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THE GOLDEN APPLE: Your report on the latest discord from The Eris Group
August 3, 2018

The Senate got out of town yesterday, but will be back in session on August 13. The Golden Apple will take next Friday off, barring unforeseen events, and will return on August 17.
Senate approves four-month flood insurance extension — The Senate voted 86-12 on Tuesday to approve a clean four-month extension of the National Flood Insurance Program (NFIP). Opponents included Senators Tom Cotton (R-AR), Ben Sasse (R-NE), Pat Toomey (R-PA), and Richard Shelby (R-AL). The House passed the bill last week.
Senate passes “minibus” appropriations bill — Before they left town, the Senate approved an appropriations bill that incorporated funding proposals for Interior, Transportation-HUD, Financial Services-General Government, and Agriculture-FDA. The Senate bill is not identical to the House package; it omits House-passed language that would give Congress more authority over the Bureau of Consumer Financial Protection, reduce regulatory burden under Dodd-Frank, and limit the IRS’s ability to deny tax-exempt status to churches that participate in politics. The bill would increase funding to Treasury, but cut funding to both the SEC and the IRS.
OCC will accept fintech charter applications — The Office of the Comptroller of the Currency announced Tuesday that it will consider applications for national bank charters from nondepository financial technology (fintech) companies engaged in the business of banking. “The decision to consider applications for special purpose national bank charters from innovative companies helps provide more choices to consumers and businesses, and creates greater opportunity for companies that want to provide banking services in America,” said Comptroller of the Currency Joseph Otting. Fintech banks that receive a special purpose charter need not accept deposits, so would not need to apply to the FDIC for deposit insurance; they may also choose to apply for a full-service charter, in which case they would have to meet FDIC requirements for deposit insurance. Fintech companies applying for a special purpose charter would have to submit contingency plans that outline strategies for restoring the bank’s financial strength in times of stress, with options for selling, merging, or liquidating the bank should that become necessary.
Treasury supports experimentation, regulatory restraint on fintech — The Treasury Department published its much-anticipated report on nonbank financials, fintech, and innovation on Tuesday, with more than 80 recommendations designed to improve the efficiency and security of consumer financial data use; streamline, coordinate, and modernize regulation of nonbank financial activities; and facilitate “regulatory sandboxes” that promote experimentation. The report recommends the creation of a national data security and breach notification standard, and adopting rules that would make it easier for banks and their service partners to share data. It also recommends updating rules for digital communications, such as the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act. The report suggests that federal and state regulators work with Treasury to design a “regulatory sandbox” that would establish a unified regulatory approach and facilitate meaningful experimentation with new financial services.
States should regulate payday lenders, says Treasury — Treasury’s report on nonbank financial services also included a recommendation that the Bureau of Consumer Financial Protection should rescind its rule on payday lending, in recognition and support of states’ authority “to establish comprehensive requirements for these products.” Treasury further recommended that regulators “take steps to encourage sustainable and responsible short term, small dollar lending by banks.” Treasury encouraged states to streamline and harmonize their licensing and supervision for both lending and payment companies.
House, Senate Republicans ask Quarles to reconsider G-SIB surcharge — Twenty-nine Republican members of the House Financial Services Committee and five Republican members of the Senate Banking Committee have written letters to Federal Reserve Board Vice Chairman Randal Quarles, asking him to recalibrate the capital surcharge for global systemically important banks (G-SIBs). The letters argued that the current requirements, which exceed the Basel minimum, are impairing US banks’ ability to compete in the global marketplace, and may cause “long-term, unnecessary competitive concerns.”
Wells Fargo to pay $2.09 billion fine for alleged mortgage misrepresentations — The Department of Justice announced Wednesday that Wells Fargo will pay a civil penalty of $2.09 billion to settle charges that the bank knowingly originated and sold mortgages based on misstated financial information, and which were not of the quality Wells Fargo claimed. The Justice Department said that nearly half of the stated income loans Wells Fargo sold for residential mortgage backed securities (RMBS) from 2005 to 2007 had defaulted, costing investors billions and contributing to the financial crisis.
FHFA Director faces sexual harassment charges — A Federal Housing Finance Agency (FHFA) staffer has filed an Equal Employment Opportunity complaint against Director Mel Watt for sexual harassment, the agency acknowledged late last week. Watt, 72, was a U.S. Representative from the 12th district of North Carolina before his appointment as Director of FHFA in 2014. His five-year term will expire at the end of this year. Watt said that the report was “obviously intended to embarrass or to lead to an unfounded or political conclusion.”
FHFA IG under investigation — Meanwhile, Politico reported this morning that Laura Wertheimer, the FHFA’s inspector general, has been the subject of an investigation by the Council of the Inspectors General on Integrity and Efficiency since March. Senate Judiciary Committee Chairman Chuck Grassley (R-IA) and Homeland Security Committee Chairman Ron Johnson (R-WI) had requested the investigation last year, after whistleblowers reported that Wertheimer suppressed a report finding inadequacies in its supervision of Fannie Mae and Freddie Mac. The IG Council is also reportedly investigating allegations that Wertheimer coerced auditors to take buyouts, cutting the office of audit’s staff from 32 to 16, following complaints from FHFA Director Watt.
Fannie, Freddie report net income of $7 billionFannie Mae and Freddie Mac reported strong business revenues in the second quarter of 2018, with Fannie Mae earning net income of $4.5 billion and Freddie Mac netting $2.5 billion. Most of these funds will be turned over to the Treasury as dividends; Fannie Mae expects to pay the Treasury $4.5 billion by September 30, while Freddie will pay the Treasury $1.6 billion.
NCUA proposes delay, higher threshold for risk-based capital rule — The board of the National Credit Union Administration voted yesterday to propose a one-year delay on the effective date of its risk-based capital rule, and to raise the asset threshold for “complex credit unions” from $100 million to $500 million. The proposed change would exempt approximately 90 percent of credit unions from the risk-based capital rule. Under the proposed change, 98 percent of all complex credit unions would be considered well-capitalized under the proposed rule, but NCUA Board member Rick Metsger said the delay would give the NCUA time to finalize its systems, and give the “handful” of complex credit unions not already in compliance time to adjust their balance sheets.
Comment period extended for Fannie, Freddie proposed capital requirements — The deadline for comments on the Federal Housing Finance Agency’s proposed rule on Enterprise Capital Requirements has been extended 60 days, to November 16, in response to “the high level of interest in the proposed rule and requests from multiple stakeholders for more time to evaluate it.”
Next Week in Washington:
Both House and Senate are in recess next week.
The Ellis Insight. Jim Ellis reports on political news: 
Arizona:  Phoenix-based OH Predictive Insights for the local Phoenix ABC15 television news released a new Arizona Senate survey (7/23-25; 600 AZ likely general election voters; an additional 576 likely Republican primary voters) just as the candidates enter the last month of primary campaigning. According to OHPI, Rep. Kyrsten Sinema (D-Phoenix) would lead Rep. Martha McSally (R-Tucson), 48-44%, if the general election were in the current period and the Tucson Congresswoman wins the Republican nomination on August 28th. In their last public offering of this race, published in April, the research organization projected Rep. Sinema to have a 48-42% margin over Rep. McSally.
In the Republican primary, Ms. McSally tops former state Senator Kelli Ward and ex-Maricopa County Sheriff Joe Arpaio, 35-27-15%. The Arizona race is one of the keys toward determining which party will control the Senate in the next Congress. Sen. Jeff Flake (R) is retiring after one term.
Michigan:  In the close Michigan US Senate Republican primary contest, President Trump announced his official support for retired Army Ranger and manufacturing company owner John James, as he battles venture capitalist Sandy Pensler for the party nomination. Polls have projected a tight race, so the Trump endorsement could make a significant difference in the final totals.

The move may already be having an effect. According to a new MIRS/Mitchell Research small-sample flash poll (7/30; 413 MI likely Republican primary voters) finds Mr. James now taking a substantial 44-30% lead over Mr. Pensler. Previously, Pensler had led in virtually every statewide survey. The winner faces an uphill climb against three-term incumbent Debbie Stabenow (D). The Wolverine State primary is scheduled for August 7th
Texas:  The new Quinnipiac University poll (7/26-31; 1,118 TX registered voters) shows the already competitive Texas US Senate race getting tighter. According to the new Texas Q-Poll, Sen. Ted Cruz (R) leads Rep. Beto O’Rourke (D-El Paso), 49-43%, which again projects the race to be in single digits. Sen. Cruz’s personal favorability ratio is 50:42% favorable to unfavorable. Rep. O’Rourke, though not as well known, posts a similar 33:23% index. 
FL-16:  A new St. Pete Polls study (7/28; 681 FL-16 likely voters via automated response device) finds six-term Congressman Vern Buchanan (R-Sarasota) leading attorney David Shapiro, his probable Democratic opponent, by a ten-point margin, 44-34%. The 16th district is a reliable Gulf coast Republican seat, but the GOP did lose a key special state Senate election within the district confines earlier in the year. Therefore, this gives Democrats hope that they can build upon such success and seriously challenge Mr. Buchanan in the fall. The St. Pete data again suggests that the Congressman is in relatively strong political shape, and having millions of dollars at his personal disposal means he will never be without the resources to adequately communicate his political message in order to drive Republican turnout.

IL-6:  Victory Communications conducted an independent survey of the hotly contested 6th Congressional District campaign (7/23-25; 600 IL-6 likely general election voters) and found 12-year incumbent Rep. Peter Roskam (R-Wheaton) leading businessman and climate change activist Sean Casteel (D) in the Chicago suburban area campaign. The poll finds 44% of the respondents supporting Rep. Roskam, while 37% back Democratic challenger Casteel. The Congressman’s personal favorability index ratio was recorded at 47:37% positive to negative.
MA-7:  Boston City Councilor Ayanna Pressley is challenging 20-year incumbent Mike Capuano (D-Somerville) in the September 4th Democratic primary. While she earned a high profile endorsement from Attorney General Maura Healey (D) this week, a new WBUR public television poll (7/27-29; 403 MA-7 likely Democratic primary voters) finds Rep. Capuano topping Ms. Pressley, 48-35%. 
MI-13:  John Conyers III announced, after his father resigned from Congress last December, that he would run for the vacated Detroit-anchored congressional seat that John Conyers Sr. had held since 1965. But he was disqualified from participating in the Democratic primary because he failed to submit the required number of valid petition signatures. Mr. Conyers just recently announced that he would run as an Independent after a court upheld the County Clerk’s original primary election ruling. Now, he has been bounced again. Wayne County Clerk Cathy Garrett announced that Conyers does not qualify to run as an Independent because he entered the Democratic primary. Therefore, the state’s “sore loser” law prevents him from appearing on the general election ballot. 
OH-12:  With the August 7th special election fast approaching to replace resigned Rep. Pat Tiberi (R), Gov. John Kasich (R) has taken to the airwaves to appear in a new commercial backing Republican nominee Troy Balderson, a Zanesville state Senator. A new Public Policy Polling survey was also released. According to the PPP figures (7/27-29; 617 OH-12 likely special election voters), Sen. Balderson has a 48-44% lead over Franklin County Recorder Danny O’Connor (D). After the PPP data became public, Monmouth University put forth their polling results (7/26-31; 512 OH-12 likely special election voters) showing a closer 44-43% result in the Republican’s favor. For the cycle, all eight polls conducted for the race find Balderson leading the race, but none project him reaching the 50% plateau.
OK-1:  With former Rep. Jim Bridenstine (R-Tulsa) accepting a position in the Trump Administration and resigning from Congress, the Tulsa-anchored 1st Congressional District is vacant. Attracting a field of five Republicans and five Democratic candidates for the safe Republican seat, the June 26th primary produced a secondary GOP run-off election featuring former Tulsa County District Attorney Tim Harris and businessman Kevin Hern.
Now, with the August 28th run-off now less than a month away, a new Newson6-Oklahoma Sooner Poll (7/24-29; 811 OK-1 likely Republican run-off voters) finds Mr. Harris posting a 38-26% advantage over Mr. Hern. The original primary election yielded a 27-23% Harris-Hern first and second place finish, which advanced both into the run-off. For the Democrats, attorney Tim Gilpin and oil business analyst Amanda Douglas are also embroiled in a run-off election, but no polling numbers were released for this contest.
Polling Trilogy:  The Freedom Business Alliance, an outside organization supporting net neutrality, released polls in each of three key congressional districts. The survey research firm IMGE Insights conducted all of the polls during the July 9-12 period. Questions about net neutrality and the FCC action taken last year regarding the subject were posed to sampling groups in individual CDs. The respondent total in each of three isolated districts is 400 likely voters. The states have already held their primary elections, so the tested candidates are official nominees.
CA-25:   In the race featuring Rep. Steve Knight (R-Palmdale) and non-profit organization executive Katie Hill (D), the two candidates were tied at 47% apiece.
CO-6:  An almost identical result was found in the contest between Rep. Mike Coffman (R-Aurora) and attorney Jason Crow (D). Here, both men posted 45% total support.
NY-19:   Another close contest is also developing in the rural Upstate New York district between Rep. John Faso (R-Kinderhook) and attorney Antonio Delgado (D). In this contest, Rep. Faso recorded a 49-44% edge.
Alabama:  Gov. Kay Ivey (R), running for her first full term after ascending to the Governorship when former incumbent Robert Bentley (R) was forced to resign in April 2017, has opened up a substantial lead in a new Cygnal Poll (7/24-25; 1,027 AL likely general election voters). According to the Cygnal data, Gov. Ivey leads Tuscaloosa Mayor Walt Maddox (D), 56-42%. 
Florida:  Before billionaire former US Senate candidate Jeff Greene became an active Democratic gubernatorial candidate, Miami Beach Mayor Philip Levine appeared to have an advantage over former US Rep. Gwen Graham (D-Tallahassee). A new St. Pete Polls automated survey (7/30-31; 1,652 FL likely Democratic primary voters) finds Ms. Graham again holding down first place with 29%, and this time Mr. Greene follows at 23%. Mayor Levine drops to third place with 19%, and Tallahassee Mayor Andrew Gillum posts 12% support. 
Another new twist just occurred. Sen. Bernie Sanders (I-VT) just endorsed Mayor Gillum, so could this help him move up in the field and possibly challenge for the lead? With the Florida primary scheduled for August 28th, this new month promises to bring intense political action as the many candidates fight through to the coming Election Day.
Hawaii:  Aloha State Gov. David Ige (D) appears poised to make an epic comeback in his Democratic primary battle with US Rep. Colleen Hanabusa (D-Honolulu). Earlier in the cycle, Gov. Ige trailed by as much as 29 points with a support figure under 25%, but now the Merriman River Group (7/19-21; 871 HI likely Democratic primary voters) finds that he has eclipsed the polling deficit and more. According to the MRG results, as the two candidates trade political punches nearing the August 11th primary election date, Gov. Ige now leads the contest, 43-34%. 
Illinois:  Illinois voters aren’t very happy. In a new Illinois Public Opinion, Inc. small-sample poll (7/12; 423 IL likely general election voters; via automated response device) gives both gubernatorial candidates and President Trump poor approval ratings. Doing the worst is Gov. Bruce Rauner (R), who records a terrible 27:62% favorability index. But his Democratic opponent, venture capitalist J.B. Pritzker, posts a 29:44%, also well below the average ratio. President Trump’s index is 38:55%. With that background, Mr. Pritzker leads Gov. Rauner on the ballot test, 39-26%. He is favored to unseat the first-term incumbent in November. 
Kansas:  A new JMC Analytics survey (7/24-26; 500 KS likely Republican primary voters, including some who have already cast early ballots) finds new Gov. Jeff Colyer trailing Secretary of State Kris Kobach as the candidates enter the last full week of campaigning before the August 7th primary election. According to the poll, Mr. Kobach has opened a 34-25-11-8% GOP primary advantage over Gov. Colyer, former state Sen. Jim Barnett, and state Insurance Commissioner Ken Selzer, respectively. Gov. Colyer, originally elected Lt. Governor, ascended to the state’s top position in January when then-incumbent Sam Brownback (R) resigned to accept a position in the Trump Administration.
Tennessee:  Rising above the fray of attacks between Rep. Diane Black (R-Gallatin) and former state Economic Development Commissioner Randy Boyd, businessman Bill Lee came from the outside to win the Tennessee gubernatorial Republican nomination, with a 37-24-23% win over Mr. Boyd and Rep. Black, respectively. Considering the way Tennessee has voted in the recent past, the GOP nomination is now tantamount to winning the general election. This gives Mr. Lee the inside track against former Nashville Mayor Karl Dean, who easily defeated state House Minority Leader Craig Fitzhugh (D-Ripley), 75-20%. 
Texas:  Contrasting the aforementioned Quinnipiac University Texas poll (see Texas Senate above), Gov. Greg Abbott (R) is expanding his lead over former Dallas County Sheriff Lupe Valdez (D). The Q-Poll projects the Governor’s advantage to be 51-38%, and he leads in all age and gender categories. He trails among African Americans and Hispanics. The Governor’s approval rating is 51:32%, while Ms. Valdez’s ratio is already an underwhelming 25:20%. While Gov. Abbott’s favorability rating is just slightly better than Sen. Ted Cruz’s, his negatives are much lower. Cruz’s unfavorable mark is a full ten points higher than Mr. Abbott’s.

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