Gensler keeps going, and going, and going

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Dec 15, 2021 View in browser   By Kate Davidson and Aubree Eliza Weaver Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. PROGRAMMING NOTE: Morning Money won't publish from Monday, Dec. 20-Friday, Dec. 31. We'll be back on our normal schedule on Monday, Jan. 3. Quick Fix One financial lobbyist called him the Energizer Bunny. To Democrats, he's their best hope for delivering on the Biden administration's sweeping financial regulatory agenda before the midterm elections. SEC Chair Gary Gensler is plowing ahead with initiatives to crack down on special purpose acquisition companies, regulate cryptocurrency, require companies to disclose their climate impact, and revamp market structure policies in the wake of the GameStop trading saga earlier this year. He's also working on proposals to scrutinize executive pay and shore up the $23 trillion Treasury market, and eyeing new investor safeguards for complex financial products traded on exchanges. Today, he's set to take his biggest step yet toward advancing Democrats' policy priorities, when the SEC meets to propose rules aimed at insider trading and share buybacks, as well as regulations on money market mutual funds and derivatives. Gensler's ambitious agenda has paved the way for a slew of potential rulemaking next year, ramping up the regulatory machine as action on Capitol Hill is expected to downshift before the 2022 midterms. It's reminiscent of his approach as chair of the Commodity Futures Trading Commission during the Obama administration. "The SEC has the luxury of having a confirmed leader who arrived with a clear vision of where he wanted to take the agency and where he wanted to focus," said Dennis Kelleher, president and CEO of Better Markets, a group that advocates for stricter Wall Street oversight. Contrast that with the other independent financial regulators: —Office of the Comptroller of the Currency: Still has no Senate-confirmed leader, after the White House's nominee, Saule Omarova, withdrew last week after losing support even from moderate Democrats over her advocacy of a vastly expanded government role in banking. —Federal Reserve: President Joe Biden has yet to nominate a vice chair for supervision, the Fed's top bank regulator, despite knowing for months that the previous vice chair's term would expire in October. (The White House says additional Fed nominations could come "before the holidays.") —Consumer Financial Protection Bureau: Director Rohit Chopra is taking a tougher line on big financial and tech firms. But he has only been in the job about eight weeks, after facing months of delays before the Senate voted on his confirmation. —FDIC: Chairman Jelena McWilliams, a Trump appointee, is attempting to block efforts by the board's Democratic-appointed members to begin a formal review of bank merger policy, sparking a partisan battle that could head to the courts. Gensler, on the other hand, had an early — though rocky — start. Biden nominated him to the job on Feb. 3, and he was confirmed and sworn in by April 17. He quickly assembled a team of top policy and legal advisers, released a list of policy priorities and put rule-writing groups to work. He stumbled with the selection of an enforcement director who resigned after it came to light that a federal judge reprimanded her in a class action lawsuit involving Exxon Mobil and Indonesian villagers, where she was representing the energy giant. He later tapped New Jersey's attorney general for the job. "He really has teed up the agency to get an enormous amount of stuff done in the next six, 12, 18 months, across a range of all the important issues," Kelleher said. IT'S WEDNESDAY — And officially mid-December. Will we actually get more Fed nominations from the White House before the holidays? Or just a lump of coal? Let us know what you think: kdavidson@politico.com, aweaver@politico.com, or on Twitter @katedavidson or @aubreeeweaver.   JOIN TODAY FOR A WOMEN RULE 2021 REWIND AND A LOOK AHEAD AT 2022: Congress is sprinting to get through a lengthy and challenging legislative to-do list before the end of the year that has major implications for women's rights. Join Women Rule editor Elizabeth Ralph and POLITICO journalists Laura Barrón-López, Eleanor Mueller, Elena Schneider and Elana Schor for a virtual roundtable that will explore the biggest legislative and policy shifts in 2021 affecting women and what lies ahead in 2022. REGISTER HERE.     Driving the Day November retail sales data released at 8:30 a.m. … Senate Banking disaster recovery aid hearing at 10 a.m. … Federal Open Market Committee releases post-meeting statement at 2 p.m. … Fed Chair Jerome Powell's press conference at 2:30 p.m. FED WATCH — — FED MEETS AMID FASTER INFLATION — NYT's Jeanna Smialek: "Federal Reserve officials, worried about rising costs and buoyed by a healing labor market, are pivoting from bolstering the economic recovery to more quickly withdrawing the support that has aided the economy since the pandemic began. The policymakers, who meet this week for their final gathering of 2021, are widely expected to outline a faster end to their bond-buying campaign and will telegraph how aggressively they expect to raise rates from rock-bottom next year. The potential for major policy signals at the Fed's meeting, which concludes at 2 p.m. on Wednesday, will make it one of the most closely watched of the pandemic era." But will the Fed break its vow on jobs? — Reuters' Ann Saphir: "With the Federal Reserve expected to soon adopt an inflation-fighting posture, it might seem at a glance as though the U.S. central bank will have to jettison its goal of broad and inclusive full employment barely a year after rolling it out. The reality, though, is more nuanced ..." —#EconTwitter food for thought : Roberto Perli, head of global policy research at Cornerstone Macro, wonders what would happen if the Fed aggressively raised interest rates but inflation falls next year on its own as markets and forecasters widely expect. "The market tells us, nothing good. The nominal neutral rate would drop to very low levels … That would be disastrous for the U.S. economy." He concludes the Fed "is better off being patient and tolerate some higher inflation now in exchange for a better future." FDIC'S MCWILLIAMS BLOCKS BID BY BOARD DEMOCRATS TO UNDERCUT HER — Our Victoria Guida: "Federal Deposit Insurance Corp. Chairman Jelena McWilliams on Tuesday fought off an effort by Democratic board members at the bank regulator to circumvent her power, but the battle is not over." McWilliams rejected a motion by CFPB Director Rohit Chopra to add to the board's minutes a recorded vote on a request for information, or RFI, about the bank merger approval process, saying the FDIC's legal division determined the vote was not valid. —Chopra in a statement after the meeting said "we must resolve this matter immediately," while Acting Comptroller of the Currency Michael Hsu raised concerns "that legal or procedural quicksand may ultimately limit our ability to act on this issue in a timely manner." —Here's more from Victoria, on the sequence of events: Chopra says FDIC staff did not provide technical or legal input by the deadline the Democrats requested: "Hours before the voting period closed, we received a last minute 'alternative' to the Request for Information with a series of strings attached. It was wholly unacceptable and was clearly a tactic to delay action on anything related to President Biden's request." Senior FDIC officials disputed Chopra's characterization of the timeline. They said McWilliams on Nov. 16 said staff was working on a draft that could be ready for consideration by Dec. 6. Shortly thereafter, the Democrats reached out to FDIC staff asking for feedback on their own request for comment while McWilliams was on a long flight. On Nov. 26, a CFPB staffer emailed out their draft request for comment for a notational vote that would close Dec. 6. The general counsel responded that the process wasn't valid, officials said. On Dec. 6, all three Democrats voted, on the same day that the FDIC staff draft was sent out. A CFPB official pushed back on the suggestion that Chopra was not acting in good faith but said the proper, legal response would have been for McWilliams to vote no. —Meanwhile: More than two-dozen consumer, labor and housing advocacy groups urged the Justice Department and financial regulators in a letter this week to hit pause on all bank mergers until guidelines for such unions are strengthened. BIDEN TAPS THOMPSON FOR FULL TERM AS TOP HOUSING REGULATOR — Our Katy O'Donnell: "President Joe Biden will nominate Sandra Thompson, currently the acting director of the Federal Housing Finance Agency, to a full term at the regulator, the White House announced Tuesday. … "The move comes after Thompson allies on the Hill, including House Financial Services Chair Maxine Waters (D-Calif.), urged Biden to keep her at the helm amid reports he planned to replace Thompson this fall. The White House had considered nominating consumer-lending advocate Mike Calhoun to the position." CONGRESS ADVANCES DEBT CEILING INCREASE — Our Jennifer Scholtes and Caitlin Emma: "The measure would increase the debt limit by $2.5 trillion, a sum expected to last into 2023 without the need for another vote to raise the borrowing cap. That would get Democrats through the midterm elections next year before having to hike the ceiling again." OCC'S HSU OFFICIALLY ENDS TRUMP-ERA CRA OVERHAUL — Victoria again: "Acting Comptroller of the Currency Michael Hsu on Tuesday finalized his move to rescind a Trump-era rule overhauling anti-redlining safeguards under the Community Reinvestment Act, setting the stage for a new effort with other regulators at modernizing the law." BIPARTISAN GROUP OF SENATORS ASK YELLEN FOR CRYPTO CLARITY — A group of bipartisan senators, in a letter to Treasury Secretary Janet Yellen, is asking the Treasury to issue informal guidance on how it intends to define "broker" under a provision in the infrastructure law that established new reporting requirements for cryptocurrency brokers. The senators, including Republicans Rob Portman, Pat Toomey, Mike Crapo and Cynthia Lummis, and Democrats Mark Warner and Kyrsten Sinema, also said they are prepared to offer legislation to further clarify their intent if necessary. RESEARCH ROOM: WALL STREET'S CARBON FOOTPRINT — The Center for American Progress and Sierra Club released new research Tuesday on the carbon footprint of the U.S. financial sector , which they found is responsible for more carbon emissions than the entire countries of Indonesia, Brazil or Japan. It also lays out steps financial regulators could take to mitigate climate risk in the sector, such as increasing capital requirements or imposing a climate risk surcharge on the biggest banks. —Banking industry reaction: Lauren Anderson, associate general counsel for the Bank Policy Institute, which represents large Wall Street firms, said the report's recommendations "would be a very blunt tool that would only serve to limit legitimate transition financing and push financing out of regulated banks and into the unregulated sector." Jobs Report Brian Nelson, the Treasury Department's under secretary for terrorism and financial intelligence, will be sworn in this afternoon by Treasury Secretary Janet Yellen.   BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we've got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don't miss out on this influential global community. Subscribe now.     Fly Around TREASURY AWARDS $8.7B FOR LENDING IN MINORITY COMMUNITIES — AP: "The U.S. Treasury Department announced Tuesday the release of $8.7 billion to help increase lending to small and minority-owned businesses and people living in poorer communities with limited access to banking." BANKS SLOWLY RECONSIDER OVERDRAFT FEES — AP's Ken Sweet: "The banking industry appears to have overdone it on overdraft fees. After decades of raking in billions of dollars from mostly poor Americans short of cash in their accounts, the biggest banks — under pressure from lawmakers and regulators — are slowly decreasing their reliance on the widely unpopular practice." TESLA TO ACCEPT DOGECOIN AS PAYMENT FOR MERCHANDISE — Reuters' Nivedita Balu: "Tesla Inc chief Elon Musk said on Tuesday the electric carmaker will accept dogecoin as payment for merchandise on a test basis, sending the meme-based cryptocurrency up over 20%. "'Tesla will make some merch buyable with Doge & see how it goes,' Musk said in a tweet . The carmaker's shares were down 3% in early trading, amid broader market declines."   Follow us on Twitter Mark McQuillian @mcqdc Kate Davidson @KateDAvidson Aubree Eliza Weaver @aubreeeweaver Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary   Follow us

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