Marty Gruenberg takes the wheel

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Feb 07, 2022 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. NEW THIS MORNING — Democrats are back in control at the Federal Deposit Insurance Corp., with big plans to strengthen rules on lending in low-income communities, jumpstart initiatives on assessing climate and cryptocurrency risks, and review the bank merger approval process. In a 6 a.m. statement, FDIC Acting Chair Martin Gruenberg offered a roadmap for how the board's Democratic appointees intend to change course to implement the Biden administration's agenda, after Trump-appointed Chairman Jelena McWilliams officially stepped down Friday following a partisan clash at the board. "While there are many pressing issues the FDIC will have to address this year, key priorities are: the Community Reinvestment Act; climate change; the Bank Merger Act; crypto-assets; and the Basel III capital rule," Gruenberg said. "All of these priorities will require close collaboration among the federal banking agencies." On the Community Reinvestment Act — Gruenberg said the independent banking regulators plan to jointly issue a notice of proposed rulemaking "in the near future" that would strengthen and enhance CRA. "Action on a revision of CRA will be the top priority of the FDIC," he said. The agencies, including the Federal Reserve and the Office of the Comptroller of the Currency, have been working on a major revision of CRA, the landmark 1977 law designed to encourage lending to lower-income borrowers to prevent redlining. It's also a priority for lawmakers, like House Financial Services Chair Maxine Waters (D-Calif.) On climate change risks — The FDIC will seek public comment on guidance designed to help banks "prudently manage" climate risks, Gruenberg said, and will establish a working group — across FDIC divisions and disciplines — on climate-related risks. The agency also plans to join the international Network of Central Banks and Supervisors for Greening the Financial System, of which the Fed and OCC are already members, along with the European Central Bank, Bank of Japan, Bank of Canada and other global central bankers and financial regulators. On bank mergers — Gruenberg said a careful interagency review of the bank merger process is warranted, "in light of the significant implications of bank mergers for competition, safety and soundness, financial stability, and meeting the financial services needs of communities." He said the process hasn't been comprehensively reviewed in 25 years. Worth noting: It was this issue that led to the initial clash between McWilliams and the rest of the board. On evaluating crypto risks — "The rapid introduction of a variety of crypto-asset or digital asset products into the financial system could pose significant safety and soundness and financial system risks," Gruenberg said. It's imperative that federal regulators carefully consider these risks, he said, and "to the extent such activities can be conducted in a safe and sound manner, the agencies will need to provide robust guidance to the banking industry on the management of prudential and consumer protection risks raised by crypto-asset activities." On capital rules — Gruenberg also said implementing the final Basel III international capital framework will be a top priority for banking regulators this year. With McWilliams out , Gruenberg should have no trouble advancing the Biden administration's regulatory priorities. He's been in the chairman's seat before and knows how the agency works and how to work with other regulators. He also has a key ally in Rohit Chopra, the director of the Consumer Financial Protection Bureau, who worked closely with Gruenberg to try to wrest control of the board's agenda last year. Gruenberg will likely face intense pushback from congressional Republicans, who have called on President Joe Biden to replace him. Don't hold your breath. A longtime Senate staffer before joining the FDIC in 2005, Gruenberg has allies on Capitol Hill and in the administration. And the White House isn't inclined to invite another difficult confirmation fight any time soon, especially when they have an acting director who has done the job before. IT'S MONDAY — We've got a House hearing on the administration's stablecoin report and fresh inflation data due this week. What else is on your radar? Let us know: kdavidson@politico.com, aweaver@politico.com, or on Twitter: @katedavidson or @aubreeeweaver.   HAPPENING THURSDAY – A LONG GAME CONVERSATION ON THE CLIMATE CRISIS : Join POLITICO for back-to-back conversations on climate and sustainability action, starting with a panel led by Global Insider author Ryan Heath focused on insights gleaned from our POLITICO/Morning Consult Global Sustainability Poll of citizens from 13 countries on five continents about how their governments should respond to climate change. Following the panel, join a discussion with POLITICO White House Correspondent Laura Barrón-López and Gina McCarthy, White House national climate advisor, about the Biden administration's climate and sustainability agenda. REGISTER HERE.     DRIVING THE WEEK Labor Secretary Marty Walsh participates in a roundtable discussion at Delgado Community College on job quality, wages and workforce training on Monday … House Financial Services hearing on the President's Working Group's stablecoin report Tuesday … White House CEA Chair Cecilia Rouse and Sen. Mitt Romney (R-Utah) speak at an AEI and Brookings Institution forum on childhood in the U.S. on Tuesday … Senate Banking hearing on minority depository institutions Wednesday … Joint Economic Committee hearing on older workers Wednesday … Fed Governor Michelle Bowman and Cleveland Fed President Loretta Mester speak Wednesday … Consumer price index data released Thursday … Senate Banking hearing on how landlords change the housing market Thursday … CFPB Director Chopra joins virtual discussion with Washington Post Live Thursday … Richmond Fed President Tom Barkin speaks Thursday. POWELL BECOMES ACTING FED CHAIRMAN — Fed Chair Jay Powell became acting chair of the Fed's board of governors Saturday, after his four-year term as the central bank's leader expired on Friday (which was also his 69th birthday). From our Victoria Guida: "Powell's role involves two jobs: head of the Fed's Washington-based board, which has jurisdiction over bank regulation and payments matters, and chair of the central bank's interest rate-setting body, known as the Federal Open Market Committee. The FOMC, which has discretion to choose its leader, named Powell as chair at its annual organization meeting, the central bank said in a press release." The Senate Banking Committee is aiming to vote on Powell's nomination for a second term on Feb. 15, Chair Sherrod Brown (D-Ohio) has said, but it's not clear how soon the full Senate would vote on his confirmation. CFPB'S ROHIT CHOPRA CAN'T STOP PICKING FIGHTS — Our Katy O'Donnell: " In less than four months on the job, [Consumer Financial Protection Bureau Director Rohit] Chopra has zeroed in on big technology companies, banks and credit-reporting firms, signaling a crackdown on their handling of personal data and fees. After he instigated the resignation of a Trump-appointed bank regulator, in what Republican critics called a 'coup,' he launched a crusade to shield consumers from billions of dollars in 'junk' charges by lenders." "His combativeness — akin to that of his former boss and CFPB architect, Sen. Elizabeth Warren (D-Mass.) — has delighted progressives and alarmed industry lobbyists who deal with the bureau, escalating partisan tensions around an already-contentious agency." PERLMUTTER: PELOSI WILL ADVOCATE FOR CANNABIS BANKING — Our Natalie Fertig: "House Speaker Nancy Pelosi has assured Rep. Ed Perlmutter, the lead sponsor of the SAFE Banking Act, that she will advocate for it to remain in the China competitiveness bill when the two chambers head to conference. The House passed the America COMPETES Act Friday with the cannabis banking attached as an amendment." "[Pelosi] understands, too, that I'm committed to put this on anything that I can," Perlmutter (D-Colo.) said. "She sees it – and I hope the Senate ultimately sees it – as inevitable." WHAT COMES NEXT AFTER THE STUNNING JOBS REPORT — Also from Victoria: "The government's latest employment report defied economic forecasts and gave President Joe Biden a sudden burst of good news: a flood of new jobs, surging wages and more workers participating in the labor force, even as Omicron surged. The report was so solid — 467,000 jobs were created in January and the totals were revised upward by more than 700,000 for the previous two months — that it may provide more fuel for the Federal Reserve to raise interest rates." TREASURY WARNS OF NFT RISKS — Our Sam Sutton: "Non-fungible tokens — the hottest trend in crypto — could emerge as a new front for money laundering schemes centered around the art industry, the Treasury Department said in a report on Friday. The report, which details the art world's potential vulnerabilities to financial crimes, found that the fast-growing market for NFTs — digital tokens linked to images, videos, audio files and other media — could create new avenues for criminals to move money while evading scrutiny from regulators or law enforcement." YELLEN SAYS SHE HAS 'NO PLANS TO LEAVE' — Bloomberg's Christopher Condon: "Janet Yellen, President Joe Biden's surprise pick as Treasury secretary in the wake of his 2020 election victory, says there's too much unfinished business to think about departing the role after just over a year on the job. "We still have a huge amount of important work to do," Yellen, 75, said last week in a statement to Bloomberg News following a wide-ranging interview marking her first year in office. "I have no plans to leave Treasury anytime soon." INFLATION IS PROBABLY ABOUT TO SPIKE (AGAIN) — Bloomberg's Vince Golle: " The consumer price index probably jumped 7.3 percent in January from a year ago, the largest annual advance since early 1982, according to the median projection in a Bloomberg survey of economists. Excluding volatile energy and food categories, the CPI is projected to have risen 5.9 percent." MODERN MONETARY THEORY TAKES 'A VICTORY LAP WITH AN ASTERISK' — NYT's Jeanna Smialek profiles Stephanie Kelton, the former Bernie Sanders aide and Stony Brook professor who has become " the most familiar public face of Modern Monetary Theory , which posits that if a government controls its own currency and needs money — to make sure its citizens have food and places to live when, say, a global pandemic pushes many out of work — it can just print it, as long as its economy has the ability to churn out the needed goods and services." EMERGING MARKET INVESTORS DIVE FOR STOCKS AMID FED STORM — Reuters' Rodrigo Campos and Marc Jones: "Developing world investors, buffeted by various 'taper tantrums' over the last decade, are now nervously watching as the rainmaker of global markets - the U.S. Federal Reserve - readies its most aggressive rate hike cycle in 17 years."   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Fly Around Sputtering momentum in China's economy — which accounts for about 15 percent of global trade and a quarter of projected global economic growth in the five years through 2026 — is already weighing on prices for commodities like iron ore, and making it harder for some companies to grow their businesses there. — WSJ's Stella Yifan Xie The Fed still lurks in the background, but it hasn't been the immediate cause of market gyrations [last] week. Instead, a spate of earnings reports from giants like Meta, Alphabet, Exxon Mobil and Amazon have moved the market sharply, and in perplexing directions. — NYT's Jeff Sommer A belief that GameStop was under attack from unscrupulous short sellers was a key part of the stock's rally in early 2021 and hasn't gone away. — WSJ's Caitlin McCabe and Alexander Osipovich   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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