SEC noms: Here's who's on the short list

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Mar 23, 2022 View in browser   By Kate Davidson and Daniel Lippman 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. QUICK FIX UP NEXT: SEC NOMINEES — With four Federal Reserve nominations almost in the rearview mirror, sources tell MM the White House is gearing up to decide on two picks for the Securities and Exchange Commission. The five-member commission currently has one vacancy, after Republican commissioner Elad Roisman stepped down in January. And Democratic commissioner Allison Lee said last week she would leave after her term expires in June, but not until her successor is confirmed. That gives President Joe Biden an opportunity to move a pair of nominees soon, with hopes of confirming them before November's midterm elections. In the mix: Jaime Lizárraga, a long-time staffer of House Speaker Nancy Pelosi, Senate Banking staffer Elisha Tuku and Fed lawyer Uzma Wahhab are all under consideration to replace Lee in the Democratic seat, people familiar with the matter say. One of the people, who is a former administration official, said Lizárraga was the leading contender for the job and had the backing of the Congressional Hispanic Caucus. The agency has had only a handful of Hispanic commissioners in its history — the most recent was Luis Aguilar, who left in 2015. Lizárraga, a senior adviser to Pelosi, has worked for the California Democrat for more than 14 years and spent eight years before that as a House Financial Services aide. The White House declined to comment on any potential nominees. Tuku, the Democratic chief counsel for the Senate Banking Committee, was seen as a potential candidate for an SEC seat several years ago, but he wasn't interested in the gig at the time and preferred to stay with the committee, one former senior Senate staffer told MM. Wahhab is an associate director in the Fed's division of supervision and regulation. She previously spent six years at the Public Company Accounting Oversight Board and eight years at the SEC. Mark Uyeda, an SEC lawyer currently detailed to the Republican staff of the Senate Banking Committee, is the likely candidate to fill the GOP vacancy, several people familiar with the matter say. It's up to Senate Minority Leader Mitch McConnell (R-Ky.) to make a recommendation for the seat to the White House. Timing? Two people who spoke with us said they expected an announcement could come soon but cautioned that a final decision hadn't yet been made. If Lee's term expires before her successor is chosen, she could technically continue on in the position until the end of the following session of Congress — i.e. the end of 2023. But while she has offered to stay to avoid leaving the commission with just three members, she has made clear that she is ready to leave, those two people said. The urgency, as with most things on the administration's to-do list, has to do with the electoral calendar. After Congress leaves for its August recess, it could become increasingly difficult to advance nominations through the Senate before the November midterm elections. One big question: After successfully derailing Sarah Bloom Raskin's nomination, will the oil and gas sector try to throw its weight around on the SEC nominations? The answer is almost certainly yes, especially after Monday's sweeping climate disclosure proposal by the agency. But they may not have as much success, given these two nominees will move as a pair, with Republicans and Democrats each getting someone they want. Still, we'd expect energy and climate issues to once again take up lots of air in the Senate Banking Committee when these nomination hearings roll around. WHERE ARE THE WALL STREET COPS? Meanwhile, our colleague Victoria Guida writes today about the Biden administration's struggle to fill top regulatory jobs. Biden pledged to bring financial oversight back in style after four years of rule rollbacks under Donald Trump. But more than a year into his first term, none of the government's major bank regulators have Senate-confirmed leaders. From Victoria: "The result is that regulators have done little to reverse what many Democrats saw as a weakening of the guardrails around banks during the Trump administration. Progressive priorities, like making it tougher for banks to merge or pressing financial institutions to prepare for climate change, are moving slowly. And there's no point person on the Fed board during an especially risky moment for the financial system as banks deal with soaring inflation, rising interest rates and disruption caused by the war in Ukraine." It also underscores the fault lines within the Democratic party over how to approach financial regulation. "It raises real questions about just how narrow the path is for anybody to be appointed to these roles," said Kathryn Judge, a professor at Columbia Law School. IT'S WEDNESDAY — Another day, another chance to hear the Fed chair — this time on a panel with his fellow central bankers. What else should we be watching? Let us know: kdavidson@politico.com, aweaver@politico.com, or on Twitter @katedavidson or @aubreeeweaver.   JOIN THURSDAY FOR A CONVERSATION ON CRYPTOCURRENCY AND REGULATION:  Cryptocurrency has gone mainstream. With the market now valued at $1.8 trillion, Washington's oversight of the fast-growing industry remains in its infancy. How should Congress and federal agencies shape future regulation of digital asset markets? Join POLITICO in person or virtually for a deep-dive discussion on what's next for crypto, regulation and the future of finance. Programming will run from 5 p.m. to 6 p.m. EDT with a reception from 6 p.m. to 7 p.m. EDT. REGISTER HERE.     Driving the Day Powell speaks on a panel at the Bank for International Settlements virtual innovation summit at 8 a.m. … Treasury nominee Jay Shambaugh speaks on a panel hosted by the Washington International Trade Association and George Washington University at 2 p.m. U.S., U.K. REACH DEAL TO END TARIFF DISPUTE — Our Doug Palmer: "The United States and the United Kingdom on Tuesday reached an agreement that will lead to the partial removal of tariffs that former President Donald Trump imposed on British steel and aluminum, an announcement that came at the conclusion of a two-day trade dialogue that was shadowed by the increasingly grim conflict in Ukraine." BIDEN TO SANCTION HUNDREDS OF RUSSIAN LAWMAKERS — WSJ's Vivian Salama: "The Biden administration is preparing sanctions on most members of Russia's State Duma, the lower house of parliament, as the U.S. continues its crackdown on Moscow over its invasion of Ukraine. "President Biden intends to announce the sanctions on more than 300 members of the Russian State Duma as soon as Thursday during his trip to Europe, where he will meet with allies from the North Atlantic Treaty Organization to formulate their next steps, according to U.S. officials and internal documents viewed by The Wall Street Journal." STUDENT LOANS SET FOR RISING DELINQUENCIES, NY FED ANALYSIS SHOWS — Reuters' Lindsey Dunsmuir: "An increase in delinquencies last year among a smaller pool of U.S. student loans not covered by a forbearance program put in place during the COVID-19 pandemic signals likely problems ahead for almost 37 million loans when that program ends, a New York Federal Reserve analysis showed on Tuesday." Crypto CRYPTO EVASION? — Our Sam Sutton writes: European Central Bank President Christine Lagarde warned that Russians are using crypto to bypass sanctions imposed by the U.S. and the European Union that were designed to cut the country off from the global financial system. "When you see the volumes of rubles into stable, into cryptos, at the moment it is the highest level that we have seen since maybe 2021," Lagarde said, according to a report from Bloomberg's Carolynn Look. Crypto assets "are certainly being used, as we speak, as a way to try to circumvent the sanctions that have been decided by many countries around the world against Russia." Crypto industry leaders have claimed that the surge in ruble-denominated trades is actually indicative of ordinary Russians flocking to digital assets to preserve their assets as the ruble collapses. While acknowledging crypto does pose some threat to sanctions, federal agencies have said it's unlikely that digital markets would offer any meaningful haven for sanctioned institutions. Jonathan Levin, co-founder of the blockchain analysis firm Chainalysis, told the Senate Banking Committee on Thursday that there's been scant evidence of sanctioned institutions seeking refuge in crypto thus far. That hasn't changed in the last week, Chainalysis spokesperson Anastasia Lukiman said in an email. "We are continuing to monitor for evidence of sanctions evasion using crypto. Any evasion would be recorded on public, immutable, transparent, and traceable blockchain ledgers," she said on Tuesday. HOW UKRAINE EMBRACED CRYPTO IN RESPONSE TO WAR — FT's Cristina Criddle and Joshua Oliver: "Ukraine had already begun embracing crypto before its war with Russia. The country was ranked fourth for cryptocurrency adoption among its citizens in a global index by Chainalysis, the crypto research group, last year. But the conflict has acted as a catalyst for the government's ambitions to build an innovative, blockchain-friendly economy, led by a young team of techno-natives in government ...." BITCOIN MINERS WANT TO RECAST THEMSELVES AS ECO-FRIENDLY — NYT's David Yaffe-Bellany: "Facing criticism from politicians and environmentalists, the cryptocurrency mining industry has embarked on a rebranding effort to challenge the prevailing view that its electricity-guzzling computers are harmful to the climate. All five of the largest publicly traded crypto mining companies say they are building or already operating plants powered by renewable energy, and industry executives have started arguing that demand from crypto miners will create opportunities for wind and solar companies to open facilities of their own." SENATE CASTS SKEPTICAL EYE ON EL SALVADOR'S CRYPTO PLANS: The Senate Foreign Relations Committee will mark up bipartisan legislation this morning (S. 3666 ) that would direct the State Department to produce a series of investigative reports into El Salvador's first-in-the-world adoption of the cryptocurrency Bitcoin as legal tender. The agency would be tasked with looking into whether the Central American nation's effort, announced in September, poses a risk to the United States, including by facilitating sanctions evasion or obscuring suspicious digital transactions.   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.     Fed File BULLARD: THE FASTER THE BETTER — Bloomberg's Steve Matthews: "Federal Reserve Bank of St. Louis President James Bullard said U.S. monetary policy needs to be tightened quickly to stop putting upward pressure on inflation that is already too high, reiterating his call for interest rates to rise above 3% this year. "'The Fed needs to move aggressively to keep inflation under control," Bullard said in an interview Tuesday on Bloomberg Television with Michael McKee. "We need to get to neutral at least so we're not putting upward pressure on inflation during this period when we have much higher inflation than we're used to in the U.S.'" Meanwhile, Goldman Sachs economists now expect the Federal Reserve to raise interest rates by 50 basis points at both its May and June policy meetings, Bloomberg's Enda Curran reported. FOR INFLATION-FIGHTING LESSONS, SKIP VOLCKER AND REMEMBER 1946 — Guggenheim Partners' Scott Minerd writes for the FT: "A more appropriate corollary from history is 1946-48 , the post-Second World War inflationary episode resulting from supply shortages during peacetime refits of manufacturing plants, rebounding demand for consumer goods, high levels of savings and soaring money growth. This sounds a lot like today." FLATTENING YIELD CURVE STIRS RECESSION DEBATE — WSJ's Sam Goldfarb: "Yields on shorter-term and longer-term U.S. government bonds have been converging rapidly, stirring fears—along with skepticism—that the bond market is close to signaling a looming recession . Yields, which fall when bond prices rise, have been climbing all year based on expectations that the Federal Reserve will raise short-term interest rates. They got another big boost Monday, after Fed Chair Jerome Powell emphasized that the central bank was prepared to raise rates in half-percentage steps to fight inflation." Jobs Report Paul Blake has moved to the World Bank's Equitable Growth, Finance, and Institutions unit as a comms officer where he'll focus on debt issues after several years in the multilateral's corporate communications shop. Fly Around Most oil workers around the world have yet to cash bigger paychecks despite the run up in crude prices, with many ready to leave the oil patch. —Bloomberg's David Wethe Consumers started tipping more during the Covid-19 pandemic, but that generosity may be slowing. — WSJ's J.J. McCorvey Banks have seized $2 billion in cash from Evergrande, the ailing Chinese real estate developer said Tuesday as it announced a delay to the publication of its annual earnings. — CNN's Laura He   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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