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

November 30, 2018

Here comes the 116th Congress — Jim Ellis’s full report is below, but here’s the top line: “In January, the chamber will feature 235 Democrats and 200 Republicans, a gain of 40 Democratic seats when compared to the previous Congress. A total of 93 are freshmen, not counting the eight members who came to the House as special election winners in 2017 and ’18 who were elected to a full term earlier this month. Of the 93 freshmen, 62 are Democrats. A total of 244 House members will have served three full terms or less when the new Congress convenes, making this the least senior chamber in the modern political era.” 
 
House Democrats elect leadership — House Democrats voted 203-35 on Wednesday to nominate Rep. Nancy Pelosi (D-CA) as Speaker of the House in the next Congress. Pelosi needs 217 votes to win the Speaker’s race in January. Rep. Steny Hoyer (D-MD) was elected majority leader, Rep. James Clyburn (D-SC) was elected majority whip, and Rep. Ben Ray Luján (D-NM) was elected assistant Democratic leader. Democrats chose Rep. Hakeem Jeffries (D-NY) to chair the Democratic caucus, and the Congressional Black Caucus elected Rep. Karen Bass (D-CA) as chair.
 
US, Mexico, Canada sign trade agreement that includes financial forum — The leaders of the US, Canada, and Mexico signed the new free trade agreement in Buenos Aires today, which Senator Charles Grassley (R-IA) has described as “95 percent . . . the same as NAFTA.” The agreement does update language on financial services and digital trade, and creates sharing authority for information about financial market development, emerging risks, and regulatory practices. US financial services providers will receive the same regulatory treatment as local providers, and all countries must allow electronic signatures for digital transactions. The agreement requires implementing legislation, which both houses of Congress will take up next year.
 
House, Senate pass one-week flood insurance extension — The House of Representatives passed a one-week extension of the National Flood Insurance Program on Thursday night, by a vote of 350-46 and over the strenuous objections of House Financial Services Committee Chairman Jeb Hensarling (R-TX). Hensarling’s committee passed a five-year reauthorization and restructuring bill last year that the Senate never took up, and Hensarling called Thursday’s vote “a sad, embarrassing day.” The Senate approved the extension by unanimous consent, and separately passed a six-month extension bill.
 
Crapo sees bipartisan support for BSA reform — At a Senate Banking Committee hearing yesterday, Chairman Mike Crapo (R-ID) said that consensus has emerged: “[M]embers of the Committee are united on the idea that there is room for change in a decades-old system that will yield a modernized BSA anti-money laundering regime.” Exactly what that reform will comprise, Crapo couldn’t say, but it seems likely to include a federal beneficial ownership standard. Committee members on both sides were interested in the idea of raising the threshold for Bank Secrecy Act reporting, but the FBI’s witness said they’re seeing a proliferation of small-dollar transactions used for terrorism funding. The OCC suggested that FinCEN be subject to the EGRPRA regulatory review process that the banking agencies go through, with public hearings, notice and comment, but FinCEN Director Blanco said this would be an unnecessary layer of bureaucracy that would pull resources from FinCEN's mission.
 
FTC asks for civil money penalties, rulemaking authority — All five board members of the Federal Trade Commission appeared before the Senate Commerce Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security for an oversight hearing that focused on privacy and data security issues. FTC Chairman Joseph J. Simons said that the agency needs more authority in this area, including the power to seek civil penalties; jurisdiction over nonprofit organizations and common carriers; and rulemaking authority under the Administrative Procedures Act. All five commissioners agreed on the need for a strong federal privacy law and a national standard for data security.
 
Agencies propose capital simplification for community banks — Earlier this month the FDIC, OCC, and Federal Reserve approved a Notice of Proposed Rulemaking that would provide for a simple measure of capital adequacy for certain qualifying community banks, as required by Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). Qualifying banks with less than $10 billion in consolidated assets and a community bank leverage ratio of more than 9% could opt in to the community bank leverage ratio framework. As long as they maintain a community bank leverage ratio of more than 9%, they would not be subject to other risk-based and leverage capital requirements. The proposal is open for comment for 60 days from publication.
 
Agencies plan to reduce reporting for banks under $5 billion — The FDIC, OCC, and Federal Reserve published a notice of proposed rulemaking that would allow certain banks with less than $5 billion in assets to file the shorter FFIEC 051 Call Report for the first and third quarters of each year, filing the longer form in the second and third quarters. Banks qualify for the reduction if they have no foreign offices, are not an “advanced approaches” institution for regulatory capital purposes, are not considered “large” or “highly complex” for deposit insurance purposes, and are not branches of foreign banks. Comments are due to the agencies by January 19, 2019.
 
FDIC proposes raising appraisal requirement threshold to $400,000 — The FDIC has also asked for comments on a notice of proposed rulemaking that would exempt real estate transactions under $400,000 from appraisal requirements. “The FDIC believes raising this threshold for residential real estate transactions from the current level of $250,000, last increased in 1994, could provide meaningful burden relief from the appraisal requirements, without posing a threat to the safety and soundness of financial institutions,” the agency said. Loans exempt from the appraisal requirement would still have to meet safety and soundness standards. The proposal is open for comment for 60 days.
 
FHFA raises maximum conforming loan limit to $484,350 — As required by the Housing and Economic Recovery Act, the Federal Housing Finance Agency (FHFA) announced this week that it will raise the maximum conforming loan limit for mortgages acquired by Fannie Mae and Freddie Mac to $484,350 in 2019, from this year’s limit of $453,100. The limit is intended to reflect average home prices nationwide; the FHFA’s third quarter Housing Price Index report found that house prices had increased 6.9 percent, on average, between the third quarter of 2017 and this year.
 
Banks report 29.3% increase in income from last year — The FDIC’s earnings report for the banking industry showed aggregate net income of $62 billion in the third quarter of 2018, up $14 billion (29.3 percent) from a year earlier. “Loan balances grew, net interest margins improved, and the number of ‘problem banks’ continued to decline,” said FDIC Chairman Jelena McWilliams. She warned, however, that banks face heightened exposure to interest-rate risk and credit risk because of strong competition and low interest rates.
 
Appointments and confirmations — Michelle W. Bowman was sworn in as a Governor of the Federal Reserve System on Monday, and will fill an unexpired term that ends on January 31, 2020. Two seats remain vacant on the Board. Randal K. Quarles, Vice Chairman of the Fed for Supervision, is expected to succeed Mark Carney as Chairman of the Financial Stability Board next month, though the Fed has not confirmed this. And the Senate has voted to limit debate on Kathleen Kraninger’s nomination to serve as Director of the Bureau of Consumer Protection, so will probably vote on that nomination next week.
 
Next Week in Washington:
 
December 4  at 4:00 p.m. — House Judiciary Subcommittee on Regulatory Reform, Commercial, and Antitrust Law holds an oversight hearing for the antitrust enforcement agencies (FTC Bureau of Competition and DOJ’s Antitrust Division). 2141 Rayburn House Office Building.
 
December 5 at 10:00 a.m. — House Financial Services Committee holds a hearing on “The National Debt: Washington, We Have a Spending Problem.” 2128 Rayburn House Office Building.
 
December 5 at 10:00 a.m. — Senate Banking Committee holds a hearing on oversight of pilot programs at Fannie Mae and Freddie Mac. SD-538 Dirksen Senate Office Building.

December 5 at 2:00 p.m. — House Financial Services Subcommittee on Housing and Insurance holds a hearing on oversight of the Federal Housing Administration. 2128 Rayburn House Office Building.

December 6 at 10:00 a.m. — House Financial Services Committee holds a hearing on "A Legislative Proposal to Provide for a Sustainable Housing Finance System: The Bipartisan Housing Finance Reform Act of 2018." 2128 Rayburn House Office Building.

December 6 at 10:00 a.m. — Senate Banking Committee holds a hearing on “Proxy Process and Rules: Examining Current Practices and Potential Changes.” 10:00 a.m., SD-538 Dirksen Senate Office Building.
 
December 7   Federal government funding expires.
 
The Ellis Insight. Jim Ellis reports on political news: 
 
President
 
An Early Schedule:  Though the 2020 primary/caucus election schedule is far from being finalized, at least ten states are considering moving their primary or caucus date to the election calendar’s beginning stage, which could mean that early voting in several places will coincide with the Iowa Caucus and New Hampshire primary. 
 
Officials in Arizona, California, Georgia, Illinois, Louisiana, North Carolina, Ohio, Tennessee, Texas, and Vermont are reportedly all looking at early delegate selection dates. By party rule for both Democrats and Republicans, the Iowa caucus, New Hampshire primary, Nevada caucus, and South Carolina primary must be the initial scheduled events, but the aforementioned states appear ready to encroach upon the First Four’s domain.
 
Sen. Bennet:  Add yet another US Senator to the potential presidential candidate rolls. Colorado Sen. Michael Bennet (D) confirms that he, too, is thinking of entering the presidential campaign. Among more than 20 other prospective contenders, Sen. Bennet, if he were to run, might directly oppose his state’s outgoing Governor, John Hickenlooper. As many as ten sitting US Senators could enter the presidential campaign, among the most serious being Kamala Harris (D-CA), Elizabeth Warren (D-MA), Cory Booker (D-NJ), and, of course, Bernie Sanders (I-D/VT).
 
Gov. Cuomo:  New York Gov. Andrew Cuomo (D), fresh from a 58% re-election victory to a third term, said definitively late this week that he would not enter the burgeoning Democratic presidential primary field. With more potential candidates expressing interest daily, Gov. Cuomo has effectively taken any budding national candidacy for himself off the political table. Mr. Cuomo said he ran again for Governor to accomplish certain things for the state of New York, and he intends to concentrate on implementing his stated goals. 
 
Senate
 
Alabama:  Potential US Senate candidates are already beginning to make preparatory moves for challenging Sen. Doug Jones (D), who must stand for election to a full six-year term next year. State Auditor Jim Zeigler (R), who initially looked toward running for Governor but backed off when Lt. Governor Kay Ivey (R) ascended to the state’s top position and quickly began to solidify party support, announced that he is filing an exploratory committee to assess his chances against Sen. Jones. 
 
We can expect to see a crowded Republican primary field, including perhaps former Attorney General and US Senator Jeff Sessions (R) who has not ruled out making a bid for his former position. US Rep. Bradley Byrne (R-Mobile) is another major political figure expected to make a run for the Senate post. Clearly, Sen. Jones, who was elected in the controversial 2017 special election, is the most vulnerable national Democratic incumbent seeking re-election.
 
Colorado:  The final 2018 Senate race ended this week, and already we see a 2020 challenger announcement. Lorena Garcia, the president of the Colorado Statewide Parents Coalition, announced that she will seek the Democratic nomination in order to challenge Sen. Cory Gardner (R). We can expect to see many Democratic candidates coming forth to make this race, but Ms. Garcia is first to make a definitive announcement.
 
Mississippi:  Appointed Sen. Cindy Hyde-Smith (R) won the special Mississippi run-off election this week with a 54-46% margin over former US Agriculture Secretary and ex-Mississippi Congressman Mike Espy (D). Despite making several gaffes in the run-off cycle, Ms. Hyde-Smith won a comfortable victory though understandably a few points shy of a typical Republican statewide vote total. In comparison, Sen. Roger Wicker (R) was re-elected to his third term in this year’s regular election with a 58-39% victory margin. 
 
The Republican win brings next year’s Senate partisan division to 53R-47D with all of the 2018 election cycle races now decided, a net gain of two seats when compared to the previous Congress. Eight of the members will constitute the freshman class. 

This number does not include the two appointed Senators, Tina Smith (D-MN) and Ms. Hyde-Smith, who have now been elected in their own right. In 2020, 22 Republicans will be defending their seats versus just 12 Democrats, the opposite of the 2018 situation where the latter party was on the defensive in 26 of the 35 election campaigns.
 
Montana:  Gov. Steve Bullock (D), who is ineligible to seek a third term in 2020, late this week again ruled out launching a challenge to Sen. Steve Daines (R) who is in-cycle in the next election. The statement fuels speculation that Mr. Bullock will form a presidential campaign committee. It has been no secret that the Governor has been testing the national political waters about joining the bulging Democratic field of presidential candidates.
 
House
 
The House Numbers:  With the 2018 campaign results now in the books, or close to it (the one exception being the outstanding CA-21 race, which now favors Democrat T.J. Cox to defeat GOP Rep. David Valadao), we can look at the detailed composition of the new House.
 
In January, the chamber will feature 235 Democrats and 200 Republicans, a gain of 40 Democratic seats when compared to the previous Congress. A total of 93 are freshmen, not counting the eight members who came to the House as special election winners in 2017 and ’18 who were elected to a full term earlier this month. Of the 93 freshmen, 62 are Democrats. A total of 244 House members will have served three full terms or less when the new Congress convenes, making this the least senior chamber in the modern political era. 
 
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 appears to be producing a different outcome. Though the counting is still not complete and likely won’t be until early next week, Democratic challenger T.J. Cox has taken a 591-vote lead over the Congressman as a new batch of Kern, Kings, and Fresno County votes were reported. 

It is difficult to say how many mail, overseas, and provisional votes remain since the 21st is split among four counties and the domain totals report in aggregate, but California political experts anticipate that this trend will hold giving Democrats their seventh conversion victory in the Golden State alone.
 
FL-26:  Two-term Rep. Carlos Curbelo (R-Miami) lost his congressional seat to Democrat Debbie Mucarsel-Powell earlier this month and says it is unlikely that he will run for Congress in 2020. The outgoing Congressman did say, however, that he has interest in seeking the Miami-Dade County mayoral position, so Mr. Curbelo’s career in elective office may not yet be at an end.
 
GA-7:  Another final call was made early in the week. A machine recount actually increased Rep. Rob Woodall’s (R-Lawrenceville) meager 419 vote margin to 433 votes. Former state Senate Budget committee director Carolyn Bourdeaux (D) conceded the result and offered the Congressman her congratulations. The final tally finds Woodall winning 140,443 to 140,010.
 
MI-13:  Detroit City Council President Brenda Jones (D) won the special 13th District congressional election to fill resigned Rep. John Conyers’ (D-Detroit) vacancy, but failed to secure the seat in the regular election. She had petitioned the House Administration Committee and Speaker Paul Ryan (R-WI) asking for a waiver to be able to serve in the lame duck session without being forced to resign her local position. 

Since Ms. Jones cannot continue serving in the new Congress once the lame duck session ends, the Speaker ruled that she can take the seat for the balance of the year. Therefore, Ms. Jones will be sworn in to complete the remaining few weeks of this congressional term.
 
NM-2:  Rep. Steve Pearce (R-Hobbs), who lost the Governor’s race three weeks ago to his congressional colleague, Rep. Michelle Lujan Grisham (D-Albuquerque), confirmed late this week that he will run for chairman of the New Mexico Republican Party next year, and has not ruled out making yet another attempt to regain the House seat he relinquished to run statewide.
 
In 2008, Rep. Pearce ran for US Senate only to see a Democrat win the House seat while the Congressman was losing statewide. Mr. Pearce re-claimed the congressional seat in 2010. With attorney Xochitl Torres-Small converting Pearce’s seat to the Democratic column in this election, it is clear that the party will be looking to recruit a strong challenger. Since it would be difficult for the party to find a stronger candidate than Rep. Pearce, a second comeback run to regain the seat he voluntarily ceded for the second time would again have to be taken seriously.
 
NC-9:  The North Carolina Board of Elections, composed of four Democrats, four Republicans, and one Independent, this week refused to certify the 9th District election results that produced a 905-vote win for Republican Mark Harris. The Board Vice Chairman cited “irregularities” in one county as the reason to delay certification. The remaining eight members agreed, hence the seat was placed in political limbo. 

The Board will reconvene today in hopes of rectifying the situation and making a final decision. We can expect a long court fight if the Board formally decides to deny Mr. Harris his certificate of election.
 
UT-4:  Rep. Mia Love (R-Saratoga Springs) conceded her congressional race to Salt Lake County Mayor Ben McAdams (D) late this week as the final vote counting concluded. Though Ms. Love dominated the rural counties, Mr. McAdams’ strength in Salt Lake County was enough to propel him to a close 694-vote victory from more than 269,000 ballots cast. 
 
Governor
 
Louisiana:  It has been presumed for some time that Sen. John Kennedy (R) will challenge Gov. John Bel Edwards (D) in next year’s Louisiana gubernatorial campaign. And, it appears that we will know definitively early next week. Reports are that Sen. Kennedy will likely announce his intention to run on Monday. It is believed that he will not draw major Republican opposition should he choose to enter the race. Developer Eddie Ripsone is already in the Republican race, and Rep. Ralph Abraham (R-Alto/Monroe/Alexandria) is expected to run, but may not if the Senator formally becomes a candidate.
 
Early polling suggests that Sen. Kennedy would force Gov. Edwards into a run-off, and appears well positioned to potentially defeat him in a subsequent campaign.
 

 
Copyright © 2018 Eris Group, All rights reserved.


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