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

January 11, 2019

Shutdown continues as House passes financial services bill — Yes, a large percentage of the federal government remains closed. The House of Representatives is voting on individual spending bills, and passed one to fund Treasury, the IRS, the SEC and other financial firms on Wednesday. Senate Majority Leader Mitch McConnell (R-KY) has said he will not ask the Senate to vote on a bill the President is likely to veto. Meanwhile, the shutdown is postponing the release of agricultural and other data, and the SEC’s shutdown is delaying IPOs and other approvals. House Majority Leader Steny Hoyer (D-MD) has said the House will not take the recess scheduled for the week of January 21 if the government is still shut down.

Regulators urge lenders to work with those affected by shutdown — State and federal banking agencies and the Consumer Financial Protection Bureau released a statement today encouraging financial institutions to work with customers affected by the federal government’s shutdown. “Prudent workout arrangements that are consistent with safe-and-sound lending practices are generally in the long-term best interest of the financial institution, the borrower, and the economy. Such efforts should not be subject to examiner criticism.” They also encouraged borrowers affected to communicate with their lenders. The statement followed a January 10 letter to the regulators from House Financial Services Committee Chairwoman Maxine Waters (D-CA), urging them to reaffirm a similar joint statement issued during the shutdown in October 2013.


Federal Reserve seeks comment on new stress test rule — On Tuesday, the Federal Reserve Board published a proposed rule that would modify company-run stress testing requirements as mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The law raised the threshold for stress testing from $10 billion to $250 billion, and would generally require stress tests for those larger companies only once every two years. Stress testing would still include a “severely adverse” scenario, but the “adverse” scenario would no longer be required for company-run or Federal Reserve-run stress tests. Comments are due by February 19.
 
Fed to publish formal proposal on insurance capital, says Quarles — The Federal Reserve will publish a proposed framework for insurance capital requirements “in the not-too-distant future,” Vice Chairman for Supervision Randal Quarles told the American Council of Life Insurers (ACLI) this week. The Fed’s Building Block Approach (BBA) will consider all material risks within the enterprise, grouping entities within the holding company that are covered by the same capital regime. The enterprise’s capital position would be the sum of the capital positions of each building block, after certain adjustments and scaling. The goal, Quarles said, is “to reinforce, rather than frustrate, the important role that insurers' investments play in our economy.”
 
CFPB publishes assessments of Ability to Repay and QM, RESPA Mortgage Servicing rules — As required by Dodd-Frank, the Consumer Financial Protection Bureau published two five-year assessments on the effectiveness of the Ability to Repay and Qualified Mortgage Rule and the RESPA Mortgage Servicing Rule, both issued in 2013. The report on the Ability to Repay & QM Rule found that the rule had not affected access to credit for borrowers with high debt-to-income ratios or self-employed borrowers, and “likely had no effect on access to credit” for borrowers seeking smaller loan amounts. Nor does the rule appear to have materially increases costs to lenders or prices of loans. The report on the RESPA Mortgage Servicing Rule found that the rule may have prevented as many as 26,000 borrowers from becoming delinquent, and that delinquent loans were more likely to recover after the rule’s effective date. The report suggests, however, that servicing costs rose by as much as $50 per loan as a result of the rule.
 
Big banks, brokers form a new stock exchange — Nine stock trading firms announced Monday that they plan to apply to the Securities and Exchange Commission for a new national securities exchange, to be called Members Exchange, or MEMX. MEMX would compete with the New York Stock Exchange and NASDAQ. The founding companies, which include Bank of America Merrill Lynch, Morgan Stanley, and UBS, said that they were creating the firm in part to challenge the “oligopoly over equity market data fees.”
 
Confirmations, nominations, departures, etc. — Michael Bright, the chief operating officer of Ginnie Mae who had been nominated to serve as Ginnie Mae’s president, is withdrawing from both his current position and the nomination to become president of the Structured Industry Finance Group. The White House withdrew the nomination of Nellie Liang to the Federal Reserve Board, at her request. The President announced the nomination of Geoffrey Okamoto as Deputy Under Secretary of the Treasury for International Finance, to serve as Assistant Secretary for International Finance upon his confirmation; he currently serves as Deputy Assistant Secretary of the Treasury for International Finance.
 
Cato challenges SEC’s “no admit, no deny” process — The Cato Institute, a libertarian Washington-based think tank, filed suit in U.S. District Court this week to challenge the SEC’s practice of lifetime gag orders as unconstitutional. “The SEC has demanded . . . an overbroad gag order in every (or nearly every) . . . civil and administrative settlement it has entered into over the course of the past forty years,” the complaint said. The Cato Institute cannot publish a book it has contracted for because its author is bound by a gag order; Cato says these orders are unenforceable under the First Amendment. SEC Chairman Jay Clayton has said these orders have helped the agency “get to settlements, to get people their money back, get bad actors out of the marketplace.”
 
Next Week in Washington:
 
January 15-16           Senate Judiciary Committee holds a confirmation hearing on the nomination of William Barr to be Attorney General of the United States. 9:30 a.m., SH-216 Hart Senate Office Building.
 
January 16     Senate Special Committee on Aging holds a hearing on “Fighting Elder Fraud: Progress Made, Work to be Done.” 9:30 a.m., SD-562 Dirksen Senate Office Building.

 
The Ellis Insight. Jim Ellis reports on political news: 
 
President
 
Sen. Sherrod Brown:  Ohio Sen. Sherrod Brown (D), just winning a 53-47% re-election victory over now-former Rep. Jim Renacci (R-Wadsworth), indicated that he will decide whether to enter the presidential race within the next two months. As many as ten Senators are either taking definitive steps toward entering the race or considering doing so.
 
Julian Castro:  Former Housing & Urban Development secretary Julian Castro has scheduled an announcement for Saturday, at which point he is expected to convert his presidential exploratory committee into a candidate committee. Mr. Castro is a long shot for the party nomination.
 
Sen. Kamala Harris:  Reports are now suggesting that California Sen. Kamala Harris (D) is close to officially becoming a presidential candidate and will apparently bypass the exploratory phase. It appears Sen. Harris will announce her national bid from her native Oakland, CA at a rally on the Martin Luther King birthday holiday, scheduled for January 21st, and not through social media as so many candidates are now doing. Announcing now will provide her a full year of campaigning before early voting begins in the California primary on February 3, 2020. 
 
Tom Steyer:  Earlier this week, billionaire former hedge fund manager Tom Steyer made his scheduled announcement from Iowa, but the message was different than expected. Instead of launching a presidential exploratory committee, Mr. Steyer said he is not running for President “at this time,” and chooses to devote his time and ample resources into building his organization that is attempting to rally grassroots support for President Trump’s impeachment.
 
Senate
 
Georgia:  Speculation continues to grow about former state House Minority Leader and 2018 Democratic gubernatorial nominee Stacy Abrams potentially challenging Sen. David Perdue (R) next year. This week, Ms. Abrams again confirmed considering running for the Senate and said she will make a decision about whether to enter the race in late March. 
 
David Perdue was first elected in 2014, defeating Democrat Michelle Nunn by a 53-45% margin. Ms. Abrams lost a very close Governor’s race to Republican Brian Kemp, a spread of just 54,723 votes from more than 3.94 million ballots cast.
 
Kansas:  Veteran Sunflower State Sen. Pat Roberts (R) announced that he will not run for a fifth term in 2020. The Senator, who will be 84 years of age at the next election, will have served a combined 40 years in Congress when combining his time in the Senate and House. He was originally elected to the western 1st Congressional District in 1980 and served eight terms, rising to become chairman of the House Agriculture Committee. He is currently the Senate Agriculture Committee chair.
 
We are expecting to see multiple candidates, likely from both parties, vie for the Republican and Democratic nominations. The 2020 open election will be only the fifth open Kansas Senate race since 1968.
 
On the Republican side, state Treasurer Jake LaTurner (R), who was appointed to his position when Ron Estes was elected to Congress in 2017 and then won a 58% statewide election victory in November, became the first announced candidate.

Former Gov. Jeff Colyer, ex-Secretary of State and defeated gubernatorial nominee Kris Kobach, and Attorney General Derek Smith are all making early moves toward running or speaking favorably toward doing so. For the Democrats, ex-US Attorney Barry Grissom and Bernie Sanders campaign activist and 2018 congressional candidate Brent Welder look like they are moving toward candidacy.
 
Those not looking toward running are US Secretary of State Mike Pompeo and former US Rep. Kevin Yoder. Indicating they will make decisions later in the year are US Rep. Roger Marshall (R-Great Bend), American Conservative Union president Matt Schlapp, and Kansas Chamber of Commerce president Alan Cobb (R).
 
Maine:  Sen. Susan Collins (R), who was first elected in 1996, stopped short of formally announcing that she will seek a fifth term next year but did say she is “getting ready to run.”  She was last re-elected in 2014 with 67% of the vote, but a more highly competitive contest is expected in the coming election. Six-term Rep. Chellie Pingree (D-North Haven/Portland) is a potential opponent.
 
Tennessee:  Iraq War veteran James Mackler (D), who quickly raised over $1 million for the 2018 Senate race before exiting in favor of former Gov. Phil Bredesen (D), announced yesterday that he will enter the 2020 open seat contest to replace retiring Sen. Lamar Alexander (R). He is the first person from either party to declare his candidacy.
 
No Republican has yet step forward to become a candidate, probably because former Gov. Bill Haslam (R) made a statement last week confirming that he is at least considering running. The move likely froze the potential GOP field, which is likely to remain in limbo until the popular two-term chief executive makes his political intentions public.
 
House
 
House:  In a signal that the US Supreme Court may be ready to issue definitive rulings about racial and political gerrymandering, the high panel announced that SCOTUS will assume jurisdiction over the Maryland political gerrymandering case that involves the state’s 6th District and will hear the latest challenge to the North Carolina lines involving a further claim of racial discrimination. 
 
Republicans are bringing the Maryland case, while Democrats are plaintiffs in the North Carolina litigation. The Court is setting early hearing dates for these cases meaning that rulings will likely come before the end of June.
 
FL-8:  Dena Grayson, wife of former Congressman and ex-US Senate candidate Alan Grayson (D-Orlando), is launching her second run for the US House. In 2016, she lost the Democratic primary for her husband’s former 9th District when he was running statewide.

Ms. Grayson announced that she will challenge Rep. Bill Posey (R-Rockledge) in the adjacent 8th CD, a much more Republican district (Trump ’16: 58-38%), instead of again going after Democratic Rep. Darren Soto (D-Kissimmee) in the more Democratic 9th District. Rep. Posey will be heavily favored for re-election.
 
IA-4:  Largely due to controversial and ill-advised statements that Rep. Steve King (R-Kiron/ Sioux City) made early in the campaign, his 2018 victory margin dropped to 50-47% against a candidate who spent more than $3 million against him. The result is more indicative of political weakness when seeing that this district carried Republican Gov. Kim Reynolds to statewide victory. 
 
Now, Mr. King faces a different type of challenge. This week, state Sen. Randy Feenstra (R-Hull) announced that he would challenge Rep. King in next year’s Republican primary. Responding to the move, the Iowa Republican Party leadership yesterday made public their position that the party apparatus will remain neutral if this nomination contest actually materializes for June of 2020. Normally, the party structure supports its incumbents. 
 
NY-22:  Broome County District Attorney Stephen Cornwell (R) just announced that he will not seek re-election next year in order to pursue “other political opportunities.”  The statement is widely interpreted to mean that the local DA plans to challenge freshman Rep. Anthony Brindisi (D-Utica), who upended one-term Republican Claudia Tenney (R-New Hartford) by a small 50.1 – 48.3% margin of victory. 

It is also possible that Ms. Tenney may seek a re-match, but it is evident from Mr. Cornwell’s move that the former Congresswoman will face a battle for re-nomination should she again choose to enter the electoral fray.
 
Governor
 
Kentucky:  Though Gov. Matt Bevin (R) has twice stated he intends to seek re-election this year, speculation is rampant that he will not. US Rep. James Comer (R-Tompkinsville), who lost the 2015 Republican gubernatorial primary to Mr. Bevin by just 83 votes of more than 214,000 ballots cast before he was elected to Congress in 2016, said he would not challenge Gov. Bevin if the Kentucky chief executive files for re-election but would run if the position comes open.
 
State Rep. Robert Goforth (R-East Bernstadt) did formally announce his opposition to Gov. Bevin in this year’s Republican primary, however. Mr. Goforth, who won his first full term in the legislature last November after winning a special election earlier in the year, was highly confrontational in his comments about Mr. Bevin. 
 
In a public comment, the Governor said he is going to going to seek re-election and hasn’t filed his committee because he is undecided about his running mate. In Kentucky, the Governor and Lt. Governor run as a ticket. The state requires both names when filing for the office, and the deadline is January 29th. This clearly brings into question whether he will retain Lt. Gov. Jenean Hampton, but he promises a decision will soon be made.
 
Louisiana:  Originally, it appeared that Attorney General and former US Congressman Jeff Landry (R) was gearing up to run for Governor but instead opted to announce for re-election when it appeared that US Sen. John Kennedy (R) would challenge Gov. John Bel Edwards (D). When the Senator decided to remain where he is, rumors began surfacing that Mr. Landry was re-thinking his political plans. This week, the Attorney General ended the speculation by announcing that he is continuing his campaign for re-election and will by-pass a run for Governor in 2019. 
 
The gubernatorial field includes, at this point, only two announced contenders: US Rep. Ralph Abraham (R-Alto/Monroe) and real estate developer Eddie Rispone, but others still have plenty of time to enter the race. Former Congressman and US Senate candidate Charles Boustany (R), state Public Service Commissioner Eric Skrmetta, and state Sen. Sharon Hewitt (R-Slidell) are all potential gubernatorial candidates.
 
The Louisiana candidate filing deadline is not until August 8th for the October 12th statewide jungle primary and November 16th run-off election.
 
North Carolina:  Public Policy Polling just conducted a survey of North Carolina voters (1/4-7; 750 NC registered voters), providing Gov. Roy Cooper (D) with results of some early ballot test data. According to the PPP results, Gov. Cooper is favorably positioned against his two potential principle opponents.
 
Isolating former Gov. Pat McCrory (R), the man he unseated in 2016, Gov. Cooper jumps out to a close 45-41% edge. His advantage grows opposite GOP Lt. Gov. Dan Forest. In that ballot pairing, the Governor would lead 47-35%. Mr. Cooper’s favorability index is 44:35% positive to negative. Before winning the Governor’s office, Roy Cooper won four consecutive elections as state Attorney General.
 
West Virginia:  Late this week, Gov. Jim Justice (R), believed to be the richest man in West Virginia, announced that he will seek re-election in 2020. Mr. Justice was first elected in 2016 as a Democrat, but publicly switched parties at one of President Trump’s rallies. It was thought that he might draw opposition in the Republican primary, and still may, but none has yet materialized. Gov. Justice would begin as the favorite to win again next year.
Copyright © 2019 GrayRobinson, All rights reserved.


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