Congress starts budget work — The President’s budget request for FY2019 hit Capitol Hill on Monday, and hearings began immediately. Its proposals include ending the federal subsidy for certain student loans, and making colleges responsible for a portion of losses in the event of default; raising and extending the tax on Fannie Mae and Freddie Mac’s guarantee fees; eliminating the Housing Trust Fund; imposing a new fee on FHA loans to fund infrastructure improvements; and bringing the Consumer Financial Protection Bureau, the Financial Stability Oversight Council and Treasury’s Office of Financial Research into the appropriations process.
House Financial Services Committee begins flood insurance reauthorization — Temporary reauthorization of the National Flood Insurance Program (NFIP) expires on May 31, and House Financial Services Committee Chairwoman Maxine Waters said Wednesday that she wants to enact a five-year reauthorization. Witnesses testified about the urgent need for reauthorization and opportunities to expand the private sector’s participation in flood insurance. Rep. Patrick McHenry (R-NC), the committee’s ranking member, called for better maps, more mitigation, faster claims processes, and rethinking old underwriting models.
Senate Judiciary to join Senate Commerce in work on data privacy, says Graham — Congress has a bipartisan will to enact meaningful data privacy legislation, Senate Judiciary Committee Chairman Lindsey Graham (R-SC) said at a hearing on Europe’s GDPR and the California Consumer Privacy Act on Tuesday. While much of the discussion focused on whether consumers should be able to opt into or have to opt out of data sharing, some witnesses called for a more government-centered approach that limits data collection and empowers the Federal Trade Commission to develop and enforce industry regulations. As at a Senate Commerce hearing on the topic last month, a consensus seemed to emerge on the need for a single, robust federal privacy standard.
Senate Banking examines FSOC designations for nonbanks — The Senate Banking Committee held a hearing yesterday to discuss how the Financial Stability Oversight Council (FSOC) designates nonbank financial institutions as systemically important financial institutions (SIFIs), in the wake of FSOC’s publication of proposed new guidance last week. Committee Chairman Mike Crapo (R-ID) said the original process had been “immeasurable and unclear,” and contrary to long-established principles. The guidance proposed last week follows recommendations made by the Treasury in November 2017, prioritizing an activities-based approach and calling for a cost-benefit analysis before designation. Senators Mike Rounds (R-SD), Doug Jones (D-AL), Thom Tillis (R-NC), and Kyrsten Sinema (D-AL) have introduced legislation to require FSOC to determine that a different response would not address risks to financial stability before voting on a nonbank designation.
Postal Service reforms are urgent, but may not need legislation — Senators and witnesses at the Senate Homeland Security Committee’s hearing on Postal Service reform this week agreed on the urgent need to address the USPS’s unsustainable funding structure and a deficit that threatens its ability to provide essential services. Most of the recommendations of the Treasury Task Force on the US Postal System would be administrative changes that wouldn’t require legislation, but the USPS’s Board of Governors currently has only two members (of a full complement of nine), and the Postal Regulatory Commission will soon need new members as well. Witnesses agreed on the need to define the Postal Service’s universal service obligation (USO) and the importance of preserving service to rural areas.
Wells Fargo is too big to manage, says Waters — House Financial Services Committee Chairwoman Maxine Waters (D-CA) began a marathon hearing on Tuesday by telling Wells Fargo President and CEO Tim Sloan that the bank may simply be “too big to manage.” Ranking member Rep. Patrick McHenry (R-NC) was more measured, but equally concerned: “Every single member of this committee has constituents in their state who were impacted by Wells Fargo,” he said. “The bank's behavior has real world consequences.” Sloan, who took office at Wells Fargo in October 2016, acknowledged that “the past few years have been a very difficult time,” but said the bank was determined to solve past problems and prevent new ones by centralizing enterprise control, adding risk professionals, and adding seven new independent directors to its board.
House subcommittee reviews updates to Bank Secrecy Act/anti-money laundering laws — The first hearing of the new House Financial Services Subcommittee on National Security, International Development and Monetary Policy looked at the need to update and revise the Bank Secrecy Act and laws against money laundering and terrorist financing (AML/CFT). Subcommittee Chairman Emanuel Cleaver (D-MO) asked for feedback on a discussion draft of legislation drafted to close gaps in existing law, particularly as it relates to technology advances and international cooperation. The Subcommittee also discussed Rep. Carolyn Maloney’s bill to require disclosure of beneficial ownership information and H.R. 389, the Kleptocracy Asset Recovery Rewards Act, which would offer financial incentives for identifying and recovering assets linked to foreign government corruption.
Fiduciary rule discussion breaks along party lines — The SEC’s proposed Regulation Best Interest was the topic of a hearing before the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets yesterday, and Democrats and Republicans disagreed on whether the proposed rule would worsen the status quo or offer valuable new consumer protections. Subcommittee Chairwoman Carolyn Maloney (D-NY) said the proposed rule failed to define “best interest” and would leave retail investors dangerously exposed, while former SEC Chairman Harvey Pitt, testifying before the panel, called the proposal “thoughtful and creative,” and said the SEC had “done the right thing.” Rep. Sean Casten (D-OH) is circulating a bill that would require the SEC to conduct usability testing on its new disclosure forms before finalizing Regulation BI; Rep. Andy Barr (R-KY) said the bill would leave the SEC stuck in “an infinite loop” and prevent the finalization of Regulation BI indefinitely.
CFPB will take no “dramatic action” on the GSE patch, Kraninger says — Echoing her pledge before the House Financial Services Committee last week to “do no harm,” Consumer Financial Protection Bureau Director Kathy Kraninger told the Senate Banking Committee on Tuesday that the Bureau will not take any dramatic or market-moving action in response to the possible expiration of the so-called “GSE patch.” The “GSE patch” is an exemption from the CFPB’s qualified mortgage rule’s debt-to-income requirements for mortgages guaranteed by Fannie Mae and Freddie Mac, and will expire when the GSEs leave conservatorship or in January 2021. Senator Mark Warner (D-VA) called for a legislative solution.
FDIC, Federal Reserve announce public meetings on BB&T-SunTrust merger — The FDIC and Federal Reserve will hold two public meetings about the proposed merger of BB&T and SunTrust, the agencies announced yesterday. The meetings are scheduled for Thursday, April 25 in Charlotte and Friday, May 3 in Atlanta. The meetings will “collect information relating to the needs and convenience of the communities to be served” and review the banks’ CRA records. Written requests to testify at the Charlotte meeting are due by April 15; requests to testify in Atlanta are due by April 23.
Warner, Kennedy seek legislative remedy to Kokesh — Senators Mark Warner (D-VA) and John Kennedy (R-LA) introduced a bill this week that would give the Securities and Exchange Commission more time to seek disgorgement and restitution for violations of the securities laws. S. 799, the Securities Fraud Enforcement and Investor Compensation Act, would extend the statute of limitations for disgorgement to ten years, and allow the SEC to demand restitution as well as disgorgement. The bill is a response to the Supreme Court’s 2017 ruling in Kokesh v. SEC, which said that the SEC’s disgorgement powers were subject to a five-year statute of limitations.
House passes four financial services bills — The House of Representatives quietly approved four financial services bills on Monday without hearings or fanfare. H.R. 758, the Cooperate with Law Enforcement Agencies and Watch Act of 2019, would limit a financial institution's liability for maintaining a customer account or a customer transaction in compliance with a written request by a law enforcement agency. H.R. 974, the Federal Reserve Supervision Testimony Clarification Act, would require the Fed’s Vice Chairman for Supervision to submit written testimony on the Fed’s supervision of certain financial institutions. H.R. 1122, the Housing Choice Voucher Mobility Demonstration Act, would authorize HUD to conduct a pilot program under which public housing authorities would administer housing assistance vouchers in a way designed to encourage low-income families to move to higher-income areas and expand access to opportunity areas. H.R. 1414, the FinCEN Improvement Act of 2019, would specifically add matters involving virtual currency to the agency’s anti-terrorism and anti-money laundering responsibilities.
Fed announces seventh triennial study on the payments system — The Federal Reserve will soon be sending financial institutions and payments organizations invitations to participate in its seventh triennial Federal Reserve Payments Study, it announced yesterday. This year the Fed will send out two surveys: one to commercial banks, savings institutions, and credit unions, and one to payment card networks, third-party processors, issuers of private-label cards, and other providers of alternative payment methods. McKinsey & Company and Blueflame Consulting will help the Fed prepare the report.
SEC staff to host public fintech forum — The Securities and Exchange Commission announced today that it will hold a public forum on May 31 to discuss distributed ledger technology (DLT) and digital assets. FinHub, the agency’s Strategic Hub for Innovation and Financial Technology, will host the meeting, which will feature panelists from industry and academia who’ll talk about initial coin offerings, DLT innovations, digital asset platforms and more. The forum will be streamed live on the SEC’s website.
Confirmations, nominations, departures, etc. — The FDIC has posted the position of Chief Innovation Officer and other positions in its new Tech Lab, created to facilitate the regulatory process for new technology in the banking industry.
Next Week in Washington:
The House and Senate are in recess next week. If things stay quiet, most of next week’s issue of The Golden Apple will be a calendar of events for the week of March 25.
The Ellis Insight. Jim Ellis reports on political news:
Beto O’Rourke: Yesterday, former Texas Congressman Beto O’Rourke became an official Democratic presidential candidate. His announcement was made in conjunction with a campaign trip to Iowa, site of the nation’s first caucus vote.
Mr. O’Rourke became a political star despite losing his US Senate campaign to incumbent Ted Cruz (R) last November. Recently, however, he has dropped into single digits in national presidential polling and is typically battling Sen. Elizabeth Warren (D-MA) for fourth place behind former Vice President Joe Biden, Sen. Bernie Sanders (I-D/VT), and Sen. Kamala Harris (D-CA).
Though O’Rourke has potential to become a first-tier candidate, he will have to show momentum early. The Texas primary, coming on March 3rd of next year, with its 228 elected delegates (the second largest contingent from any state) will become critical in defining Mr. O’Rourke’s chances for the nomination.
Rep. Tim Ryan: Eastern Ohio Congressman Tim Ryan (D-Youngstown), who has been considered as an outlier presidential candidate, maintained again this week that he may enter the national race and will decide within the next several weeks.
Mr. Ryan has toyed before with running for Governor, Lt. Governor, and US Senate, without pulling the trigger. He did, however, challenge Rep. Nancy Pelosi for the Democratic Leader position in 2016 and lost badly, attracting just 1/3 support among his party colleagues. He has the advantage, under Ohio election law, of being able to run simultaneously for President and re-election to his House seat.
Democratic National Convention: The Democratic National Committee leadership has announced that Milwaukee, WI has been officially selected as the site of the party’s national convention next year. The official dates encompass the period from July 13-16, 2020. Milwaukee was chosen over the two other finalist cities, Houston and Miami. The Republicans selected Charlotte, NC, for their presidential nominating convention to be held August 24-27, 2020.
Minor Candidates: The number 65,000 is becoming important in the 2020 political cycle because each debate-qualifying Democratic candidate needs to have this many individual donors and at least 200 in each of 20 states in order to earn a podium for the televised forums.
Entrepreneur Andrew Yang, who announced months ago and is running on the Universal Basic Income platform that would guarantee every American $1,000 per month, has already made the financial threshold.
South Bend Mayor Pete Buttigieg is also on his way. Participating in a CNN Townhall event, Mr. Buttigieg attracted over 22,200 donations just in that one evening. The first debates will be held in June and July, with four more to follow before the end of 2019.
Monmouth National Poll: Monmouth University just released their new national Democratic primary survey (3/1-4; 746 US registered voters; 310 Democratic likely primary voters). According to their results, former Vice President Joe Biden and Sen. Bernie Sanders (I/D-VT) are continuing to break away from the rest of the large field. Monmouth sees Mr. Biden attracting 27% as compared to Sen. Sanders’ 25%. California Sen. Kamala Harris was third at 10%, while all others tracked in single-digits.
Iowa Poll: The Des Moines Register/CNN/Mediacom (Selzer & Company; 3/3-6; 401 likely Democratic Caucus participants) released their new Iowa data, now 11 months before the first-in-the-nation caucus vote. The numbers almost perfectly mirror the latest Monmouth national poll. As in Monmouth, Selzer & Company, polling for the three media entities, finds former Vice President Joe Biden leading Sen. Bernie Sanders by the same 27-25% margin.
Here, however, the third-place finisher, still well behind the leaders, is Sen. Elizabeth Warren (D-MA) with 9%. In the national poll, California Sen. Kamala Harris holds third with 10%. In Iowa, Sen. Harris drops to fourth with 7%. But, the statistical differences among those bunched together in these small sample surveys is insignificant.
Alabama: WPA Intelligence conducted a new poll of Alabama Republicans (3/10-12; 501 AL Republican primary voters) to test how former state Supreme Court Chief Justice Roy Moore, who lost the 2017 special election to Sen. Doug Jones (D), would fare against Rep. Mo Brooks (R-Huntsville). Mr. Moore defeated Rep. Brooks and eight other candidates including appointed Sen. Luther Strange (R) for the special GOP Senate nomination.
According to the WPA results, Mr. Brooks would cruise to the Senate nomination in a one-on-one battle with former Justice Moore. The numbers would break 52-32% in Brooks’ favor. At this point, Mr. Brooks is saying he does not intend to run for the Senate. Rep. Bradley Byrne (R-Mobile) is in the race, but WPA numbers featuring him were not released. Mr. Moore says he is considering making another run even though his 2017 attempt ended in political disaster.
Arizona: Rep. Ruben Gallego’s (D-Phoenix) ex-wife, former City Councilwoman Kate Gallego, won the special Phoenix Mayoral election over fellow Democrat Daniel Valenzuela on Tuesday night. Her strong 58% victory makes it more likely that Rep. Gallego will soon announce his US Senate candidacy.
Though the two are divorced, the Gallegos are still political allies, and the Congressman put his own statewide plans on hold until his ex-wife’s race was complete. With a strong Gallego win, the Congressman’s chances of competing against astronaut Mark Kelly for the Democratic Senatorial nomination appear to have improved. We can soon expect to see a Gallego for Senate campaign being formed. The eventual Democratic winner will face appointed Sen. Martha McSally (R) in the special general election to run concurrently with the 2020 election calendar.
Montana: Montana Gov. Steve Bullock (D), serving his second and final term as the state’s chief executive, is in Iowa testing the presidential waters. Still, questions abound, however, as to whether he might turn away from his national ambition and instead challenge Sen. Steve Daines (R) next year.
Gov. Bullock has previously indicated his disinclination toward challenging the first-term Republican Senator, but he always seemed to leave the door to such a possibility open a crack. Yesterday, he closed off his Senate option, telling the news media that he has “ruled out” running against Sen. Daines next year. He is still a potential presidential candidate and appears leaning toward entering the national Democratic campaign.
New Hampshire: A recent Emerson College New Hampshire poll (2/21-22; 910 NH registered voters) projected Gov. Chris Sununu (R) and Sen. Jeanne Shaheen (D) to be locked in a 44% tie if the two were to oppose each other next year.
Previously, Gov. Sununu had shown no interest in a Senate race, but that may be changing. When asked about the possibility of challenging Sen. Shaheen instead of seeking a third term as Governor, Mr. Sununu simply indicated that he isn’t “ruling anything out.” Clearly, the Governor would be the GOP’s top recruitment target to challenge the two-term Senator and former Governor. Ms. Shaheen has already announced that she will run for a third term next year.
Texas: Houston City Councilwoman Amanda Edwards (D) is the latest Democrat to state publicly that he or she is considering running for the party nomination to challenge Sen. John Cornyn (R) next year. Though Ms. Edwards is a local official, she has run at-large in the state’s biggest city of Houston and would have name identification throughout Harris County. The latter entity houses 8% of the state’s 15.8 million registered voters.
US Rep. Joaquin Castro (D-San Antonio) is considering a Senate candidacy. Former state Senator and 2014 gubernatorial nominee Wendy Davis (D) says she would possibly enter the race if Rep. Castro decides not to run.
CA-49: San Clemente City Councilman Steve Knoblock (R) has formed a FEC committee to begin testing the waters over challenging freshman Rep. Mike Levin (D-San Juan Capistrano). Previously, San Juan Capistrano Mayor and former congressional candidate Brian Maryott (R) said that he would again run for the seat next year. Though 2/3 of this district’s constituency resides in San Diego County, all of the candidates, including Rep. Levin, are from Orange County. Though this district has been traditionally Republican, Rep. Levin will be favored to win his first re-election.
CA-50: With several candidates already announcing against indicted Rep. Duncan Hunter (R-Alpine), one major political figure just declared that he is not going to run. Former state Senator Joel Anderson (R), who was ineligible to seek a third term under California’s term limits law, said yesterday that he will not run for Congress, and fully supports Rep. Hunter.
GA-6: Former US Rep. Karen Handel (R-Roswell), who lost her seat in November to current Rep. Lucy McBath (D-Marietta) by a 50.5 – 49-5% margin, confirmed that she is considering running again in 2020. Ms. Handel, a former Secretary of State and gubernatorial and US Senate candidate, won the 6th District seat in the 2017 special election overcoming record spending by her opponent, Jon Ossoff. She failed, however, to hold the position in the regular election.
Earlier, state Sen. Brandon Beach (R-Alpharetta) announced his candidacy meaning that Ms. Handel will face significant primary opposition before obtaining her desired rematch with Ms. McBath.
GA-7: The closeness of the 7th District race last November in the Atlanta suburbs has engendered much political change. The 419-vote difference race has led to Rep. Rob Woodall (R-Lawrenceville) already announcing his retirement, while four Democrats, including 2018 nominee Carolyn Bourdeaux, have already declared their candidacies.
Now, a fifth contender has emerged. Fulton County Commission chairman John Eaves (D) made his congressional announcement during the week. It is likely we will see additional individuals step forward in the lengthy remaining interval between now and Georgia’s candidate filing exactly a year from now.
Democratic State Reps. Brenda Lopez (D-Norcross), Pete Marin (Duluth), and Sam Park (D-Lawrenceville) have all signaled interest. Eight Republicans, mostly state legislators, also confirm they are at least considering entering the open congressional contest.
GA-13: It appears that veteran Rep. David Scott (D-Atlanta) is drawing a 2020 primary re-match challenge. Claiming that the Congressman has cast too many votes with Republicans, outgoing Cobb County Democratic Party chairman Michael Owens is confirming that he will again attempt to deny Mr. Scott re-nomination. In 2014, the two tangled and Rep. Scott won easily in an 82-18% victory spread. Therefore, the chances of this race developing into a threatening challenge appear slim at least at the outset.
TX-24: Eight-term Rep. Kenny Marchant (R-Coppell), like many Texas Republican members, had a relatively close call in November. He defeated an under-funded opponent by only a 51-47% count. Now, it appears he will have a more substantial Democratic foe. Kim Olson (D), who held state Agriculture Commissioner Sid Miller (R) to a 51-46% win in November, says she will enter the 24th District race next year. There was some speculation that Ms. Olson might enter the Senate race but has apparently settled for a battle against Rep. Marchant.
Indiana: Former Sen. Joe Donnelly (D), who lost his seat to new Senator Mike Braun (R) in November, has made a decision about his professional future. While being recruited to challenge Gov. Eric Holcomb (R) next year, Mr. Donnelly instead announced that he is joining the Akin Gump law and legislative advocacy firm. Doing so virtually guarantees that he will not return to Indiana to run for Governor in 2020.