance Corporation has published a Notice of Proposed Rulemaking on reciprocal deposits. The proposed rule would exempt a capped amount of reciprocal brokered deposits from treatment as brokered deposits for certain insured depository institutions. It is the first half of a two-part effort to revisit the FDIC’s brokered deposits rules; the second half, which will address brokered deposits more widely, will be published later this year. Comments on this notice are open for 30 days.

Rettig confirmed to IRS — The Senate voted 64-33 on Wednesday to confirm Charles Rettig as Commissioner of the Internal Revenue Service. Rettig was a member of the California Franchise Tax Board Advisory Board, and practiced tax law as a partner with the Beverly Hills firm of Hochman, Salkin, Rettig, Toscher & Perez, P.C. A graduate of UCLA, Pepperdine University School of Law, and NYU School of Law, Rettig is also a member of Academy of Magic Arts, the Los Angeles-based magicians’ society that operates The Magic Castle. David Kautter, who has served as Acting IRS Commissioner for almost a year, returns to the Treasury Department as Assistant Secretary for Tax Policy.

San Francisco Fed names Mary Daly President — The Federal Reserve Bank of San Francisco announced Friday that Mary C. Daly will become President and CEO of the bank on October 1. Daly has been the San Francisco Fed’s executive vice president and director of research since last year. She joined the bank in 1996, and is a globally recognized expert on labor market dynamics. A graduate of the University of Missouri-Kansas City and the University of Illinois Urbana-Champaign, she holds a Ph.D. from Syracuse University. In addition to her service within the Federal Reserve System, she has also served on the advisory boards of the Congressional Budget Office, the Social Security Administration, the Office of Rehabilitation Research and Training, the Institute of Medicine, and the Library of Congress.

FSOC lifts designation of ZB, N.A. — The Financial Stability Oversight Council voted Wednesday to grant the appeal of ZB, N.A. not to be treated as a designated nonbank financial company after its proposed merger with and into its parent company, Zions Bancorporation.

Next Week in Washington:

The House of Representatives is in recess next week.

September 18    Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Fintech: Examining Digitization, Data, and Technology.” 10:00 a.m., SD-538 Dirksen Senate Office Building.

The Ellis Insight. Jim Ellis reports on political news:

Primary Results
Several states held the election cycle’s final primaries last night. The New Hampshire primary produced gubernatorial nominees. First term Gov. Chris Sununu (R) will face former state Sen. Molly Kelly (D) in the fast-approaching general election. Gov. Sununu, with strong job approval ratings, is the favorite for the fall campaign.
In the open 1st Congressional District, Executive Councilor Chris Pappas (D) and former South Hampton police chief Eddie Edwards (R) advanced to the general election. The November winner will replace retiring Rep. Carol Shea-Porter (D-Rochester). Mr. Pappas opens as a slight favorite, but this district has swung back and forth between the two parties more than any seat in the nation since 2006.
Rhode Island Gov. Gina Raimondo was re-nominated in the Democratic primary on Wednesday, but with only 56% of the vote. She again faces Republican Cranston Mayor Allan Fung in the coming general election. Mr. Fung also won re-nomination this week with a percentage only in the mid-50s. He came within five percentage points of Ms. Raimondo in the 2014 general election.
As expected, New York Gov. Andrew Cuomo cruised to an easy 65-35% Democratic primary victory over actress Cynthia Nixon on Thursday. He is the prohibitive favorite to win a third term over the new Republican gubernatorial nominee, Duchess County Executive Marc Molinaro.
Rep. Sean Patrick Maloney (D-Cold Spring/West Point) lost his bid for Attorney General, so he returns to the congressional race. New York is the only state that holds two separate primaries, one for federal and the other for state offices, so current elected officials have the benefit of being able to run for two offices in the same cycle, and then choosing where they will run in the general election. Rep. Maloney’s statewide defeat means he will remain in the House.
Arizona:  Several surveys were released this week in Arizona, producing mixed results. Gravis Marketing publicized their new survey (9/5-7; 882 AZ likely voters) that finds Rep. McSally’s (R-Tucson) campaign standing improving. Instead of trailing Rep. Kyrsten Sinema (D-Phoenix) by single digits as she was before the late August primary, Gravis projects that the Tucson Republican now has slightly forged ahead of the Phoenix Democrat, 49-48%.
OH Predictive Insights (9/5-6; 597 AZ likely voters), an Arizona-based firm, also finds Rep. McSally leading, this time with a 49-46% advantage. A third firm, Data Orbital (9/4-6; 550 AZ likely voters), however, sees the race flipping back into Rep. Sinema’s favor by a 46-42% count. All of the surveys were conducted during the same September 4-7 period. The later Fox News data (9/8-11; (801 AZ registered voters; 710 likely voters) also posts Rep. Sinema to an advantage, 47-44% among likely voters, and 46-42% within the larger registered voter pool.
Indiana:  On the heels of the NBC/Marist College Indiana poll (8/26-29; 576 IN likely voters) that we covered last week showing Sen. Joe Donnelly (D) holding a 43-41% lead over former state Representative and international businessman Mike Braun (R), Fox News sees a split result. Their new survey(804 IN registered voters; 677 likely voters) posts Mr. Braun to a 45-43% advantage among likely voters, while Sen. Donnelly leads 42-41% within the registered voter segment.
Michigan:  The Glengariff Group survey research firm, polling for the Detroit News and WDIV-TV (9/5-7; 600 MI likely voters) tested the US Senate race between three-term incumbent Debbie Stabenow (D) and retired Army Ranger and manufacturing business owner John James (R). According to the Glengariff results, Sen. Stabenow has developed a strong 56-33% margin. Since he officially became the Republican nominee in the August 7thprimary, Mr. James has yet to establish a strong foothold opposite the Senator.
Missouri:  Last week, NBC News/Marist College released their Missouri Senate survey (8/25-28; 774 MO registered voters), that saw Sen. Claire McCaskill (D) topping Attorney General Josh Hawley (R), 44-40%. This week Fox News (808 MO registered voters; 675 likely voters) publicized their data that virtually confirms the NBC/Marist numbers. They find Sen. McCaskill up 44-41% among likely voters, and 41-39% when registered voters are included.
Nevada:  A new Suffolk University poll (9/5-10; 500 NV likely voters) confirms a dead heat race between Sen. Dean Heller (R) and Rep. Jacky Rosen (D-Henderson) that every other poll has shown. This survey projects Ms. Rosen clinging to the smallest of edges, 41.6 (208 respondent votes) to 41.2% (206 respondent votes) on the ballot test question.
Ohio:  The Morning Consult organization released their recent Ohio data (9/2-11; 1,592 OH registered voters via automated response device) and sees two-term Sen. Sherrod Brown (D) developing a wide lead in his re-election battle against Rep. Jim Renacci (R-Wadsworth). The MC results find Sen. Brown holding a strong 47-31% advantage. The other most recent public survey, from Change Research, found a much closer contest at 46-42% in the Senator’s favor.
Tennessee:  The open Tennessee Senate race between former Gov. Phil Bredesen (D) and US Rep. Marsha Blackburn (R-Brentwood) has been bouncing around for weeks. Last week we reported upon the NBC News/Marist College poll (8/25-28; 538 TN likely voters) that gave Mr. Bredesen a 48-46% edge over Ms. Blackburn. Now, Fox News counters with their data (809 TN registered voters; 686 likely voters) that finds the Congresswoman holding a 47-44% advantage among likely general election participants, and a 45-43% edge when registered voters are tested.
AR-2:  The Talk Business & Politics group and the Hendrix College survey research arm again teamed up, as they have done before every recent election, to test the Arkansas electorate. The entities released surveys in all four of the state’s congressional districts, but the 2nd CD, anchored in Little Rock, is the only one that appears even somewhat competitive. According to the Hendrix data (9/5-7; 428 AR-2 likely voters), two-term Rep. French Hill (R-Little Rock) leads state Rep. Clarke Tucker (D-Little Rock), by a 50-41% count. Though Mr. Hill is comfortably ahead, Mr. Tucker’s level of support does suggest this seat is worth watching as the campaigns now begin to hit full stride.
FL-6:  Now officially the Republican gubernatorial nominee, Rep. Ron DeSantis (R-Palm Coast/Daytona Beach) resigned his congressional seat this week to concentrate fulltime on his statewide campaign opposite Tallahassee Mayor Andrew Gillum (D).
The DeSantis decision does not particularly affect the 6th District race. Because the Congressman was not seeking re-election, this district is already part of the 65 open seat count. The 6th should remain in Republican hands, but Democrats are making a competitive challenge. The GOP nominee is businessman, Afghan War veteran, and ex-aide to Vice President Dick Cheney, Mike Waltz. His Democratic opponent, Nancy Soderberg, is a former alternate Representative to the United Nations in the Clinton Administration before directing a congressional advisory committee pertaining to national security in the Obama Administration.
KY-6:  Soon after the Kentucky primary in late May, the Democratic Congressional Campaign Committee (DCCC) released a survey showing challenger Amy McGrath (D) jumping out to a major 52-37% lead over three-term Rep. Andy Barr (R-Lexington). This, and what is reported as confirming internal Barr data at the time, led the Congressman’s campaign to go heavy negative against Ms. McGrath. It appears the ad campaign drawing a clear ideological contrast has worked in the conservative-leaning northeast Kentucky district.
According to a new Fabrizio, Lee & Associates for the Congressional Leadership Fund (9/4-6; 400 KY-6 likely voters), the Congressman is back on top, 49-45%. The negative attacks drove Ms. McGrath’s favorability index from 55:16% favorable to unfavorable in June to 45:34% in early September.
MA-3:  Former Boston mayoral chief of staff Dan Koh officially requested a recount of his race against former congressional chief of staff and businesswoman Lori Trahan and eight other Democrats and the results are actually expanding his opponent’s slight edge. The original unofficial tally gave Ms. Trahan only a 52-vote lead over Mr. Koh. Though the process is not fully completed, the latest report suggests that Ms. Trahan’s lead has expanded to 132 votes. The recount will conclude by Monday. The eventual Democratic winner, probably Ms. Trahan, faces businessman Rick Green (R) in the general election for the seat that retiring Rep. Niki Tsongas (D-Lowell) is vacating.
TX-23:  Texas’ 23rd District, the one truly swing seat in the Lone Star State and a domain that stretches from San Antonio to El Paso, is again a Democratic conversion target this year. The New York Times/Siena College polling project just surveyed the district (9/10-11; 495 TX-23 likely voters) and posted Rep. Will Hurd (R-San Antonio) to a 51-43% lead over his Democratic opponent, former US Trade Office official Gina Ortiz Jones (D).

Utah:  Utah pollster Dan Jones & Associates just released new survey data in three of the state’s four congressional districts. Republican Representatives Rob Bishop and John Curtis are posting big re-election leads, but Salt Lake City Congressman Chris Stewart is facing a more competitive opponent. He leads Democratic college professor Shireen Ghorbani by eleven points, 45-34%.
The top competitive seat in the state, the south Salt Lake City suburban district that two-term Congresswoman Mia Love (R-Saratoga Springs) represents, is much closer. Dan Jones did not poll this district because so many surveys have been recently released, four alone in August and September, including a pair from the campaigns themselves. Rep. Love leads Salt Lake County Mayor Ben McAdams (D) in all, with margins between two and nine percentage points.
Arizona:  Gravis Marketing and the Data Orbital survey research organization released new Arizona gubernatorial data, and each sees Gov. Doug Ducey (R) re-establishing his early lead. According to Gravis (9/5-7; 882 AZ likely voters), Gov. Ducey has built a 48-44% advantage over Arizona State University professor David Garcia (D). Data Orbital (9/4-6; 550 AZ likely voters) finds a similar result, though is more bullish for the Governor. They project Mr. Ducey to be holding a 49-41% advantage. The new Fox Poll (9/8-11; 710 AZ likely voters) largely confirms the DO spread. They see Gov. Ducey’s lead at 51-40%.
Florida:  St. Pete Polls, surveying for the Empower Wellness organization, which is a medical marijuana advocacy group (9/5-6; 2,240 FL likely voters), finds Tallahassee Mayor Andrew Gillum (D) and US Rep. Ron DeSantis (R-Palm Coast/Daytona Beach) in almost a flat tie. The large-sample poll found 1,066 respondents choosing Mr. Gillum and 1,059 professing support for Rep. DeSantis. The support percentages are 47.6 to 47.3%.
Georgia:  The Georgia gubernatorial race is just as close as the one described above in Florida. According to a University of Georgia poll for the Atlanta Journal Constitution and News Channel 2 (8/26-9/4; 1,020 GA likely voters), Secretary of State Brian Kemp (R) has the smallest 45.3 to 44.9% lead over former state Rep. Stacey Abrams (D), meaning 462 poll respondents chose him versus 458 for the Democratic nominee.
Michigan:  The aforementioned Glengariff poll (see Michigan Senate above) finds Democratic nominee Gretchen Whitmer, a former state House Minority Leader, jumping out to a double-digit lead over Attorney General Bill Schuette (R) in the state’s open Governor’s race. According to the poll, Ms. Whitmer leads, 50-36%. The Michigan Governor’s race is critical from a national redistricting perspective, and it’s clear that Mr. Schuette has his work cut out for him if he is to restore Republican chances to continue presiding in this state as they have done for the past 20 of the last 28 years.
Nevada:  The important Silver State Governor’s race was also tested. As we saw in the Suffolk University poll quoted above (see Nevada Senate), the state chief executive’s race is just as close as the Senate race. According to Suffolk, Clark County Commissioner Steve Sisolak (D) has grasped a slight lead over Attorney General Adam Laxalt (R). The margin spread here is 37-35%.

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