26 days and counting
Closer to 25, actually, once you get this. That may be all the time Congress has to raise the federal debt limit before the U.S. starts to default on its obligations, according to a letter Secretary of the Treasury Janet Yellen sent to Congressional leadership on Monday.
“It is impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills,” Yellen wrote, but it could be as early as June 1. Treasury has already stopped issuing State and Local Government Series (SLGS) Treasury securities, which help states and municipalities manage their own tax obligations, because those securities count against the debt limit. On Tuesday, the Treasury Borrowing Advisory Committee (TBAC) reported “extraordinary volatility in short-term Treasury yields,” and said that “risks around the debt ceiling have led to some distortions in the T-bill yield curve, and meaningful concessions in some new issuances.”
Yellen reminded Congress that “waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.” The Council of Economic Advisers laid out potential consequences of default in a post on Wednesday: skyrocketing interest rates, sharp drops in equity prices, as many as 2 million jobs lost. The effects of even a short-term breach would weaken the dollar’s role in the global economy.
President Biden is scheduled to meet with Republican and Democratic leaders of the House and Senate on Tuesday, May 9, and remains adamant that Congress needs to pass a clean increase in the debt limit. Speaker of the House Kevin McCarthy (R-CA), who led a Congressional delegation to Israel this week, has been equally clear that it’s up to White House and Senate to compromise.
Did your earmark make the list? Check and see!
The House Appropriations Committee has released a comprehensive list of Community Project Funding requests (formerly known as earmarks) submitted for consideration for FY 2024. We’re proud to say that the list includes quite a few projects important to our clients; Representatives are limited to 15 requests apiece, which then go through a rigorous vetting process at the committee level. The vast majority of House members — 369 out of 435 — submitted requests, a total of 5,067 projects costing $19.4 billion in all. Republicans requested 1,864 projects totaling $10.2 billion and Democrats requested 3,203 projects totaling $9.2 billion. The Transportation-HUD bill was the most popular destination for requests, garnering 2,814 earmarks totaling $8.8 billion.
How should the federal government recover compensation from executives of failed banks?
Although Senate Banking Committee Chairman Sherrod Brown (D-OH) said earlier this year that he wanted to focus on housing issues in this Congress, it seems likely that the banking industry’s struggles will occupy the Committee’s attention for some time to come. Committee members talked to witnesses yesterday about whether and how the federal banking agencies should try to recover salaries, bonuses, and stock sale revenue from executives of failed banks. FDIC Chairman Martin Gruenberg has said that while current federal statutes allow for some recovery, the agency’s authority is limited. Senator Tim Scott (R-SC), the Committee’s ranking member, said that federal agencies have the authority they need to censure, fine, and ban executives whose actions lead to bank failures. Both Brown and Scott said the Committee would be calling executives of the failed Silicon Valley Bank and Signature Bank to testify, and would have at least one hearing to review the supervisory reports issued last week by the FDIC, Federal Reserve, and GAO.
FDIC proposes options for changes to deposit insurance
As policymakers argue about recent deployments of deposit insurance coverage, the Federal Deposit Insurance published a report called Options for Deposit Insurance Reform to almost no fanfare on Monday. The report recaps the history of deposit insurance in the American financial system, then offers three options for reform:
Limited coverage - Retaining something close to the current framework, which insures individual depositors up to a specified limit, possibly higher than the current $250,000 cap
Unlimited coverage - Just what it says, unlimited coverage for depositors in insured institutions
Targeted coverage - Offering different types of insurance for different types of accounts, such as providing significantly higher coverage for payroll accounts than for retail deposits
“Of the three options outlined in this report, the FDIC believes targeted coverage best meets the objectives of deposit insurance of financial stability and depositor protection relative to its costs,” the FDIC said in a statement, noting that this would require statutory changes.
SEC finalizes rules on private fund reporting, share repurchase disclosure
The Securities and Exchange Commission voted this week to change disclosure requirements for share repurchases (Regulation S-K) and reporting requirements for certain SEC-registered investment advisers to private funds (Form PF). The changes to Regulation S-K will require issuers to disclose daily quantitative share repurchase information either quarterly or semi-annually, and to make quarterly disclosures about the adoption and termination of trading arrangements under Rule 10b5-1, which governs trades by company insiders. The changes to Form PF will require large hedge fund advisers and all private equity fund advisers to file reports when certain events occur that “could indicate significant stress at a fund or investor harm;” the SEC offered examples including “extraordinary investment losses, significant margin and default events, terminations or material restrictions of prime broker relationships, operations events, and events associated with withdrawals and redemption.”
Confirmations, Nominations, Departures
Congratulations to our own Blair Hancock, who has been selected to the American Enterprise Institute (AEI) Spring 2023 Cohort Leadership Network (LN), a policy education and professional development program for state-based, mid-career public, private, and nonprofit executives. LN members participate in policy summits, scholar briefings, and regional and national networking events. In other news:
The World Bank’s Executive Directors named Ajay Banga, former President and CEO of Mastercard, as President of the World Bank, effective June 2. Banga will serve a five-year term, succeeding David Malpass.
The Securities and Exchange Commission (SEC) announced 14 new members of its Small Business Capital Formation Advisory Committee, who will serve four-year terms.
The Week Ahead
Both the House and the Senate are in session for the next two weeks. The Senate will be out the week of May 22, and the House will be out the week of May 29 (Memorial Day).
May 9 at 10:00 a.m. House Committee on Ways & Means holds a field hearing in Staten Island, NY on “Trade in America: Securing Supply Chains and Protecting the American Worker.”
May 10 at 9:30 a.m. House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion and the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development hold a joint hearing on “The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Asset Markets.”
May 10 at 10:00 a.m. House Transportation & Infrastructure Subcommittee on Highways and Transit holds a hearing on “Freight Forward: Overcoming Supply Chain Challenges to Deliver for America.”
May 10 at 10:00 a.m. House Committee on Small Business holds a hearing on “Taking on More Risk: Examining the SBA’s Changes to the 7(a) Lending Program, Part I.”
May 10 at 2:00 p.m. House Financial Services Subcommittee on Financial Institutions and Monetary Policy holds a hearing on “Federal Responses to Recent Bank Failures.”
May 11 at 10:00 a.m. House Financial Services Subcommittee on Oversight and Investigations holds a hearing on “Oversight of Silicon Valley Bank and Signature Bank: GAO’s Preliminary Review.”
May 11 at 2:00 p.m. House Transportation & Infrastructure Subcommittee on Railroads, Pipelines, and Hazardous Materials holds a hearing on “Getting Back on Track: Exploring Rail Supply Chain Resilience and Challenges.”
The Ellis Insight - Jim Ellis on political news
PRESIDENT
Gov. Glenn Youngkin: Verifying stories that had surfaced last week, Virginia Gov. Glenn Youngkin (R) at an appearance in California earlier this week confirmed that he will not be running for President in 2024. Clearly, the Governor, who under Virginia law may not run for a consecutive four-year term, was testing the national political waters but obviously does not see a viable victory path. Therefore, the chances of the GOP nomination battle winnowing to a race between former President Donald Trump and Florida Gov. Ron DeSantis increase.
SENATE
Maryland: Veteran Maryland officeholder Ben Cardin (D) announced this week that he will not seek a fourth US Senate term next year, retiring after serving what will be a storied 58 consecutive years in elective office when combining his time in the state legislature, the US House of Representatives, and Senate.
We can expect to see a spirited battle forming to succeed Sen. Cardin in the Democratic primary. With Republicans having little chance to win a Maryland statewide Senate race in a presidential election year, especially with their best potential candidate, former two-term Gov. Larry Hogan, already saying he will not run; the real battle will be in next year’s Democratic nomination process.
US Rep. David Trone (D-Potomac) and Montgomery County Councilman Will Jawando (D) have already announced their Senate candidacies. Congressmen John Sarbanes (D-Baltimore), son of the late former Sen. Paul Sarbanes, and Jamie Raskin (D-Takoma Park), along with Prince Georges County Executive Angela Alsobrooks are all potential Senate candidates. Mr. Cardin is the third Senator to announce retirement plans. He follows Sens. Debbie Stabenow (D-MI) and Dianne Feinstein (D-CA) who earlier made their intentions public.
Montana: Republican efforts to use the 2024 Montana Senate race as a test case for changing the state’s primary system to an all-party top two jungle structure have failed. The legislature adjourned with the bill not moving from the state House of Representatives. The measure had previously passed the state Senate, but then was tabled in a state House committee. Another committee attempted to revive the bill, but that effort failed, and the session ended. Therefore, we will see a traditional Montana Senate primary next year.
Texas: Democratic leaders have been making a play to recruit three-term US Rep. Colin Allred (D-Dallas), a former NFL football player, to challenge Sen. Ted Cruz (R) next year and now achieved success. Though gaining a safe Democratic seat in 2021 redistricting, Rep. Allred announced via video that he will enter the Senate race.
While Mr. Allred is likely the strongest potential candidate among the Texas Democratic possibilities, Sen. Cruz remains favored to win a third term, particularly in a presidential year where Texas again would be expected to handily support the Republican nominee. Still, the Allred candidacy will make this Senate contest much more competitive, and Texas now becomes the Democrats’ top national conversion target.
West Virginia: The co/efficient Republican polling firm tested the West Virginia electorate soon after Gov. Jim Justice (R) formally announced his Senatorial campaign. The survey (4/24-25; 974 WV likely general election voters; 753 WV likely Republican primary voters; online) posts Gov. Justice as the leading candidate in the Republican primary, the general election, and in personal approval ratings.
Opposite GOP Rep. Alex Mooney (R-Charles Town), Gov. Justice would lead 45-17%. Advancing to the general election, the two-term state chief executive would top incumbent Sen. Joe Manchin (D), 43-29%. If Rep. Mooney were the Republican nominee, he would trail Sen. Manchin 30-36%.
HOUSE
NY-17: Former US Rep. Mondaire Jones (D) appears intent on attempting to reclaim the Westchester County Congressional seat he abandoned in an unsuccessful attempt to win a newly created New York City open district last year. Reports from the state say Mr. Jones has dismissed any thought of challenging Sen. Kirsten Gillibrand in the Democratic primary to focus on a return to the 17th District.
Driving Jones’ decision to find a new seat in 2022 was then-Rep. Sean Patrick Maloney’s (D) plan to run in the 17th. Mr. Maloney was then defeated in the general election at the hands of freshman Rep. Mike Lawler (R-Pearl River).
President Biden appointed Mr. Maloney this week to be the US Ambassador to the Organization for Economic Cooperation and Development, which is headquartered in Paris, France, meaning he is likely ruled out as a 2024 congressional contender.
Though Mr. Jones may return, he will face Democratic primary competition from at least one announced candidate: Katonah-Lewisboro School Board Trustee Liz Gereghty, the sister of Michigan Gov. Gretchen Whitmer (D). NY-17 is a D+7 rated district according to the FiveThirtyEight data organization, thus making the 2024 campaign a prime Democratic conversion opportunity.
NC-8: Reports are surfacing from the Tar Heel State that Charlotte US Rep. Dan Bishop (R-Charlotte) may be preparing a run for the state’s open Attorney General’s post. Rep. Bishop looks to have the inside track to the Republican nomination if he chooses to run. Western North Carolina District Attorney Andrew Murray is interested in in the statewide post but suggests he will step aside for Rep. Bishop if the Congressman decides to enter the race.
Rep. Jeff Jackson (D-Charlotte) is a potential Democratic AG candidate, looking to succeed incumbent Josh Stein (D) who is running for Governor. Rep. Jackson appears as the potential top target in what is expected to be a new redistricting plan coming from the legislature as a direct result of the state Supreme Court’s recent redistricting and voter ID rulings, thus a statewide run is likely a more attractive option than seeking re-election.
GOVERNOR
Indiana: Former state Superintendent of Public Instruction Jennifer McCormick (D), who was originally elected as a Republican, announced that she will compete in the open Democratic primary. So far, she is the first Democrat to announce her candidacy. Republican US Sen. Mike Braun, Lt. Gov. Suzanne Crouch, and venture capitalist Eric Doden comprise the GOP field. Republicans are favored to hold the Governor’s office. Incumbent Eric Holcomb (R) is ineligible to seek a third term.
Mississippi: A new Siena College poll of the Mississippi electorate (4/16-20; 783 MS registered voters; live interview & online) projects Gov. Tate Reeves (R) expanding what was a closer lead over Mississippi Public Service Commissioner Brandon Presley (D). The ballot test yields Gov. Reeves a 49-38% advantage. In early March, Mason-Dixon Polling & Strategy found the Governor holding a 46-39% edge.
While the Siena College poll revealed the Governor’s job approval index at 53:46% favorable to unfavorable, his personal popularity remains upside down. This latest data projects Mr. Reeves with only a 42:45% positive to negative ratio.
Countering the Siena College numbers, Mr. Presley’s campaign then released their own internal data (Impact Research; 4/24-27; 600 MS likely voters) the results of which portend a much different conclusion. IR finds its candidate, Mr. Presley, actually leading Gov. Reeves, 47-44%.
The 2023 Magnolia State general election campaign promises to be much more competitive than in years past. Gov. Reeves faces only minor competition in the August 8th Republican primary and Commissioner Presley is unopposed on the Democratic side. Therefore, it is clear the two will face each other in the November 7th general election.
New Hampshire: Manchester Mayor Joyce Craig (D), who has already declared that she will not be seeking re-election next year, this week announced the filing of a gubernatorial exploratory committee.
Gov. Chris Sununu (R), only the second Granite State chief executive to serve four consecutive terms in office could run for a fifth two-year term. Most believe that he will retire, however, and could well enter the presidential campaign as a favorite son from the first-in-the-nation primary state. It had been speculated upon for several months that Mayor Craig would make the jump into the 2024 gubernatorial campaign.
North Carolina: Lt. Gov. Mark Robinson has opened a huge lead in the open Republican gubernatorial primary according to a new Survey USA Poll. The study (4/25-29; 707 NC likely Republican primary voters; live interview & online) projects Mr. Robinson to a whopping 43-9-8-4% lead over former Congressman Mark Walker, North Carolina Agriculture Commissioner Steve Troxler, and state Treasurer Dale Folwell, respectively.
The GOP winner will likely face Attorney General Josh Stein (D) in the general election. Gov. Roy Cooper (D) is ineligible to seek a third term. The North Carolina primary is scheduled for Super Tuesday, March 5, 2024.
Washington: Evergreen State Gov. Jay Inslee (D), a former Congressman and presidential candidate, announced during the week that he will not seek a fourth term in office saying that “it is time to pass the torch.”
Attorney General Bob Ferguson (D) is the first to announce his gubernatorial candidacy. Lt. Gov. Denny Heck and state Land Commissioner Hilary Franz are potential Democratic candidates. Former US Representative Jaime Herrera Beutler is the Republican attracting the most attention as a potential GOP contender. Democrats will be favored to maintain the office, but a Republican advancing from the all-party jungle primary is also a likelihood.
STATES
Alaska: In 2020, Alaska voters with only a 50.5% victory margin approved a top-four/Ranked Choice Voting election change that has had a major effect upon the state’s elections. Under the system, all candidates are placed on the same ballot with the top four finishers, regardless of party affiliation, advancing into the general election. In the regular vote, if no candidate receives majority support, the Ranked Choice process takes effect.
Now, conservative activists backed by former Governor Sarah Palin and 2022 US Senate candidate Kelly Tshibaka (R) are mounting a signature campaign for a ballot initiative that would repeal the current system. The legislature is also considering legislation to do the same.
Proponents of the repeal initiative must submit 26,705 valid registered voter signatures to qualify the measure. The group has already recruited the mandatory 100 petition sponsors and received initial approval from the Lt. Governor, meaning the initiative is officially qualified for signature gathering. The group’s goal is to place the measure on the 2024 general election ballot.
Late last week, Gov. Greg Gianforte (R) signed legislation to prohibit the Ranked Choice Voting system from being instituted in the state of Montana, joining several other states that have taken similar action.
North Carolina: In the 2022 election, Republicans converted two Democratic seats on the North Carolina Supreme Court, which gave the GOP a 5-2 majority. In the post-election session, the outgoing Democratic panel ruled that the state Senate boundaries were unconstitutional as was the North Carolina voter ID law. The congressional and state House maps are court-drawn. The new Republican court decided to reconsider these previous court rulings and on Friday reversed the directives.
This means the legislature can redraw all of the district maps and their chance of being upheld in this state Supreme Court is high. The new court and the legislature’s majority members are much closer in the way they view redistricting law and procedure. Therefore, we can soon count on seeing a new congressional plan that will likely break the 7R-7D current delegation’s partisan division. The new draw will inevitably add Republican seats to the congressional delegation at the likely expense of some of the less senior Democratic members.