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Letter from Washington

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President Trump’s schedule (EDT):

11:45 AM:  Daily intelligence briefing;

  1:00 PM:  Attends the Senate Republican Policy Luncheon; and

  3:15 PM:  Meets with House Republicans on how to pass the U.S. Mexico-Canada Agreement (USMCA).

“Trump, House Republicans Meet to Line Up Support for New NAFTA.”  This morning’s CQ Roll Call article leads with:

President Donald Trump is scheduled to meet with a number of House Republicans later Tuesday [3:15 PM EDT] as the White House steps up efforts to increase support for the proposed trade agreement to replace NAFTA.

The afternoon meeting comes after Trade Representative Robert Lighthizer courted House Democrats earlier this month with closed-door meetings on the United States-Mexico-Canada Agreement (USMCA). It would replace the North American Free Trade Agreement (NAFTA) if simple majorities in the House and Senate approve it. 

Kevin Brady [R-TX], ranking member on the Ways and Means Committee, said Monday night that he does not know how many GOP lawmakers have accepted the White House invitation for the session.

However, Brady said he and Vern Buchanan of Florida, the top Republican on the Ways and Means Trade Subcommittee, will discuss their outreach efforts to GOP colleagues to back the proposed trade agreement. Brady said Minority Whip Steve Scalise, R-La., also is part of their drive to solidify Republican votes for the three-way pact.   

“The President is going to meet with us about his trade agenda, specifically about our effort we recently kicked off to support passage of USMCA,” said Brady of Texas. “We’ll work for the next month or so to build support for passage.”

Brady said it’s early in the process, adding that “trade votes are always challenging and require an all-in effort by the White House and an all-in effort by those who believe in more trade.”

Getting the new NAFTA through the House will require the votes of a majority of Republicans and an undetermined number of Democrats. Brady said he is concerned many Democrats may not want to give the president a victory on trade given their opposition to most of his policies.

Democrats have voiced several concerns with the proposed pact including that it doesn’t stop the outsourcing of jobs.

“There’s no good excuse for them not to back it,” Brady said, noting that Lighthizer included labor provisions in the updated NAFTA that Democrats have long sought.

In my opinion, the odds of enacting the USMCA are 67% and will hinge on how much support House Speaker Pelosi (D-CA) musters.  Here’s what Mrs. Pelosi had to say about it in during her February 6th press conference:

Q: Two questions on trade, if I could one. 

Speaker Pelosi.  Yes, ma’am.

Q: One, I was wondering if you support the bicameral Congressional Trade Authority Act to reclaim some of the trade authority for Congress?  And also, I was wondering if – what, if any, are the elements of the USMCA that are concerning to you? 

Speaker Pelosi.  Well, two questions.

One, first of all, I really haven’t seen that legislation, but I do support reclaiming some of Congress’s – it is Congress’s prerogative.  We have given some of that authority to the President, and there is legislation here that I am familiar with that would give him even more authority, and I don’t support that.

The concerns that we have about, and hopefully they’re resolvable, because I’m optimistic always with the ­– what are we calling it now, U.S., Mexico, Canada – I don’t know if it has an acronym – formally known as NAFTA, but not NAFTA.  The concerns center around workers’ rights, center around the environment, center around prescription drug prices.  Those are some of the subjects, but the overarching issue is enforcement.  You can have the best language on any subject in a bill, but if you don’t have the enforcement provisions very strongly spelled out, not as a sidebar, not as a side letter, but central to the treaty, then there’s a problem.

So, I believe that the Trade Representative has been most accommodating and being available for Members.  Hopefully he’ll come to answer some questions soon.  But we’ve had good rapport with Mr. Lighthizer.  I believe that the committees of jurisdiction, that being the Ways and Means Committee, largely, will be having sessions with Members so that Members can see what is in the legislation, what we’d like to see in the legislation and how we can be supportive.

I have always thought that this was probably one of the easier trade agreements to come to agreement on, but, so far, we’re not there yet.

“Pot Banking Bill Goes to House Markup With Bipartisan Support.”  This morning’s CQ Roll Call article leads with:

As the House Financial Services Committee takes up a pot banking bill with broad bipartisan support [at 2 PM EDT today], the legal barriers preventing state-sanctioned marijuana growers and dispensaries from accessing the financial system may soon go up in smoke.

The pot banking bill (HR 1595) is one of five scheduled for committee markup Tuesday, and with 143 co-sponsors — including 12 Republicans — it’s the one with the most support. First proposed by Rep. Ed Perlmutter, D-Colo., in 2013, this version was introduced by Perlmutter, Denny Heck, D-Wash., Warren Davidson, R-Ohio, and Steve Stivers, R-Ohio.

Stivers couched his support as a pragmatic response to the dangerous realities facing state-authorized cannabis companies under existing federal law, rather than approval of the underlying drug.

“My support for the SAFE Banking Act is not an approval of marijuana businesses. It is based on the dangers of these businesses having to store massive volumes of cash, making them prime targets for violent robberies and money laundering schemes,” Stivers said. “In addition, having banking relationships creates an auditable trail for these businesses, which is important.”

The bill would offer a regulatory safe harbor to firms providing financial services to “cannabis-related legitimate businesses.” It would also exempt such companies’ proceeds from federal money laundering laws, which effectively deputize banks and credit unions to investigate when customers make shady-looking transactions. While that is designed to insulate pot businesses and their banks from criminal prosecution, the financial institutions would still be required to file suspicious activity reports with the Treasury Department’s Financial Crimes Enforcement Network.

Stivers is expected to offer an amendment during the markup to expand the safe harbor protections from criminal prosecution to insurance companies.

The bill would also direct the Federal Financial Institutions Examination Council to develop uniform guidance and examination procedures for depository institutions working with legitimate marijuana businesses.

The sponsors have been working closely with Sens. Jeff Merkley, D-Ore., and Cory Gardner, R-Colo., on a companion bill, said Heck’s legislative director, Brendan Woodbury.  

This bill has 144 House cosponsors and strong financial industry support, so the chances of enactment are high, say 80%.

Rx Pricing Talks Have Begun Between President Trump and Speaker Pelosi.  This morning’s Politico Playbookleads with this scoop:

NEWS … W.H.-PELOSI TALKS … THE WHITE HOUSE has quietly been having early-stage, staff-level conversations with SPEAKER NANCY PELOSI’S staff about drug-pricing legislation, according to sources in both camps. The effort is being spearheaded on the administration’s end by the DPC’s Joe Grogan, HHS and the leg affairs shop, and on Pelosi’s end, it’s being handled by Wendell Primus, the speaker’s longtime health policy staffer.

THE POLITICS: PRESIDENT DONALD TRUMP is hungry for a domestic legislative victory, according to sources in the White House, and this is an issue Democrats and the Trump administration have some agreement on. But, of course, getting anything done will be an uphill battle, especially on an issue like drug pricing at the same time the administration is trying to wallop Obamacare. We’ve also not seen much appetite among Democrats to work with the president, and vice versa. Not to mention, the Trump administration is known for its uneven handling of complex legislative issues — especially at the principal level. (Both the White House and Pelosi’s team confirmed these talks.)

HENRY CONNELLY, Pelosi’s deputy communications director, sends us this note: “We’ve been having some staff-level discussions with the Administration about lowering prescription drug prices, but they aren’t negotiations. House Democrats promised the American people we’d take bold action to lower prescription drug prices, and that’s what we’re going to do.”

I’ve long predicted an Rx bill will be enacted this year.  The only question is how watered down it will get before President Trump signs it.

“Disaster Recovery: Better Monitoring of Block Grant Funds Is Needed.”  Yesterday’s 84-page Government Accountability Office report, in preparation for this morning’s 10 AM House Financial Services hearing, stated:

The 2017 hurricanes (Harvey, Irma, and Maria) caused an estimated $265 billion in damage, primarily in Texas, Florida, Puerto Rico, and the U.S. Virgin Islands. As of February 2019, Congress had provided over $35 billion to HUD for CDBG-DR grants to help communities recover. …

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About Pete Davis

Pete Davis

Pete Davis advises Wall Street money managers on Washington, DC policy developments that affect the financial markets. Visit his website here daviscapitalinvestmentideas.yolasite.com.

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