House Republicans, industry groups square off against financial regulators

Two House Financial Services Subcommittee hearings scheduled for this week reflect Republican members’ sense that the federal financial regulators are trying to do too much, too fast. On Tuesday, the Subcommittee on Capital Markets will query William Birdthistle, Director of the Securities and Exchange Commission’s Division of Investment Management, about recent rulemaking at the SEC. The following day, the Subcommittee on Financial Institutions and Monetary Policy will look at the interactions of recent proposals that address bank capital requirements, stress testing, changes in resolution plans, and minimum requirements for long-term debt.

On September 14, all the Republican members of the House Committee on Financial Services sent a letter to Federal Reserve Vice Chairman for Supervision Michael Barr, Federal Deposit Insurance Corporation Chairman Martin Gruenberg, and Acting Comptroller of the Currency Michael Hsu demanding that the agencies withdraw its proposal to implement the Basel III Endgame capital requirements, calling it “plagued by politics.” Witnesses from the industry appeared before the Financial Institutions Subcommittee to warn about the potential effects of those requirements on the American economy. Their testimony echoed the objections raised in a September 12 letter to the federal regulators from the American Bankers Association, the Bank Policy Institute, the Financial Services Forum, the Institute of International Bankers, the Securities Industry and Financial Markets Association, and the US Chamber of Commerce.

Gensler gets partisan feedback from Senate Banking
Last week, Securities and Exchange Commission Chair Gary Gensler made his first appearance before the Senate Banking Committee in almost a year, and got very different messages from the Committee’s Chair and ranking member. Chair Sherrod Brown (D-OH) praised the SEC’s recent private funds rule and said that objections to the rule were coming from companies that had something to hide. He urged the SEC to “keep moving forward,” and said he was eager to see the climate disclosure rule finalized. Senator Tim Scott (R-SC), the Committee’s ranking member, said that Gensler had flouted Congressional oversight requests. He was especially critical of the Commission’s notice-and-comment periods for proposed rules, which he said were inadequate to the point of ridicule. “The breakneck pace you are pumping out regulations should not be applauded.”
 
Wall Street must do more to protect US investors from China, says panel
The House Select Committee on the Chinese Communist Party held a field hearing in New York City last week to discuss the potential harm to U.S. investors from inaccurate and inadequate reporting by Chinese companies. Committee Chairman Mike Gallagher (R-WI) and Rep. Raja Krishnamoorthi (D-IL), the panel’s ranking member, agreed that U.S. investors should stop funding Chinese companies that produce weapons or goods that might threaten the United States and its markets. Former SEC Chair Jay Clayton said that Chinese businesses’ lack of transparency poses a threat to global financial stability. Under President Biden’s executive order calling for regulations on outbound investment, the government might be able to provide U.S. markets information unavailable to individual businesses, Clayton said, but the regulations must be coherent and consistent for all channels of investment.
 
Congress will not support a CBDC, says Hill
Opposition to a central bank digital currency (CBDC) is bipartisan and almost universal among legislators, said House Subcommittee on Digital Assets, Technology, and Inclusion Chairman French Hill (R-KY) at a hearing on the topic Thursday afternoon. “There is no support for a CBDC in Congress.” He noted that Representatives Jake Auchincloss (D-MA), Ritchie Torres (D-NY), and Wiley Nickel (D-NC) had all sponsored or cosponsored legislation to block it. Thursday’s witnesses said that proponents had misrepresented or overstated the potential benefits of a CBDC, citing continuing progress toward real-time payments. Paige Paridon, Senior Vice President and Senior Associate General Counsel of the Bank Policy Institute, noted that a retail CBDC might replace the demand deposits use to make loans, making credit less available and more expensive. Rep. Tom Emmer (R-MN) raised concerns that a CBDC might be “a tool for financial surveillance” by the federal government; last year, he warned the Federal Reserve Bank of Boston against researching, developing, or scaling a CBDC through its Project Hamilton with the Digital Currency Initiative at MIT.

Confirmations, Nominations, Departures

Dr. Adriana D. Kugler was sworn in as a Governor of the Federal Reserve System on Wednesday, bringing the Federal Reserve Board to its full complement of seven members.

Senator Mitt Romney (R-UT) announced on Wednesday that he will not seek reelection in 2024. “Frankly, it’s time for a new generation of leaders,” he said.

Former Senator Lauch Faircloth (R-NC) died last week at the age of 95. He was the junior Senator from North Carolina from 1993 through 1999, and headed the Appropriations Subcommittee that coordinated the financial rescue of Washington, DC’s city government. Our sympathies to his family and colleagues.

The Week Ahead

The House left town last week without acting on the must-pass defense authorization bill. They are scheduled to be out Thursday and Friday, but Speaker Kevin McCarthy (R-CA) reportedly told members of the Republican Caucus that he would not allow them to leave until they pass a spending bill to prevent a government shutdown. Congress traditionally does not meet during Yom Kippur, which ends at sundown on Monday, September 25. We wish a sweet new year to everyone celebrating.
 
September 19 at 10:00 a.m. House Financial Services Subcommittee on Capital Markets holds a hearing on “Oversight of the SEC’s Division of Investment Management.”  
 
September 19 at 10:00 a.m. Senate Committee on the Judiciary holds a hearing on “Evading Accountability: Corporate Manipulation of Chapter 11 Bankruptcy.”
 
September 19 at 10:00 a.m. The Securities and Exchange Commission’s Small Business Capital Formation Advisory Committee holds a public meeting to discuss the roles of smaller venture capital funds, emerging fund managers, and alternative funding options in supporting early-stage and smaller companies. The meeting will stream online at sec.gov.
 
September 19 at 2:00 p.m. House Financial Services Subcommittee on Financial Institutions and Monetary Policy holds a hearing on “A Holistic Review of Regulators: Regulatory Overreach and Economic Consequences.”
 
September 20 at 10:00 a.m. House Committee on Transportation and Infrastructure holds a hearing on “Oversight of the Department of Transportation’s Policies and Programs.” Secretary of Transportation Pete Buttigieg will testify.
 
September 20 at 10:00 a.m. Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Artificial Intelligence in Financial Services.”
 
September 20 at 10:30 a.m. House Energy & Commerce Subcommittee on Innovation, Data, and Commerce holds a hearing on “Mapping America’s Supply Chains: Solutions to Unleash Innovation, Boost Economic Resilience, and Beat China.”
 
September 20 at 2:00 p.m. House Ways & Means Subcommittee on Trade holds a hearing on “Reforming the Generalized System of Preferences to Safeguard US Supply Chains and Combat China.”
 
September 20 at 2:15 p.m. Joint Economic Committee holds a hearing on “Growing the Economy of the Future: Job Training for the Clean Energy Transition.”
 
September 20 at 2:30 p.m. Senate Energy Subcommittee on Water and Power holds a hearing to examine the effects of drought on drinking water access and water availability.
 
September 20 at 2:30 p.m. Senate EPW Subcommittee on Fisheries, Water, and Wildlife holds a hearing to examine drinking water infrastructure and tribal communities.

The Ellis Insight - Jim Ellis on political news

PRESIDENT

President Biden The newly released Issues & Insights TIPP poll (8/30-9/1; 606 US likely Democratic primary voters; online) again finds President Biden holding an overwhelming lead over Robert F. Kennedy, Jr. in a Democratic primary trial heat. The margin, though still on the weak side for an incumbent President considering 32% of the Democratic respondents would choose a candidate other than Mr. Biden, continues to stake the President to a 68-10% margin. 

More importantly than the Biden number that fluctuates to a degree, the Kennedy support figure has remained consistent in the low double-digit range. The fact that we have seen little movement in the nomination campaign despite months of campaigning from Mr. Kennedy, suggests that the final result will not differ greatly from what we’re seeing in the multitude of similar polling totals.

Iowa The newly released Emerson College Hawkeye State survey (9/7-9; 839 IA respondents; 357 IA likely Republican caucus attenders; multiple sampling techniques) stakes former President Trump to a 50-39% advantage over President Biden in a head-to-head ballot test. If Green Party candidate Dr. Cornel West is added to the questionnaire, Mr. Trump would lead Biden and he, 48-35-5%. 

Comparing Mr. Trump’s current polling numbers to those found during the 2016 and 2020 election cycle suggests that the former President’s lead over Mr. Biden could be even greater. In the two previous elections, Mr. Trump clearly under-polled in Iowa surveys when compared with the ultimate final result.

Michigan Michigan Secretary of State Jocelyn Benson (D) yesterday announced that she will award Donald Trump a ballot position on the Michigan primary ballot, unless a court decision directs otherwise. Ms. Benson stated that “…the courts and not secretaries of state should decide if the US Constitution disqualifies Trump.” 

The Michigan primary is scheduled for February 27, 2024. Presumably, she will also slate Mr. Trump in the general election, again barring a court ruling, should the former President win the 2024 Republican nomination. Michigan is a critical swing state, so ensuring a ballot position here is a must for the Trump campaign.

CNN Poll The new CNN national poll (conducted by the SSRS research company, CNN’s regular polling firm; 8/25-31; 1,503 US adults; live interview & text) found no fewer than five of the announced Republican presidential candidates holding small leads over President Biden in general election ballot tests. 

Former UN Ambassador Nikki Haley fared best, scoring a six point advantage over the President. Two-point leaders included former Vice President Mike Pence, Sen. Tim Scott (R-SC), and ex-New Jersey Gov. Chris Christie. Former President Trump held a one-point edge, while Florida Gov. Ron DeSantis tied Mr. Biden. The only Republican contender to fall behind Biden, and by only one point, is businessman Vivek Ramaswamy. 

SENATE

Texas Back in May when Texas Rep. Colin Allred (D-Dallas) announced his Senate campaign it looked as if the Democratic leadership had the candidate they wanted to challenge Sen. Ted Cruz (R). Two months later, state Sen. Roland Gutierrez (D-San Antonio) announced his candidacy, and then resigned Nueces County District Attorney Mark Gonzalez followed. Yesterday, another joined them. Dallas state Representative Carl Sherman, Sr. (D), a former local Mayor and pastor, declared his US Senate candidacy. 

While Rep. Allred still may top what is now becoming a crowded field, he will undoubtedly be forced to drain his campaign treasury – he’d raised over $6 million before the June 30th campaign finance quarterly report – just to win the nomination. Sen. Cruz will then be able to build an uncontested campaign treasury and force all four Democratic candidates far to the left on key issues such as the Biden energy policy and the Texas-Mexico border. 

Utah Saying it is “time for a new generation of leaders,” and that he would “be in my mid-eighties if I were to serve another full term,” Utah Sen. Mitt Romney (R) yesterday announced that he will not seek a second term next year. 

Had he sought another term, Sen. Romney would have faced an active Republican primary challenge. Since he would not likely have fared well at the conservative-dominated Republican nominating convention, it is probable that the Senator would have been forced to access the ballot via the petition signature route. Now, we will see a highly competitive GOP primary battle to succeed Mr. Romney in what will be an open seat campaign.

Immediately after the Senator’s announcement, speculation about who might enter the race is running rampant. The two who appear as sure candidates are state House Speaker Brad Wilson (R-Kaysville) and Riverton Mayor Trent Staggs (R). One individual who rather surprisingly has already taken himself out of the Senate race is Attorney General Sean Reyes, who at one time was thought to become a Romney primary challenger. A day after Romney went public with his plans, Mr. Reyes said he will bypass the open Senate race and run for re-election as Attorney General.

West Virginia Reportedly, West Virginia Sen. Joe Manchin (D), who has not yet decided whether to seek re-election, make a third party run for President, or retire from politics, is also contemplating leaving the Democratic Party. Therefore, if he does run for office again a strong possibility exists that he will do so as an Independent. 

Sen. Manchin faces a difficult re-election run as the West Virginia Democratic Party’s status has weakened considerably since he was last on the ballot in 2018. The Senator was originally elected in a 2010 special election. He has served as West Virginia’s Governor, Secretary of State, and in both houses of the state legislature, all as a Democrat. 

West Virginia continues to be rated as the Republicans top conversion Senate opportunity. Both Gov. Jim Justice and US Rep. Alex Mooney (R-Charles Town) are competing for the Republican nomination.

Wisconsin Trempealeau County Supervisor Stacey Klein (R) announced late this week that she will enter next year’s statewide US Senate campaign with the hope of unseating two-term incumbent Tammy Baldwin (D). This race has been very slow to develop, and Ms. Klein now becomes the most politically accomplished individual in the Republican primary. This, despite her western Wisconsin county serving as home to less than 30,000 individuals. 

Unless a more senior opponent soon announces, Sen. Baldwin could coast to a third term in what should be a very competitive political environment come November.

HOUSE

CA-11 Though many expected 83-year old former House Speaker Nancy Pelosi (D-San Francisco) to retire, she instead announced a re-election bid for a 20th term in Congress. In her statement, Rep. Pelosi said, “our country needs America to show the world that our flag is still there, with liberty and justice for ALL. That is why I am running for reelection — and respectfully ask for your vote.” She will easily be renominated and re-elected next year.

CA-31 Former US Rep. Gil Cisneros (D), who was elected in 2018 but defeated for reelection two years later in a pre-redistricting Los Angeles-Orange County congressional district and then served as a Defense Department Under Secretary in the Biden Administration, has once again become an unofficial congressional candidate. Mr. Cisneros this week filed exploratory committee documents with the Federal Election Commission that allow a potential candidate the ability to raise greater than $5,000 in campaign funds. 

The former Congressman is starting from scratch in his new CD. The open 31st District, from which veteran Rep. Grace Napolitano (D-Norwalk) is retiring, has no constituent in common with the district that Mr. Cisneros previously represented. He won’t have money problems, however. You may recall that in 2010, Mr. Cisneros, then a recently retired US Navy officer, won a $266 million Mega Millions lottery so campaign funding should not be a particular issue for him. 

MI-3 Attorney and Michigan Supreme Court judicial candidate Paul Hudson (R), who finished fourth in a field of five 2022 candidates, announced for Congress at the end of last week. He hopes to oppose freshman Rep. Hillary Scholten (D-Grand Rapids) in a district the FiveThirtyEight data organization rates as D+3. 

Mr. Hudson is the third announced Republican candidate but is clearly the most credible. Should he prevail in the August 6, 2024, GOP primary, assessments will be made as to whether he will become a top tier challenger candidate. MI-3, however, is the type of politically marginal district that the GOP must win in 2024 in order to protect and enhance the party’s slim majority.

NM-3 Former state Representative Sharon Clahchischilliage (R), a member of the Navajo Nation who served three terms in the legislature before being defeated for re-election in 2018, announced that she will challenge two-term Rep. Teresa Leger Fernandez (D-Santa Fe) next year. 

The FiveThirtyEight data organization rates New Mexico’s 3rd District as D+5, meaning we could see a competitive general election develop. In 2022, Rep. Leger Fernandez was re-elected with 58% of the vote, but against a Republican candidate who spent only $301,000 on her campaign.

NY-4 Sarah Hughes (D), who was a member of the 2002 US Olympic figure skating team and had formed a congressional exploratory committee earlier in the year to challenge Rep. Anthony D’Esposito (R-Island Park), announced yesterday that she will not pursue her candidacy. 

The top Democrats appear to be state Sen. Kevin Thomas (D-Garden City) and ex-Hempstead Town Supervisor and 2022 nominee Laura Gillen (D). In the face of such competition, Ms. Hughes’ chances of winning the Democratic primary were poor; hence, the decision to end her political quest. New York’s 4th District, at D+10 according to the FiveThirtyEight data organization, is likely to become the Democrats’ top conversion opportunity in the country.

NC-8 In 2018, it looked for a time that Republican former pastor Mark Harris had won a southern North Carolina congressional seat. After challenges uncovered serious voter fraud and a new election called, Mr. Harris withdrew from the campaign. Then-state Senator Dan Bishop (R-Charlotte) went onto claim the seat despite being badly outspent in the special general election. Now, Mr. Bishop is leaving the House to run for state Attorney General. Mr. Harris announced yesterday that he will return as a candidate in what will be an open 2024 election. 

The district, however, may be drastically changed once the legislature submits a new redistricting plan sometime next month so it is likely too early to forge any serious predictions. The only other announced candidate from either party is former Union County Commissioner Allan Baucom. Currently, Union County is the Republican bedrock of the 8th CD, a district the FiveThirtyEight data organization rates as a whopping R+38.

OH-13 Jane Timken, the former Ohio Republican Party chair who was a 2022 US Senate candidate, announced yesterday that she will not enter next year’s Republican primary in Ohio’s Akron anchored 13th District. GOP candidates will be vying for the opportunity to challenge freshman Rep. Emilia Sykes (D-Akron).

Announced Republican candidates are Hudson City Councilman Chris Banweg and 2022 congressional candidate Greg Wheeler. Republican leaders are reportedly attempting to recruit former state Senator and ex-Representative Kevin Coughlin. 

The 13th will likely feature a competitive general election. The FiveThirtyEight data organization rates the seat R+2. Dave’s Redistricting App, however, casts the partisan lean in the Democrats’ favor, 50.7D – 47.0R. President Biden carried the district over former President Trump, 50.7 – 48.0%.

GOVERNOR

Utah State Representative Phil Lyman (R-Blanding), who hails from San Juan County in the far southeastern corner of the Beehive State that includes the “Four Corners” where Utah, Arizona, Colorado, and New Mexico meet, announced he will challenge Republican Gov. Spencer Cox in next year’s Republican convention and potentially the state primary. 

Mr. Lyman, a land rights radical, received a pardon from former President Trump after the government arrested him for his protest activities. Gov. Cox may not be particularly popular with the Republican base, so Mr. Lyman may have a chance to assemble a significant support coalition at the state convention.