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

June 22, 2018

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Another voice silenced — “My fight is over,” columnist Charles Krauthammer announced to his readers earlier this month. The cancer removed from his abdomen last August had returned, he wrote, and his doctors estimated that he had only a few weeks left to live. That time proved even shorter, as his family announced Krauthammer’s death yesterday. Krauthammer, 68, was a practicing psychiatrist before becoming a speechwriter for Vice President Walter Mondale, a consultant to the Carter administration, and later a conservative columnist and political commentator. Both sides of the aisle will miss his clear eye, sharp pen, and unyielding pursuit of truth.
 
Supreme Court rules that SEC staff cannot appoint administrative law judges — The Supreme Court ruled yesterday in Lucia v. SEC that administrative law judges (ALJs) are “Officers of the United States,” subject to the Appointments Clause, and that the SEC had exceeded its authority in hiring ALJs of its own. Since the ALJ who ruled in the SEC’s enforcement action against Raymond Lucia’s “Buckets of Money” scam had not bee constitutionally appointed, the Court overturned the judge’s decision, and ordered that the complaint be heard again before a constitutionally appointed judge. This ruling presumably invalidates all decisions made by SEC-appointed ALJs, and has sweeping implications for in-house judges in other federal agencies.
 
US District Court judge finds CFPB unconstitutional — A judge in the Southern District of NY yesterday ruled that Title X of Dodd-Frank, which established the Bureau, should be stricken in its entirety. Ruling in CFPB and the State of NY v. RD Legal Funding et al., Judge Loretta A. Preska granted the defendant’s motion to dismiss the CFPB from the case, but allowed the NY State Attorney’s case to proceed. The finding contradicts the DC Circuit’s en banc ruling in PHH v. CFPB.
 
Senate includes CFIUS reform in defense bill — The Senate included language to reform the Committee on Foreign Investment in the U.S. (CFIUS) in the National Defense Authorization Act (NDAA) it passed on Monday. The House companion to the Foreign Investment Risk Review Modernization Act has not yet been voted on, and was not included in the House version of NDAA; the House is expected to consider CFIUS reform next week.
 
Government Reform Plan would privatize Fannie and Freddie, overhaul rental assistance, merge financial literacy programs — Yesterday the Office of Management and Budget released a 132-page plan for shrinking, streamlining, and consolidating the federal government. “Reform Federal Role in Mortgage Finance,” starting on p. 75, proposes “transitioning Fannie Mae and Freddie Mac to fully private entities,” and giving them and other private-sector competitors access to an explicit federal guarantee for mortgage-backed securities issued “in only limited, exigent circumstances.” The plan endorses HUD’s efforts to “reduce administrative burden, incentivize work, and place” the program “on a more fiscally-sustainable path.” It calls for consolidating, streamlining and eliminating financial literacy programs currently administered by 20 different federal agencies. Congressional hearings on the plan begin next week.
 
White House names Kraninger as CFPB Director — Kathy Kraninger, Associate Director for General Government at the Office of Management and Budget, will be nominated to serve as Director of the Bureau of Consumer Financial Protection, the White House announced on Monday. Kraninger was the Department of Homeland Security’s first Deputy Assistant Secretary for Policy; she later served as counsel to the House and Senate Appropriations Committees. Her nomination allows Acting Director Mick Mulvaney to remain in that position until the Senate votes to confirm or reject her. 
 
HUD seeks new comment on disparate impact standard — The Department of Housing and Urban Development published an advance notice of proposed rulemaking on Wednesday that asks for comment on possible amendments to the 2013 rule implementing the Fair Housing Act’s disparate impact standard. The Treasury Department recommended last October that HUD reconsider applications of this rule, especially in relation to the insurance industry. The notice specifically asks for comments about standards of proof for the rule’s burden-shifting framework, and about the desirability of safe harbors from liability. Comments are due to HUD by August 20.
 
NCUA approves field-of-membership changes — Yesterday the National Credit Union Administration approved changes in its field-of-membership rules that allow applicants for community credit union charters to submit narratives that establish the existence of a “well-defined local community,” and require public hearings for applications where the community would exceed 2.5 million. The new rule would also allow applicants from communities that are subdivided into metropolitan divisions to designate some portion of that area as its community, without regard to boundaries. The final rule takes effect on September 1.
 
SEC’s goals focus on Main Street investors, market innovations, enhanced agency performance — The Securities and Exchange Commission is asking for comment on a draft of its five-year strategic plan, published this week. The plan’s top goal is to “Focus on the long-term interests of our Main Street investors,” followed by recognizing and adapting to market developments and trends, and improving the agency’s analytical capabilities and human capital development. The draft plan is open for comment for 30 days.
 
SEC may reopen comments on proxy process, Clayton says — Appearing before the House Financial Services Committee on Thursday, SEC Chairman Jay Clayton said that the agency is taking a broad look at the role proxy advisory firms play in shareholder participation. He is considering reopening comment on the SEC’s proposed changes to the proxy process, he said, “including the plumbing.” Separately, he said he was glad to see the Enforcement division cracking down on retail fraud; on Tuesday, the agency announced that it had shut down a $102 million Ponzi scheme.
 
All pass the Fed’s stress test — The Federal Reserve Board announced yesterday that all 35 of the bank holding companies subject to supervisory stress tests have capital sufficient to keep lending during a severe global recession. Vice Chairman of Supervision Randal K. Quarles said that the stress tests showed that most of these institutions would have higher capital levels under severe stress than they had had in the years leading up to the most recent recession. The Fed’s results did not include CIT Group Inc., Comerica Incorporated, and Zions Bancorporation, as recent legislation exempted them and all bank holding companies with less than $100 billion in consolidated assets from the stress test requirements.
 
House panel approves bills to ease access to capital — Yesterday the House Financial Services Committee passed three more bills designed to reduce unnecessary regulatory burden and make access to capital easier for small and emerging businesses. The panel voted unanimously to approve H.R. 5970, the “Modernizing Disclosures for Investors Act” sponsored by Rep. Ann Wagner (R-MO), and H.R. 6139, the “Improving Investment Research for Small and Emerging Issuers Act” sponsored by Reps. Bill Huizenga (R-MI) and Maxine Waters (D-CA). Both bills would require SEC studies, one on the cost-benefit analysis of emerging growth companies’ use of SEC Form 10-Q and the other on the issues related to investment research into small issuers. The Committee passed H.R. 6130, the “Helping Startups Continue to Grow Act” sponsored by Rep. Keith Rothfus (R-PA), which would extend the on-ramp for emerging growth companies with an additional five years of exemptions from certain reporting requirements, by a vote of 32-24.
 
Beneficial ownership question highlighted at Senate hearing — Ending anonymous corporate ownership would be the single most powerful action Congress could take against money laundering, witnesses told a Senate Banking subcommittee on Wednesday. At a hearing on “Combatting Money Laundering and Other Forms of Illicit Finance,” Senator Ben Sasse (R-NE), chairman of the Subcommittee on National Security and International Trade and Finance, said he was also interested in pursuing “fusion centers” within the government that would look at what data the government collects, what data it needs, and how best to distribute that data to stakeholders who need it.
 
Nominations to OFR, NCUA, Ex-IM and HUD — In a busy week, the White House also announced the nominations of Dino Falaschetti, currently chief economist to the House Financial Services Committee, to head Treasury’s Office of Financial Research; Rodney Hood, a corporate responsibility manager for JPMorgan Chase, to serve on the board of the National Credit Union Administration; Kimberly Reed, who had been nominated to serve as vice president of the Export-Import Bank, to be President of the bank instead; and Rae Oliver Davis to serve as Inspector General of the Department of Housing and Urban Development.
 
New York issues ninth virtual currency license — Square, Inc. became the ninth firm to receive a virtual currency license from the New York State Department of Financial Services on Monday. Square had had a state money transmitter license. Superintendent Maria T. Vullo said she was pleased to welcome Square to “New York’s expanding and well-regulated virtual currency market.”
 
Next Week in Washington:
 
June 26          House Financial Services Subcommittee on Housing and Insurance holds a hearing on “Oversight of the Federal Government’s Approach to Lead-Based Paint and Mold Remediation in Public and Subsidized Housing.” 10:00 a.m., 2128 Rayburn House Office Building.
 
June 26          Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Legislative Proposals to Increase Access to Capital.” 10:00 a.m., SD-538 Dirksen Senate Office Building.
 
June 26          House Science, Space, & Technology Subcommittees on Energy and Research & Technology hold a hearing on “Artificial Intelligence — With Great Power Comes Great Responsibility.” 10:30 a.m., 2318 Rayburn House Office Building.
 
June 26          House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on “International and Domestic Implications of De-Risking.” Witnesses include representatives of the GAO and the National Association of Federal Credit Unions. 2:00 p.m., 2128 Rayburn House Office Building.
 
June 26          House Judiciary Subcommittee on Crime and Terrorism holds a hearing on “Protecting Our Elections: Examining Shell Companies and Virtual Currencies as Avenues for Foreign Interference.” 2:30 p.m., SD-226 Dirksen Senate Office Building.
 
June 27          House Committee on Financial Services holds a hearing on “Oversight of the Department of Housing and Urban Development.” HUD Secretary Ben Carson will be the only witness. 10:00 a.m., 2128 Rayburn House Office Building.
 
June 27          House Committee on Oversight and Government Reform holds a hearing on “Examining the Administration’s Government-Wide Reorganization Plan.” 10:00 a.m., 2154 Rayburn House Office Building.
 
June 28          Senate Banking Committee holds a hearing on “Legislative Proposals to Examine Corporate Governance.” 10:00 a.m., SD-538 Dirksen Senate Office Building.
 
June 28          Senate Committee on Finance holds a hearing on the nomination of Charles P. Rettig to serve as Commissioner of the Internal Revenue Service. 10:00 a.m., SD-215 Dirksen Senate Office Building.
 
June 28          Securities and Exchange Commission holds an open meeting to discuss amendments to the definition of “smaller reporting company;” amendments to rules governing the use of XBRL; a new coordination agreement with the CFTC; automatic exemptions for certain exchange-traded funds; and other issues. 10:00 a.m., 100 F Street NW. A closed meeting will follow at 2:00 p.m.

 
The Ellis Insight. Jim Ellis reports on political news: 
 
Senate
 
Arizona:  Regular Arizona pollster OH Predictive Insights released their latest survey (6/11-12; 600 AZ likely Republican primary voters) and finds a major change in the Senate GOP primary scheduled for August 28th. According to OH, Rep. Martha McSally (R-Tucson) has opened up a 39-24-14% lead over former state Senator and 2016 US Senate candidate Kelli Ward, and ex- Maricopa County Sheriff Joe Arpaio. Previously, Ms. McSally’s advantage was much smaller. The Republican primary winner will face Rep. Kyrsten Sinema (D-Phoenix), the consensus Democratic candidate, in the general election. Sen. Jeff Flake (R) is not seeking re-election.
 
California:  The new Los Angeles Times/University of Southern California poll was just released (6/6-17; 893 CA adults, 767 registered voters, 498 of whom voted in the 6/5 state primary; online) and posts Sen. Dianne Feinstein (D) to only a 36-18% lead over state Senator and former Senate President Kevin de Leon (D-Los Angeles). The remaining 46% declared themselves as undecided. The Feinstein total is obviously low for an incumbent who was originally elected in a 1992 special election, and then won four full terms in subsequent campaign years. In the June 5th jungle primary, Sen. Feinstein garnered 44% of the vote, well under a majority, but also faced 31 opponents. Sen. de Leon advancing creates a double-Democrat general election. He placed second with just 12% of the vote, however.
 
Missouri:  A new Democratic Senate Majority PAC survey (Global Strategy Group; 6/11-13; 804 MO likely voters) finds Sen. Claire McCaskill (D) moving into her strongest position within this current election cycle. Recovering from hits taken during former Governor Eric Greitens’ (R) extra-marital affair scandal that forced him from office prior to impeachment and being charged with felonies, Attorney General Josh Hawley (R) has now fallen behind Sen. McCaskill 47-41% according to the GSG results. Previous polls have shown a much closer race, a spread usually in the plus or minus two percentage point range.
 
North Dakota:  A new Mason-Dixon Polling & Strategy survey for the Valley News Service (6/13-15; 625 ND registered voters via live interview) finds at-large Rep. Kevin Cramer (R-Bismarck) leading first-term Senator Heidi Heitkamp (D) 48-44% on the statewide count. At this point in the election cycle, the North Dakota race appears to be the Republicans’ best conversion opportunity according to available polling.
 
Texas:  Greenberg Quinlan Rosner Research went into the field to test the Texas Senate race (5/29-6/5; released 6/14; 1,000 TX likely voters) and their data reinforced other released polls within the same time period. According to GQR, Sen. Ted Cruz (R) has a 49-43% lead over Rep. Beto O’Rourke (D-El Paso). Though the Cruz advantage continues to languish in single-digits, the Senator’s early standing isn’t particularly unusual for a Texas Republican statewide candidate facing a credible and active opponent. Republicans tend to under-poll in the state, and generally elsewhere in the South. The voting history suggests Sen. Cruz’s actual final margin will be more substantial, in the 10-14 point range.

Utah:  A new pre-primary survey from the Hinckley Institute of the University of Utah, conducted for the Salt Lake Tribune newspaper, finds former presidential nominee Mitt Romney (R) in position to score a landslide US Senate primary nomination victory on Tuesday night. The poll (6/11-18; 654 UT registered voters; 356 UT registered Republicans) finds Mr. Romney holding a commanding 65-23% lead over state Rep. Mike Kennedy (R-Provo). In a general election pairing, Mr. Romney holds a 58-20% lead over Salt Lake County Councilwoman Jenny Wilson who won the Democratic nomination in convention. 
 
Wisconsin:  The Restoration PAC released a new Hodes & Associates survey of the Wisconsin Senate Republican primary (6/7-12; 600 WI likely GOP primary voters) that again stakes businessman Kevin Nicholson to a lead over state Sen. Leah Vukmir (R-Brookfield). Once more, we also see a very large undecided segment as the candidates move toward the August 14th primary election. According to Hodes, Mr. Nicholson sports a 28-14% advantage over Sen. Vukmir, while a new Marquette University Law School poll (6/13-17; 800 WI registered voters) finds him holding a 37-32% primary lead. The eventual Republican nominee challenges first-term Sen. Tammy Baldwin (D) in the general election.
 
House
 
CA-48:  The Golden State’s 48th Congressional District primary election remains unresolved now more than two full weeks after the June 5th primary election. Rep. Dana Rohrabacher (R-Costa Mesa) is safe in first place with 30% against 15 opponents. But, biomedical company CEO Hans Keirstead (D) and businessman Harley Rouda (D) continue seesawing for second place and the right to advance into the general election. The latest official count finds Mr. Rouda ahead by just 62 votes, meaning a lengthy recount process will likely begin after the official vote is finally recorded.
 
NY-11:  Campaigns on Staten Island, NY are always known for their “no holds barred” styles and the Republican congressional primary challenge between Rep. Dan Donovan (R-Staten Island) and former Rep. Michael Grimm (R) is certainly no exception. Late last week, Mr. Grimm, who was forced from office because of a federal tax fraud conviction and would subsequently spend seven months in federal prison, claims that Rep. Donovan promised to obtain a pardon from President Trump if he (Grimm) would exit the race. Rep. Donovan denies the accusation, but said the subject did come up in a conversation that he and the President held. Mr. Donovan asserts that he did not ask for the pardon, nor did Mr. Trump move in such a direction. The New York federal primary is June 26th.
 
ND-AL:  Democrats and Republicans made their US House nominations official in the June 12th state primary, and Mason-Dixon Polling & Strategy late this week released its at-large congressional race results from their new statewide survey (see North Dakota Senate above). According to M-D, state Sen. Kelly Armstrong (R-Dickinson) leads former state House Minority Leader Mac Schneider (D), 46-35%, on the ballot test question. The winner replaces three-term Rep. Kevin Cramer (R-Bismarck), who is running for the Senate.
 
OH-12:  Special election candidates Troy Balderson (R-Zanesville), a state Senator, and Danny O’Connor (D), the Franklin County Recorder, continue moving forward to their August 7th decision day.  JMC Analytics just released their latest poll (6/13-16; 500 OH-12 likely special election voters who completed the ten-question survey) and found Sen. Balderson leading Mr. O’Connor, 46-35%. This tracks with the previously released Monmouth University poll (6/7-10; 501 OH-12 likely special election voters) that found Sen. Balderson holding a 43-33% district-wide advantage. 
 
PA-10 & 16:  Two new polls find Keystone State Reps. Mike Kelly (R-Butler) and Scott Perry (R-Dillsburg/York) holding only single-digit leads in their newly configured congressional districts. Public Policy Polling (6/8-10; 654 PA-10 likely voters) projects Rep. Perry to be leading Lutheran minister and retired Army officer George Scott (D), 45-41%. In 2016, President Trump comfortably carried the new 10th District with a 52-43% margin. 
 
In Rep. Kelly’s new western Pennsylvania’s 16th CD, stretching from Erie to the outer northern Pittsburgh suburbs, the Normingtion Petts survey research firm conducted a poll for Democratic nominee Ron DiNicola (6/5-7; 400 PA-16 likely voters) and also finds a competitive challenge. According to their data, Rep. Kelly’s advantage is only 50-44%, and is the second such poll to suggest that this campaign has the potential to develop. President Trump carried the new PA-16 by a full 20 points, 58-38%, so this seat is more likely to normalize as Election Day approaches. 
 
Governor
 
Florida:  Two new Democratic gubernatorial primary surveys again see a very close statewide race. The “Let’s Preserve the American Dream” organization (6/5-9; 800 FL likely Democratic primary voters) finds Miami Beach Mayor Philip Levine topping the primary field, but he leads former US Rep. Gwen Graham (D-Tallahassee) only 24-21%. Tallahassee Mayor Andrew Gillum is next with 11%, while Orlando businessman Chris King has 4% support, and wealthy businessman Jeff Greene attracts 3 percent.
 
But RABA Research (6/15-16; 660 FL likely Democratic primary voters) sees the race as being razor thin. Their data suggests Mayor Levine’s edge is only one point over Ms. Graham, 27-26%, while Mr. King improves his standing to 15%, Mayor Gillum tabs 8% support, and Mr. Greene has 3 percent. The Florida primary is August 28th. The Republicans see an equally tight Republican race between state Agriculture Commissioner and former US Congressman Adam Putnam and US Rep. Ron DeSantis (R-Palm Coast/Daytona Beach), but neither of these polls tested the Republican race.
 
Maine:  Through referendum, Maine voters instituted an “instant run-off” process to ensure political party nominees obtain a majority vote, but the new program’s first test has been anything but “instant.”  On June 12th, Democratic primary voters cast 33% of their gubernatorial ballots for appointed Attorney General Janet Mills, but she did not officially win. Businessman and Iraq War veteran Adam Cote finished second with 29% support, and six other candidates followed with between 16 and 1 percent of the vote. The succeeding candidates are important because their supporters are key to who eventually is declared the party nominee.
 
In a long counting process that began after the election and found irregularities in five towns, the Secretary of State’s office finally completed the ranked vote tabulation at the end of this week. When a person now votes in Maine, they are asked to rank the candidates by level of support from 2nd through 8th, in this case. The laborious process finally ended and AG Mills was declared the winner over Mr. Cote, 54-46%, after the ranked votes from the other six candidates were dispersed. Ms. Mills now faces businessman Shawn Moody, who won the Republican nomination outright. The now-official general election pairing begins as a toss-up race.
 
New York:  Syracuse former Mayor Stephanie Miner (D), whom the national Democratic leadership continually tried to recruit as a challenger for Rep. John Katko (R-Syracuse), has decided to run for a different office. But her next political move is not exciting her previous supporters. This week, Ms. Miner announced that she will enter the Governor’s race and form her own party in order to do so. The decision will place her into the general election against both Gov. Andrew Cuomo (D) and actress Cynthia Nixon (D/Working Families), but with minimal chances of winning the race. 
 
The likely Republican nominee is Duchess County Executive Mark Molinaro, who will also control the Conservative and Reform Party ballot lines.  In New York, candidates may appear on the ballot with different political party lines. All votes cast for a candidate, regardless of on which party affiliation line, are amassed together. Gov. Cuomo is favored to win a third term. The New York state primary is not until September 13th.
 
South Carolina:  The short two-week Republican gubernatorial run-off cycle is already drawing to a close, and the first post-primary poll has just been released. The Trafalgar Group went into the field right after the June 12th primary (6/13-14; 1,000 GOP likely run-off voters) and found Gov. Henry McMaster opening up a commanding 60-36% margin over businessman John Warren. The pollsters included those respondents who are reported as “leaning” to a particular candidate. The June 26th winner, presumably Gov. McMaster, then faces state Rep. James Smith (D-Columbia) who clinched the Democratic nomination on primary night.
 
Wisconsin:  A previously mentioned Marquette University Law School poll (see Wisconsin Senate above) finds Superintendent of Public Instruction Tony Evers opening up a commanding Democratic primary lead over his nine tested opponents for the August 14th Democratic primary. According to Marquette, Mr. Evers scores 25% support in comparison to the other candidates, with the next closest finishers, Madison Mayor Paul Soglin and former state Democratic Party chairman Matt Flynn, each only pulling 7% preference. In a general election pairing with Gov. Scott Walker (R), Mr. Evers trails the two-term incumbent, 48-44%.
 

 
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