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November 11, 2022
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THE TOP
Happy Friday morning. This is our only edition of the day. Happy Veterans Day. Thank you to all who served and their families.
Official Washington has been riveted during the last few days by the drama surrounding House Minority Leader Kevin McCarthy and his suddenly endangered bid to become the next speaker. Tuesday’s poor showing by Republicans – and the prospect of a narrow majority at best — make McCarthy’s path to the speaker’s chair much more treacherous. There are real concerns among his GOP colleagues whether McCarthy can get there at all.
McCarthy’s aides and allies say McCarthy brought Republicans to the majority and he’ll be the one who leads them in it. Yet hardline conservatives never cared much for McCarthy and much of their existence is reliant on sowing chaos for the leadership.
But this morning, we’re going to focus on the huge question hanging over House Democrats – “What will Speaker Nancy Pelosi do?”
The answer – No one knows yet. And that’s frozen the rest of the House Democratic leadership in place.
Still dealing with the aftermath of the brutal attack on her husband, Paul Pelosi, the speaker hasn’t informed anyone what her plans are. Or at least not anyone who’s willing to disclose those plans. Pelosi will be interviewed on two Sunday shows this weekend, yet we don’t anticipate she’ll be making any announcement on her future.
Of course, a lot of what happens will depend on the outcome in House races, and it may be some time before those are finalized. What’s clear is that Democrats have beaten the odds and kept Republicans to shockingly small gains for midterm election. There remains a chance that Democrats could keep the House. Slim, but possible.
CNN’s John King went through how Democrats could keep the House last night. Watch it. It’s fascinating.
Pelosi retiring would be a seismic shift for House Democrats, many of whom have never had another leader during their congressional careers. And that’s to say nothing about the future of Pelosi’s longtime deputies and fellow octogenarians, House Majority Leader Steny Hoyer and Majority Whip Jim Clyburn.
In public, Democrats are acting like there’s nothing unusual going on. Nothing to see here, move along.
Members who’ve long agitated for a wholesale change in leadership are quiet. The Democrats who could replace the Big Three sure aren’t saying anything. And rank-and-file lawmakers who haven’t expressed a preference either way are mum as well.
Everyone is waiting for Pelosi. If you’re familiar with “Pelosi Time” on the Hill, this isn’t too different than that – just with way bigger stakes.
Pelosi returns from Egypt today after leading a quick codel of more than a dozen Democrats to the COP27 climate conference. Pelosi was getting briefed on the election results during the trip, aides said.
We’ve spent the week talking to Democrats from across the caucus, senior staffers and veterans of Pelosi world who are now downtown. We’re not exaggerating when we say everyone has a different answer for what they think she’ll do and when.
This leaves those House Democrats interested in running for leadership in a bind. They’ve all spent the past two years trying to quietly position themselves to move up while simultaneously acting like Pelosi will never leave.
We can report, however, that Pelosi is hearing from a number of members who want her to stay another term as leader, even if Democrats are in the minority. Assuming that Republicans win the House but the margins are as slim as they appear to be, Democrats have a real shot at grabbing back the chamber in 2024.
There’s a faction of Democrats who want to see Pelosi – with her unmatched fundraising prowess, command of the caucus and legislative strategy – stick around to tussle with a Speaker McCarthy, if he’s able to get the job.
In the meantime, the “Next Three” as we call them – Democratic Caucus Chair Hakeem Jeffries, Assistant Speaker Katherine Clark and Vice Chair Pete Aguilar – have been quietly making calls to members.
They’re quick to congratulate lawmakers and members-elect on their victories yet careful not to make a “hard ask” for support. But the goal here is obvious – it’s an attempt to keep tabs on where members are and gauge their support for potential leadership races.
The Next Three will also be hosting a reception together during new member orientation. Hoyer and Pelosi are doing similar events but they’re also the top two Democrats.
Speaking of Hoyer, he’s making congratulatory calls as well, although the Maryland Democrat isn’t asking anyone for support either. Still, it’s clear if Democrats did somehow hold the majority – which is possible but unlikely – he would run again for majority leader.
Both Hoyer and Clyburn have previously declined to commit to the term limits Pelosi agreed to four years ago.
House Democratic leadership elections will be held Nov. 30, as we scooped yesterday.
| → | One other point: The most important issue House and Senate leaders have to deal with during the upcoming lame-ducks session is the omnibus spending bill. With government funding running out Dec. 16, appropriators in both chambers want to get a deal by then to cover all of FY 2023. |
But appropriations watchers are warning that the Dec. 6 runoff in the Georgia Senate race between Democratic Sen. Raphael Warnock and Republican Herschel Walker could impact the timing of any such deal, or make it much tougher to get one. Senate Republicans, in particular, may not want to reach a compromise over spending levels or policy issues before then in order to avoid alienating conservatives. We’ll get a better gauge on this when the Senate returns Monday.
BTW: Dave Wasserman of the Cook Political Report with Amy Walter has called the race in Arizona for Sen. Mark Kelly (D-Ariz.). Kelly topped Blake Masters. AP has not called this race, however.
– John Bresnahan and Heather Caygle
PUNCH POWER MATRIX
— Max Cohen
CRYPTO COLLAPSE
Crypto’s outlook on Capitol Hill darkens as SBF crashes
The sudden collapse of one of the crypto world’s most high-profile figures has radically altered the legislative landscape for the future of digital assets.
Sam Bankman-Fried was a crypto billionaire until this week, when his exchange, FTX, imploded. SBF’s wealth made him a prolific, if possibly short-lived, donor to Democrats during the primaries this year. He donated nearly $40 million this cycle.
But what started as a liquidity crunch and hostile takeover from an industry rival has since morphed into something far more dire: The Wall Street Journal reported yesterday that FTX had “lent more than half of its customer funds” to a corporate affiliate that was making some “risky bets” – a total of $10 billion. Bankman-Fried is now facing an SEC probe for “potential violations of securities rules,” according to Bloomberg.
We’re in the early stages of what may be the largest crypto collapse yet, and that’s going to have an impact on Capitol Hill.
Until about a week ago, Bankman-Fried was at the center of discussions around top crypto legislation heading into the lame duck and the next Congress. Now the FTX brand has become so radioactive that its U.S. affiliate resigned as a member of the Crypto Council for Innovation, one of crypto’s top trade associations.
Bankman-Fried had established himself as an honest broker who was willing to play ball with the U.S. government, and a turnaround this sudden is likely to stick in policymakers’ minds when the next crypto “savior” comes along.
But here’s the other key point. Without a doubt, Washington’s crypto advocates and the sector’s reputation more broadly have been thrashed by this news. We have also heard, however, a palpable sense of relief from some policy experts in this space.
SBF and FTX were all-in on a Senate Agriculture Committee bill introduced by chair Debbie Stabenow (D-Mich.) and ranking member John Boozman (R-Ark.). Even as that approach gained some steam, the wider crypto sector had a number of issues with the legislation, specifically how it treated decentralized finance.
In a statement last night, Boozman pointed to the “events” of the past week and suggested the bill might change.
“In light of these developments, we are taking a top-down look to ensure [the Digital Commodities Consumer Protection Act] establishes the necessary safeguards the digital commodities market desperately needs,” Boozman said.
Crypto advocates were already feeling a bit miffed by Bankman-Fried’s go-it-alone approach. His apparent fall now will give the sector’s trade associations and their various members the opportunity for a hard reset around legislation. Keep an eye on the moves made by Kristin Smith of the Blockchain Association and Sheila Warren of the Crypto Council for Innovation in the coming weeks.
It’s also looking increasingly likely to us that Congress’s focus is going to shift in the near-term to the regulation of centralized crypto exchanges, of which FTX was the fourth largest in the world.
That may put a political target on the backs of fellow exchanges Coinbase, Kraken, and Binance. But it also offers the opportunity to expand their profiles in the United States, with some proper regulatory oversight. It’ll be a tough balancing act for the sector’s advocates regardless of who controls Congress next year.
– Brendan Pedersen
Our keynote speakers: Martin Luther King III and Arndrea Waters King
NEW: We’re excited to announce Martin Luther King III and Arndrea Waters King will be our two keynote speakers at Punchbowl News’ The Findings.
The Findings is our half day convening that will bring together a diverse set of leaders in the business world, government and nonprofit sector to gather as a community and engage in an open and robust dialogue about racial equity and environmental sustainability.
The Findings will feature leaders in our community including: Tasha Cole of the DCCC, Kiera Fernandez of Target, Worku Gachou of Visa, Laura Gillam of the Senate Environment and Public Works Committee, Caitlin Haberman of the House Committee on Energy and Commerce, Jonay Foster Holkins of Business Roundtable, Lori Castillo Martinez of Salesforce, Heidi Nel of New Theory Ventures and Amanda Nusz of Target.
Keenan Austin Reed of the Alpine Group, Isaac Reyes of Target, Cristina Rohr of S2G Ventures, Amanda Slater of Mastercard, Paul Thornell of Mehlman Castagnetti Rosen & Thomas, Jose Antonio Tijerino of the Hispanic Heritage Foundation, Puru Trivedi of the Meridian International Center, Rick Wade of the U.S. Chamber of Commerce, Carla Walker of the World Resources Institute and more will also be featured!
Interested in joining us in-person? Let us know here.
Want to nominate a friend? Email us at rsvp@punchbowl.news
IN MEMORIAM
Who burned the most money in 2022?
The ability to raise money from your supporters is the oldest hallmark of any decent political campaign. And money was wildly abundant during the midterms. Open Secrets estimates that $16.7 billion has been spent so far, and a Georgia Senate runoff in December will see tens of millions of dollars more shelled out.
But not all campaign money is spent equally. Here’s a quick round-up of the congressional races where candidates assembled massive war chests only to lose in the end:
| → | Marcus Flowers (Ga.) |
The race in Georgia’s 14th District between Rep. Marjorie Taylor Greene and Democratic challenger Marcus Flowers was easily one of the House’s most expensive this cycle. It also happened to be one of the Democrats’ longest of long shots.
Flowers, a former defense contractor and political novice, raised more than $15 million for his campaign. But that fundraising success didn’t translate into much success at the voting booth. Flowers lost by 31 points to Greene.
Greene’s district is deeply Republican, voting for Trump by a 40-point margin in 2020. Greene is also a heavyweight fundraiser in her own right and raised about $12 million for this race.
| → | Val Demings (Fla.) |
Any campaign to unseat Sen. Marco Rubio (R-Fla.) was always going to be tough and expensive. And Rep. Val Demings (D-Fla.) seemed well-positioned to become the first Black senator from Florida, even as the state has turned deeper shades of red in recent years.
But despite raising more than $72 million, Demings lost in a landslide, receiving just over 41% of the vote to Rubio’s nearly 58%.
Demings was by no means the only Florida Democrat to struggle on Tuesday night. The state Democratic Party experienced a historic shellacking, including in the closely watched race for governor, where incumbent GOP Gov. Ron DeSantis defeated Democratic challenger Charlie Crist by an even wider margin of nearly 20 points.
| → | Don Bolduc (N.H.) |
Republicans were fond of telling us this cycle they’d be able to flip the seat held by Sen. Maggie Hassan (D-N.H.) in a red wave scenario. They were wrong.
Bolduc’s campaign only raised about $2.2 million – a far, far cry from the $38 million raised by Hassan – but the Republican saw a last minute infusion of outside cash after some favorable polling late in the race. This included $1 million from the NRSC and another $1 million ad buy from the Sentinel Action Fund. That’s on top of $9 million spent by the Senate Leadership Fund to support Bolduc.
In the end, Bolduc only mustered about 44% of the vote, making Hassan’s re-election one of the first competitive Senate races to be called on Tuesday night.
| → | Tina Forte (N.Y.) |
Republican challenger Tina Forte raised $1.2 million to take on Democratic Rep. Alexandria Ocasio-Cortez. Forte lost by 43 points.
Look, we get it. $1.2 million isn’t the largest chunk of change to burn this cycle. But losing by this kind of margin makes us wonder where that money could have been spent. That’s a lot of election night pizza, for one!
| → | Honorable Congress-adjacent mention: Lee Zeldin |
The race for New York governor was ultimately closer than expected, but incumbent Gov. Kathy Hochul (D) still managed to win by a healthy margin, beating Rep. Lee Zeldin (R) by a little more than five points.
Zeldin’s ability to tighten the race in its final stretch prompted a sudden infusion of cash from one source in particular – New York billionaire Ronald Lauder, who pumped in $11 million.
It’s possible Zeldin’s proximity to a historical upset managed to boost GOP turnout in the state and carried Long Island Republican candidates down ballot. If the margin of victory for control of the House is slim, that Zeldin-inspired boost could ultimately mean a world of difference for Capitol Hill.
Of course, while we’re talking about a gubernatorial race, we’d be remiss not to mention Democrats Stacey Abrams and Beto O’Rourke, who raised hundreds of millions of dollars only to lose handily to GOP governors in Georgia and Texas respectively.
– Brendan Pedersen
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DOWNTOWN DOWNLOAD
| → | We see former Rep. Jerry Costello (D-Ill.) hanging around the Capitol a lot these days. Here’s why – he’s a lobbyist! And he has a new client. Costello signed Memorial Health from his home state and he’ll be lobbying on “health care policy issues.” |
FRONTS
– Jake Sherman
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Presented by Apollo Global Management
One size rarely fits all. That’s why Apollo provides custom capital solutions designed to help companies achieve their ambitious business goals. Think Credit New