A cross-sector look at what investors need to be aware of in Washington this
week. Please contact the Capital Alpha sales team for a more detailed analysis.
Macro – James Lucier
A Bad Two Weeks for Everyone
Biden’sworkingonareset,withhispollsasbadasever.Trump,facing$500millionin
legaljudgments,isatpeaklegalriskthroughJuly.Ourbasecasefortheelectionhas
focusedonBidenlikelywinning.Whatwe'reseeingnowmightinsteadsuggest50-50
oddsonthepresidentialelection.
Possibly Higher Weight on Republican Senate
RepublicanshavebeengainingtractioninSenaterecruitment,namelyinMontana
andMaryland.DemocratsonlyneedtopreventRepublicanpickups,sinceVice
PresidentHarriscanbreakatieina50-50Senate.Regardless,Republicansdoseem
tohaveearlymomentuminSenateraces.
Shutdown Watch
Watchtheaudiblecallsnextweek.It’sdifficulttoseehowaMarch1shutdowncan
beavoided,andwedon'tthinkashutdownwouldlastlong,buttheultimateoutcome
isunclear.Wecouldseeashort-termcontinuingresolution(CR)whileCongress
worksonanappropriationsdeal,a“cromnibus,”orevenafullyearofCR.
Smith-Wyden Tax Bill: Window Is Closing
SenateRepublicansdisagreeonthetaxbill’ssubstance,timing,process,andpolitics.
Thebillcouldpasswith70votes–ifRepublicanleadersturn–butthereareno
positivesignalsyetfromleaderslikeMcConnell,Thune,Cornyn,Crapo,andGrassley.
LittletimeislefttoactonthebillbeforetaxfilingdeadlinesandCongress’stwo-week
Easterbreak.
Today’s Morning Thoughts call (replay) includes comments on Shutdown, CBO,
elections (2:25); Russo-Ukraine war, implications, risks in the third year (16:09); The
Capital One-Discover deal; Durbin is back (sort of) (25:00); Window closing for
pre-election health bills (29:35).
February 20, 2024
Rich Linville
richard.linville@capalphadc.com
913-677-6302
Courtney Oldham
courtney.oldham@capalphadc.com
202-548-0102
Mike Giordano
michael.giordano@capalphadc.com
201-721-8604
Paul Murray
paul.murray@capalphadc.com
201-914-6031
RELATED RESEARCH
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THE WEEK AHEAD FROM WASHINGTON
Capital Alpha Outlook
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Financials– Ian Katz
COF-DFS: Tough Battle Ahead but Regulators Have Path to Approval
TheCapitalOne-Discoverdealwillfacevigorousoppositionfromprogressivegroupsandinvestoradvocateswhile
regulatorsweightheideaofanothergiantintheindustryagainsttheprospectofcreatingmorecompetitionfor
VisaandMastercard.Weleanslightlytowardthinkingthedealwillbeapproved,butnotbeforetheNovember
elections.
Stress Test Scenarios Add ‘Exploratory’ Element but Comparable to Last Year
Thecriteriareleasedlastweekincludeexploratoryanalysisscenariosthat,amongotherthings,simulatemajor
hedgefundfailures.Overall,however,thetestsseemcomparableintoughnesstolastyear’s.Capitalrequirements
arelikelytoremainroughlythesameintheaggregate.TestresultsareexpectedinlateJune.
SEC Climate Rule Expected in Next Several Weeks
TheSECisexpectedtovotesoon-ishontheclimate-riskdisclosurerule.Politicocitedasourceassayingtheagency
aimstohavetherulefinalizedbytheendofMarch.Wethinkasofteningoftheproposal,includingonScope3
emissions,islikelyinthefinalrule.
Supreme Court Case Tuesday Could Help Industry Challenge Rules
Thecase,Corner Post v. Federal Reserve Board,posesthequestionoftowhatextentanewbusinesscanchallenge
anoldregulation.Itcouldpotentiallygivemoreroomforbusinessestochallengelong-timerules.
Wells Fargo Released from Consent Order, Raising Hopes on Asset Cap
TheOCClastweekreleasedWellsFargofroma2016consentorderrelatedtothebank’ssalespracticesscandal.It
requiredWellstoimposetougherinternalcontrolsandriskmanagement.TheFedassetcapisstillinplace,butthe
OCCmovewillraisehopesthatitcouldbeliftedbytheendofthisyear.
Industry Pushing for SEC to Narrow Crypto Custody Guidance
TheAmericanBankersAssociation,BankPolicyInstitute,FinancialServicesForum,andSIFMAhavewrittentoSEC
ChairGaryGensleraskingtheagencytomodify2-year-oldStaffAccountingBulletin121,whichsayscompanies
shouldmarkcryptoassetsthattheyholdforcustomersasliabilitiesontheirbalancesheets.
Health Care – Kim Monk & Rob Smith
FTC/HHS RFI Targets GPOs and Wholesalers for Possible Drug Shortage Link
Theagencies’endgameisunclearwithregardtotheirjointRFIfocusedongrouppurchasingorganizations’(GPOs)
anddrugwholesalers’compliancewithantitrustlaws,consolidation,andpotentialroleingenericdrugshortages.
Texas Court Cans PhRMA's Drug Negotiation Suit
Thesuitwasdismissedduetolackofstanding.PhRMAisabletorefileifitchoosesandislikelyweighingits
options.Weremainskepticalthattheremainingpendingindustrysuitswillresultinsubstantialpiecesofthe
InflationReductionAct'snegotiationprogrambeingoverturned.
New Data on Surprise Billing Law’s Impact
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New Data on Surprise Billing Law’s Impact
NewCMSdatashowsthatamajorityofarbitrationdecisionsresultedinpricesabovethemediancontractedrate,
whileanotheranalysisfoundthatin-networkcareincreasedafterthepassageoftheNoSurprisesAct(NSA).
SCOTUS Denies GOP AG Motion, Misinformation Lawsuits Proceed
TheSupremeCourtoftheUnitedStates(SCOTUS)todaydeniedstandingforthreestateAttorneyGenerals(AGs)
whoaskedtoemploylimitsonmifepristoneprescribingpriortoSCOTUS’shearingonFDA v. Alliance for
Hippocratic Medicine inMarchandexpectedJunedecision.Meanwhile,twocourtcasesinvolvingstepsthatthe
FDA,CDC,andotherfederalagenciestooktocombatCovidmisinformationwillproceed.
CMS Issues Guidance on Medicare Monthly Prescription Payment Plan
Part2ofthedraftguidanceaddressesseveralissuesrelatedtoanInflationReductionActprovisionthatallows
MedicarebeneficiariestospreadMedicarePartDout-of-pocketcostsoverthecourseoftheyearstartingin2025.
Several Drug Makers Agree to Patent Delisting, Dems Want More Guidance
Kaléo,Amneal,andGSKhaveagreedtodelistseveralpatentsonolderinhalerandinjectordevice-drugcombosin
lightofFTCwarninglettersregardingimproperlylistedpatentsintheFDA'sOrangeBook.
FTC to Host Webinar on Private Equity in Health Care March 5
Thepurposeofthewebinaristobringtogethervariousstakeholderstoaddress“growingconcerns”aboutprivate
equity’sinvestmentsinhealthcaremarketsand“whatthefederalgovernmentisdoingtoaddressanyharmful
effects.”
CMS Wants Input on Potential ASC Prior Auth Demo
TheagencyinJanuaryissuedabroadrequestforinformationonpriorauthandaccesstoservicesintheMedicare
Advantage(MA)program.TheAmbulatorySurgicalCenter(ASC) requestmayindicatethatitintendstopursuea
demofocusedoncertainsurgicalservices.
Climate, Energy & Sustainability– James Lucier
EPA to Relax EV Mandate
TheNew York TimesreportedthattheEPAwillrelaxitsplannedEVmandatewhenitproducesfinalrulesfor
CorporateAverageFuelEconomy(CAFE)standardsandtailpipeemissionsforlight-dutyvehicles.TheEPAwilldefer
itstargetdateforEVs,reaching67%ofnewlight-dutyvehiclesales.WallStreethaslongbeenskepticalofthe
timetable.
Supreme Court Hears Arguments on Stay of EPA Reg
TheSupremeCourtwillhearoralargumentsonFebruary21onstategovernmentandindustrypetitionsforastay
oftheEPA’sGoodNeighborPlan.ItisonlythesecondtimethattheSupremeCourthasconsideredastayofan
EPAregulationbeforeitislitigatedinthelowercourts.Weexpectadecisionbymid-March.
White House Backs Tougher Standard for Ethanol
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White House Backs Tougher Standard for Ethanol
TheWhiteHousewillbackaclimatemodelthatismorerigorousthanexpectedforethanolthatwillbeusedfor
SustainableAviationFuel(SAF).Thenewmodelwilllikelyrequiresustainablefarmingpracticesforethanoltomeet
thegoal.CO2generatedinthefermentationprocesswouldalsohavetobedeliveredviapipelinetoa
sequestrationsite.
PHMSA CO2 Pipeline Safety Standard Under Review at OMB
OnFebruary2,along-awaitedproposedsafetystandardforCO2pipelinesarrivedattheOMBforitsconsistency
review.ThetimingisconsistentwithpublicationoftheproposedruleinearlyMarch.Thefinalrule,whichwedon’t
expectuntilnextyear,willbeessentialtositingandcompletionofCO 2pipelinesthatwillsupportconversionof
ethanoltoSAF.
Telecom, Media, & Technology – Robert Kaminski
Semis: More CHIPS Act News
TheCommerceDept.celebratedPresidents'DaybyannouncingitsthirdCHIPSActaward,aheadlineamountof
$1.5billionforGlobalFoundries.Aswehavenotedbefore,itmaybeseveralmonthsuntilchecksareactually
written.Thetermscanalsochange.WeexpectmoreannouncementsaheadofthePresident'sMarch7Stateofthe
Union.
Cable/Telecom: Any BEAD News?
SpeakingofmoneyfromtheCommerceDepartment,therehasbeennonewsin2024abouttheBroadband,
Equity,Access,andDeployment(BEAD)program.LouisianaisstilltheonlystatetohavereceivedNTIAapprovalof
itsinitialproposal(unlocking$1.3billion).WewouldalsonotbesurprisedbymorestateapprovalsbeforetheState
oftheUnion.
Industrials & Defense – Byron Callan
March Approps Lapses Should Be Immaterial
WecontinuetostronglybelievethatCongresswon’tmissmilitarypaydays.WeexpectadditionalCR(s)through
March22and/orApril18.
Slight Positive Change to Budget Odds
Wenowsee50%oddsofFY24DODappropriationsattherequestedlevel,plusafractionoftheamountsfor
Ukraineinrecentsupplementalbills,40%oddsofFY24at99%ofFY23levelsandnoUkraineaid,and10%that
CongressaddsmoretotheDODrequestandapprovestheSenatefundinglevelsinthesupplemental.
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ANALYSTCERTIFICATION
Thefollowinganalystsherebycertify(1)thattheirviewsaboutanyandallofthesubjectcompaniesand
securitiesdiscussedinthisreportareaccuratelyexpressedand(2)thatnopartoftheircompensationwas,is,
orwillbedirectlyorindirectlyrelatedtotheviewsexpressedinthisreport:RichLinville,CourtneyOldham,
MikeGiordano,PaulMurray.
IMPORTANTDISCLOSURES
Thispublicationisforprivatecirculationanddistributioninitsentirety;itisprovidedtoyouforinformation
purposesonly.Thisisnotanoffertobuyorsellorthesolicitationofanoffertobuyorsellany
security/instrumentortoparticipateinanyparticulartradingstrategy.CapitalAlphaPartners,LLC(“Capital
Alpha”)makeseveryefforttousereliable,comprehensiveinformation,butwedonotrepresentorwarrant
thatitisaccurateorcomplete.TheviewsinthispublicationarethoseofCapitalAlphaandaresubjectto
changewithoutnotice.CapitalAlphahasnoobligationtoupdateitsopinionsortheinformationinthis
publication.CapitalAlphamayprovideitsservicestopublicandprivatecompaniesthatarereferencedin,or
thathaveafinancialinterestinthesubjectmatterof,CapitalAlpha’sresearch.NeitherCapitalAlphanorany
ofitsofficers,directors,partners,employees,oraffiliatesacceptsanyliabilitywhatsoeverforanydirector
consequentiallossarisingfromanyuseofthispublicationoritscontents.Analystsmayownsecuritiesofthe
issuersdiscussedherein.
©CopyrightCapitalAlphaPartners,LLC(2024).Allrightsreserved.Nopartofthispublicationmaybe
reproduced,sold,orredistributedwithoutthepriorwrittenpermissionofCapitalAlphaPartners,LLC.
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