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

December 7, 2018

Fair winds and following seas — Washington said goodbye to President George H.W. Bush this week. President Bush died in Houston last Friday night, and lay in state in the Capitol Rotunda from Monday evening until his funeral on Wednesday morning. We honor his service and his legacy.

President George H.W. Bush signs the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).
Congress pushes continuing resolution to December 21 — Yesterday the House and Senate approved a two-week extension to the continuing resolution keeping the government running. Although Congress has approved 2019 spending bills for much of the government, it has yet to reach agreement on the authorizations for Agriculture, Commerce-Justice-Science, Financial Services, Homeland Security, Interior-Environment, State-Foreign Operations, and Transportation-HUD. The National Flood Insurance Program is part of the package requiring action.
FDIC announces multiple initiatives to streamline applications for de novo banks — “The FDIC wants to see more de novo banks,” Chairman Jelena McWilliams said this week, unveiling a set of actions designed to encourage new applications for deposit insurance and simplify the process. The FDIC published a Request for Information to seek comment on the deposit insurance application process, including feedback on FDIC practices that may discourage potential applications, and whether emerging technology and fintech companies should apply for federal deposit insurance. The agency has also updated its Applying for Deposit Insurance handbook and its Deposit Insurance Applications Procedures Manual.
Banking agencies encourage innovation in BSA/AML compliance — The FDIC, Federal Reserve, FinCEN, the NCUA, and the OCC issued a joint statement on Monday to encourage banks to consider and “responsibly implement” innovative approaches to Bank Secrecy Act and Anti-Money Laundering compliance. While regulators will not criticize banks for not adopting these approaches, the joint statement commends banks for experimenting with the use of artificial intelligence and digital identity technology to fight money laundering. Banks that want to launch pilot programs to test new approaches will not be penalized even if these pilot programs prove unsuccessful.
Federal Reserve, OCC join FDIC in seeking comment on appraisal threshold increase — The federal banking agencies published a joint notice of proposed rulemaking and request for comment this week on raising the threshold for residential real estate appraisals from $250,000 to $400,000. The FDIC Board voted to propose the change last week. The proposal would also exempt certain rural properties from appraisal requirements, as directed by the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018.
Senate Banking hears testimony on proxy reform — As the Securities and Exchange Commission digests the feedback it got at last month’s roundtable on the proxy process, the Senate Banking Committee heard testimony yesterday on whether and which reforms are needed. Senator Jack Reed (D-RI) introduced S. 3614, the Corporate Governance Fairness Act, last month with co-sponsors Senators David Perdue (R-GA), Doug Jones (D-GA), Thom Tillis (R-NC), Heidi Heitkamp (D-ND) and John Kennedy (R-LA). The bill would require proxy advisory firms to register with the SEC as investment advisors.
Nonbank mortgage lender agrees to penalties for deception — The Bureau of Consumer Financial Protection (BCFP) filed a complaint and a stipulated final judgment this week against Village Capital & Investment LLC, a Nevada-based nonbank mortgage lender. Without admitting guilt, Village Capital agreed to pay $268,869 in redress to consumers and a civil penalty of $260,000. The BCFP alleged that Village Capital misled veterans by overstating the benefits of refinancing their mortgages.
Appointments and confirmations — The Senate voted 50-49 on Thursday to confirm Kathleen Kraninger to a five-year term as Director of the Bureau of Consumer Financial Protection. The Senate will vote next week, possibly as early as Monday, on the nomination of Justin Muznich to be Deputy Secretary of the Treasury. President Trump announced today that he will nominate William P. Barr to serve as Attorney General; Barr previously held that position under President George H.W. Bush.
Next Week in Washington:
Several of the hearings scheduled for this week were postponed because of the national day of mourning for President Bush, so some items on this calendar may look familiar.
December 11             House Financial Services Committee holds a hearing entitled, “The National Debt: Washington, We Have a Spending Problem.” 10:00 a.m., 2128 Rayburn House Office Building.
December 11             Senate Banking Committee holds a hearing on oversight of the Securities and Exchange Commission. 10:00 a.m., SD-538 Dirksen Senate Office Building.
December 11             House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing to assess the impact of FASB’s Current Expected Credit Loss (CECL) accounting standard on financial institutions and the economy. 2:00 p.m., 2128 Rayburn House Office Building.
December 12             House Financial Services Subcommittee on Monetary Policy and Trade holds a hearing on “Evaluating the Effectiveness of the International Financial Institutions.” 10:00 a.m., 2128 Rayburn House Office Building.
December 12             House Education and the Workforce Subcommittee on Workforce Protections holds a hearing on “Mandating a $15 Minimum Wage: Consequences for Workers and Small Businesses.” 10:00 a.m., 2175 Rayburn House Office Building.
The Ellis Insight. Jim Ellis reports on political news: 
Gov. Inslee:  As a plethora of Democratic political figures begin to make statements and initiate moves toward the 2020 presidential race, several took a definitive step early this week. One of them, two-term Washington Governor and ex-US Congressman Jay Inslee (D), formed a federal political action committee that could be the first step in his making a formal move into the presidential contest. 
Of the 30 potential candidates who have at least acknowledged considering the race, five are Governors or former Governors. The sitting incumbents in addition to Gov. Inslee are Govs. John Hickenlooper (CO) and Steve Bullock (MT). The former state chief executives are Terry McAuliffe (VA), and Deval Patrick (MA).
Ex-Gov. Patrick:  Though 30 individuals are still expressing interest in entering the 2020 presidential campaign, one Democrat who won’t be joining them is Massachusetts former two-term Gov. Deval Patrick. Earlier this week, Mr. Patrick made public his intentions not to become a candidate. The decision surprised many observers as most believed the former Bay State chief executive was making moves to enter the race. 
Sen. Merkley:  Attempting to follow Sen. Cory Booker’s (D-NJ) lead in changing state law to allow an individual to run simultaneously for different offices, Sen. Jeff Merkley (D-OR) is not finding the same reception among Oregon political leaders as Mr. Booker did in New Jersey. 

Asked whether the state legislature will move on legislation to, in this case, allow Mr. Merkley to run for President as he seeks re-election to the Senate, the state Senate President and House Speaker, according to local publication Willamette Week, respectively did not respond to inquiries and said that she doesn’t currently have a position on the issue.
But, Gov. Kate Brown’s (D) spokesperson was a bit more definitive when she said, “Gov. Brown’s current focus is on helping Oregon families thrive and working with legislators, stakeholders, and community members on her budget and policy agenda, which does not include a proposal for legislation on this topic.”
Arizona:  Grand Canyon State Gov. Doug Ducey (R), fresh from winning a landslide election to a second term, stated yesterday that he will not be a US Senate candidate in 2020, and that he intends to serve his entire second term. 
Appointed Sen. Jon Kyl (R) is likely to soon leave his interim post, since he committed only to serving to the end of 2018 when accepting Gov. Ducey’s short-term appointment after incumbent Sen. John McCain (R) passed away in late August. Once Mr. Kyl departs, Gov. Ducey will name a replacement who could presumably run in the 2020 special election to serve the balance of the McCain term. 

The seat next comes before the voters for a full term in 2022. Some believed that the Governor would appoint another caretaker officeholder at which point he would run himself. But, such will not be the case.
Georgia:   Columbus Mayor Teresa Tomlinson (D) is confirming that she is considering challenging Sen. David Purdue (R) when her term expires in January. Ms. Tomlinson was first elected to lead the city of approximately 195,000 people in 2010, becoming the first female Mayor in Columbus’ history. She was re-elected in 2014, but is ineligible to seek a third term in this election year. 
Ms. Tomlinson qualified her Senate consideration, however, indicating she would yield to gubernatorial nominee Stacey Abrams if the latter woman chooses to run. For her part, Ms. Abrams, while confirming she wants to run for office again, says she wants to spend next year as a “private citizen.” In 2014, Mr. Purdue scored a 53-45% win over Michelle Nunn (D), the daughter of former Sen. Sam Nunn (D). 
Mississippi:  Former US Agriculture Secretary and ex-Mississippi Congressman Mike Espy’s 54-46% loss to Sen. Cindy Hyde-Smith (R) is not yet two weeks old, but he has already made a political decision for 2020. Mr. Espy just formed a campaign committee for the next election cycle, meaning we will likely see a re-match of the contest just ended.
CA-21:  Though California Rep. David Valadao (R-Hanford/Bakersfield) had been projected as the winner, the state’s marathon post-election day counting process has produced a different outcome. Now falling behind by 862 votes with still some more provisional ballots to count, Rep. David Valadao (R-Hanford/Bakersfield) conceded defeat to Democrat T.J. Cox, finally closing a race that had been left undecided since election night.
The Cox victory now makes the final pre-commencement count, 235 Democrats, 199 Republicans, with one seat, NC-9, very possibly headed to a new election because of a certification deadlock. Republicans have now been decimated in the 53-member California delegation, trailing the Democrats 46-7.
CA-52:  Political rumors are surfacing in San Diego that four-term US Rep. Scott Peters (D) may decide not to seek re-election in 2020 so he can enter the open Mayor’s race. Republican incumbent Kevin Falconer is ineligible to seek a third term, so the Mayor’s position is guaranteed to be open. Before coming to Congress, Mr. Peters served as president of the City Council. 
The 52nd District began the decade as a swing seat that saw Mr. Peters winning by very close margins. Over the succeeding elections, however, the Congressman has secured the seat and it remains to be seen if Republicans can again become competitive here before the next redistricting should the district open.
NC-9:  The North Carolina Board of Elections, on a 7-2 vote last Friday, again refused to certify Republican Mark Harris’ 905 vote victory over Democrat Dan McCready postponing a further review until December 21st. The problem revolves around what some Board members are claiming “irregularities” in one county. 
Much of the controversy concerns a large number of absentee ballots requested but not returned, and other unexplained issues. The problem is that a state court has already ruled the composition of this Board to be unconstitutional and is scheduled to dissolve on December 12th

Therefore, it appears that finding a solution to this situation will likely require a great deal of time through what will likely be several legal venues. It appears very possible that no one will be sworn in from this district on January 3rd and holding a new election could become the ultimate solution.
Indiana:  Though he has yet to publicly respond, many Indiana Democratic Party leaders are already encouraging defeated Sen. Joe Donnelly (D) to challenge first term Gov. Eric Holcomb (R) in 2020. Mr. Holcomb, who had been appointed Lt. Governor less than a year before the previous general election, won a 51-45% victory over former state House Minority Leader John Gregg (D) in 2016. 

For his part, Mr. Gregg, who was also the party nominee in 2012 when then-US Rep. Mike Pence (R) slipped past him, 49-47%, confirms that he is considering making another run for the state’s highest office.
Kentucky:  Former congressional candidate Amy McGrath, the Democratic retired Army helicopter pilot who raised over $7 million in an unsuccessful attempt to unseat Rep. Andy Barr (R-Lexington), is considering entering next year’s Governor’s race but may face an obstacle even if she decides to move forward. 
Kentucky law requires gubernatorial candidates to be residents of the state for the previous six years before running, and though Ms. McGrath has maintained an address there since 1995, she has not necessarily lived in Kentucky for the entire time, some of which was due to military service. But, when comparing similar past court rulings, maintaining an address in the state, voting, and paying state taxes during times of extended absence may not be enough to meet the state’s residency standards.
Gov. Matt Bevin (R) is seeking a second term. Attorney General Andy Beshear (D) and state House Minority Leader Rocky Adkins (R-Sandy Hook) are already announced Democratic candidates. Ms. McGrath’s strong fundraising ability and name ID as a result of her high profile but losing campaign makes her a viable potential statewide candidate, even against established Democratic primary opposition.
Louisiana:  US Sen. John Kennedy (R) was expected to make an announcement on Monday of this week proclaiming his challenge to Gov. John Bel Edwards (D) in next year’s Louisiana gubernatorial election. Instead, however, Sen. Kennedy stated that the best way for him to best serve Louisiana is to remain in the US Senate. Therefore, even though he wouldn’t have to risk his Senatorial position to run for Governor, Mr. Kennedy will let the opportunity of forcing a race against Gov. Edwards pass.
US Rep. Ralph Abraham (R-Alto/Monroe) then announced his statewide candidacy as expected, joining developer Eddie Rispone as Republican candidates. On the other side of the spectrum, Lt. Gov. Billy Nungesser (R) announced that he will not run for Governor, presumably in order to seek re-election for a second term in his current position. 
The big unanswered question seems to surround whether Attorney General Jeff Landry (R) will change his mind about seeking re-election now that Sen. Kennedy is out of the Governor’s race and Abraham and Rispone are in. Early signals suggest that he may be again readying himself to enter the race. State Treasurer John Schroder also confirms that he is considering becoming a gubernatorial candidate. 
Mississippi:  The open Mississippi Governor’s race is beginning to attract a lot of attention on the eve of the new election year. While Lt. Gov. Tate Reeves (R) is said to be less than a month away from announcing his presumed candidacy, state Rep. Robert Foster (R-DeSoto County), who was originally elected in 2017, says he is strongly considering entering the Governor’s race and appears to have no trepidation about running against Mr. Reeves.
On the Democratic side, Attorney General Jim Hood (D) is an official candidate and looks to be drawing some intra-party opposition. Velesha Williams, the former director of the Metro Jackson Community Prevention Coalition, announced her candidacy early this week. Magnolia Mayor Anthony Witherspoon also confirms that he, too, is considering entering the Democratic gubernatorial primary.

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