Remember the debt ceiling?
Congress’s busy schedule this week meant we had to miss the World’s Strongest Man contest in Myrtle Beach, SC. Tom Stoltman’s record is safe from us, but we’re thinking about giving his diet a try. (Like us, he’s a fan of IHoP.)
Remember the debt ceiling?
That thing we hit a couple of months ago, and will blow through for real without Congressional action in the immediate future?
Speaker of the House Kevin McCarthy (R-CA) announced Republicans’ “Limit, Save, Grow Act” on the House floor on Wednesday. It would raise the borrowing cap by $1.5 trillion or until March 2024, whichever comes first. It would also
Slash federal spending by as much as $130 billion
Set FY24 spending at FY22 levels
Limit spending increases to 1% per year
Claw back unspent COVID money, which Republicans estimate in the billions
Repeal the additional funding provided to the Internal Revenue Service by the Inflation Reduction Act
Block President Biden’s plan to cancel thousands of dollars in student debt
Repeal the green tax credit repeal
Impose new work requirements for social programs
House Budget Committee Chairman Jodey Arrington (R-TX) will lead the debt limit bill, and the House may vote on it as soon as next week.
House and Senate Democrats immediately voiced their opposition, as did the White House; Senate Majority Leader Chuck Schumer (D-NY) called the proposal a “MAGA wish list” and said it had no chance of moving through the Senate. Senator Joe Manchin (D-WV), however, applauded the Speaker for putting forward a proposal, noting that “it is the only bill actually moving through Congress that would prevent default.”
The bill does not yet have a number, nor is it in the Congressional Record as of Friday afternoon, but we have the text, a summary, and a section-by-section breakdown. If you’d like copies, send Blair Hancock an email.
Chairman Gensler’s long day
Securities and Exchange Commission Chair Gary Gensler spent five and a half hours testifying before the House Financial Services Committee on Tuesday. It had been eighteen months since the panel’s last SEC oversight hearing, and Committee Republicans, in particular, had a lot to get off their minds. A few major themes emerged:
Both Republicans and Democrats are concerned about the sheer volume of rulemaking coming out of the SEC.
Both Republicans and Democrats are concerned about the potential effects of the proposed rule on conflicts of interest (required by Dodd-Frank) on private mortgage insurers.
Both Republicans and Democrats are concerned about the effects of the proposed open-end liquidity rule, which they fear will disadvantage retail investors who aren't on the East Coast.
Republicans believe that Gensler has not been responsive to requests for information on a wide range of topics.
Republicans believe the SEC is regulating digital assets by enforcement, and both/either 1) lacks the necessary authority to regulate crypto businesses and/or 2) is not doing enough to make it clear how the SEC's rules apply to them.
Republicans believe that the SEC's proposed rule on climate risk disclosure is an attempt to impose environmental regulations on public companies and the financial sector more broadly.
Rep. Warren Davidson (R-OH), after listing what he called Chair Gensler’s “long series of abuses,” said he would introduce legislation to replace the SEC Chair with a professional Executive Director, hired by the Commission members. Former Chairs of the SEC would not be eligible for the position.
For his part, Gensler said that the SEC’s rulemaking was largely focused on the middle of the market, driving efficiency, integrity, and resilience. He called AI “the most transformative” technology of our time, and said the SEC needed projects in this area around robo-advisers, brokerages apps, and predictive data analytics. He defended the proposed rule on climate risk disclosures by saying that public companies were already making these disclosures, and the proposed rule seeks to make them more consistent and comparable.
FSOC seeks comment on guidance for designating nonbanks as SIFIs, new framework for analyzing financial stability risks
This morning’s meeting of the Financial Stability Oversight Council (FSOC) was not a regularly scheduled one. Its agenda was a vote on two proposals for public comment.
The first is a new framework for analyzing and addressing financial stability risks, which lists vulnerabilities that most commonly contribute to risk: leverage, liquidity risk and maturity mismatch, interconnections, operational risks, complexity and opacity, inadequate risk management, concentration, and destabilizing activities.
The second, and possibly more significant, proposal would reverse earlier interpretive guidance by laying out a process for the Financial Stability Oversight Council to designate nonbank financial institutions as systemically important.
Treasury Secretary Janet Yellen said the two recent bank failures had underscored the importance of FSOC’s work: “to continue to improve the resilience of a financial system that can support the economy through both good and bad times.” She said she believed these proposals would advance that effort. Both proposals are open for comment for 60 days after their publication in the Federal Register.
Cuts to HUD budget would be “devastating,” says Fudge
Secretary of Housing and Urban Development Marcia L. Fudge appeared before House and Senate Appropriations subcommittees this week to discuss the President’s FY 2024 budget for the agency, which requests for $73.3 billion to fund HUD’s core programs and an additional $104 billion over the next ten years to make investments in affordable housing. House Transportation and Housing & Urban Development Subcommittee Chairman Tom Cole (R-OK) said he did not yet know what their topline figure would be for the HUD budget, but it was “fair to say” that the Administration would not get the increases it is asking for. Secretary Fudge said that cutting HUD’s budget back to FY 2022 levels, as proposed by the Republicans’ debt ceiling plan, would evict as many as 640,000 people from federally supported housing. Even a continuing resolution (CR) would create serious hardships, cutting off housing support for approximately 125,000 people. Chairman Cole said he was determined to pass an appropriation bill: “I don’t believe in CRs.”
Moving forward on stablecoins
Bipartisan leadership of the House Financial Services Committee spent much of last year working on legislation to create a regulatory framework for stablecoins, but were not able to complete that work before the end of the year. The House Financial Services Subcommittee Digital Assets, Financial Technology, and Inclusion returned to the effort with a hearing on Wednesday. Witnesses emphasized the urgency of putting rules in place that provide certainty and stability to the sector, and noted that stablecoin issuers are already moving to jurisdictions that have these frameworks in place — or, in cases of bad actors, don’t.
Subcommittee Chairman French Hill (R-AR) acknowledged that last year’s discussion draft was “an ugly baby,” but he is determined to move forward on legislation that would allow multiple paths for stablecoin issuers. He called “the ongoing turf war between the SEC and the CFTC” over digital assets “not only unhelpful, but unsustainable.”
Earlier in the week, Federal Reserve Board Governor Michelle Bowman discussed the Fed’s work on a central bank digital currency (CBDC) in a speech at Georgetown University. The threshold questions for a CBDC, she said, are 1) what problems is the policymaker trying to solve, and could a CBDC solve them? and 2) what features and considerations, including unintended consequences, should policymakers be discussing as they decide to design and adopt a CBDC? Bowman sees some promise for the use of wholesale CBDCs for settlement of certain financial market transactions and processing international payments. “It is difficult to imagine a world where the tradeoffs between benefits and unintended consequences could justify a direct access CBDC for uses beyond interbank and wholesale transactions,” she said.
Not an endorsement of stablecoins, but as close as the Fed is likely to come.
House panel looks at proposals for capital formation
The House Financial Services Subcommittee on Capital Markets held the fourth and last in its series of hearings on capital formation this week, with witnesses offering feedback on 12 legislative proposals to streamline the IPO process, amend the SEC’s accredited investor definition, expand crowdfunding opportunities, and more. Committee members on both sides of the aisle agreed that a simple wealth test is not the best standard for investor accreditation. Witnesses urged the Subcommittee to facilitate the development of angel investor networks across the country, particularly to serve Black, women, and Latino founders.
Systemic risk exception cost the Deposit Insurance Fund $22.5 billion
Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg said this week that although the failures of Silicon Valley Bank and Signature Bank cost the Deposit Insurance Fund (DIF) approximately $22.5 billion, that should not affect the plan to restore the DIF to its statutory minimum reserve ratio of 1.35% by the deadline of September 30, 2028. That’s because $19.2 billion of that loss is attributable to the systemic risk exception that covered uninsured depositors, which federal law requires to be repaid by a special assessment on banks. The net loss to the DIF is $3.3 billion, which “is not expected to have a material effect on the projected timeline.” The FDIC has not yet announced the special assessment to cover the $19.2 billion.
Confirmations, Nominations, Departures
Deborah J. Jeffrey has been named Inspector General of the Securities and Exchange Commission, filling a position that has been officially vacant since May 2022.
The Week Ahead
Next week we’ll be covering both Senate Banking Committee hearings, the Senate Small Business Committee hearing, and the House Financial Services Subcommittee hearing on FinCEN. Let us know if you’d like those reports.
April 24 – 27 The Securities and Exchange Commission’s Small Business Office hosts its 42nd annual Small Business Forum. Streaming sessions begin daily at 1:00 p.m., and the public is welcome to register.
April 26 at 10:00 am Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Building Consensus to Address Housing Challenges.”
April 26 at 3:30 pm Senate Committee on Small Business & Entrepreneurship holds a hearing on “Oversight of SBA’s Implementation of Final Rules to Expand Access to Capital.”
April 27 at 10:00 am Senate Banking Committee holds a hearing on “Oversight of the Credit Reporting Agencies.”
April 27 at 1:00 pm House Committee on Ways and Means holds a hearing on “Accountability and Transparency at the Internal Revenue Service.” IRS Commissioner Danny Werfel will be the only witness.
April 27 at 2:00 pm House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion holds a hearing on “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure.”
April 27 at 2:00 pm House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions holds a hearing on “Oversight of the Financial Crimes Enforcement Network (FinCEN) and the Office of Terrorism and Financial Intelligence (TFI).”
April 27 at 2:00 pm House Energy & Commerce Subcommittee on Innovation, Data, and Commerce holds a hearing on “Addressing America’s Data Privacy Shortfalls: How a National Standard Fills Gaps to Protect Americans’ Personal Information.”
The Ellis Insight - Jim Ellis on political news
PRESIDENT
Mike Pompeo, Gov. Glenn Youngkin: Former Secretary of State Mike Pompeo (R) announced that he will not join the 2024 presidential field. Only a long shot victory path existed for the former Secretary, CIA Director, and US Representative from Kansas. Additionally, according to a New York Times report, Virginia Gov. Glenn Youngkin (R) has put his fledging presidential effort on hold and is now apparently unlikely to enter the race.
To date, the only announced candidates are former President Donald Trump, ex-UN Ambassador Nikki Haley (R), former Arkansas Gov. Asa Hutchinson, and businessman Vivek Ramaswamy. South Carolina Sen. Tim Scott has filed a presidential exploratory committee. While President Biden has repeatedly said he “plans to run again,” he has still not made a formal announcement. Florida Gov. Ron DeSantis and ex-Vice President Mike Pence are both expected to join the campaign in the next few weeks.
Robert F. Kennedy, Jr.: The son of former US Attorney General and New York Senator Robert F. Kennedy officially entered the Democratic presidential primary. Robert F. Kennedy, Jr. gained national attention for his anti-vaccination stance, but is unlikely to be a serious threat to President Biden. He could, however, do some damage in New Hampshire and Georgia if the two states don’t adhere to the Democratic National Committee primary schedule, thus likely forcing the President to skip those primaries.
Arizona: Two presidential polls were released in critically important Arizona, one for the Republican primary and the other isolating the candidates against President Biden. The Republican primary survey posts former President Donald Trump to a substantial advantage over Florida Gov. Ron DeSantis. The latter man would lead President Biden in a general election poll, however, while Mr. Trump would not.
JL Partners (4/10-12; 550 AZ registered Republican and Undeclared voters) finds Mr. Trump holding a 47-24-4-4-3-2% advantage over Gov. DeSantis, ex-Vice President Mike Pence, former US Rep. Liz Cheney, ex-UN Ambassador Nikki Haley, and businessman Vivek Ramaswamy, respectively, in the GOP primary study. Public Opinion Strategies surveyed the state’s general electorate (4/11-13; 500 AZ likely voters; live interview) and forecasts Gov. DeSantis leading President Biden, 48-42%, while Mr. Trump trails 45-44%.
New Hampshire: A new University of New Hampshire Granite State poll (4/13-17; 818 NH likely Republican primary voters; online) sees former President Donald Trump continuing to lead the proposed Republican presidential primary field, while home state Gov. Chris Sununu breaks into double-digits ascending to third place. Mr. Trump would lead Florida Gov. Ron DeSantis and Gov. Sununu, 42-22-12%. No other potential candidate reaches 5% support. On the Republican side, New Hampshire will remain as the first-in-the-nation primary.
South Carolina: The recently released National Public Affairs survey (4/11-14; 538 SC registered voters likely to vote in the Republican primary; online & text) finds former President Trump again topping the Palmetto State field with 40% of the vote, a full 20 points ahead of Florida Gov. Ron DeSantis. South Carolina candidates Nikki Haley, the former Governor, and Sen. Tim Scott who has filed a presidential exploratory committee, would command 18 and 16%, respectively.
Though still trailing badly in their home state, the NPA ballot test posts the South Carolina pair to their strongest showing to date.
SENATE
Arizona: Former solar company CEO Jim Lamon, who placed second in the 2022 US Senate race with 28.1% of the Republican primary vote, says he will not return for another run this year and is instead endorsing Pinal County Sheriff Mark Lamb (R). Several other Republicans, including 2022 gubernatorial nominee Kari Lake and senatorial nominee Blake Masters, are reportedly considering the race.
The 2024 Senate race, expected to be one of the most competitive in the country, likely will feature a three-way contest with incumbent Senator Kyrsten Sinema running as either an Independent or the nominee of the No Labels Party, which has qualified for the ballot in Arizona. Rep. Ruben Gallego (D-Phoenix) is the only announced Democratic contender and is fast becoming a consensus candidate.
Ohio: Buckeye State businessman Bernie Moreno (R), who for a short time was in the 2022 Senate race but dropped out before the first ballots were cast, announced that he will join the 2024 Republican primary with the hope of challenging Sen. Sherrod Brown (D) in the general election. While a candidate in the previous campaign, Mr. Moreno spent $4 million of his personal fortune on his political effort.
Currently in the race is state Senator and 2022 US Senate candidate Matt Dolan (R-Chagrin Falls) who has already invested $3 million of his own money into the ’24 Senate race. Thus, it appears we have two major self-funders set to battle each other for what should be a valuable GOP nomination in what portends to be one of the hottest general election Senate races in the country.
Pennsylvania: Republican Keith Rothfus served three terms in the US House from 2013 to 2019. He was defeated for re-election in 2018 when the state Supreme Court map collapsed Rep. Rothfus’ Pittsburgh area seat with that of fellow Rep. Conor Lamb (D). In that Democratic wave election year, Rep. Lamb defeated Mr. Rothfus with a 56-44% margin. The victorious Congressman would then lose the 2022 US Senate Democratic primary to current incumbent John Fetterman, however.
Though the national and state Republican leadership are making it clear they would like to see 2022 Senate candidate David McCormick return to challenge Sen. Bob Casey, Jr. (D), Mr. Rothfus is indicating that he would have the ability to become a consensus candidate. There is yet no definitive word from Mr. McCormick himself if he will again run for the Senate. The Republican leadership certainly wants to put this seat in play but defeating Sen. Casey will be a tall order regardless of who becomes the GOP nominee.
Texas: Texas state Senator Roland Gutierrez (D-San Antonio), who represents the city of Uvalde, the site of the terrible May 2022 elementary school shooting, is reportedly preparing to launch a US Senate challenge to two-term incumbent Ted Cruz (R). Sen. Gutierrez would be the first significant candidate to come forward, assuming he makes the final decision to announce.
Sen. Cruz, who won the 2018 race against former Congressman Beto O’Rourke (D) with 50.9% of the vote, would be favored to win a third term with a much greater percentage in a presidential election year. He eschewed another run for President this year to concentrate on his Senate re-election campaign.
Wisconsin: Reports are surfacing that Wisconsin US Rep. Tom Tiffany (R-Minocqua) has approved the purchase of US Senate campaign domain names. The Congressman indicated, however, that this act does not necessarily mean he will actually become a statewide candidate. Should he run for the Senate and win the Republican primary, Rep. Tiffany would face Sen. Tammy Baldwin (D), who recently announced that she will compete for a third term.
HOUSE
IL-7: Veteran Illinois Congressman Danny Davis (D-Chicago) was first elected to the US House in 1996 after serving both as a Cook County Commissioner and on the Chicago City Council. Though his district is heavily Democratic and safe from a Republican opponent, Rep. Davis did have a relatively close call in the 2022 Democratic primary when he defeated community organizer Kina Collins by a 52-45% count. In 2020, he defeated the same opponent with a 60-13% victory margin.
At 81 years of age, he is considered a retirement prospect for the 2024 election. That being the case, Chicago City Treasurer and former state Representative Melissa Conyears-Ervin (D) this week formed a congressional exploratory committee for the 7th District. This is a March 2024 Democratic primary campaign to watch.
IN-3: Republican Marlin Stutzman, who served three terms in the US House before losing the 2016 US Senate Republican primary to then-Congressman Todd Young, announced that he will attempt to reclaim the seat he vacated eight years ago. The race will be no gimme for the former Congressman and ex-state legislator, however. Already announced as candidates are state Senator Andy Zay (R-Huntington) and former Circuit Judge Wendy Davis, among others.
In a district that the FiveThirtyEight data organization rates R+34, the successor to Rep. Jim Banks (R-Columbia City), who is now running for Senate, will be decided in the May 2024 Republican primary.
MI-10: A third Democratic candidate came forward to compete for the party nomination to challenge Michigan freshman US Rep. John James (R-Farmington Hills). Emily Busch, a gun control activist and defeated state Representative candidate, said she will run for Congress next year. Already in the Democratic primary are attorney Brian Jaye and financial consultant and ex-state Rep candidate Diane Young.
It is likely that 2022 nominee and former judge and prosecutor Carl Marlinga will return for a re-match. He will be heavily favored in the Democratic primary having lost to Mr. James by just a half-percentage point. The 10th District 2024 campaign again promises to be highly competitive and is a national Democratic congressional target.
NY-3: Looking at the negative media circus that has surrounded freshman New York Rep. George Santos (R-Long Island), which certainly lessens his chances of winning re-election in 2024, former Congressman Tom Suozzi (D), who left the House to run a longshot 2022 campaign for Governor, confirms that he is considering making a congressional comeback attempt next year. Regardless of whether Mr. Suozzi runs, the NY-3 race will be a top Democratic conversion opportunity.
NY-22: Last November, freshman Rep. Brandon Williams (R-Syracuse) held the state’s new 22nd Congressional District that former Congressman John Katko (R) represented for eight years before retiring. Then, and now, the Syracuse anchored seat leans toward the Democrats (FiveThirtyEight: D+2; Dave’s Redistricting App: 53.4D – 43.1R partisan lean) but has elected a Republican to the US House in the last five consecutive elections.
Late last year, Manlius Town Councilwoman Katelyn Kriesel (D) announced that she would compete for the Democratic nomination to challenge Rep. Williams. Her campaign proved short-lived, however, since she dropped her bid at the beginning of March.
Now, a new Democratic contender has emerged. DeWitt Town Councilwoman and US Air Force veteran Sarah Klee Hood (D) came forward to enter the race. Count on this race being highly competitive in the 2024 general election cycle no matter who ultimately becomes the Democratic nominee.
GOVERNOR
Kentucky: Less than one month before the 2023 Kentucky statewide primary election, a new Emerson College poll (4/10-11; 900 KY likely Republican primary voters; interactive voice response system & text) sees Attorney General Daniel Cameron continuing to lead the GOP gubernatorial primary despite being under intense attack from his main opponent.
The poll results find AG Cameron leading former UN Ambassador Kelly Craft 30-24%. Trailing are Agriculture Commissioner Ryan Quarles (15%), disbarred attorney Eric Deters (6%), and state Auditor Mike Harmon (2%). The winner of the May 16th primary battle will then challenge Gov. Andy Beshear (D) in the November general election.
West Virginia: Reports from West Virginia suggest that Gov. Jim Justice (R) will announce a US Senate challenge to incumbent Joe Manchin (D) before April ends. The new Morning Consult Governor approval ratings report will give Mr. Justice a boost. Among the 50 Governors, he rates as tied for third with New Hampshire Gov. Chris Sununu (R) in recording a positive score of 66%. In comparison, Sen. Manchin’s latest job approval ratio was 38:55% favorable to unfavorable.
Before directly challenging Sen. Manchin, Gov. Justice must first defeat US Rep. Alex Mooney (R-Charles Town) in the Republican Senate primary. Under West Virginia law, the Governor is ineligible to seek a third term.