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THE GOLDEN APPLE: Your report on the latest discord from The Eris Group
July 27, 2018
 

Happy shark week — Two days left to celebrate our favorite apex predators. According to the Florida Natural Museum’s International Shark Attack File, your odds of being eaten by a shark are only about one in 11.5 million. Better odds than winning the Powerball, for sure (one in 292 million), but much lower than the odds of being attacked by a bear (one in 2.1 million). 2017 was “just an average year” for shark attacks worldwide, and it was actually the second year in a row without a shark-related fatality in the U.S.
 
How red or blue is your neighborhood? The New York Times has put together an interactive map of voting precincts, so you can see exactly how your area voted in 2016. More evidence, if you needed it, of how important the power to draw district boundaries is.
 
House votes to extend flood insurance without reforms — The House of Representatives voted 366-52 on Wednesday to approve a “clean” reauthorization of the National Flood Insurance Program (NFIP) through November 30. The Senate must approve the bill before July 31 to avoid a lapse in the program. House Financial Services Committee Chairman Jeb Hensarling (R-TX) voted against the reauthorization, noting that the House had passed a reform package last November while the Senate “has done nothing . . . Enough is enough,” he said. “It is an unsustainable program. The finances do not work.”
 
House, Senate approve CFIUS reform — House and Senate lawmakers announced an agreement this week on the National Defense Authorization Act (NDAA), which includes the Foreign Investment Risk Review Modernization Act (FIRRMA) to strengthen and empower the Committee on Foreign Investment in the United States (CFIUS). Treasury Secretary Steven T. Mnuchin applauded the agreement, saying it would “give the U.S. Government enhanced capacity to protect our critical technology and infrastructure, while also keeping America open to foreign investment.” The House approved the NDAA yesterday; a Senate vote is likely next week.
 
Seven bills passed by House Financial Services Committee — Affirming Chairman Jeb Hensarling’s description as “one of the hardest working committees on the Hill,” the House Financial Services Committee approved seven bills this week on a range of issues, from housing eligibility to weapons proliferation. Among the bills passed were H.R. 5036, the Financial Technology Protection Act, which would establish an independent Financial Technology Task Force to provide rewards to whistleblowers and encourage the development of tools to fight illicit use of digital currencies; H.R. 5059, which defines an insurance savings and loan holding company and limits the Fed’s authority over them; and H.R. 3626, the Bank Service Company Examination Coordination Act of 2017, which facilitates and enhances state and federal information-sharing in the examination of banks’ third-party technology providers.
 
Nominees to SEC, Ginnie Mae, HUD OIG and OFR get warm welcome from Senate Banking — The Senate Banking Committee held an unusually cordial hearing Tuesday on the nominations of Elad Roisman as a member of the Securities and Exchange Commission, Michael Bright to serve as President of Ginnie Mae, Rae Oliver Davis as Inspector General of the Department of Housing and Urban Development, and Dr. Dino Falaschetti to be Director of the Treasury’s Office of Financial Research. Roisman declined to comment on the SEC’s pending Best Interest rule, but said that he would prioritize promoting investor confidence and improving capital formation and secondary market liquidity for smaller companies. Senator Elizabeth Warren (D-MA) praised Bright for his work to stop “churning” of VA refinancings, and said she looked forward to supporting his nomination. The Committee may vote on these nominations as early as next week.
 
Portman, Cardin introduce IRS reform bill — The Senate Finance Subcommittee on Taxation and IRS Oversight heard testimony yesterday about ways to improve tax administration. Subcommittee Chairman Rob Portman (R-OH) and Senator Benjamin Cardin (D-MD) introduced the Protecting Taxpayers Act, which would reform and revitalize the IRS Oversight Board; require the IRS to submit a comprehensive training strategy; reinstate IRS authority to regulate paid tax preparers; clarify reporting requirements for tip income; overhaul the IRS appeals process; and strengthen the IRS’s IT infrastructure, among other changes. Witnesses expressed frustration with IRS’s staffing shortages and outdated information technology, and the urgent need to supplement traditional service delivery channels.
 
House panel contemplates action in response to Wayfair decision — The House Judiciary Committee heard testimony from an eight-witness panel on Tuesday about the ramifications of the Supreme Court’s ruling in South Dakota v. Wayfair, which allows states to collect sales tax from internet sellers located in other states. Witnesses disagreed sharply on what actions states are likely to take, and how difficult compliance will be. The National Conference of State Legislatures has asked states to wait until January 1, 2019 to start collecting these taxes; several witnesses called for a Federal moratorium on state action.
 
Lighthizer optimistic about a Mexico trade deal — U.S. Trade Representative Robert Lighthizer told a Senate Appropriations subcommittee yesterday that he hopes to have a trade agreement with Mexico finalized soon, and that this agreement should bring Canada to the table for a revision of the North American Free Trade Agreement (NAFTA). The agreement needs to be made next month if outgoing President Enrique Peña Nieto is to sign it before leaving office on November 30. Lighthizer said that both he and President Trump believe that bilateral trade agreements will serve the country better than multilateral agreements. The U.S. is close to a final deal with South Korea, Lighthizer said, and getting ready to pursue new agreements with the Philippines and in sub-Saharan Africa.
 
FTC says it’s not playing “gotcha” with payment processors — At a joint House Oversight Subcommittee hearing yesterday, the Director of the FTC’s Bureau of Consumer Protection said that the agency was not a participant in Operation Chokepoint, the Department of Justice/FDIC initiative against illegal activity by third-party payment processors. Instead, Andrew Smith said, the FTC “follows the money” and has brought cases against only 15 processors in the last ten years. Jason Oxman, CEO of the Electronic Transactions Association, said the problem is the “unrelenting” flow of civil investigative demands the FTC sends third-party processors, which often seem to target specific industries, and the potential liability businesses and individuals face. Rep. Mark Meadows (R-NC), Chairman of the Government Operations Subcommittee, offered to sit down with representatives of the FTC and the ETA to find a solution.
 
FHFA will not update credit score model in 2018 — The Federal Housing Finance Authority (FHFA) announced on Monday that it will not make a decision about updating the credit score model used by Fannie Mae and Freddie Mac this year, instead focusing on the implementation of Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. That section requires the FHFA to promulgate rules that set standards and criteria for validating credit score models; FHFA Director Mel Watt said that updating the credit score model “would be duplicative of, and in some cases inconsistent with” the work required by Section 310.
 
SEC proposes changes to streamline disclosures on registered debt offerings — The Securities and Exchange Commission voted Tuesday to seek comment on proposed changes to Rules 3-10 and 3-16 of Regulation S-X that would focus disclosures on information material to investors, make disclosures easier to understand, and reduce costs and burdens for registrants. Chairman Jay Clayton said that he had personally seen cases in which the cost and time burdens of disclosure had prevented issuers from pursuing SEC registration, and that the goal of the changes was “to encourage these offerings to be conducted on a SEC-registered basis.” The proposal is open for comment for 60 days.
 
Senate Banking Democrats challenge OCC changes on CRA enforcement — Nine Democratic members of the Senate Banking Committee, led by ranking member Sen. Sherrod Brown (D-OH), sent Comptroller of the Currency Joseph Otting a letter on Tuesday asking him to explain the changes to CRA reviews proposed in its June 15 bulletin. The senators said the OCC’s letter had “undermined fair lending compliance among the national banks it regulates.”  They called on Otting to rescind the bulletin, noting that it had not been subject to notice and comment.
 
FDIC Inspector General recommends IT improvements — An audit of the FDIC’s information technology initiatives found that the agency was falling short in several areas. The report recommended that the FDIC develop an implementation plan for its IT Strategic Plan; incorporate cloud strategy principles into the IT Governance Framework; implement an agency-wide enterprise architecture (EAs) to guide IT decisions; define roles and responsibilities for data security; and evaluate the costs and potential benefits of cloud project. The FDIC’s Chief Information Officer accepted these findings and said they had already taken action on six of the IG’s recommendations, with work on the other two to be finished by June 28, 2019.
 
Leadership changes at Fannie Mae as Mayopoulos announces departure — Fannie Mae announced on Monday that CEO Timothy J. Mayopoulos will step down before the end of this year, to be replaced by a candidate chosen by Fannie’s board. In the meantime, David Benson has been named President, and Celeste Brown has been promoted to succeed him as Executive Vice President and Chief Financial Officer, effective August 6. Benson will report to the CEO, and will manage the company’s day-to-day business and operations.
 
Next Week in Washington:
 
The House is in recess until September 4th.
 
July 31            Senate Commerce Subcommittee on Communications, Technology, Innovation, and the Internet will hold a hearing on “The Internet and Digital Communications: The Impact of Global Internet Governance.” 10:00 a.m., SR-253 Russell Senate Office Building.
 
The Ellis Insight. Jim Ellis reports on political news: 
 
President
 
Convention:  The Republican National Committee announced on Friday that the party’s 2020 presidential nominating convention will be held in Charlotte, NC, making it the second time the city will have hosted a national major political party convention. In 2012, Democrats gathered there to re-nominate President Barack Obama.
 
The Democratic National Committee has narrowed its convention site choice to three cities: Houston, Miami Beach, and Milwaukee. They have set the event schedule, however, and the convention will be held from July 13-16, 2020. A fourth city host finalist, Denver, saw its leadership withdraw after the calendar was announced because of scheduling conflicts in conjunction with their convention facilities. 
 
Senate
 
California:  US Senator Dianne Feinstein (D) received some further disconcerting news from a new Public Policy Institute of California survey (7/8-17; 1,711 CA adult residents; 1,420 CA registered voters; 1,020 CA likely voters; questionnaire provided in English and Spanish) this week. The poll found her leading state Senator Kevin de Leon (D-Los Angeles), a former state Senate President, 46-24%. While the advantage seems substantial, she continues to fall below the 50% mark, and has, in fact, never hit that mark. Even in the jungle primary election, Sen. Feinstein’s total vote only equaled 44%. 

The poll also determined that as many as 20% of the polling respondents, mostly Republicans, said they plan to skip the race, voting for neither Feinstein nor de Leon. This could prove problematic for the Senator who, in the end, is expected to attract more Republican votes than de Leon, a contender well left of the five-term incumbent.
 
Florida:  The Florida Senate race, one of the top campaigns in the country, has been bouncing back and forth between three-term incumbent Bill Nelson (D) and Gov. Rick Scott (R) for an extended period of time. Though the Florida primary isn’t until August 28th, it is a foregone conclusion that both men will advance into the general election.
 
A new Florida Atlantic University survey was just released (7/20-21; 800 FL registered voters) and it finds Gov. Scott leading Sen. Nelson, 44-40%, which, interestingly, is the exact result they found from their May statewide poll. Gov. Scott also led substantially on job approval ratings. According to this data, by a ratio of 50:32%, voters approve of the Governor’s job performance. Conversely, Sen. Nelson’s approval index is much lower at 37:32%.
 
House
 
CA-24:  Third-time congressional candidate Justin Fareed (R) just released a new internal Olive Tree Strategies poll (7/12-15; 404 CA-24 likely general election voters) that claims he trails freshman Rep. Salud Carbajal (D-Santa Barbara) by only one percentage point, 47-46%. In 2016, culminating a tough open seat campaign, then-County Supervisor Carbajal defeated businessman Fareed, 53-47%. The 24th District, covering all of Santa Barbara and San Luis Obispo Counties, with a sliver of Ventura added, can yield close campaigns but probably not a Republican victory. The constituency voted 57-37% in Hillary Clinton’s favor, for example.
 
CO-6:  Rep. Mike Coffman (R-Aurora) has consistently won his tough suburban Denver district that was drawn to elect a Democrat. A new Global Strategy Group poll (7/11-17; 506 CO-6 likely general election voters) for the Jason Crow (D) campaign finds the Democratic challenger posting a tight 47-45% edge. Like in many polls this year, and what could prove to be the Democrats’ greatest asset in the current election cycle, the unaffiliated voters are breaking decidedly their way. According to GSG, Mr. Crow’s margin within this segment is 49-35% over Rep. Coffman. The race will be classified as a toss-up all the way to Election Day.
 
GA-6&7: In the Georgia Democratic US House run-off campaigns earlier in the week, gun control activist Lucy McBath defeated businessman Kevin Abel, 54-46%, to become the party nominee for the right to face freshman Rep. Karen Handel (R-Roswell). The Congresswoman begins the official general election campaign with more than $1 million in her bank account and is the clear favorite in the 6th District general election.
 
In the northeastern Atlanta metro 7th District, Democrats nominated former state Senate Budget director Carolyn Bourdeaux to oppose four-term Rep. Rob Woodall (R-Lawrenceville). She won a close 52-48% contest over businessman David Kim in a very low turnout election of just over 15,000 voters. Here, too, the Republican incumbent is considered the favorite for November.
 
Louisiana:  The final state to hold its candidate filing deadline is now reporting its political contenders for the fall, meaning the entire country has set its political card. Louisiana has no Governor or Senate race this year, and none of the six House incumbents, all seeking re-election, appear to have drawn stiff competition for their November elections. It is probable that each of the half-dozen House members: Reps. Steve Scalise (R-Jefferson/Mesquite), Cedric Richmond (D-New Orleans), Clay Higgins (R-Lafayette), Mike Johnson (R-Benton/Shreveport), Ralph Abraham (R-Alto/Alexandria), and Garret Graves (R-Baton Rouge) will all win outright on November 6th
 
MI-11:  Target Insyght released the Democratic primary numbers for their survey of Michigan’s open 11th CD (7/16-18; 500 MI-11 likely Democratic primary voters). According to the results, former US Treasury Department official Haley Stevens leads technology corporation CEO Suneel Gupta, the brother of CNN medical correspondent Sanjay Gupta, state Rep. Tim Greimel (D-Troy), and ex-Homeland Security Department official Fayrouz Saad, 21-15-14-7%, respectively, as the candidates move toward the August 7th primary election. 
 
MI-13:  A lot of news coverage has been generated about which member of the Conyers family will succeed resigned Rep. John Conyers (D-Detroit) in Michigan’s now vacant 13th Congressional District. According to a just-released district survey from Target Insyght (7/16-18; 600 MI-13 likely Democratic special election and primary voters), however, it doesn’t appear that state Sen. Ian Conyers (D-Detroit) is well positioned to win the Democratic nomination, which is tantamount to general election victory in this center-city district.

According to the TI data, a very tight three-way race is evolving for the party primary. Detroit City Council President Brenda Jones has a miniscule 21-20-19% lead over Westland Mayor Bill Wild and former state Rep. Rashida Tlaib. State Sen. Coleman Young II, son of the former Detroit Mayor, is next with 14%, while Ian Conyers trails badly at 8 percent. The Michigan primary is scheduled for August 7th. In the general election, because he failed to qualify for the primary ballot, John Conyers III, the former Congressman’s son, has entered the contest as an Independent.
 
PA-17:  Monmouth University (7/19-22; 401 PA-17 registered voters) gives us the first glimpse of the western Pennsylvania paired incumbents’ race between Reps. Conor Lamb (D-Pittsburgh) and Keith Rothfus (R-Sewickley). Rep. Lamb, fresh from his special election victory that allowed him to spend more than $10 million to become known throughout western PA, is taking advantage of his early assets. In the Monmouth survey, Mr. Lamb posts a strong 51-39% lead over Rep. Rothfus in a district that looks to be a pure toss-up on paper. The 17th District will host one of the most important congressional campaigns in the 2018 cycle.
 
Governor
 
Florida:  Billionaire Jeff Greene’s (D) late entry into the Florida Governor’s race is dramatically changing the Democratic primary. Quickly spending more than $10 million to re-acquaint himself with the voters — he was a US Senate candidate in 2010 — Mr. Greene has jettisoned into third place and is clearly damaging former front runner Philip Levine, the wealthy Miami Beach Mayor. 
 
According to an Associated Industries of Florida poll (released 7/24; 800 FL likely Democratic primary voters), former US Rep. Gwen Graham (D-Tallahassee) has surged into the lead with 24%. Mayor Levine drops to 16%, just ahead of Mr. Greene with 13%, and Tallahassee Mayor Andrew Gillum, who has 12 percent. Businessman Chris King, as he has for most of the campaign, languishes in low single digits at 4 percent. 
 
On the other hand, Mason-Dixon Polling & Strategy just released a new survey (7/23-25; 1,000 FL likely voters; 500 FL likely Democratic primary voters; 500 FL likely Republican primary voters) and they, too, find Mr. Greene garnering substantial primary support. M-D also sees Ms. Graham leading the group. According to their result, she has a stronger 27-18-12-10-7% support margin over Messrs. Levine, Greene, Gillum, and King. For the Republicans, the Mason-Dixon numbers report a conclusion similar to several others. They find Rep. Ron DeSantis (R-Palm Coast/Daytona Beach) leading Agriculture Commissioner Adam Putnam 41-29%, in a race that looks completely different than it did last month. The Florida primary is August 28th, so these fluid campaign situations can still change.
 
Georgia:  Peach State voters went to the polls this week and Republicans chose Secretary of State Brian Kemp to oppose former state House Minority Leader Stacey Abrams in the state’s open general election for Governor. Mr. Kemp’s victory over Lt. Gov. Casey Cagle was a landslide 69-31% result. Mr. Cagle’s self-inflicted political wounds, then allowing Mr. Kemp to move to his ideological right, and President Trump and Vice President Pence endorsing within the last two weeks all culminated in a huge victory for the retiring Secretary of State. Survey USA (7/15-19; 1,199 GA likely general election voters) tested the November election just before the run-off vote, and found Mr. Kemp topping Ms. Abrams, 46-44%.
 
Illinois:  Gov. Bruce Rauner (R) has long been down in the polls even before his poor performance in the March Republican primary when he barely won re-nomination. The newly released Victory Communications survey provides no contrary information. According to the data (6/26-28; 1,208 IL likely general election voters via automated response device), Democratic nominee J.B. Pritzker, a billionaire venture capitalist, leads Gov. Rauner, also a billionaire, 45-30%, in a race where combined spending will likely top $300 million for the campaign cycle. Obviously, Illinois is the Democrats’ best national conversion opportunity.
 
Kansas:  The Remington Research Group released a new poll of the Kansas Governor’s campaign (7/19-20; 1,189 KS likely general election voters via automated response device) and finds a distinct difference in how the general election polling respondents break depending upon who is cast as the eventual GOP nominee. 
 
If Gov. Jeff Colyer wins the party nomination, he would lead state Sen. Laura Kelly (D-Topeka) and significant Independent candidate Greg Orman, 38-28-10%. But, if Secretary of State Kris Kobach wins the Republican gubernatorial nomination on August 7th, the race becomes much tighter. Remington projects a virtual dead heat in the latter scenario, with Mr. Kobach leading 36-35-12% over Kelly and Orman, respectively. Having Mr. Orman campaigning from the left clearly makes the Democrats’ task more difficult as the eventual nominee will attempt to become the first party member to win the Kansas Governor’s office since Kathleen Sebelius was re-elected in 2006. 
 
Oklahoma:  The new 9News (Oklahoma City)/Sooner Poll (7/18-20; 483 OK likely GOP run-off voters) finds the two Republican run-off participants, Oklahoma City Mayor Mick Cornett and mortgage banker Kevin Stitt in a dead heat, tied at 38% apiece. In the primary, Cornett placed first in a field of ten candidates with 29% of the vote. Mr. Stitt placed second with 24%, thus both advanced to the run-off election. The winner of the August 28th contest moves to the general election against former Attorney General Drew Edmondson, who won the Democratic nomination outright on June 26th. Gov. Mary Fallin (R) is ineligible to seek a third term.
 
Oregon:  Gravis Marketing released the results of their Oregon gubernatorial poll (7/16-17; 770 OR likely general election voters) and surprisingly find Gov. Kate Brown (D) and state Rep. Knute Buehler (R-Bend) tied at 45%, apiece. The sampling group contains 33% registered Democrats, 23% registered Republicans, with the remainder (44%) being Independent or unaffiliated voters. But, the major party respondents are a bit under-represented in each party. The actual Oregon voter registration roles show the Democrats at 35.6%, Republicans claiming 26.1%, and the combined Independent and unaffiliated total reaching 35.9%. 
 
Rhode Island:  Cranston Mayor Allan Fung, who lost the 2014 Governor’s race to then-state Treasurer Gina Raimondo (D) in a close 41-36% vote with Independent Bob Healey capturing over 21%, is again challenging for the Republican gubernatorial nomination. This week, Mr. Fung’s campaign released the results of their latest Public Opinion Strategies survey (7/11-14; 400 RI likely Republican primary voters) that projects their candidate to a huge GOP primary lead over state House Minority Leader Patricia Morgan, 62-22%. Ms. Morgan claims the results are so lopsided because the survey was a “push poll”, designed to test an extreme situation. It will take some time to determine who is correct. The Rhode Island statewide primary is not scheduled until September 12th.
 

 
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