Debt ceiling countdown
A week closer to June 1 — the possible X-date past which the US Treasury will no longer be able to meet its obligations in full — are negotiators closer to a deal to raise the debt ceiling? Maybe. President Biden met with the Republican and Democratic leaders of the House and Senate on Tuesday. They were supposed to meet again today, but staffers are meeting instead, with the principals to reconvene next week. In the meantime, every hearing on the House side this week (and there were a lot of them) included at least some arguments and finger-pointing about the threat of default.
House Financial Services, Agriculture Subcommittees join forces on crypto
Borrowing the giant House Ways and Means Committee hearing room, the House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion and the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development held a rare joint hearing this week on closing the regulatory gaps for digital assets. Bipartisan consensus has been building on the need for a regulatory framework for digital assets, but the question of whether digital assets are commodities (under the Ag Committee’s jurisdiction) or securities (Financial Services) makes the legislative process cumbersome and regulatory lines unclear. Tuesday’s hearing was long, substantive, and unusually cordial, but the only legislation under consideration was a “Resolution Expressing Support for Blockchain Technology and Digital Assets.”
Focusing on the Fed
When things are going well, most of us don’t think much about the Federal Reserve System or the Board that governs it. Washington’s been paying a lot of attention to the Fed for the last several months, and that’s not good news for anyone.
The Federal Reserve’s role in recent bank failures was the focus of hearings before two different subcommittees of the House Financial Services Committee this week — not just any gaps or deficiencies in its supervision of Silicon Valley Bank, but also the role interest rate increases played in the failures of SVB, Signature Bank, and more recently First Republic.
Both Rep. Andy Barr (R-KY), chair of the Subcommittee on Financial Institutions and Monetary Policy, and Rep. Bill Huizenga (R-MI), chair of the Subcommittee on Oversight and Investigations, described the Fed’s report on the failure of Silicon Valley Bank as self-serving. The Fed played a significant role in that collapse, Republican subcommittee members argued, through delayed supervisory action and by not thinking through the effects of rapid interest rate increases on the nation’s banks.
Congressional attention to this year’s bank failures will ramp up even further next week, when former executives from SVB and Signature Bank testify before the Senate Banking Committee, all the federal prudential regulators testify before both the House Financial Services Committee and the Senate Banking Committee, and the two House subcommittees that had separate hearings on these failures this week combine for a joint hearing to explore the topic further.
Separately, this morning President Biden announced his plans to fill three current or upcoming vacancies on the Federal Reserve Board. Biden has chosen current Federal Reserve Board Governor Philip Jefferson to serve as Vice Chair, filling the vacancy left by Lael Brainard, now Director of the National Economic Council. He named Adriana Kugler, currently the World Bank Group Executive Director for the United States, to the vacant seat on the Board of Governors, and renominated Lisa Cook to a full term as Governor. Dr. Kugler would be the first Latina to serve on the Federal Reserve Board.
And just to round things out, the Fed published its quarterly Financial Stability Report this week, highlighting risks in four “categories of vulnerabilities”: asset valuations, borrowing by businesses and households, leverage in the financial sector, and funding risks. A majority of survey respondents expressed concern about persistent inflation and monetary tightening, banking sector stress, US-China tensions, commercial and residential real estate, and the Russia-Ukraine war.
13 ways of looking at the supply chain
Multiple House committees held hearings this week on different aspects of the supply chain, looking at shipping, trucking, and railroads. Concern about unfair competition from China is common across industries that trade internationally, and shortages of qualified workers are nearly universal among the different modes of transportation. Witnesses and policymakers discussed the tension between keeping workers safe and overly burdensome regulations, and between paying competitive wages and losing work to Chinese companies that use forced labor. Unfair competition from China will be the topic of two House hearings next week—one in prime time, from the House Select Committee on the Chinese Communist Party.’
Confirmations, Nominations, Departures
Rep. George Santos (R-NY) was indicted in the US District Court for the Eastern District of New York this week on 13 criminal counts, including wire fraud, money laundering, fraudulently obtained unemployment benefits, and making false statements on House financial disclosure statements. Santos, who holds no committee appointments, has said he has no plans to resign from the House.
The Week Ahead
May 16 at 10:00 a.m. House Committee on Financial Services holds a hearing on “Oversight of Prudential Regulators.”
May 16 at 10:00 a.m. Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Examining the Failures of Silicon Valley Bank and Signature Bank,” with testimony from the former CEO of Silicon Valley Bank and the former Chairman and President of Signature Bank.
May 17 at 10:00 a.m. House Financial Services Subcommittees on Financial Institutions & Monetary Policy and Oversight & Investigations hold a joint hearing on “Continued Oversight Over Regional Bank Failures.”
May 17 at 10:00 a.m. House Committee on Oversight and Accountability holds a hearing on “Tracking the Postal Service: An Update on the Delivering for America Plan.”
May 17 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 II.”
May 17 at 10:00 a.m. The Securities and Exchange Commission holds an open meeting to consider a new rule on covered clearing agency resilience and recovery and wind-down plans.
May 17 at 2:00 p.m. House Financial Services Subcommittee on Housing and Insurance holds a hearing on “The Current Mortgage Market: Undermining Housing Affordability with Politics.”
May 17 at 2:30 p.m. Senate Banking Committee holds a two-panel hearing on “Strengthening Accountability at the Federal Reserve: Lessons and Opportunities for Reform.”
May 17 at 7:00 p.m. House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party holds a hearing on “Leveling the Playing Field: How to Counter the CCP’s Economic Aggression.”
May 18 at 9:00 a.m. House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion holds a hearing on “Putting the ‘Stable’ in ‘Stablecoins’: How Legislation Will Help Stablecoins Achieve their Promise.”
May 18 at 9:00 a.m. House Foreign Affairs Subcommittee on Indo-Pacific holds a hearing on “Standing United Against the People’s Republic of China’s Economic Aggression and Predatory Practice.”
May 18 at 9:30 a.m. Senate Banking Committee holds a hearing on “Oversight of Financial Regulators: Financial Stability, Supervision, and Consumer Protection in the Wake of Recent Bank Failures.”
May 19 at 10:00 a.m. The Securities and Exchange Commission’s Division of Investment Management hosts an inaugural Conference on Emerging Trends in Asset Management. The event is open to the public and will stream online.
The Ellis Insight - Jim Ellis on political news
PRESIDENT
Vivek Ramaswamy: In the unlikely event that businessman Vivek Ramaswamy wins the Republican presidential nomination, we will have the first bipartisan presidential ticket. Mr. Ramaswamy announced during the week that he would choose Robert F. Kennedy, Jr., currently challenging President Biden for the Democratic Party nomination, as his running mate.
The idea, meaning a bipartisan ticket, is something similar to what the No Labels Party would craft if they can recruit a presidential ticket. Speculation abounds that Sen. Joe Manchin (D-WV) could eventually become the No Labels presidential nominee in lieu of him embarking upon an uphill battle for re-election.
Florida: A National Research, Inc. survey of Florida Republican voters (5/8-9; 500 FL likely Republican primary voters; live interview & text) for the first time found Gov. Ron DeSantis’ trailing in his home state. According to these results, which the DeSantis Super PACs will undoubtedly soon counter, former President Donald Trump has taken a 42-34% lead over Gov. DeSantis, with no other candidate even reaching 3%. A total of 16% claim to be undecided in the early part of the presidential race.
This poll again underscores Mr. Trump’s current strength in the party primaries. The trend could change, however, when Gov. DeSantis officially begins his national campaign.
Georgia: Earlier in the year, the Democratic National Committee adopted a new primary voting schedule that moved Georgia and Michigan into the pre-Super Tuesday group, bounced Iowa, made South Carolina first, and added Nevada to New Hampshire’s early primary date. Georgia will not go along with the plan. The move underscores that states and not the political parties have the ultimate decision-making power in this regard.
Secretary of State Brad Raffensperger (R) has now declared that the Georgia presidential primary will be held on March 12th, and not February 13th as the DNC wanted. The decision is not a surprise. With the Republicans not going along with the Democrats’ pre-Super Tuesday calendar change, it was always highly unlikely that Georgia and New Hampshire would accommodate the DNC by holding separate primaries. Michigan, by vote of the legislature and agreement from Gov. Gretchen Whitmer (D), did comply and both parties will hold their primaries on February 27, 2024.
ABC/Washington Post Poll: ABC News and the Washington Post released the results of their new national poll (4/28-5/3; 1,006 US adults; 438 Republican and Republican leaning voters; 396 Democratic and Democratic leaning voters; live interview) and the data reveals President Biden trailing both former President Donald Trump and Florida Gov. Ron DeSantis in ranges beyond the polling margin of error. The latter point, relating to the polling margin of error, is significant since the sample cut seems to skew Republican.
On the national ballot test, among an unspecified number of registered voters, President Biden trails Mr. Trump, 39-45%, and Gov. DeSantis, 38-44%. As stated before many times in previous posts, the national popular vote poll is not particularly important. The race will probably come down to how key states such as Arizona, Georgia, Pennsylvania, and Wisconsin break.
Morning Consult Poll: Though former President Donald Trump may not be doing well in the courts, he continues to build a strong lead in Republican primary polls. The Morning Consult tracking survey (5/5-7; 3,574 US registered voters who identify or lead Republican; online) finds Mr. Trump hitting the 60% mark against Florida Gov. Ron DeSantis and the second-tier candidates. The former US chief executive holds a 60-19% margin over DeSantis. Former Vice President Mike Pence and, surprisingly, entrepreneur Vivek Ramaswamy lead the second-tier group with 5% support apiece.
SENATE
Maryland: Prince Georges County Executive Angela Alsobrooks (D) kicked off her open US Senate campaign this week. The move was expected. Already in the Democratic primary race are US Rep. David Trone (D-Potomac) and Montgomery County Councilman Will Jawando. Rep. Jamie Raskin (D-Takoma Park) and former Rep. John Delaney (D) are potential candidates.
The Democratic primary will almost assuredly decide the successor to retiring Sen. Ben Cardin (D). The Maryland nomination battle, which will be hotly contested and a determinative precursor for the general election, is scheduled for May 14, 2024.
Pennsylvania: Susquehanna Polling & Research returned a new Keystone State survey (5/2-8; 700 PA likely voters) testing the upcoming US Senate race. Though former hedge fund CEO and 2022 Senate candidate David McCormick (R) is not yet an announced candidate, he was the only person tested against Sen. Casey. The ballot test yielded the incumbent a stronger twelve-point lead, 53-41%. The previous published poll, from Franklin & Marshall College in early April, projected a 42-35% Casey edge.
Texas: Last week, Texas Rep. Colin Allred (D-Dallas) announced that he would enter the 2024 Senate race to challenge two-term incumbent Ted Cruz (R). At that time, most believed Mr. Allred would be virtually unopposed for the Democratic nomination. Previously, state Sen. Roland Gutierrez (D-San Antonio) indicated an interest in challenging Sen. Cruz, but he largely became a second thought when Rep. Allred declared his candidacy. Most then believed that Sen. Gutierrez would not force a Senate nomination campaign.
This week, however, the state legislator indicated that he in fact is still considering launching a US Senate campaign and headed toward becoming a candidate. Rep. Allred would still be favored to win the party nomination but adding Sen. Gutierrez to a competitive Democratic primary would certainly add spice to this intra-party campaign.
HOUSE
CA-47: The California Republican Party has already voted to officially endorse 2022 congressional candidate and ex-state Assemblyman Scott Baugh (R) for the open 47th CD that Rep. Katie Porter (D-Irvine) is vacating to run for the Senate. Mr. Baugh, also a former Orange County Republican Party chairman, scored 48.3% against Rep. Porter in the 2022 election though outspent by almost $26 million.
The 47th could become highly competitive as an open seat. Fully contained in Orange County, the FiveThirtyEight data organization rates the seat as D+6, which is better from a GOP perspective than seats three of their candidates won in the last election. Dave’s Redistricting App calculates the partisan lean at a competitive 52.5D - 45.5R.
Additionally, Democrats have had some recent candidate problems here. Former US Rep. Harley Rouda, who had announced his candidacy, has already withdrawn due to health problems. State Sen. David Min (D-Irvine), largely believed to be the leading candidate, has just been cited for a serious drunk driving violation. CA-47 will be a race to watch next year.
CA-49: In both California’s 40th and 49th Congressional Districts, we see two candidates who lost the same 2022 state Senate race venturing into congressional contests. Auto Dealer Matt Gunderson (R), who lost the general election to State Sen. Catherine Blakespear (D-Encinitas), says he will challenge Rep. Mike Levin (D-San Juan Capistrano/La Jolla) in a CD that closely resembles the state legislative seat where he received 48% of the vote last year.
The 49th CD that stretches from Orange County south into San Diego, is a politically marginal district. The FiveThirtyEight data organization assigns a D+5 rating, while Dave’s Redistricting App calculates the partisan lean at 52.0D - 46.0R. Rep. Levin has three times defeated ex-San Juan Capistrano Mayor and Councilman Brian Maryott (R). In 2022, the margin was 53-47%. While clear the Republicans need a new candidate to compete in this district, it remains to be seen if Mr. Gunderson can wage an effective enough campaign to unseat the three-term incumbent.
IL-7: The second Democratic challenger to Illinois Rep. Danny Davis (D-Chicago) came forward this week, which drew a quick response from the Davis camp indicating that the 81-year-old veteran Representative will seek re-election. Mr. Davis had been on the rumored retirement list. Educator Nikhil Bhatia (D) announced her candidacy, which precipitated the response from the Davis political operation.
The Congressman’s major potential opponent, however, is Chicago City Treasurer and former state Representative Melissa Conyears-Ervin (D) who has filed a congressional exploratory committee and reiterated that she continues to test the political waters irrespective of whether Rep. Davis will be her opponent.
The Democratic primary is tantamount to winning the seat (FiveThirtyEight rating D+70), so the March 19, 2024, election date is the key to claiming the succeeding term. The race is worth watching. Rep. Davis won the 2022 Dem primary with only a 52-45% margin over community organizer Kina Collins.
NY-3: The US Attorney from the Eastern District of New York indicted Rep. George Santos (R-Long Island) with 13 federal crimes under what was a sealed indictment. Rep. Santos says he will not resign his seat while he fights the charges. Speaker Kevin McCarthy says he will be allowed to serve while he works through the legal process. Even before the indictment, four Democrats and two Republicans had already announced their 2024 candidacies. We can expect more potential candidates to soon come forward.
NY-4: Freshman Long Island Republican Congressman Anthony D’Esposito (R-Island Park) holds, along with California Rep. David Valadao’s (R-Hanford) 22nd District, the most Democratic seat in the country that elects a Republican to the House. Now, it appears that he will be facing a re-match with the woman he defeated in 2022, former Hempstead Town Supervisor Laura Gillen (D). The 2022 result was 51-47% in Mr. D’Esposito’s favor.
Long Island’s 4th District includes the town of Hempstead and the Garden City, Oceanside, Freeport, and Valley Stream communities among others. The FiveThirtyEight data organization rates the seat as D+10. Dave’s Redistricting App calculates the partisan lean at 59.6D – 38.9R. President Biden carried the district with a 56.8 – 42.2% margin, which suggests that Rep. D’Esposito has a difficult road to re-election in a presidential election year.
VA-7: Businessman Bill Moher became the second Republican to announce his congressional candidacy opposite three-term Rep. Abigail Spanberger (D-Glen Allen). Previously in the race was Army veteran Shaliek Tarpley (R). Unless the Republicans find a top tier 2024 candidate, it is unlikely the party will be able to unseat Rep. Spanberger in the post redistricting seat where she will have had the opportunity of representing for a full term by the time of the next election.
Rep. Spanberger was re-elected in 2022 with a 52-48% margin in a campaign where combined campaign spending exceeded $12 million not counting independent expenditures.
LOCALITIES
Philadelphia Mayor: A new Data for Progress survey (4/26-29; 560 Philadelphia likely Democratic mayoral primary voters; online & text) finds a tie at the top of the Democratic primary candidate field as the contenders head toward Tuesday’s primary election day.
The poll’s sponsor, former Philadelphia City Councilwoman Helen Gym and ex-City Controller Rebecca Rhynhart were tied with a support figure of 21%. Close behind is former City Councilwoman Cherelle Parker with 19%. Ex-Councilman Alan Domb, businessman Jeff Brown, and state Rep. Amen Brown followed with 13, 9, and 2% backing, respectively.
Previously, a Survey USA poll (4/21-23; 1,013 Philadelphia likely mayoral Democratic primary voters; online) arrived at a similar conclusion, but saw an 18-17-15-14% split featuring Rhynhart, Parker, Gym, and Domb consecutively within the polling margin of error. It clearly appears the Democratic nomination is within reach of several candidates. The winner will face former City Councilman David Oh, who is unopposed for the Republican nomination. He will automatically move into the November general election and could well become a viable contender.