Fed will proceed with rate increase despite global uncertainty, says Powell
Federal Reserve Board Chairman pro tempore (because he hasn’t been confirmed yet) Jerome Powell appeared before the House Financial Services Committee and the Senate Banking Committee this week to deliver the Fed’s semiannual Monetary Policy Report. The economy is remarkably strong, Powell said, and everything would be great if not for that pesky inflation. Powell had already made it clear that the Federal Open Market Committee would raise the target funds rate at its meeting later this month. He said that this was still his plan, despite the uncertainties created by global sanctions on Russia. He supports a 25 basis point increase, and said that further increases are likely to follow depending on how the economy responds. He told policymakers that no major US bank had significant direct exposures to Russian financial institutions, but the Fed will be watching closely for any second-order effects.
Senators introduce bill for LIBOR “long tail” fix
With the London Inter-Bank Offered Rate (LIBOR) benchmark on track to end in June 2023, a bipartisan group of Senators has introduced legislation to provide an orderly transition for the last LIBOR-based contracts, the so-called “long tail.” The Economic Continuity and Stability Act, introduced by Senators Jon Tester (D-MT), Thom Tillis (R-NC), Sherrod Brown (D-OH), and Pat Toomey (R-PA), would provide guidance and a consistent federal standard for contracts with LIBOR-based interest rates. It would direct the Federal Reserve to determine replacement rates for contracts that don’t or can’t specify a non-LIBOR replacement rate. Twenty-three trade organizations representing the financial services industry have endorsed the bill.
Treasury issues new guidance on Russia sanctions
Treasury’s Office of Foreign Assets Control (OFAC) has issued public guidance for US companies to cut off avenues for the Russian Central Bank to evade sanctions in the wake of Russia’s invasion of Ukraine. Executive Order 14065, issued on February 21, prohibits new US investments in the so-called Donetsk People’s Republic and Luhansk People’s Republic, while freezing US-based assets held by any individual or company designated by Treasury to have operated in the contested regions or provided material assistance to those individuals and companies. Treasury has posted an updated set of Frequently Asked Questions to its website.
House panel agrees that local land use changes are critical to boosting the housing supply
The House Select Committee on Economic Disparity & Fairness in Growth held a hearing on Tuesday to hear testimony about rising housing prices and the worsening shortage of affordable housing. While inflation and the nationwide labor shortage have raised the costs of construction, members on both sides of the aisle pointed to local laws on zoning, land use, and housing density as the biggest obstacles to new construction. Former Secretary of Housing and Urban Development Shaun Donovan called for a quadrupling of federal housing vouchers, as currently only one in four households that qualify for a voucher receive one, but acknowledged that this would cost “tens of billions of dollars a year.”
Federal Reserve seeks comment on guidelines for master account applications
This week the Federal Reserve Board published a request for comments on further updates to its guidelines for account access. The proposed new guidelines would set up a tiering framework for due diligence on master account applications from non-federally insured financial institutions. This week’s proposed guidelines would supplement the revised Account Access Guidelines the Fed published for comment last May. The proposed framework would put federally insured depository institutions into Tier 1, generally subject to less intensive and more streamlined review. Tier 2 would be applications from financial institutions that are not insured but are subject to federal prudential supervision, such as bank holding company affiliates; these applications would receive an intermediate level of review. Tier 3 would cover eligible institutions that are neither federally insured nor subject to federal prudential supervision, which would include most fintechs. These applications “would generally receive the strictest level of review.” Comments are due to the Fed within 45 days.
SEC Commissioner Lee says it may be time for the agency to set standards for lawyers
In remarks to a Practicing Law Institute event on corporate governance today, Securities and Exchange Commissioner Allison Herren Lee noted that the agency had never fulfilled the Sarbanes-Oxley Act’s mandate to adopt minimum standards for professional conduct for lawyers appearing before the SEC. The agency did adopt its “up-the-ladder” rule, which requires lawyers to report certain violations within a corporate client up the chain of management, but “even this single standard has not been enforced,” Lee said. Although the SEC can and does bring actions against attorneys who violate securities laws, Lee said that the Commission needs to issue rules, as directed under Section 307 of Sarbanes-Oxley, for minimum standards of conduct. These rules might include greater detail about lawyers’ obligations to clients, advice on materiality, and requirements of competence and expertise. They might also consider “some degree of oversight at the firm level,” similar to that in place for audit firms of public companies.
Confirmations, Nominations, Departures
Rep. Ted Deutch (D-FL), who chairs the House Ethics Committee and the House Foreign Affairs Subcommittee on the Middle East, North Africa, and Global Counterterrorism, announced this week that he will not seek reelection. Instead, he will serve as CEO of the American Jewish Committee at the end of this term, his seventh.
Senator Jim Inhofe (R-OK) will resign his seat at the end of this year. He was first elected to the Senate in 1994, after serving four terms in the House of Representatives. Oklahoma will hold a special election to choose a successor to serve out his term, which ends in 2025.
Rep. Van Taylor (R-TX) announced that he would end his campaign for reelection after failing to win a majority in Tuesday’s Republican primary.
The Week Ahead
March 8 at 10 a.m. House Committee on Financial Services holds a hearing on “The Inflation Equation: Corporate Profiteering, Supply Chain Bottlenecks, and COVID-19.”
March 8 at 10 a.m. House Committee on Small Business holds a hearing on “Overview of the Small Business Innovation Research and Small Business Technology Transfer Programs.”
March 8 at 10 a.m. Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Examining Mandatory Arbitration in Financial Services Products.”
March 8 at 10:15 a.m. House Energy & Commerce Subcommittee on Energy holds a hearing on “Charging Forward: Securing American Manufacturing and Our EV Future.”
The Ellis Insight - Jim Ellis on political news
SENATE
Arizona: Confirming what he has been intimating for months, term-limited Arizona Gov. Doug Ducey (R) formally announced that he will not run for the Senate this year, choosing to concentrate on finishing his final year in office. The Republican Senate primary is already a crowded affair, featuring Attorney General Tim Brnovich, businessmen Blake Masters and Jim Lamon, and former Arizona Adjutant General Mick McGuire. The eventual GOP nominee will challenge freshman Sen. Mark Kelly (D) who is on the ballot for a full six-year term.
Ohio: For the fifth time in the last seven releases, a pair of surveys again find businessman Mike Gibbons leading the open Republican US Senate field vying to succeed retiring Ohio Sen. Rob Portman (R).
The new Emerson College survey (2/25-26; 410 OH likely Republican primary voters; 313 OH likely Democratic voters; live interview; text; interactive voice response system; online panel) projects Mr. Gibbons topping the crowded primary with 22% followed by former state Treasurer Josh Mandel’s 15%. Author J.D. Vance, former Ohio Republican Party chair Jane Timken, and state Sen. Matt Dolan (R-Chagrin Falls) trail with 8-6-6%, respectively.
The Fabrizio Lee firm conducted a panel back survey that re-interviewed people who responded to their January 18-20 poll. The new study (2/23-24; 800 OH previously questioned likely Republican primary voters; live interview) sees Mr. Gibbons holding an 18-14-14-12-8% edge over Messrs. Vance, Mandel, Ms. Timken, and Sen. Dolan. Mr. Vance moved up five points from the January poll, and Mr. Gibbons, four. On the Democratic side, as expected, US Rep. Tim Ryan (D-Warren/Youngstown) easily tops Democrats Traci Johnson and Morgan Harper, 31-9-4% in the small-sample Emerson study.
Oklahoma: Resigning Sen. Jim Inhofe’s (R) endorsement of his chief of staff, Luke Holland, apparently isn’t stopping others from moving toward their own Senate candidacies. US Rep. Markwayne Mullin (R-Westville) officially declared his US Senate campaign and state Sen. Nathan Dahm (R-Broken Arrow), who was challenging Sen. James Lankford in the Republican primary, announced that he will switch to the open special election, as reportedly will pastor Jackson Lahmeyer (R), who was also in the Lankford race. US Rep. Kevin Hern (R-Tulsa) is soon expected to follow suit.
Gov. Kevin Stitt (R) announced that he is continuing to seek re-election. The Oklahoma primary is June 28th with a runoff, if necessary, scheduled for August 23rd.
Utah: A newly released OH Predictive Insights poll of Utah voters (2/7-14; 739 UT registered voters; 366 UT Republican primary voters; online opt-in) finds Independent former presidential candidate Evan McMullin becoming a factor against Sen. Mike Lee (R). The three-way race would break 34-24-12% in Sen. Lee’s favor over Mr. McMullin and former State Department official Kael Weston, if he were to become the Democratic nominee.
HOUSE
CO-5: Colorado state Rep. Dave Williams (R-Colorado Springs) announced that he will attempt to qualify for the primary ballot through the state convention process. A candidate must secure 30% of the delegate vote to win ballot access. Contenders may also petition onto the ballot by collecting 1,500 valid signatures from registered party members in the particular district. Candidates who fail to obtain 30% but exceed the 10% threshold can revert to the petition process.
Incumbent Rep. Douglas Lamborn (R-Colorado Springs) says he already has enough signatures to qualify but will participate in the convention process. The 5th District is a strongly Republican seat, so the Congressman’s re-election battle lies in the GOP primary. The Colorado nomination election is June 28th.
FL-22: Florida Congressman Ted Deutch (D-Boca Raton), chairman of the House Ethics Committee who was first elected in a 2010 special election, announced that he will resign from the House when Congress recesses at the end of the session in order to head the American Jewish Committee advocacy organization. Mr. Deutch becomes the 31st Democrat not to seek re-election in 2022 as compared to 18 Republicans.
HI-2: Freshman Rep. Kai Kahele (D-Hilo) in an interview with the Hawaii Star Advertiser indicated he and his family have decided that “DC is not some place right now that we would like to raise our family in and the best place that my family can be is here in Hawaii.” Rep. Kahele has been openly speculating about running for Governor; therefore, it is likely he will soon announce for the statewide office. The move will create an open seat in Hawaii’s 2nd District for the second time in two election cycles.
IL-6: Freshman Rep. Marie Newman (D-La Grange) released her internal Victoria Research survey (2/10-15; 650 IL-6 likely Democratic primary voters; live interview) that projects the Congresswoman tied with Rep. Sean Casten (D-Downers Grove) at 37% apiece. The Newman campaign stresses that approximately twice as many of Rep. Newman’s carryover constituents live in the new 6th as compared to Rep. Casten’s. This race is one of the six incumbent pairings around the country and will be decided in the June 28th Illinois primary.
NE-1: Moore Information, polling for indicted Nebraska Rep. Jeff Fortenberry’s (R-Lincoln) campaign, released their internal survey (2/23; 405 NE-1 likely Republican primary voters; interactive voice response and Peer-2-Peer systems) at the end of last week. The ballot test finds Rep. Fortenberry, scheduled to stand trial in Los Angeles on March 15th for campaign finance and lying to federal authorities charges, leading state Sen. Mike Flood (R-Norfolk), 40-30%.
The MI analysis illustrates that this result is an improvement for Rep. Fortenberry from their January survey that found the two contenders separated only by two percentage points. Should Rep. Fortenberry be found guilty of the charges, this situation will undoubtedly change.
NC-9: With the North Carolina congressional lines set for the 2022 election and the candidate filing deadline approaching on Friday, a state Representative attempting to run for Congress has changed his plans. State Rep. John Szoka (R-Fayetteville) announced he is scrapping his plans to challenge GOP Rep. Richard Hudson (R-Concord) in the state’s new 9th District.
NC-14: Earlier in the year, state Sen. Jeff Jackson (D-Charlotte) withdrew from the US Senate race, which led to former state Supreme Court Chief Justice Cheri Beasley becoming a virtual consensus candidate for the party nomination. The withdrawal, however, did not end his quest for federal office.
On Friday, Sen. Jackson announced that he will enter the new open 14th District congressional race now that the North Carolina map is final for the 2022 election. At this point, Sen. Jackson would be rated as the favorite for both the Democratic nomination and the general election in November.
PA-9: With his 12th District eliminated in Pennsylvania’s interim court-ordered redistricting map, Rep. Fred Keller (R-Middleburg) initially said he would challenge Rep. Dan Meuser (R-Dallas) to a Republican primary battle in the new 9th District. Later, Rep. Keller had a change of heart. Saying, “with control of Congress - and the direction of our nation - at stake, this election is bigger than any one person,” Mr. Keller said he would not seek re-election this year, accepting his fate as the delegation’s “odd man out.”
The decision gives Rep. Meuser an easy ride through his primary and general election in a new district that the FiveThirtyEight statistical entity rates as a R+41 district.
Texas Primary Results: Reps. Henry Cuellar (D-Laredo), and opponent Jessica Cisneros are forced into a secondary May 24th runoff election as the two came just short of the 50% mark. Mr. Cuellar posted 48.4% versus Ms. Cisneros’ 46.8%.
The outright winners were Reps. Dan Crenshaw (R-Houston), Pat Fallon (R-Sherman), Jake Ellzey (R-Midlothian), Kay Granger (R-Ft. Worth), Randy Weber (R-Friendswood), Veronica Escobar (D-El Paso), Pete Sessions (R-Waco), Chip Roy (R-Austin), Troy Nehls (R-Richmond), Tony Gonzales (R-San Antonio), Beth Van Duyne (R-Irving), Michael Burgess (R-Pilot Point), Michael Cloud (R-Victoria), John Carter (R-Round Rock), Marc Veasey (D-Ft. Worth), Vicente Gonzalez (D-McAllen), and Lloyd Doggett (D-Austin). All other incumbents were unopposed.
Non-incumbent outright winners appear to be Nathaniel Moran (R) in District 1, who will replace Rep. Louie Gohmert (R-Tyler), Morgan Luttrell (R) succeeding Rep. Kevin Brady (R-The Woodlands), Monica de la Cruz (R-McAllen) in the open 15th CD, Greg Casar (D-Austin) in the open 35th, and Wesley Hunt (R) in the new 38th CD. Both Ms. De la Cruz and Mr. Hunt are 2020 congressional nominees. Mr. Casar is a member of the Austin City Council.
Because of slow counting in Harris County, the Luttrell and Hunt victories only became final at the end of the week. State Rep. Jasmine Crockett (D-Dallas), the leading candidate to replace retiring Rep. Eddie Bernice Johnson (D-Dallas), is also forced to a runoff in falling just short of the 50% mark. She will face former Biden campaign Texas Director Jane Hamilton on May 24th.
TX-3: Just after the primary, north Texas Rep. Van Taylor (R-Plano) announced he is withdrawing from the runoff, publicly admitting to an extra-marital affair. Apparently, affair rumors began to surface late in the primary contest. Clearly knowing the story would become common knowledge, he admitted the indiscretion and immediately announced that he would not contest the runoff election into which he was forced from Tuesday’s primary.
Under Texas election procedure, a candidate qualifying for a runoff election can decline to participate. The concession means the opponent automatically wins the party nomination. Thus, former Collin County Judge (Executive) Keith Self is the new 3rd District Republican nominee with an accompanying ticket to Washington, DC after the November 8th election.
Mr. Taylor only secured 48.7% of the vote in Tuesday’s primary, meaning that a majority of Republican primary voters chose another candidate. This is never a good sign for any incumbent and the chief reason that most incumbents fail when forced to the secondary election. Adding the personal baggage obviously told Rep. Taylor that his re-election chances were irreparably damaged.
GOVERNOR
Texas Primary Results: Both Gov. Greg Abbott (R) and former US Rep. Beto O’Rourke (D) won their respective gubernatorial primary outright on Tuesday night. Gov. Abbott easily captured the nomination to run for a third term, defeating former Texas Republican Party chairman Allen West and ex-state Senator Don Huffines. Mr. O’Rourke topped a group of Democratic candidates to easily secure his nomination. Gov. Abbott will be favored in the general election.
STATES
Texas Primary Results: Lt. Gov. Dan Patrick (R), state Agriculture Commissioner Sid Miller (R), and State Comptroller Glenn Hegar (R) were all easily re-nominated. Attorney General Ken Paxton, as expected, was forced into a Republican runoff election and will face Land Commissioner George P. Bush, son of former Florida Gov. Jeb Bush, in what will be a highly competitive contest. Mr. Bush’s open Land Commissioner position will also go to a secondary election with state Sen. Dawn Buckingham (R-Lakeway) placing a clear first. The Texas runoff election is scheduled for May 24th.