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CRE Finance World, Summer 2014

Mid-Year 2014 Legislative and Regulatory Update hereas last year was full of fits and starts — risk retention reproposal, accounting reforms, GSE reform bills introduced (and, alas, stalled), Basel III and the introduction of the terrorism risk insurance reauthorization — 2014 has shaped up to be a bit more purposeful. We now see many of the above issues coming to a head and perhaps resolution through legislative and regulatory actions. CREFC’s government relations and policy work has been in high gear recently, having extensive meetings with both legislative and regulatory bodies about these and other proposals. We’ll recap some of the highlights below. And, since 2014 is an election year, we would be remiss to not discuss the prospects for this year’s big event in Washington. Simply stated, the Senate is very much in play and the House is all but certain to remain in Republican hands through 2016. What does this do to prospects for the President pushing legislation to bolster his legacy? Will GSE, tax, immigration or other reforms have a chance if the Senate flips? Will Obama play ball ala Bill Clinton in welfare reform? Our guess is that the Senate has a roughly 55% chance of turning over this November. Republicans need to win six additional seats to reclaim the majority. We would note, though, if this becomes a wave election, there is a path for Republicans to win nearly a dozen. If that happens, Obama would be forced into a position to make deals. Mindful of the odds of a Senate flip, everyone in DC has been speculating about whether or not there will be a lame duck session of Congress. With a few must-pass pieces of legislation lingering on down the legislative calendar, lame duck might be essential to keep the lights on in 2015. Still on the list are the highway trust fund bill, the government’s funding legislation or “continuing resolution”, export-import bank, miscellaneous tax provisions, and of course, the terrorism reinsurance (TRIA) reauthorization. Dem Retirements Kill Chances for House Flip; Senate Up for Grabs A procession of Democrat lawmakers opting for retirement and the newly-redrawn Congressional electoral maps all but assure a Republican majority next congress, and perhaps well beyond. The current ratio in the House is 233-199. Many political analysts CRE Finance World Summer 2014 12 predict House Republicans increasing their majority by a handful of seats. The mid-term election prospects can cause whiplash — Bill Clinton lost 52 seats in the 1992 election and George W. Bush lost 30 in his sixth year in the White House. Party donors are quite mindful of the prospects. With only so much money to go around in an election year that has yielded very little positive, Democrats need to concentrate resources on preserving the chamber they have now — the Senate. Losing control of both chambers would certainly doom whatever hopes the President has of securing new left-leaning legacy policies. Ten veteran Democratic incumbents have announced they will not be seeking reelection. These include liberal stalwarts such as California democrats George Miller and Henry Waxman — both major allies of Minority Leader Nancy Pelosi. The Washington Post reported that about 20 percent of the people who stand to become chairmen if Democrats re-take the House are choosing not to run for re-elect. These are ominous signs for House Democrats and the White House. On the Senate side of the Capitol, things don’t look all that rosy either. Nate Silver, the noted political statistician, recently predicted a Republican takeover of the Senate that upset already nervous Democrats worried about the mid-terms. Silver announced that the GOP has a roughly 60% chance of taking back the Senate this election. The Silver prediction put in public what many insiders have been saying quietly for nearly a year. Republican candidates in key races have recently emerged as much more sellable than their 2012 counterparts, who were more aligned with tea party causes. Thanks to establishment efforts by institutional stalwarts such as the US Chamber of Commerce, this year’s Senatorial slate is more mainstream than the class of 2012. The open seat in Michigan now looks to be trending Republican, and Democrats once thought safe such as Kay Hagan (D-NC) are now being viewed as toss-up races. The growing disenchantment with the health care law and foreign policy gaffes has put the president’s party on the defensive as Members scramble to re-sell their earlier votes. W Martin Schuh Vice President, Legislative and Regulatory Policy CRE Finance Council


CRE Finance World, Summer 2014
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