TRP Financial Services Report

Last week President Obama delivered his State of the Union.  Depending on your political leanings it was either (a) the populist mantra you’ve been waiting for, or (b) the populist mantra you’ve been expecting.  While it was noted that the President chose not to acknowledge the new Republican majorities, he did indicate that one take away from the past election was that the American public wanted Washington to work.  He then went on to implore Republicans to work with him on a litany of issues, all of which had been strategically leaked prior to the address, and all of which are unlikely to generate real bipartisan support.  However, he didn't take the same tone on his tax reform proposal – perhaps an indicator for cautious optimism on getting tax reform done this year.   

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TRP Health Policy Report

Last week, attention in Washington centered on President Obama’s State of the Union address. The President made economic growth a central theme of his remarks to Congress, highlighting proposals to make community colleges tuition-free, increase the minimum wage and guarantee paid sick leave. The President also proposed new tax breaks aimed at working families, which would be offset through an increase on top capital-gains tax rates and new taxes on many inheritances. While Congressional Democrats said they were invigorated by the President’s approach, top Republicans criticized his policies and his pledge to veto bills that could roll back healthcare, immigration and financial reforms.

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The Hill: ‘Small Shops are Winning Big’

As several boutique shops tally up their final revenue numbers for the year, The Hill names Thorn Run Partners (TRP) as the fastest growing of 10 boutique firms that provided annual growth reports.  Citing Republican control of the Senate among the factors that have “provided a ripe environment for growth,” the article highlights TRP’s addition of Harriet Melvin, a longtime lobbyist with Republican ties, as the firm’s tenth partner. As 2015 begins, TRP is looking to continue on as what The Hill calls  "a growing bipartisan shop." 

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TRP Health Policy Report

The House adjourned last Wednesday for the annual Republican retreat. Before departing, lawmakers passed legislation to nullify President Obama’s recent immigration order, tying the contentious issue to a bill (H.R. 240) funding the Department of Homeland Security (DHS). The vote was 235-191 for the appropriations bill after the House easily approved amendments to unravel the President’s plan to give safe harbor to up to 4 million illegal immigrants. The underlying $39.7 billion measure would fund DHS from Feb. 27, which its current funding expires, through September. The vote sends the measure to the Senate, where it would need 60 votes to clear procedural hurdles, and where Democrats appear to have the votes to stop it. Even if the legislation reaches the President’s desk, the White House promised to veto it. As a result, it remains unclear how Congress and the White House will agree on a bill funding Homeland Security. According to Republican aides and lawmakers, House GOP leaders intend to wait to see how the Senate responds before making their next move. Lawmakers in both parties have suggested it is unthinkable that DHS funding will be allowed to expire, particularly in light of recent terrorist attacks in Paris.

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TRP Financial Services Report

It seems clear that we are now clearly in the world of “Veto Politics” and despite Republican majorities in both Houses of Congress, the Democratic minority has real power to negotiate with Republicans if both sides want to get anything done.   With the respective flanks of both sides appearing willing to sacrifice the perfect for the good – only time will tell if the so-called adults in the room will be able to find enough moderates to pass substantive legislation by veto proof margins.

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TRP Health Policy Report

Republicans took charge of both the House and Senate last week for the first time in eight years. Last November’s sweeping victories powered the GOP to full control, as the 114th Congress convened on Tuesday. Vice President Biden gaveled in a new Senate, with 54 Republicans to 44 Democrats, two independents and a new majority leader, Sen. Mitch McConnell (R-KY). Meanwhile, on the House side, Republican Speaker John Boehner (R-OH) won a third term in that post, but only after surviving a Tea Party attempt to unseat him. Twenty-five Republicans voted against Boehner, a record uprising for a sitting speaker. Boehner commands 246 Republicans to 188 Democrats, the biggest GOP majority in nearly 70 years. The new Congressional leadership will meet with President Obama at the White House early this week.

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TRP Financial Services Report

Speaker John Boehner won reelection despite the defection of 25 conservative Republicans.  While initial attention focused on the Speaker’s retaliation and the removal of certain members from the Rules Committee, if he were to channel his true Frank Underwood, then he would have rescinded the waiver that allowed Rep. Garrett to keep his chairmanship of the Capital Markets Subcommittee, something that does not seem likely to happen.   Regardless, the Speaker was elected with a six vote cushion, meaning that the Republican leadership will not be as hard pressed to seek Democratic votes this year, though with reports of how Dodd-Frank modifications appear to be dividing House Democrats it seems like the minority party is also suffering from identity orthodoxy politics. 
Meanwhile, the economy continues to hum along, with the latest jobs report noting that 252,000 jobs were added in December.  While this was a decrease from the 321,000 jobs added to the payrolls in November, it was buttressed by the fact that unemployment fell to 5.6 percent.  The continued economic growth means that both sides can do what politicians do best – claim victory.

Looking Ahead

Near Term 

  • The House will have a shortened work week, as both the Republicans and Democrats leave town for their respective Legislative Retreats.  However, before leaving the House is expected to pass H.R. 37, legislation which failed to pass under the Suspension calendar last week (see below for more).  The House is also expected to pass legislation to fund the Department of Homeland Security, the only agency whose funding was set for the fiscal year in the CRomnibus legislation passed last year.
  • The Senate will consider legislation to approve the Keystone Pipeline.
  • The President will roll out a series of proposals to address cybersecurity, identity security, privacy and technology access over four days next week.  Similar to last week, these are issues he intends to address in the State of the Union later this month.

Further Out 

  • President Obama will deliver the State of the Union on January 20th.
  • Funding for the Department of Homeland Security runs out on Feb 27th.


The Past Week
Legislative Branch

Liberal Dems Dig in on Dodd-Frank Reform
On Wednesday, by a vote of 273-146, the House failed to approve H.R. 37, a series of Dodd-Frank reforms, including changes to the Volcker Rule, as well as the Swaps section of the law.  Although more than half of the house voted for the bill, it fell 18 votes short of securing the 2/3rds of the House necessary to pass bills through the “suspension” process, which was how it was brought up.  Republicans then announced that the bill will be back this week, though it will come to the floor under a rule, a process that only requires a simple majority for passage.  However, with the President announcing that he would have vetoed the measure, it is unlikely to move quickly through the Senate, and, as currently constituted, not going to become law.  Whether some of the other, less controversial, elements of the bill could move in a different way remains possible.
House Passes Rule to Allow for Dynamic Scoring
On Tuesday, as part of the House Rules and on a nearly party-line vote (234-172) the House voted to allow the Congressional Budget Office and the Joint Committee on Taxation – the two Congressional entities charged with determining the budgetary impact of legislation – to use “dynamic scoring.”  The change was controversial as Democrats accused Republicans of setting up a system of “fuzzy math” in order to push for tax reform.  Dynamic scoring is a way of figuring out the cost of legislation by imputing the economic effects of the bill into the score, or cost, and is viewed by some as improving the likelihood that that Congress could take up tax reform this year.
Waters Announces Congressional Amicus Brief on Disparate Impact Case
On Friday, Ranking Member Waters announced that late last year she and twenty-one other current and former members of Congress, including the recently deceased Edward Brooke and former Senator and VP nominee Walter Mondale, signed an Amicus Brief  for the upcoming Supreme Court case, Texas Department of Housing and Community Affairs, et al. v. Inclusive Communities Project, Inc.  The case is about whether the theory of disparate impact is applicable under the Fair Housing Act, and the Waters brief supports the position that it is.  The case is being closely watched as it will be the first time the Supreme Court has weighed in on this issue.    
Senate Approves TRIA
On Thursday, by a vote of 93-4, the Senate approved legislation to extend TRIA for five years.  The move followed quickly after the House passed the legislation on Wednesday by a vote of 416-5.  As part of the agreement to take the bill up in the Senate, the chamber voted down an amendment, by a vote of 31-66, offered by Senator Warren that would have stripped out the so-called end user provision from the TRIA legislation, with Democrats arguing that Dodd-Frank changes should not be included in unrelated legislation.  Another unrelated provision in the bill that didn’t draw any controversy was offered by Senator Vitter, and it reserves a seat on the Federal Reserve Board for someone with “community bank” experience.  Interestingly, President Obama’s recently announced nominee might not meet the definition of community bank experience as set forth in the bill.
Senate Financial Services Cardinal Announced
Last week the Senate Appropriations Committee announced the Chairmen, or Cardinals, of the various subcommittees.  Senator John Boozeman (Arkansas) will take over the Financial Services and General Government Subcommittee, which has jurisdiction over the Treasury, SEC, and CFTC among other agencies.

Select Highlights from the Administration

Housing and Urban Development (HUD) 
FHA Announces Reduction in Annual Premiums
On Thursday, the HUD Secretary Julian Castro announced that the Federal Housing Administration (FHA) would reduce its annual premiums by half a percent.  The move, which HUD noted would save  more than two million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years, was almost immediately met with criticism from Republicans.  For example, Senators Corker and Vitter sent a letter to HUD urging the Secretary to reconsider the decision, while House Financial Services Committee Chairman Hensarling expressed his concerns that the move, along with recent bank settlements would deplete the FHA’s insurance fund.  The Chairman also invited Secretary Castro to come before the Committee in February to offer his explanation.  If Castro does come to the Committee he can expect to be defended by the Ranking Member, who strongly praised FHA’s announcement.     
IRS Working on Anti-Inversion Regulations
On Monday, Erik Corwin, Deputy Chief Council (Technical) for the IRS spoke at a luncheon where he mentioned that the IRS was actively working on regulations to implement its anti-inversions Notice as well as additional guidance that could include action on earnings stripping.  The move came shortly before House Minority Leader Pelosi unveiled the Democrats alternative agenda, which among other things included a plan to push an anti-inversion bill that would subject a foreign corporation to U.S. taxes if it acquired a U.S. corporation or partnership after May 8, 2014, so long as it would then own more than half the stock of the new entity, or its management or control is mostly within the U.S. and the new entity has significant U.S. business activities.  It is highly unlikely that such a measure would advance in the Republican controlled House.
FSOC Regulations of Asset Managers Not for “Immediate Horrizon”
Speaking before a Brookings Institute Event on Asset Management, on Friday, Deputy Assistant Secretary for FSOC Patrick Pinschmidt, indicated that it was “very premature” to think the FSOC was preparing any regulations of the asset management industry in the immediate near future.  Noting that the Council was “still in the risk identification phase of its work” and it was still waiting for comments from the Dec 24th notice in the Federal Register.    Speaking at the same conference, Nellie Liang, director of the Federal Reserve’s Office of Financial Stability Policy and Research also noted that more data was needed, especially on mutual funds’ use of derivatives. 

Next Week’s Schedule

Tuesday January 13th at 10:00am in 2167 Rayburn, the House Financial Services Committee will hold an organizational hearing.

Outlook on the 114th Congress

Congress returned from one of its longest end of the year recess’ in recent memory – all of two and half weeks – to begin the 114th Congress yesterday.  This will also be the first time in eight years that Republicans had majorities in both chambers, and so much attention has been focused on the Republican congressional agenda.  The following memorandum outlines a few key policy areas that we anticipate action on over the coming weeks and months.

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The Hill Cites TRP’s Melvin as a Leader in Engaging Women in Politics

A new article in The Hill points to Thorn Run’s addition of Harriet Melvin as the firm’s tenth partner. According to the article, “Melvin spent 10 years at Quinn Gillespie & Associates, but she comes from a firm she founded in 2010 called The Capitol Group.” While Melvin has experience in a wide variety of legislative issues such as telecommunications, financial services and intellectual property, she is also active in groups that promote women’s participation in politics.

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Politico Influence: Melvin ‘Knows How to Help Clients Succeed in Washington’

Today’s edition of Politico Influence, Washington’s leading government relations beat, covered Thorn Run’s addition of Harriet Melvin as the firm’s the tenth partner. According to the article, “a veteran legislative and public affairs strategist with over two decades of lobbying experience and a deep reservoir of relationships with lawmakers, Harriet knows how to help clients succeed in Washington, DC.” Joining TRP from The Capitol Group, which she founded after ten years with Quinn Gillespie & Associates, Harriet has extended her expertise through a wide array of issues including telecommunications, anti-trust, transportation and intellectual property.

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