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THE GOLDEN APPLE: Your report on the latest discord from The Eris Group
June 29, 2018
The Golden Apple will not be published on Friday, July 6, and Eris’s offices will be closed on Wednesday, July 4th. We wish you and yours a safe and happy Independence Day.

Asteroid Lutetia, photographed by Rosetta
Happy Asteroid Day — Tomorrow is the fourth annual International Asteroid Day, co-founded by the astrophysicist Dr. Brian May, formerly of the rock band Queen (no, we are not making this up), to increase the asteroid discovery rate to 100,000 a year in the next ten years. More than a million asteroids have the potential to hit the earth, but scientists have discovered only about one percent of them. Early warning can help save the planet from a devastating impact, scientists say. Because, you know, we didn’t have enough to worry about.
Kennedy announces retirement — Supreme Court Justice Anthony Kennedy announced on Wednesday that he will retire from the Court on July 31. Kennedy has spent 30 years on the Supreme Court, appointed in 1988 by President Ronald Reagan. “Justice Kennedy taught collegiality and civil discourse by example,” said Chief Justice John Roberts, while Justice Ruth Bader Ginsburg called him, “a true gentleman, a caring jurist, and a grand colleague in all respects.”
Supreme Court rules for AmEx in antisteering case — The week began with the Supreme Court finding in favor of the defendant in Ohio v. American Express Co. et al., a suit that charged American Express with antitrust violations because of its vendor agreements that prohibit merchants from steering customers to lower-fee cards. “Amex’s increased merchant fees reflect increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price,” the Court ruled.
House passes CFIUS reform — The House of Representatives voted 400-2 on Tuesday to approve H.R. 5841, the Foreign Investment Risk Review Modernization Act (FIRRMA), sponsored by Rep. Robert Pittenger (R-NC). FIRRMA would close jurisdictional loopholes for the Committee on Foreign Investment in the United States (CFIUS), giving it broader authority to review foreign investments for national security risks, and clarify terminology involving critical technologies and infrastructure.
Senate votes to reauthorize flood insurance — The farm bill passed by the Senate this week, H.R. 2, includes a six-month reauthorization of the National Flood Insurance Program. The program is scheduled to expire on July 31; with the farm bill heading to conference, Senators are already looking for other ways to pass an extension if the conference hasn’t ended by then. Senators John Kennedy (R-LA) and Bill Cassidy (R-LA) have introduced the extension as a standalone bill.
Rettig promises independence if confirmed to IRS — At a cordial confirmation hearing on Thursday, Charles P. Rettig told the Senate Finance Committee that he hoped everyone would see him as “staunchly independent” if confirmed as Commissioner of the Internal Revenue Service. He promised to be a vocal advocate for the strength of IRS’s enforcement mechanisms, but said that the agency would focus on issuing “clear, timely, succinct guidance” on changes related to the new tax laws, especially in the area of passthroughs for small business. Committee Chairman Orrin Hatch (R-UT) said he hoped to vote on Rettig’s nomination as quickly as possible.
Revised manufactured housing rules should be out by year-end, Carson says — Appearing before the House Financial Services Committee on Tuesday, Secretary of Housing and Urban Development Ben Carson agreed that the regulatory burden on manufactured housing “has been absolutely ridiculous.” Carson noted that manufactured housing comprises 10% of the nation’s single-family homes, and said that the agency is continuing its work on revising HUD’s manufactured housing rules. He told the Committee to watch for new rules before the end of 2018, with significant reductions in regulatory burden. Carson stressed the need to modernize the FHA’s information technology system; Chairman Jeb Hensarling (R-TX) asked whether the FHA might be able to import platforms from Fannie Mae and Freddie Mac; Carson said he would not object to this.
Ripple effect of de-risking may cause international instability — Witnesses told the House Financial Services Subcommittee on Financial Institutions and Consumer Credit on Tuesday that US banks’ decision to end relationships or reduce services to customers they perceive as high money-laundering risks is causing serious stress to businesses and governments that rely on these services. Despite the end of the FDIC’s Operation Chokepoint, a disconnect remains between agency policy and examiner practices, witnesses said, and businesses and nonprofits operating in areas of conflict are having an especially hard time getting access to money transmitter services. Sally Yearwood, Executive Director of Caribbean-Central American Action, noted that US remittances form a substantial percentage of Haiti’s GDP, and reductions in these payments raise the risk of crime and political instability.
Senate Banking reviews capital access proposals — Making it easier for startups to reach angel investors and rescinding the SEC’s floating NAV rule were two of seven bills discussed at a Senate Banking Committee hearing on Tuesday. While S. 2155 sought to provide regulatory burden relief to community and regional banks, Senator Thom Tillis (R-NC) noted, the bills considered this week would offer relief for newer companies and smaller businesses. While the number of public companies has fallen considerably and the number of IPOs remains stagnant, Professor Mercer Bullard of the University of Mississippi noted that that total capital represented by US companies continues to increase, and US capital markets remain the global standard.
Fed issues passing grades on stress tests, with one exception — The Federal Reserve System announced yesterday that 34 financial firms had passed their annual Comprehensive Capital Analysis and Review (CCAR), but one, DB USA, had not. Eighteen of the largest and most complex banks were subject to both quantitative and qualitative analyses, while 17 were subject only to quantitative analysis. Objections to DB USA’s capital plan were based on qualitative concerns about material weaknesses in the bank’s data capabilities and controls, and weaknesses in the approaches and assumptions used to forecast revenues and losses under stress. The Fed issued conditional non-objections to Goldman Sachs and Morgan Stanley, requiring them to maintain capital distribution at the levels of recent years, and to State Street Corporation, requiring it to take certain steps to limit its counterparty exposures under stress.
Agencies seek comment on living will guidance — Today the FDIC and Federal Reserve System published a request for comment on proposed guidance for the “living wills” to be submitted by the eight largest complex financial institutions for 2019 and onward. The guidance calls for these plans to cover six areas: capital, liquidity, governance, operations, legal entity rationalization and separability, and derivatives and trading activities. The proposed guidance tracks the 2016 guidance, but would update the areas dealing with derivatives and trading activities (DER) and payment, clearing, and settlement activities. Comments are due 60 days after the proposal appears in the Federal Register.
SEC expands qualifications for scaled disclosure — The Securities and Exchange Commission (SEC) approved amendments yesterday that will expand the definition of “smaller reporting company” for purposes of qualifying for certain scaled disclosure requirements. The new definition will allow companies with less than $250 million of public float, and companies with less than $100 million in annual revenues with a public float that is less than $700 million, to provide scaled disclosures. The new definition does not change the threshold for “accelerated filer,” but Chairman Clayton has directed SEC staff to look at the issue.
CFTC, SEC sign new agreement on regulating swaps — Yesterday the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) announced a new Memorandum of Understanding (MOU) that specifically addresses the regulatory regime for swaps and securities-based swaps. The MOU seeks to harmonize the agencies’ Title VII rules, to “enhance our oversight efforts and reduce unnecessary complexity,” said CFTC Chairman J. Christopher Giancarlo.
Senate Democrats call for updates to SEC buyback rules — Twenty-one Democratic Senators, led by Senators Tammy Baldwin (D-WI), Chris Van Hollen (D-MD), and Charles Schumer (D-NY), wrote to SEC Chairman Jay Clayton this week to urge him to update Rule 10b-18, which governs stock buybacks. “While we are troubled by the magnitude of stock buybacks and the consequences for employees and communities,” they wrote, “we are even more disturbed by the dramatic increase in stock sales by corporate insiders following the announcement of a buyback.” They asked Clayton to open a public comment period to review the rules.
SEC announces four regional investor roundtables — As part of his stated intention to focus on “Mr. and Ms. 401(k),” SEC Chairman Jay Clayton and senior SEC staff will conduct four investor roundtable discussions around the country in July. These meetings are open to retail investors who work with a financial professional and have no affiliation with the financial services industry. They will take place in Miami, FL on July 9; in Washington, DC on July 12; in Philadelphia, PA on July 17; and in Denver, CO on July 25. Participants will receive background documents and a feedback form that asks what they think about the summary that describes their relationship with their investment professional.
Next Month in Washington:
Congress is in recess next week, and will return on July 10. Barring anything totally unforeseen, The Golden Apple will take next week off. But here’s what we know about the month ahead:
July 4              Independence Day. See for details.
July 9              SEC conducts a roundtable discussion to solicit feedback from retail investors about their investment experience. 2:00 p.m., University of Miami Founders Hall, Miami, FL; RSVP to Angela Cruz at or at (305) 284-6554
July 12            Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “An Overview of Credit Bureaus and the Fair Credit Reporting Act.” 10:00 a.m., SD-Dirksen Senate Office Building.
July 12            SEC conducts a roundtable discussion to solicit feedback from retail investors about their investment experience. 10:30 a.m., US Securities and Exchange Commission, 100 F St NE, Washington, DC; RSVP to Suzanne McGovern at or (202) 551-6459
July 17            Senate Banking Committee holds a hearing on “The Semiannual Monetary Policy Report to Congress.” Federal Reserve Board Chairman Jerome H. Powell will be the only witness. 10:00 a.m., SD-538 Dirksen Senate Office Building.
July 17            SEC conducts a roundtable discussion to solicit feedback from retail investors about their investment experience. 11:00 a.m., US Securities and Exchange Commission, Philadelphia Regional Office, 1617 John F. Kennedy Blvd., Suite 520, Philadelphia, PA; RSVP to Suzanne McGovern at or (202) 551-6459
July 19            Senate Banking Committee holds a hearing on the nominations of Kathleen Laura Kraninger to be Director of the Bureau of Consumer Financial Protection and Kimberly A. Reed to be President of the Export-Import Bank. 10:00 a.m., SD-538 Dirksen Senate Office Building
July 24            Senate Banking Committee will conduct a hearing on the nominations of Elad L. Roisman to serve as a member of the Securities and Exchange Commission and Michael R. Bright to be President of the Government National Mortgage Association. 10:00 a.m., SD-538 Dirksen Senate Office Building
July 25            SEC conducts a roundtable discussion to solicit feedback from retail investors about their investment experience. 10:00 a.m., US Securities and Exchange Commission, Denver Regional Office, Byron G. Rogers Federal Building, 11961 Stout St, Suite 1700, Denver, CO; RSVP to Suzanne McGovern at or (202) 551-6459
The Ellis Insight. Jim Ellis reports on political news: 
Arizona:  CBS News and the YouGov polling organization teamed up to survey a potential general election campaign pitting US Rep. Kyrsten Sinema (D-Phoenix) against the three Republican candidates. The Arizona poll (6/19-22; 1,001 AZ registered voters) finds Ms. Sinema leading Rep. Martha McSally (R-Tucson), 45-37%. If former state Sen. Kelli Ward were the Republican nominee, Rep. Sinema’s lead is a similar 46-38%. Former Maricopa County Sheriff Joe Arpaio fares the worst. Against Rep. Sinema, he would trail 49-29%. Marist College found similar results from their June 17-19 poll of 839 AZ registered voters. Against Rep. McSally, the Sinema advantage is 49-38%. Opposite former state Sen. Ward the lead is an almost identical 48-38%. And, as found in CBS/YouGov, the Sinema lead over ex-Sheriff Arpaio is stronger. In Marist, the spread becomes 57-32%. The Arizona primary is August 28th.
California:  No Golden State US Senate poll has ever depicted Sen. Dianne Feinstein (D) as trailing in her bid for re-election, yet the five-term Senator has also never reached majority support. This includes the actual California jungle primary vote where she took 44% against 31 opponents from all parties. The new Survey USA poll, though with a small sample of just 559 likely statewide general election voters (6/26-27), finds Ms. Feinstein holding a 46-24% lead over fellow Democrat Kevin de Leon, a Los Angeles state legislator and former state Senate President. Though Sen. Feinstein is showing some weakness, it is unlikely that Mr. de Leon will have the necessary resources to run a winning campaign.
Florida:  Over the past six weeks, several polls have been conducted of the toss-up Sunshine State Senate race, and now we see another where the two candidates are virtually tied. Public Policy Polling, surveying for the EDGE Communications group (6/18-19; 1,308 FL registered voters; automated), finds Sen. Bill Nelson (D) leading Gov. Rick Scott (R), 48-46%. A day later, CBS News/YouGov released their poll (6/19-22; 1,002 FL registered voters) that found Gov. Scott in a much better position, leading with a 46-41% advantage. But, Marist College (6/17-21; 947 FL registered voters) saw Sen. Nelson rebound, as he posted a 49-45% margin in their newly released survey.
Ohio:  The third Marist College poll, and one that CBS/YouGov did not previously survey, is of the Ohio electorate. Here (6/17-22; 778 OH registered voters), Marist found Sen. Sherrod Brown (D) topping Rep. Jim Renacci (R-Wadsworth), 51-38%. This margin is consistent with other previously conducted and released surveys.
Texas:  The last of the released CBS News/YouGov polls surveyed the Texas electorate, tested Sen. Ted Cruz (R) and US Rep. Beto O’Rourke (D-El Paso), the respective Republican and Democratic US Senate nominees. According to this poll (6/19-22; 1,030 TX registered voters), Sen. Cruz has a 50-40% advantage. This result is in line with many other released studies that find the Senator holding an advantage in a similar range.
Utah:  As expected, former presidential nominee Mitt Romney (R) won the US Senate primary nomination in last Tuesday’s Republican primary. Mr. Romney defeated state Rep. Mike Kennedy (R-Provo), 72-28%, and now becomes the prohibitive favorite defeat Salt Lake County Councilwoman Jenny Wilson, the Democratic nominee. 
West Virginia:  Public Policy Polling (6/12-13; 633 WV registered voters) released their new West Virginia poll that finds Sen. Joe Manchin (D) continuing to lead Attorney General Patrick Morrisey (R). The ballot test numbers give Sen. Manchin a 49-42% advantage. But, the office holder approval ratings prove interesting. While President Trump scores a 64:30% positive to negative ratio, he is the only tested political figure who lands in positive territory. Sen. Manchin scores only a 39:48% favorability index, but he is in better shape than Mr. Morrisey who posted a 30:44% ratio. Gov. Jim Justice (R) fares the worst, at 27:47% positive to negative. 
CA-48:  Three weeks after Californians voted in their jungle primary, a second place finisher in the state’s 48th District has finally been declared. Businessman Harley Rouda (D) will advance into the general election and oppose 15-term Rep. Dana Rohrabacher (R-Costa Mesa) in the general election. The final count gives Mr. Rouda a 126-vote lead, and the third place finisher, biomedical company CEO Hans Keirstead (D), announced that he will not ask for a re-count and has endorsed Mr. Rouda. The final uncertified account gives Mr. Rouda 30,099 votes as compared to Mr. Keirstead’s, 29,973. Rep. Rohrabacher finished first with 52,734 tallies. The 48th District jungle primary attracted 16 candidates. The race is rated as a Toss-up for the fall campaign.
CO-2:  In another primary race that produced an expected outcome, former University of Colorado Regent Joe Neguse easily won the Democratic primary with 67% of the vote. Mr. Neguse is now the prohibitive favorite to win the seat in November. He faces marketing executive Peter Yu in what has become a very safe Democratic district.
CO-5:  Six-term Rep. Doug Lamborn (R-Colorado Springs), who was originally disqualified from the ballot for lack of valid petition signatures only to have his status restored in court, easily won his heavily contested Republican primary. Mr. Lamborn received 52% of the vote against four Republican opponents including El Paso County Commissioner and former US Senate GOP nominee Darryl Glenn (20%), and state Sen. Owen Hill (18%). Rep. Lamborn is now a lock to defeat Baptist minister Stephany Spaulding in the general election.
MD-6:  After spending millions in the neighboring 8th District in the last election to finish second, Total Wine Store founder and CEO David Trone unleashed another $10 million in the adjacent open 6th District. This time the spending paid off, as Mr. Trone captured 40% of the vote, topping seven Democratic opponents. He now faces 2016 Republican nominee Amie Hoeber in the general election. Mr. Trone begins this campaign as the clear favorite to succeed retiring Rep. John Delaney (D-Potomac), who is intends to run for President.
MS-3:  In yet another race with a clear expected outcome, local District Attorney Michael Guest easily won the Republican run-off election (65-35%), defeating businessman Whit Hughes. Mr. Guest is a big favorite to hold the seat in the GOP column in November, and will replace the retiring Rep. Gregg Harper (R-Pearl/Jackson) with his predicted win in the general election.
NJ-7:  A newly released Greenberg Quinlan Rosner Research poll for Democratic candidate Tom Malinowski (6/20-25; 500 NJ-7 likely general election voters) finds the challenger ticking ahead of incumbent Rep. Leonard Lance (R-Clinton Township) by a 47-45% count. The Lance-Malinowski campaign is typically viewed as a toss-up election, and this poll certainly confirms such an assertion. Rep. Lance was first elected in 2008, and has averaged 57.5% of the vote over his four re-election campaigns. Mr. Malinowski is a former US Assistant Secretary of State (Obama) and National Security Council Member (Clinton). He won the Democratic primary on June 5th with 67% of the vote against two opponents.
NY-11:  The political backstreet brawl between Rep. Dan Donovan (R-Staten Island) and former Congressman and convicted felon Michael Grimm (R) ended with a clear victory for the incumbent. Mr. Donovan’s margin was 64-36%, and he is the heavy favorite to win a second full term in November.
NY-14:  One of the biggest primary upsets of the election cycle occurred on Tuesday when little known Alexandria Ocasio-Cortez upset ten-term Rep. Joe Crowley (D-Queens) in the Democratic primary. The 28-year old self-proclaimed Democrat-Socialist scored a 58-42% victory, but just 27,658 people voted in the party primary. It appears that Rep. Crowley could still enter the general election from the Working Families and Women’s Equality Parties, where he carries their ballot lines, but apparently will not do so. Mr. Crowley has already endorsed Ms. Ocasio-Cortez and says that Democrats need to unify in order to win in the fall. The Congressman is also the chairman of the powerful Queens County Democratic Party. Mr. Crowley is the third incumbent House member to lose a re-nomination campaign in this election cycle. The other two are Reps. Bob Pittenger (R-NC) and Mark Sanford (R-SC).
SC-1:  Just two weeks after state Rep. Katie Arrington (R-Summerfield) denied US Rep. Mark Sanford (R-Charleston) re-nomination in the Republican primary, she was seriously injured in a car accident that caused the person at fault to perish. Ms. Arrington is expected to fully recover from the crash, but will likely endure two surgeries and spend some time away from the campaign trail while she recuperates. In response, Democratic nominee Joe Cunningham said he would suspend his campaign efforts while Ms. Arrington begins the healing process. She is expected to win the seat in November and hold the seat in the Republican column.
SC-4:  Run-off elections were held in the Greenville-Spartanburg congressional district, with the GOP winner becoming the prohibitive favorite to succeed retiring Rep. Trey Gowdy (R-Spartanburg) in the fall. State Sen. William Timmons (R-Greenville) topped former state Senator Lee Bright with a 54-46% victory margin. He will now face university official and former congressional candidate Brandon Brown who easily won the low-turnout Democratic run-off.
VA-10:  A new Monmouth University poll (6/21-24; 400 VA “potential” voters) finds two-term Rep. Barbara Comstock (R-McLean) falling behind the new Democratic nominee, state Sen. Jennifer Wexton (D-Loudon). According to Monmouth’s likely voter model, challenger Wexton would lead incumbent Comstock, 50-41%. Among the full voter sample, the Wexton margin was 49-39%. 
Alaska:  Alaska Survey Research, polling for the Alaska Correctional Officers Association (6/15-21; 654 AK registered voters), released the first public poll of the state’s gubernatorial campaign after former Sen. Mark Begich (D) joined the candidate field. According to ASR, incumbent Gov. Bill Walker (I) drops to third place among three major contenders. For purposes of this poll, only former state Sen. Mike Dunleavy was tested for the Republicans. Neither ex-Lt. Gov. Mead Treadwell nor businessman Scott Hawkins was included in the ballot test questionnaire. That being the case, it is Mr. Dunleavy who takes first place with 38%, followed by former Sen. Begich who posted 33%, and Gov. Walker trailing badly with only 23% support.
Colorado:  US Rep. Jared Polis (D-Boulder) and state Treasurer Walker Stapleton won their respective Democratic and Republican gubernatorial primary campaigns on Tuesday. Mr. Polis defeated former state Treasurer and officially endorsed Colorado Democratic Party candidate Cary Kennedy by a 20-point margin. He captured 44.4% in the four-way primary vote. Mr. Stapleton received 48% in the Republican primary, defeating former state Rep. Victor Mitchell and two others. Gov. John Hickenlooper (D) is ineligible to seek a third term. Rep. Polis begins the general election contest as at least a slight favorite to win in November.
Maryland:  Former NAACP President Ben Jealous, in a Democratic primary that was marked by the death of one of the major contenders, Baltimore County Executive Kevin Kamenetz, won the party primary with 40% of the vote over eight opponents. He will now face popular Republican Gov. Larry Hogan in the fall. The Governor typically records the second best job approval ratings in the country, but Maryland’s Democratic nature will still make the general election competitive.
Ohio:  The previously mentioned Marist College Ohio poll (see Ohio Senate above) finds Republican Attorney General and former US Senator Mike DeWine topping former Attorney General Richard Cordray (D). According to Marist, AG DeWine leads Mr. Cordray, 46-42%, in the open race. Gov. John Kasich (R) is ineligible to seek a third term.
Oklahoma:  A gubernatorial run-off election will now be held on August 28th, as Oklahoma City Mayor Mick Cornett and mortgage banker Kevin Stitt advance into the secondary Republican nomination phase. Mr. Cornett placed first with 29.3% of the vote, followed by Mr. Stitt with 24.4%. Lt. Gov. Todd Lamb (R), at one time viewed as the early favorite, garnered 23.9%, falling just short of Mr. Stitt, meaning the former man is eliminated from further competition. The run-off winner faces former Attorney General Drew Edmondson, who won the Democratic primary outright with 61.4% of the vote. This general election could become more competitive than we normally see in Oklahoma elections.
South Carolina:  Gov. Henry McMaster successfully won the Republican gubernatorial nomination with a 54-46% run-off victory over Greenville area businessman John Warren. Gov. McMaster, who ascended to his position when then-incumbent Nikki Haley (R) resigned to become US Ambassador to the United Nations, now runs for his first full term and becomes the party standard bearer. He will oppose state Rep. James Smith (D-Columbia) who won the Democratic primary outright on June 12th. The Governor begins the general election campaign in the favorite’s position.
Wisconsin:  The abnormally large Democratic gubernatorial field just got a bit smaller as the candidates move toward Wisconsin’s August 14th state primary. After most polling gives Superintendent of Public Instruction Tony Evers sustained leads over the field of ten Democratic candidates even though three-quarters of the respondents are choosing other contenders, businessman Andy Gronik and state Rep. Dana Wachs (D-Eau Claire) have both decided to end their campaigns. The eventual nominee, and it most likely appears that Mr. Evers will become the party standard bearer, will then challenge Gov. Scott Walker (R) who is running for a third term.

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