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

October 19, 2018

Yeah, yeah, we said we wouldn’t publish this week. We wanted to send you Jim Ellis’s political news, and a few other things happened in DC this week, so here’s an abbreviated edition. We reserve the right to send one out next week, too.
 
IRS, Treasury publish guidance for Opportunity Zones — The Department of the Treasury and Internal Revenue Service proposed guidance today to implement tax benefits for investors in Opportunity Zones, as mandated by last year’s tax reform bill. More than 8,700 communities in all 50 states and five territories have been designated as Opportunity Zones, a designation they will hold for 10 years. Investors may defer tax on almost any capital gain up to December 31, 2026 by investing that gain in a Qualified Opportunity Fund (QOF). QOFs must hold at least 90 percent of their assets in Qualified Opportunity Zone property. The proposed guidelines are open for comment for 60 days, and the Treasury and IRS will hold a public hearing on the proposed guidelines at the IRS on January 10, 2019.
 
FSOC rescinds Prudential’s designation as systemically important — Surprising exactly no one, the Treasury Department announced Wednesday that the Financial Stability Oversight Council (FSOC) had rescinded its determination that Prudential Financial’s failure could pose a systemic risk to the US economy. Prudential will therefore no longer be subject to supervision by the Federal Reserve System, nor to the enhanced prudential standards required for systemically important financial institutions (SIFIs). The decision was unanimous; SEC Chairman Jay Clayton recused himself, so Commissioner Elad Roisman cast the vote for the SEC.
 
SEC launches FinHub — The Securities and Exchange Commission announced yesterday that it has created a Strategic Hub for Innovation and Financial Technology (FinHub). FinHub will replace several internal working groups within the agency, and will serve as a primary point of contact for industry and the public to communicate with the SEC about fintech issues. It will be the source of information about the SEC’s activities in blockchain/distributed ledger technology, digital marketplace financing, automated investment advice, and AI/machine learning. FinHub is already planning a FinTech Forum on distributed ledger technology and digital assets for 2019.
 
CFPB considering rulemaking on “abusive” standard, Mulvaney says — Mick Mulvaney, acting director of the Bureau of Consumer Financial Protection, told the Mortgage Bankers Association on Monday that the agency is looking at whether rules are necessary to clarify the meaning of “abusiveness” under section 1031 of Dodd-Frank. The issue is the last item mentioned on the Bureau’s rulemaking agenda, released Wednesday, which also says the Bureau continues to reexamine the “disparate impact” doctrine of the Equal Credit Opportunity Act. In the shorter term, the Bureau plans to issue additional rules to implement the Economic Growth, Regulatory Relief, and Consumer Protection Act, and said it will issue a Notice of Proposed Rulemaking on payday lending “no later than early 2019.”  
 
Inspector General identifies “serious” challenges for FHFA — In a memo delivered Monday, the Federal Housing Finance Administration’s Inspector General, Laura Wertheimer, cited “four serious management and performance challenges” the FHFA faces in its ongoing conservatorship of Fannie Mae and Freddie Mac. First, the OIG said, FHFA needs to improve its oversight of matters delegated to the GSEs, and improve its internal review processes for matters it hasn’t delegated. FHFA must also upgrade its supervision of the GSEs while continuing its “robust supervision” of the Federal Home Loan Banks. Cybersecurity remains a concern, and the FHFA needs to enhance its supervision in this area while ensuring its own systems are secure. And the FHFA needs to improve its supervision of the GSEs’ third-party relationships with counterparties and vendors. Finally, the OIG expressed concerns about FHFA’s own internal controls, especially in light of Director Mel Watt’s departure in January 2019. “Changes in leadership can lead to lack of attention to internal controls,” the report noted.
 
FinCEN employee arrested for leaking SAR data — Natalie Mayflower Sours Edwards, a senior adviser at Treasury’s Financial Crimes Enforcement Network (FinCEN), was charged on Wednesday with making unauthorized disclosures of information contained in suspicious activity reports (SARs). Edwards appears to have been the anonymous source for several Buzzfeed stories about financial transactions involving Russian activities during the 2016 presidential campaign, including transactions by Paul Manafort, Richard Gates, the Russian Embassy, Mariia Butina, and Prevezon Alexander. “Willful disclosure of a SAR or its contents by government employees or agents except as necessary to fulfill official duties is a felony,” the US Attorney’s Office for the Southern District of New York reminded the public in the announcement of charges.
 
Fed reports rise in fraudulent noncash payments — The growth of fraud in noncash payments considerably outpaced the growth in noncash payments overall between 2012 and 2015, the Federal Reserve reported this week. The value of fraudulent noncash transactions rose 37 percent from $6.1 billion in 2012 to $8.3 billion in 2015, the Fed found, while the total value of noncash transactions rose only 12 percent during the same time. Card fraud was the most frequent type of fraud, while check fraud declined in value and the rate of ACH fraud remained unchanged. In absolute terms, however, the rate of fraud remained low: 38 cents of fraud for every $10,000 in transactions in 2012, rising to 46 cents per $10,000 in 2015.
 

Next Week in Washington:
 

The House and Senate remain in recess.
 

The Ellis Insight. Jim Ellis reports on political news: 
 
Senate
 
Indiana:  Though the Indiana Senate race has been rated a toss-up since the election cycle began, the contest has been seldom polled until this week. Gravis Marketing released their new survey (9/29-10-2; 695 IN likely voters) and found Sen. Joe Donnelly (D) leading former state Representative and international businessman Mike Braun (R), 44-40%. Indiana is a strongly Republican state, but the Midwest, especially in the Great Lakes region, appears to be trending Democratic for this election. Therefore, Sen. Donnelly’s survival chances have clearly improved in the waning days of this campaign.
 
The Vox Populi firm also released their poll (10/13-15; 783 IN “active” voters). They see an even greater advantage for Sen. Donnelly. According to their data, the Democratic incumbent leads Mr. Braun, 44-36%. 
 
Minnesota:  An NBC/Marist College survey (9/30-10/4; 637 MN likely voters) finds appointed Sen. Tina Smith (D) holding a much larger lead over state Sen. Karin Housley (R-St. Croix River Valley) than in other polls, 54-38%. The previous publicly released ballot test, that from Mason-Dixon Polling & Strategies (9/10-12; 800 MN likely voters) taken almost three weeks earlier, found Ms. Housley within the same support range but projected Sen. Smith’s preference at a much lower 44%. 
 
Nevada:  Vox Populi also surveyed the tight Nevada Senate race. Their new Silver State poll (10/13-15; 613 NV “active” voters) finds the two candidates, Sen. Dean Heller (R) and Rep. Jacky Rosen (D-Henderson), tied at 44% apiece. When pushed, the undecideds lean a bit more to Rosen, given her an overall edge of 51-49%. These results are consistent with most Nevada polling. Recently, several surveys have shown Sen. Heller to be in stronger shape but, overall, the data continues to find that the margin between these two candidates is razor thin meaning either can win the race.
 
New Jersey:  A new Quinnipiac University poll (10/10-16; 873 NJ likely voters) sees New Jersey Sen. Bob Menendez (D) leading former pharmaceutical company CEO Bob Hugin (R), 51-44%, but negative signs are ominous for the embattled incumbent with an approval rating of 36:52% favorable to unfavorable. 
 
A pair of surveys find Sen. Menendez holding leads of varying degrees. Monmouth University (10/11-15; 527 NJ likely voters) sees the Senator holding a 49-40% margin over Mr. Hugin, and his personal favorability index is a similar upside down 28:45% positive to negative. The National Research firm (released 10/18; 600 NJ likely voters) sees the race much differently, and places Mr. Hugin within the polling margin of error. According to NR, the spread is only 42-40% in Sen. Menendez’s favor.

Tennessee:  The Siena College/New York Times polling series returned numbers for the open Tennessee race. Their data (10/8-11; 593 TN likely voters from 28,670 attempted calls) shows Rep. Marsha Blackburn (R-Brentwood) opening up a double-digit lead over former Gov. Phil Bredesen (D), a whopping 54-40% spread. 
 
The Siena/NYT survey is the strongest public poll recorded for Ms. Blackburn, though others are also forecasting her with leads beyond the margin of error. YouGov (10/2-5; 871 TN likely voters) found her advantage at 50-42%. Fox News (9/29-10/2; 666 TN likely voters) projected a 48-43% Blackburn edge. The new Vanderbilt University survey, however, (10/8-13; 800 TN registered voters) stakes Mr. Bredesen to a 44-43% slight edge.
 
Texas:  Texas Rep. Beto O’Rourke (D-El Paso) set an all-time national US Senate fundraising record for a three-month period with his performance in the 3rd quarter. Mr. O’Rourke raised an incredible $38 million just in the 90-day period. For the campaign, his total receipts exceed $61 million. In comparison, Sen. Ted Cruz (R) obtained $12 million for the quarter and $24 million for his entire campaign. But, the new Siena College/New York Times poll (10/8-11; 800 TX likely voters) finds Sen. Cruz taking a 51-43% lead. 
 
West Virginia:  Though Sen. Joe Manchin (D) has led consistently throughout this campaign, the common political wisdom suggested that his battle with Republican Attorney General Patrick Morrisey would tighten as Election Day drew near. Vox Populi also tested the Mountain State Senate race (10/13-15; 789 WV “active” voters) and found the Senator maintaining a lead, but a smaller one than earlier perceived. This ballot test found a 44-40% split in Sen. Manchin’s favor, with undecideds breaking his way when pushed to arrive at a 53-47% race. Mr. Morrisey will have to make a major move to reverse this trend on Election Day.
 
House
 
IA-1:  Earlier in the week, Iowa Rep. Rod Blum (R-Dubuque), who is routinely believed to be one of the most vulnerable Republican incumbents seeking re-election, released an internal Polling Company survey that found him closing his ballot test deficit to just one point. A confirming poll was then released that revealed a similar result. 

Now the Congressional Leadership Fund is committing a $1 million expenditure for the 1st District, which is the first outside organization to back the Congressman with a major effort. The Democratic National Campaign Committee, which had reduced its media buy, is again increasing spending for their nominee, state Rep. Abby Finkenauer (D-Dubuque), so this campaign is clearly back in the highly competitive realm.
 
NC-13:  A new Survey USA poll (10/9-12; 533 NC-13 likely voters) for the conservative Civitas policy organization finds first-term Rep. Ted Budd (R-Advance) clinging to a 44-41% edge over University of North Carolina at Greensboro Trustee Kathy Manning (D), another of the Democratic challengers who has raised well over $2 million for the current campaign. The 13th District, created in the 2016 re-draw, occupies a large sector of the Piedmont Triad area. President Trump carried the district, 53-44%.
 
NY-22:  During the summer, New York freshman Rep. Claudia Tenney (R-New Hartford) fell sharply behind her challenger, Assemblyman Anthony Brindisi (D). After the national Republican groups launched a major attack ad campaign against him, tying Brindisi to convicted former Assembly Speaker Sheldon Silver and Gov. Andrew Cuomo (D) who is unpopular in this Upstate district, Ms. Tenney has rebounded.
 
According to an internal Polling Company survey for the Tenney campaign (10/12-13; 400 NY-22 likely voters), the Congresswoman has assumed a 50-42% lead over Mr. Brindisi. Other numbers in the 22nd also favor the GOP. The party leads 47-41% on the generic ballot test over the Democrats, and President Trump’s favorability index is a strong 58:39%. Favoring Brindisi is how the undecideds are breaking. When pushed, those proclaiming themselves to be uncommitted say they would favor Brindisi, 27-9%, if forced to make a decision.
 
WV-3:  Monmouth University again surveyed the open 3rd Congressional District that contains southern West Virginia, and we see a substantial turnaround from the organization’s June poll. Four months ago, MU found state Sen. Richard Ojeda (D-Logan) leading state House Majority Whip Carol Miller (R-Huntington) 48-39% under the most favorable Democratic turnout model. 
 
Monmouth’s new poll (10/10-14; 350 WV-3 likely voters) now sees Ms. Miller rebounding to the point of overcoming Sen. Ojeda’s entire lead. With little difference among MU’s three projected turnout models: low, standard, and “Democratic surge,” Ms. Miller has developed a small advantage, 48-45%. 
 
Governor
 
Alaska:  Lt. Gov. Byron Mallot (I), who was Gov. Bill Walker’s (I) original choice for Lt. Governor and served throughout the Administration, has resigned his position. He admits to making inappropriate, but unspecified comments. Mr. Mallot was immediately replaced in office and on the ballot. Gov. Walker chose Indian healthcare policy advisor Valerie Nurr’arsoluk Davidson both as Lt. Governor and as his running mate for re-election. The appointment may be short-lived, however. Polling indicates Gov. Walker is trailing badly and on the precipice of losing his office on November 6th.
 
Ohio:  Suffolk University released the results of their new small sample survey (10/4-8; 500 OH likely voters) that shows former Attorney General Richard Cordray taking a 46-40% lead over current Attorney General and ex-US Senator Mike DeWine (R). This result is different than most other polls that generally give DeWine a small edge. The sample of 500 is small for a state the size of Ohio, thus making the error factor higher than for most other surveys. The Ohio gubernatorial race is consistently rated as a toss-up campaign.
 
Oregon:  A new DHM poll for the Oregon Public Broadcasting network (10/4-11; 500 OR likely voters) again finds only a small margin separating Gov. Kate Brown (D) and state Rep. Knute Buehler (R-Bend). Oregon, however, is a state where polling seems to favor Republican candidates in better margins than historical voting patterns would suggest. 
 
That being the case, the DHM numbers find Gov. Brown’s lead at only 40-35%. Her favorability index is dead even at 45:45% positive to negative. Mr. Buehler’s is 36:29%. Sen. Ron Wyden (D) scores best among those tested at 54:29%. President Trump is worst at 41:55%. Regardless of the current poll results, Gov. Brown is still favored to win re-election to a full four-year term. 
 
Tennessee:  The same Vanderbilt University poll (10/8-13; 800 TN registered voters) also tested the state’s open gubernatorial race. The VU data finds Republican businessman Bill Lee topping former Nashville Mayor Karl Dean (D), 48-37%. Mr. Lee is routinely rated as a solid favorite to win the general election and replace

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