“On the Record with GRay Matters: The Golden Apple" - April 9, 2021

Welcome Back! It's been a busy couple of weeks in Washington, even if Congress was officially in recess.

President submits "skinny budget" President Joe Biden began the long process of hammering out a budget today by sending Congress his discretionary funding request for FY 2022, which an administration official described as “reinvesting in the foundation of our country’s strength.” The budget request is for $769 billion in nondefense discretionary spending. It calls for major increases in spending on high-poverty schools, medical research, public health, and core climate functions. It would extend Housing Choice Vouchers to more than 200,000 additional households and provide a $500 million increase in Homeless Assistance Grants. More detailed proposals will follow for these programs, for nondiscretionary spending and for tax reform. Today’s request is “complementary but separate” from the President’s American Jobs Plan, unveiled last week. In both cases, these are opening gambits in a policy debate that will continue over the next several months of hearings, markups, and—theoretically—eventual compromises. 

American Jobs Plan would invest $2.3 trillion in infrastructure President proposed the $2.3 trillion American Jobs Plan, which he said would be the “largest American jobs investment since World War Two” if Congress approves it. If you’re a subscriber to this newsletter, you should already have received our summary of the plan, which includes  

• $631 billion for transportation
• $428 for caregiving and veterans services
• $232 billion for supply chain modernization and clean energy
• $213 billion for housing
• $200 billion for water and broadband
• $180 billion for research and development
• $137 billion for schools and child care investments
• $126 billion for environment and electric grid improvement
• $100 billion for workforce training and labor protections
• $36 billion for small business programs

  On Wednesday President Biden said he was “open to ideas about how to pay for this plan,” and pledged not to impose tax increases on anyone making less than $400,000 a year. He proposed an increase in the corporate tax rate to 28 percent, which he said would be lower than at any time between World War II and 2017. He noted a study’s finding that at least 55 of the nation’s largest corporations paid no federal income tax in 2020, and said that was “just not fair.”   President Biden is also proposing a global minimum tax of 21 percent on US corporations, and pledged to step up IRS enforcement against corporate and “super wealthy” tax dodgers.

Yellen expands on corporate tax proposals Secretary of the Treasury Janet Yellen had more to say about the administration’s tax plans in a speech to the Chicago Council on Global Affairs earlier this week. She described a global “thirty-year race to the bottom on corporate tax rates,” and said they were working with other G20 nations on a global minimum corporate tax rate that would level the playing field in taxation of multinational corporations. She emphasized the need for the United States to resume a position of global leadership, with the primary objective of “a stable and growing world economy that benefits the US economy.”

CFPB rescinds policy statements, delays debt collection rules The Consumer Financial Protection Bureau, under the guidance of Acting Director Dave Uejio, announced last week that it is rescinding seven policy statements that had given financial institutions temporary flexibility during the pandemic. “With the rescissions, the CFPB is providing notice that it intends to exercise the full scope of the supervisory and enforcement authority provided under the Dodd-Frank Act,” the Bureau said. The seven statements, issued between March 26, 2020 and June 3, 2020, covered a wide range of supervisory issues, including appraisal requirements, quarterly reporting and filing requirements, and supervisory expectations on resolutions, disclosures, and communications. On Wednesday, the Bureau proposed 60-day extensions to the effective dates for final rules issued under the Fair Debt Collection Practices Act; under the extensions, the new rules would not take effect until January 29, 2022.

CFPB warns against evictions and foreclosures The Bureau also issued guidance to mortgage servicers, warning them to make changes now to prevent a wave of foreclosures in the fall: “The CFPB will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation.” Last week the CFPB and the Federal Trade Commission issued a joint statement about their plans to monitor and investigate eviction practices, “particularly by major multistate landlords, eviction management services, and private equity firms” to ensure compliance with applicable laws. The Centers for Disease Control has extended the federal moratorium on evictions to June 30.

Regulators issue supervisory guidance, seek comment on model risk management for BSA/AML compliance Today the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System, and the Office of the Comptroller of the Currency (OCC) issued a joint statement to clarify that they expect banks to adopt no specific model risk management framework for complying with Bank Secrecy Act/anti-money laundering requirements, but that responsibility for compliance remains with the banks, even if they use third-party models. The regulators said they would not recommend any specific organizational structure for BSA/AML oversight, but will apply principles of risk management “commensurate with a bank’s risk profile.” They have asked for comment on their model risk management guidance (MSMG), which is due to the agencies by June 5. Agencies ask for views on financial institutions’ use of AI The Federal Reserve, CFPB, FDIC, OCC, and National Credit Union Administration want to know: how are financial institutions using artificial intelligence? How do they want to use artificial intelligence? How do they identify and manage the risks involved? How do they explain those risks to customers? How do institutions manage the collection, use, and protection of data for AI purposes? What happens when AI “learns” patterns that diverge from bank policies or regulatory requirements, such as fair lending? How will, or should, community banks’ use of AI differ from that of large institutions? And what roles are appropriate for third-party providers? The agencies published a Request for Information last week to ask all these questions and more. Comments are due on June 1.   SEC promises vigilance on SPACs The Securities and Exchange Commission (SEC) issued a statement yesterday to address rising concerns about the use of special purpose acquisition companies (SPACs) to evade the legal requirements that apply to traditional initial public offerings (IPOs). John Coates, Acting Director of the SEC’s Division of Corporate Finance, said yesterday that the use of SPACs does not reduce potential liability exposure for SPAC participants—in fact, “in some ways, liability risks for those involved are higher,” because of the potential for conflicts of interest within the SPAC structure. Furthermore, Coates said, a material misstatement or omission in any SPAC registration document is subject to the same legal penalties as any other Securities Act registration statement, and may be subject to liability under state law as well. He added that the SEC may need to clarify the scope of the “safe harbor” provisions of the Private Securities Litigation Reform Act.

• Rep. Mo Brooks (R-AL) announced that he will run for the Senate seat being vacated by retiring Senator Richard Shelby next year, rather than seeking reelection to the House.
• Rep. Lee Zeldin (R-NY) announced that he will run for Governor of New York instead of running for reelection.
• President Biden will nominate Doug Parker, currently Director of the California Division of Occupational Safety and Health (Cal/OSHA) to serve as Assistant Secretary of Labor for Occupational Safety and Health. OSHA has been without a confirmed chief since 2017.

April 13 at 10:00 a.m. Senate Banking Committee holds a hearing on “Separate and Unequal: The Legacy of Racial Discrimination in Housing.”   April 13 at 2:30 p.m. Senate Banking Subcommittee on Economic Policy holds a hearing on “The Student Debt Burden and its Impact on Racial Justice, Borrowers, and the Economy.”   April 13 at 3:00 p.m. Senate Commerce Subcommittee on Tourism, Trade, and Export Promotion holds a hearing on “The State of Travel and Tourism during COVID.”   April 14 at 10:00 a.m. House Financial Services Committee holds a hearing on “Building Back Better: Examining the Need for Investments in America’s Housing and Financial Infrastructure.”   April 15 at 10:00 a.m. Senate Banking Committee holds a hearing on “21^st Century Communities: Public Transportation Infrastructure Investment and FAST Act Reauthorization.”   April 15 at 10:00 a.m. House Financial Services Subcommittee on Consumer Protection and Financial Institutions holds a hearing on “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charters.”   April 15 at 10:30 a.m. House Energy & Commerce Subcommittee on Environment and Climate Change holds a hearing on “The CLEAN Future Act and Environmental Justice: Protecting Frontline Communities.”   April 15 at 11:00 a.m. House Transportation Subcommittee on Coast Guard and Maritime Transportation holds a hearing on “Practical Steps Toward a Carbon-Free Maritime Industry: Updates on Fuels, Ports, and Technology.”   April 15 at 2:00 p.m. House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets holds a hearing on “The End of LIBOR: Transitioning to an Alternative Interest Rate Calculation for Mortgages, Student Loans, Business Borrowing, and Other Financial Products.”  

PRESIDENT  

Former Vice President Mike Pence: Late this week, former Vice President Mike Pence announced the formation of his new national advocacy organization, entitled Advancing American Freedom. It is expected to be a vehicle to position Mr. Pence for a presidential run in 2024. Among the board members are Arizona Governor Doug Ducey, former Wisconsin Gov. Scott Walker, ex-White House advisors Larry Kudlow and Kellyanne Conway, former Senator and presidential candidate Rick Santorum, ex-House Speaker Newt Gingrich, and former US Intelligence Director and Texas Congressman John Ratcliffe.

SENATE

Alabama: The battle to replace retiring Alabama Sen. Richard Shelby (R) may not draw as many candidates as anticipated. Late this week, former President Donald Trump already weighed in to endorse Rep. Mo Brooks (R-Huntsville) in the Senate Republican primary. The race, so far, has drawn only one other announced candidate: wealthy former Trump-appointed Ambassador Lynda Blanchard (R) who has already pledged $5 million of her own money for the campaign. No Democrat has come forward to run at this time. Rep. Terri Sewell (D-Birmingham) had considered the statewide race but announced that she will instead seek re-election to the House.   Alaska: A new Cygnal survey research company 2022 Alaska Senate race poll, which appears as the first such study conducted of the state’s new Top Four jungle primary system, was released into the public domain this week. The compiled data comes from an aggregate of 500 registered voters via live interviews, SMS texts, and email responses. The survey was conducted during late March and released on the 29th of that month.    According to Cygnal, Sen. Lisa Murkowski (R) fares poorly. On the ballot test, she barely places second, trailing former State Administration Director Kelly Tshibaka (R) 34-19%, and running just ahead of Dr. Al Gross, the 2020 Democratic US Senate nominee, who places third with 18%. Dr. Gross has not indicated that he will again become a candidate. American Independent Party candidate John Howe attracted 6%, and Democrat Edgar Blatchford notched 3%.  Under the new primary procedure, Ms. Tshibaka, Sen. Murkowski, Dr. Gross, and Mr. Howe would all advance into the general election. Needless to say, the new system drastically changes how the election, and the various campaigns, will be conducted.   Ohio: Amy Acton, the former Ohio Public Health Director who was actually running ahead of Rep. Tim Ryan (D-Warren/Youngstown) in early US Senate Democratic primary polling, says she will not run for the Senate next year. Rep. Ryan had indicated he would announce his statewide candidacy in March, but then put any type of official declaration on hold for an undefined period of time. Sen. Rob Portman (R) is not seeking a third term in 2022. Republicans are expecting a crowded primary contest.   Pennsylvania: While Philadelphia Congressman Brendan Boyle (D) announced last weekend that he will not enter the open US Senate campaign next year, two more Democrats announced early this week that they will run. Montgomery County Commission chair Val Arkoosh and physician Kevin Baumlin (D) both announced their candidacies. Including these two latest entries, Democrats now have 11 active candidates running for the state’s open US Senate seat.   

HOUSE

FL-20: After a long battle with pancreatic cancer, veteran Florida Rep. Alcee Hastings (D-Delray Beach) passed away Wednesday morning. Mr. Hastings came to the House with an election victory in a 1992 open seat campaign and served until his death. He had been a federal court judge but was impeached due to financial impropriety in 1989. He then ran unsuccessfully for Secretary of State in 1990 before winning election to the House two years later.   In anticipation of a special election at some point before 2022, Democratic candidates had begun quietly preparing. We can expect a large field competing when Gov. Ron DeSantis (R) schedules the special election. Already coming to the forefront are state Senator and former House Minority Leader Perry Thurston (D-Ft. Lauderdale) and Broward County Commissioner Barbara Sharief.  The 20th District that covers a large portion of the territory between Ft. Lauderdale and Miami is safely Democratic, so the real Hastings succession battle will occur in the special Democratic primary.   GA-6: During the week, author and US Army veteran Harold Earls (R) announced that he will challenge two-term Georgia Rep. Lucy McBath (D-Marietta) next year. Mr. Earls’ move may be a bit early, however. While the current 6th District is competitive, an eventual final redistricting plan may make this seat safely Democratic. It would not be unusual to see the Republican map drawers craft the 6th as a Democratic CD while making the politically marginal and adjacent 7th District much more Republican.    IL-17: Insurance broker and former US Marine Charlie Helmick (R) announced that he will enter the 2022 race against Rep. Cheri Bustos (D-Moline). Esther Joy King, who held Rep. Bustos to a closer than expected 52-48% re-election victory, is returning for a re-match and faovred for the GOP nomination. Navy veteran Corey Allen is also an announced Republican candidate. Rep. Bustos’ 17th District, with Illinois sure to lose a seat in reapportionment, will see significant change in the coming re-draw. It is likely this race will be highly competitive in 2022.   KS-3: 2020 Republican congressional nominee Amanda Adkins, who lost to Rep. Sharice Davids (D-Roeland Park/Kansas City) on a 54-44% count, announced that she will return for a second run in 2022. Ms. Adkins hopes for a more favorable 3rd District from the Republican legislature in redistricting, but Democratic Gov. Laura Kelly will be in position to veto any major changes. Regardless of redistricting, it is probable that we will see a more competitive race here next year.   MS-4: This week, Jackson County Sheriff Mike Ezell (R) launched a Republican primary challenge to six-term Rep. Steven Palazzo (R-Biloxi). Rep. Palazzo won his congressional seat in 2010, defeating then-incumbent Gene Taylor (D).  Having a primary challenge is nothing new for the Congressman having won four other intra-party battles including one against the man he originally unseated. Mr. Taylor switched parties and challenged Rep. Palazzo in the 2014 Republican primary, a race the Congressman won 50-43%. Mr. Palazzo has averaged 73.4% of the vote in his five re-election campaigns including running unopposed last November.   NY-12: Last week, both Rep. Carolyn Maloney (D-Manhattan) and her Democratic opponent from the last two elections, businessman and former Obama Administration official Suraj Patel, announced that they will run again in 2022. In the 2020 contest, Mr. Patel came within a 43-39% margin of denying the Congresswoman re-nomination.    On Thursday, Socialist Democrat community organizer Jesse Cerotti also joined the race. Considering Rep. Maloney only won her last primary with plurality support suggests the more opponents she draws the better for her, so the Cerotti entry could actually help the incumbent. Rep. Maloney was first elected from a safe Democratic “silk stocking” New York City district in 1992.   NY-18: GOP state Assemblyman Colin Schmitt (R-Washingtonville) declared this week that he will seek the Republican congressional nomination in order to challenge five-term Rep. Sean Patrick Maloney (D-Cold Spring/Orange County).  As chairman of the Democratic Congressional Campaign Committee (DCCC), Rep. Maloney will have little trouble raising whatever funds he needs should his re-election become more competitive post redistricting. In 2020, Rep. Maloney was re-elected in a 56-43% spread over engineer and businesswoman Chele Farley who was also the 2018 Republican US Senate nominee.   OH-12: Danny O’Connor (D), the Franklin County Recorder who held Republican Troy Balderson to a bare 50-49% win in the 2018 special congressional election and then fell to him 51-47% in that year’s regular election, will now return for a re-match. In November, Rep. Balderson defeated Democrat Alaina Shearer, 55-42%. The 12th District contains all or parts of seven counties north and east of Columbus. Ex-President Trump carried the district over President Biden, 52-46%.   TN-5: Community organizer Odessa Kelly (D) announced her 2022 Democratic primary challenge to Tennessee Rep. Jim Cooper (D-Nashville) yesterday armed with support from the progressive left Justice Democrats political action committee, which is closely associated with New York Rep. Alexandria Ocasio-Cortez (D-Bronx).  In 2020, Mr. Cooper won a primary challenge opposite Nashville attorney Keeda Haynes with a 57-40% vote margin despite her only spending about $147,000. With the Justice Democrats involvement, the 2022 race could prove even more competitive for the Congressman than was his 2020 intra-party battle.  

GOVERNOR

Alabama: In responding to a reporter’s question about whether she will seek re-election, Alabama Gov. Kay Ivey (R) answered that her “plate’s pretty full right now, and it’s just not time to make that decision known.” Gov. Ivey, who will be 77 at the time of the next election, assumed the Governorship when then-Gov. Robert Bentley (R) was forced to resign as part of a plea bargain over campaign finance violations in April of 2017. She was elected in her own right a year later with 59% of the vote. If Gov. Ivey runs in 2022, she will be a heavy favorite for re-election.   Nevada: Saying that the Nevada Democratic Party had moved to the far left—three Socialist Democrats were recently elected to state Democratic Party leadership positions—North Las Vegas Mayor John Lee on Tuesday officially left the Democratic Party to join the Republicans.  Mr. Lee had served in the Nevada Assembly and Senate as a Democrat and developed a record of being one of the most conservative members of the party. He lost re-election to the Senate in 2012 but was elected Mayor of Nevada’s fourth largest city a year later. He won re-election in 2017. There is strong speculation he will soon launch a bid for Governor against incumbent Steve Sisolak (D).   New York: US Rep. Lee Zeldin (R-Shirley/Long Island) announced on Thursday that he will run for Governor next year in hopes of challenging beleaguered Gov. Andrew Cuomo (D). While Rep. Zeldin might have a chance if Gov. Cuomo becomes his opponent, it is far from certain that the Democratic incumbent will run again or even survive an impeachment effort.    Additionally, Andrew Giuliani (R), the son of former Mayor Rudy Giuliani, says he will also run for Governor. The younger Mr. Giuliani, a former professional golfer, served as a White House aide to President Trump. Considering Gov. Andrew Cuomo’s (D) political trouble, next year’s race is expected to draw greater attention from New York Republicans and national analysts than typical for a statewide campaign in this most Democratic of states.  

STATES

National Voting Procedures Poll: In the midst of the controversy over the Georgia vote security measure, the Associated Press contracted the NORC survey research firm to conduct a nationwide poll of 1,166 adults over the March 26-29 period.  While they find just over half the respondents indicating they favor no-excuse absentee voting (52-33%) and 60% favor automatic voter registration (60-19%), an even stronger majority (72-13%) supports voters having to produce identification as a prerequisite to casting a ballot. When asked if every voter should automatically be sent an absentee ballot, the survey sample was mixed. A total of 43% favored such a procedure while 39% opposed.