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

January 25, 2019

In case you missed it — The President announced this afternoon that he will sign a bill to provide funding for the unfunded portions of the federal government through February 15. Everybody at Treasury, HUD, Justice, the SEC, the CFTC, the FTC, the State Department and more should be back at work on Monday. That sound you heard from Washington this afternoon was a massive sigh of relief — for now.
Waters announces House Financial Services Subcommittees, leadership — Rep. Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, announced the Committee’s subcommittees and chairs for the 116th Congress yesterday. The Committee will have six subcommittees, with chairs to be approved by the Democratic Steering and Policy Committee and the Democratic Caucus:
  • Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, chaired by Rep. Carolyn Maloney (D-NY)
  • Subcommittee on Consumer Protection and Financial Institutions, chaired by Rep. Gregory Meeks (D-NY)
  • Subcommittee on Housing, Community Development and Insurance, chaired by Rep. Wm Lacy Clay (D-MO)
  • Subcommittee on National Security, International Development and Monetary Policy, chaired by Rep. Emanuel Cleaver (D-MO)
  • Subcommittee on Diversity and Inclusion, chaired by Rep. Joyce Beatty (D-OH)
  • Subcommittee on Oversight and Investigations, chaired by Rep. Al Green (D-TX)
Waters asks credit rating agencies, trade associations to report on shutdown relief measures — In a letter last Friday to the CEOs of the financial services trade associations and the credit rating agencies, House Financial Services Committee Chairwoman Maxine Waters asked for reports no later than today on what the organizations and their members are doing “to help innocent consumers in response to this unprecedented government shutdown.” She asked for specifics about what accommodations the institutions and member companies are offering to affected consumers, and how many customers have been helped to date. She also requested any observations or anecdotal information about how the shutdown has affected the communities these organizations serve. “It is in no one’s interest to punish those who may be enduring financial stress through no fault of their own,” she concluded.
Waters, Brown ask Otting about plans for FHFA — HFSC Chairwoman Waters and Senator Sherrod Brown (D-OH), ranking member of the Senate Banking Committee, wrote to Comptroller of the Currency Joseph Otting this week to ask what his intentions are as acting director of the Federal Housing Finance Agency (FHFA). Waters and Brown expressed concern that the President had not selected an Acting Director through the process set forth by the Housing and Economic Recovery Act. “However, since you have assumed this role, we are writing to seek information about your planned tenure there.” The letter cited recent reports that Otting had told FHFA employees that he would pursue a plan to take Fannie Mae and Freddie Mac out of conservatorship without Congressional action, and that he had told an interviewer that the Treasury and White House had “a clear mission . . . [of] what they want to accomplish.” Chairwoman Waters and Senator Brown asked for “a copy or detailed description of the mission that Treasury and the White House have outlined” by February 1.
Aggregate credit risk is down, except for leveraged loans — The annual Shared National Credit (SNC) Program Review, released today by the federal banking agencies, found that risk had declined in the portfolio of large syndicated loans, but the dollar volume of loans rated below “pass” remains elevated, and risks associated with leveraged lending have increased. Leveraged lending made up 73 percent of the loans rated “special mention” and 86 percent of the loans rated “classified.”
Confirmations, nominations, departures, etc. — The Federal Reserve announced today that Stacey Devlin will become Director of the Division of Research and Statistics upon the retirement of David Wilcox; Devlin currently serves as associate director of the division. The Office of the Comptroller of the Currency has named Morris Morgan as the new Senior Deputy Comptroller and Chief Operating Officer; he had been Senior Deputy Comptroller for Large Bank Supervision since 2016.
Next Week in Washington:
While Committees on both sides of Capitol Hill continue to organize next week, committee work is beginning in earnest. The State of the Union address, scheduled for Tuesday, January 29, had been postponed until after the government shutdown ended — we have no idea whether it’s back on.
January 28 — The Financial Accounting Standards Board (FASB) will host a public roundtable meeting to gather additional views on the credit losses standard and the expected credit losses (CECL) model. Representatives of banks, regulators, and other stakeholders will participate, and the agenda will include a proposal submitted by banks to consider an alternative to the current expected CECL model. The meeting will stream online through the FASB website and on the FASB YouTube channel. 8:30 a.m. – 2:30 p.m.
January 29 — House Committee on the Budget holds a hearing on the Congressional Budget Office’s Budget and Economic Outlook. Keith Hall, Ph.D., Director of the Congressional Budget Office, will be the only witness. 10:00 a.m., 1334 Longworth House Office Building.
January 29 — Senate Budget Committee holds a hearing on the Congressional Budget Office’s Budget and Economic Outlook for 2019-2029. 2:30 p.m., SD-608 Dirksen Senate Office Building.
The Ellis Insight. Jim Ellis reports on political news: 
Mayor Pete Buttigieg:  South Bend, IN Mayor Pete Buttigieg announced the formation of a presidential exploratory committee this week, quite a jump from being a small city mayor all the way to running for President. At this point, Mr. Buttigieg must be viewed as a minor candidate, but with millennial and LGBTQ constituencies serving as a potential political base, the South Bend Mayor could have access to both a financial and vote base. 
Sen. Kamala Harris:  As expected, Sen. Kamala Harris (D-CA) announced her candidacy for President but did not do so at a Martin Luther King Day rally in her birthplace city of Oakland as originally planned. Instead, she made her declaration during an interview on ABC News’ Good Morning America, followed by a speech at Howard University in Washington, DC. Regardless of her announcement venue, Sen. Harris is now an official presidential candidate.
John Hickenlooper:  Former Colorado Gov. John Hickenlooper, out of office for less than a month after serving two terms, says he will decide by March about whether to enter the presidential campaign. Mr. Hickenlooper has been on the fringes of the national campaign for months and may find himself dropping hopelessly behind if he doesn’t begin to take action very soon.
Sen. Chris Murphy:  Though Connecticut Sen. Chris Murphy has never indicated that he would become a presidential candidate in 2020, his name often surfaced as an individual looking to make a run for the national office. Yesterday, Sen. Murphy addressed the rumors and stated flatly that he will not be a candidate for President next year, saying that he will continue to fulfill the duties of his current office.
PPP National Polls:  The Public Policy Polling firm conducted a nationwide political survey (1/19-21; 760 US registered voters), testing President Trump against seven potential Democratic opponents. The poll clearly skews left and finds the President trailing all, suggesting that his dip in popularity would be very serious if he were directly heading into an election. On the plus side for him, the Trump standing isn’t much worse than his previous polling status versus Hillary Clinton, meaning he still retains his strong base.
Former Vice President Joe Biden fares best, topping Mr. Trump, 53-41%. Sen. Bernie Sanders (I/D-VT) would beat him 51-41% if the election occurred during the PPP polling period. The other candidates, Sens. Kamala Harris (D-CA), Kirsten Gillibrand (D-NY), Elizabeth Warren (D-MA), Cory Booker (D-NJ), and former Rep. Beto O’Rourke (D-TX), all lead between five and seven points. 
Alabama:  Conventional political wisdom suggests that the Alabama Republican Senatorial primary will be a crowded affair with the winner having a strong chance of unseating Sen. Doug Jones (D), who won the 2017 controversial special election. Yesterday, Rep. Bradley Byrne (R-Mobile), always believed to be a near-sure Senatorial candidate, indicated he would make his 2020 decision known in the next few weeks. All signals suggest that the Congressman will enter the race.
Michigan:  Manufacturing company owner and retired Army Ranger John James (R), who did much better in a losing effort against Sen. Debbie Stabenow (52-46%) than originally projected even in a bad year for Michigan Republicans, may challenge Sen. Gary Peters (D) next year. Mr. James confirms he is interested in again seeking political office, and National Republican Senatorial Committee chairman Todd Young (R-IN) continues to sing Mr. James’ praises as a viable candidate. 
Should he run in 2020, Mr. James’ campaign effort will be taken much more seriously, but the political road ahead will remain rocky despite Sen. Peters rather tepid job approval ratio (33:28%; according to the Morning Consult national polling organization in their pre-election survey of all 100 Senators).
GA-6:  First-term Rep. Lucy McBath (D-Marietta) scored a close 50-49% upset victory over Rep. Karen Handel (R-Roswell) in November. Therefore, it is clear that she will be a major GOP conversion target in 2020. Already, two potential Republican opponents are signaling that they will be candidates in 2020. 
Former Rep. Karen Handel (R-Roswell), who won the most expensive race in history in a 2017 special election but lost the regular vote to Ms. McBath by less than a percentage point, says she is seriously considering running again in 2020. State Sen. Brandon Beach (R-Alpharetta) also took action just before the holiday weekend break. He filed a fundraising committee with the Federal Election Commission. 
GA-7:  Georgia’s 7th District race produced the closest raw vote margin in the country, a spread of just 419 votes between veteran Rep. Rob Woodall (R-Lawrenceville) and former state Senate committee staff director Carolyn Bourdeaux (D). We have not heard whether Ms. Bourdeaux will make another run in 2020, but if she does the former nominee will not have a free ride in the Democratic primary. Yesterday, attorney and Democratic activist Marqus Cole announced that he plans to file for the 7th CD party nomination next year.
HI-2:  Soon after announcing that she plans to run for President, Hawaii Rep. Tulsi Gabbard (D-Kailua) has drawn a serious Democratic challenger for her congressional seat. State Sen. Kai Kahele (D-Hilo) announced that he will run for the 2nd District House seat whether or not Ms. Gabbard seeks re-election in 2020. Under Hawaii law, an individual can simultaneously run for President and another office. This potential contest could well become a serious political challenge. 
Ms. Gabbard was first elected to the House in 2012 after serving in the Hawaii state House of Representatives and on the Honolulu City Council. She did not seek re-election after one term in the legislature in order to serve in Iraq with her National Guard unit. 
IL-3:  In a strong March 2018 Democratic primary challenge, media consultant Marie Newman came within two percentage points of denying veteran Rep. Dan Lipinski (D-Western Springs/ Chicago Suburbs) re-nomination. According to a public statement made late this week, it appears highly likely that Ms. Newman will return for a re-match with the eight-term Congressman early next year. 
IA-1:  The eastern Iowa congressional district that is usually friendly to Democrats but had a Republican Representative for the previous two terms figures to be another battleground region in 2020. Freshman Rep. Abby Finkenauer (D-Dubuque) defeated Rep. Rod Blum (R-Dubuque) 51-46% last November. Now, state Rep. Ashley Hinson (R-Marion/Cedar Rapids) confirms she is considering the race and expects to soon make a decision. Reports coming from the National Republican Congressional Committee suggests that leadership believes Ms. Hinson will become a strong challenger candidate.
IA-4:  Rep. Steve King (R-Kiron/Sioux City) has been under heavy media attack over racial comments for the past two weeks, and a new poll has shown the controversy has hurt him. Winning re-election by just a 50-47% margin in what is normally a safe Republican district, 2018 Democratic nominee JD Scholten would already lead the Congressman according to a new poll just released.
The Insight 20/20 organization, polling for the Majority Rules Political Action Committee (1/16-17; 472 IA-4 registered voters), finds Rep. King trailing Mr. Scholten, 39-44%. Already, state Sen. Kurt Feenstra (R-Hull) has announced his primary challenge to Rep. King. Both Gov. Kim Reynolds (R) and the official Iowa Republican Party committee leadership have said they will not support Rep. King for re-election.
NC-9:  A North Carolina Superior Court judge denied Republican congressional candidate Mark Harris’ legal move to be declared the winner of the disputed 9th District election. The presiding jurist indicated that the state Board of Elections is investigating the voter fraud allegations and that declaring either candidate a winner would be premature. The investigation has dragged on since Election Day. A new state Board of Elections will be in place beginning in February. The most probable result is calling for a new election.
TX-10:  Democratic attorney Mike Siegel, who held Rep. Michael McCaul (R-Austin) to a 51-47% re-election victory, says he will again seek the 2020 Democratic nomination in preparation for a re-match with the seven-term Congressman and former Homeland Security Committee chairman. The 2018 race was surprisingly close, and Siegel can again expect a big vote coming from the Travis County (Austin) part of the district. 
Kentucky:  Secretary of State Alison Lundergan Grimes (D), who attracted national political attention in her unsuccessful 2014 US Senate race against then-Minority Leader Mitch McConnell (R), was another potential candidate said to be considering challenging Gov. Matt Bevin (R) later this year. This week, however, Ms. Grimes indicated that she will not become a candidate for Governor or any other office in 2019. She is ineligible to seek re-election to a third term as Secretary of State. 
Montana:  Attorney General Tim Fox (R), who for several years was the state’s lone Republican office holder, late this week announced as expected that he will run for Governor next year. With incumbent Gov. Steve Bullock (D) ineligible to seek a third term and seriously considering entering the presidential campaign realm, the door is wide open for Mr. Fox to make a strong bid to attain the Governor’s office. 
Secretary of State Corey Stapleton (R) is already running for Governor, so AG Fox will face significant primary opposition. Democrats will attempt to field strong candidates both for Governor and to challenge Sen. Steve Daines (R) as the latter man seeks re-election for the first time. Lt. Gov. Mike Cooney waits in the wings as the leading potential Democratic statewide candidate.
New Hampshire:  Being one of two states that limit their gubernatorial terms to only two years – neighboring Vermont is the other – New Hampshire state chief executives are always running. Late this week, Gov. Chris Sununu (R) drew his first major Democratic challenger. 
Executive Councilor Andru Volinsky (D), a strong Bernie Sanders backer in 2016, told supporters through an email message that he will enter the Democratic gubernatorial primary in hopes of winning the opportunity to challenge the two-term Republican Governor. As always in New Hampshire, the statewide race has the potential of being decided by just a few votes. In November, Gov. Sununu was re-elected with a closer-than-expected 53-46% margin.

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