GOP draws the line on FDIC uprising

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Dec 17, 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 GOP senators are fuming about the attempt by the FDIC board's Democratic appointees to undercut the Republican chairman and are exploring ways to deter similar moves in the future. Among the options under consideration: Republicans on the Senate Banking Committee are weighing sending virtually all of the president's nominees under the panel's purview back to the White House — including the renomination of Fed Chair Jerome Powell, according to a GOP aide. What that means in practice: At the end of the year, any of the president's nominees who haven't yet been confirmed may be carried over to the new session of Congress, as long as all senators agree. Republicans could block that move, and force the administration to resubmit the nominations — 12 in total — when Congress reconvenes in January, a cumbersome process that could delay some confirmations and potentially derail others. "If this type of behavior continues, there will be a price to pay," the aide said, but emphasized that no decisions have been made. Meanwhile, in a letter to the president this morning obtained by MM, the committee Republicans urged President Joe Biden to rebuke Consumer Financial Protection Bureau Director Rohit Chopra and FDIC board member Martin Gruenberg "for their attempt to politicize the FDIC and compromise its neutrality and independence by disregarding its bylaws and its historical practice of conducting agency business through the chairman." The committee Republicans also asked Biden to promptly replace Gruenberg, the former FDIC chairman appointed by President Obama whose term as a board member expired three years ago. "It is inappropriate for a director to continue serving on the FDIC board long after the expiration of his term in order to undermine its Senate-confirmed leader," they wrote. It's been a little more than a week since Chopra, Gruenberg and Acting Comptroller of the Currency Michael Hsu tried to advance a formal request for information about bank merger rules — only to be blocked by Chairman Jelena McWilliams. (It's worth pointing out that Hsu, who voted for the action but didn't join Chopra and Gruenberg in a statement after the meeting, wasn't mentioned by Republicans in their letter.) McWilliams, in a Wall Street Journal op-ed, says the board members flouted the longstanding rules and norms of the agency in an attempt to wrest control from her. But CFPB officials insist the law is on their side and say the chairman cannot override the will of the majority. House Financial Services Committee Chair Maxine Waters (D-Calif.) called on McWilliams Thursday to explain her legal authority for essentially blocking the vote on the merger rule. Twenty progressive groups also called on Biden to fire McWilliams if she refuses to allow the Democratic majority on her board to set the agency's agenda, our Victoria Guida reported. Georgetown Law professor Adam Levitin, in a piece for POLITICO Magazine Thursday, said the same. One key question: Where did this idea come from? The idea of Democratic board members asserting more authority at the FDIC has been circulating among progressives for some time. In a draft paper earlier this year, Todd Phillips, director of Financial Regulation and Corporate Governance at the Center for American Progress and a former FDIC lawyer, looked at the lack of laws governing the relationships between members of multi-member commissions and boards throughout the government. In the FDIC's case, the bylaws give the board members much more power than officials on other boards or commissions, where the chairman usually has the final say, Phillips says. In a November op-ed in the Hill, Phillips encouraged the board members to use their authority to direct FDIC staff to take action, such as issuing climate supervisory guidance for banks. Gruenberg and Chopra, who hired former CAP policy analyst Gregg Gelzinis to advise him on FDIC matters, used a different strategy, instead circulating a draft rule prepared by CFPB staff. "The [FDIC] majority has several different avenues to exercise its prerogatives," a CFPB official told MM this week. "It didn't take an army of lawyers to analyze the statute and bylaws. They pretty plainly provide the authority of the board to the board, and not to the chairman." IT'S FRIDAY — A huge, heartfelt thanks from your MM host for the warm welcome to this role over the past few months. We hope you're enjoying this new chapter as much as we are. We'll see you in the new year! Meantime, you can reach us with your latest Fed nomination predictions or favorite holiday movie suggestions at kdavidson@politico.com, aweaver@politico.com or on Twitter at @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 Financial Stability Oversight Council meets this morning … FSOC releases annual financial stability report at 12 p.m. … Georgetown's Center for Financial Markets & Policy hosts virtual panel on the SEC's proposal for securities lending at 12 p.m. CFPB TRAINS SCRUTINY ON 'BUY NOW, PAY LATER' — Our Katy O'Donnell: "The CFPB on Thursday sent information-request orders to five companies that offer 'buy now, pay later' credit, opening a probe into the increasingly popular type of loan. "The agency gave the companies — Affirm, Afterpay, Klarna, Paypal and Zip — until March 1 to submit information on the way they handle transactions, installments, credit reporting and consumer data, among other questions included in the orders." OCC ISSUES DRAFT GUIDANCE FOR BIG BANKS ON CLIMATE RISK — Victoria again: "The Office of the Comptroller of the Currency on Thursday published preliminary guidance for large banks in their efforts to guard against financial risks posed by climate change, the most concrete and public step taken in this area by a federal bank regulator. "The agency published draft principles that banks with more than $100 billion in assets should follow to prepare for physical risks — harm to people or property — as well as transition risks that could arise from "shifts in policy, consumer and business sentiment, or technologies associated with the changes necessary to limit climate change." FHFA ISSUES PROPOSAL REQUIRING ANNUAL CAPITAL PLANS FROM FANNIE, FREDDIE — Katy again: "The Federal Housing Finance Agency on Thursday proposed a rule that would require Fannie Mae and Freddie Mac to submit annual capital plans to the regulator. The proposed rule would require the government-sponsored enterprises to outline their anticipated sources and uses of capital and to assess risks under a range of scenarios." BANK OF ENGLAND HIKES INTEREST RATES TO 0.25 PERCENT — Our colleague Matei Rosca in London: "The move was approved by eight out of nine members of the monetary policy committee … In effect, it judged that the risks posed by higher inflation are more acute than those posed by the new form of virus." "The Omicron variant poses downside risks to activity in early 2022, although the balance of its effects on demand and supply, and hence on medium-term global inflationary pressures, is unclear," the bank said. "Global cost pressures have remained strong." DEMOCRATS SEE THE AS AGENDA HITS BRICK WALL IN SENATE — Our Burgess Everett and Marianne LeVine: "Senate Democrats are openly venting their frustration at the stalled state of both elections reform and President Joe Biden's sweeping spending ambitions as their work winds down for the year. "Front and center is the imminent expiration of the expanded child tax credit, now caught up in a dispute between most of the party and Sen. Joe Manchin of West Virginia. Democrats are also staring at an impasse over proposals to weaken the filibuster and pass their elections bill via a simple majority, as the party remains several votes short of what they need to change the Senate rules." —Biden acknowledged Thursday that negotiations over his Build Back Better bill are poised to drag on into 2022 despite efforts and pledges by Democrats to get it done before Christmas, our Alex Thompson reported. THE LEFT'S EXCUSES FOR INFLATION: National Review editor Rich Lowry writes for POLITICO Magazine : "No one on the left seems to deny that supply chain disruptions are playing a role in inflation, but the focus on corporate greed is an absurdly reductive depiction of the U.S. economy — as if a broad-based, multicausal economic phenomenon is being mainly or at least significantly driven by a handful of corporate malefactors wielding nearly unchecked power over the consumer price index." —Here's MM's take on how Democrats are focused on corporations as the next inflation culprit. TOP BIDEN ECONOMIST: 'I REALLY DO BELIEVE' INFLATION WILL EASE — Bloomberg's Nancy Cook and Katia Dmitrieva: "The head of President Joe Biden's Council of Economic Advisers expressed confidence that high inflation will fade in 2022 as supply bottlenecks ease and more Americans return to work, even as the price spike has proved more persistent than many economists had been expecting. "'I really do believe that inflation will ease over the coming year. It's not to say that we're not watching, I would never declare victory,' Cecilia Rouse said in an interview Thursday." FOR THE FED, 2021 WAS A YEAR FOR 'RECALIBRATING' — Dana Peterson, chief economist for the Conference Board, writes in WSJ: "It is a common refrain that the Federal Reserve's numerous tone and policy shifts in 2021 was equivocation—leading to frustration among market participants and business leaders. "But there is another way of looking at how the Fed's policy makers navigated the year's turbulent and uncharted waters, as economic and financial-market developments gyrated and morphed daily. In fact, if I had to pick one word to describe the Fed's strategy over the past year, it would be this: recalibration."   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 LIFE AFTER QUITTING: THE WORKERS WHO LEFT THEIR JOBS — WaPo's Heather Long and Maggie Penman: "With yet another coronavirus wave now bearing down, the physical and mental health stresses of service-sector work are unyielding. While data on what happened next to those who quit is scant, recent analysis suggests that many workers who have left the fields of restaurant and hotel work — the two sectors with the most resignations — end up back in those industries or in similarly low-wage work in retail, according to the California Policy Lab at the University of California." HOW BANKS WIN WHEN INTEREST RATES RISE — WSJ's David Benoit: "Banks yearning for interest rates to rise appear on the verge of getting their wish . Federal Reserve officials on Wednesday signaled they were prepared to raise interest rates at least three times next year in response to rising inflation, a faster timeline than was expected a few months ago. "For the nation's biggest banks, even a small increase in the Fed's benchmark rate could lead to billions of dollars in revenue, since the banks can charge more on loans but aren't likely to pay depositors more. Banks also are sitting on giant piles of cash that aren't earning returns, and some bankers have said they plan to redeploy that money into securities as soon as interest rates rise." CITADEL, BLACKSTONE ALLOW REMOTE WORK AGAIN AS OMICRON RAGES — Bloomberg's Katherine Burton, Melissa Karsh and Hema Parmar: "Citadel, Blackstone Inc. and Millennium Management are among asset managers telling staff this week that they may once again work remotely, at least for the next several weeks, in response to the latest spike of Covid cases."   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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