Gary Gensler tests the GOP oversight machine

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Apr 18, 2023 View in browser   By Zachary Warmbrodt Presented by Sallie Mae® 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. Rep. Tom Emmer vowed late last year that SEC Chair Gary Gensler “might as well bring a cot” to Capitol Hill because he’d be spending so much time in front of the House Financial Services Committee. In reality, it took the panel until today — about three months — to nail down its first hearing with one of the GOP’s most despised regulators. The committee’s Republicans have yet to unearth and share any big revelations on their top oversight target. So for Financial Services Chair Patrick McHenry , the stakes are high. He has held off on subpoenaing Gensler — to the private annoyance of some Republicans — but in the last few days made his first threat along those lines. So when Gensler testifies later this morning, you can expect McHenry and fellow Republicans to continue to build the case that he is, in their view, a regulator run amok and unresponsive to their demands. Eleanor Mueller reports that McHenry hasn’t assigned topics to members — Rep. Sean Casten (D-Ill.) told our Declan Harty to expect a “disjointed” Q&A. A few of the big topics you can expect to come up Tuesday (with reporting assists by Eleanor and Declan). Crypto will be a top priority for questioning, according to GOP aides. It’s also an area where you could see friction from Gensler’s fellow Democrats. Gensler is fresh off a crypto crackdown that hit the digital asset exchange Bittrex on Monday and may snag Coinbase in the near future. He showed no signs of backing down in prepared testimony justifying the agency’s crypto enforcement push: “It’s the law; it’s not a choice.” Climate-risk disclosure is another ripe space for bipartisan fireworks. Republicans and Democrats alike have complained about the SEC’s proposal to require public companies to disclose their environmental footprints, while progressives have been concerned that the agency will cave to industry pressure and water down the rule. Republicans will likely question the SEC’s authority to pursue the regulation. “Just as with any proposal, we greatly benefit from public input and will consider adjustments that the staff, and ultimately the commission, think are appropriate,” Gensler will say. Wall Street brokerages and trading firms are livid over the SEC’s plans to revamp equity market structure, and House Financial Services members have gotten the memo. McHenry has said the efforts “will inject uncertainty and threaten the dominance of our markets.” Gensler will tell the committee that given the size of the business and rapidly changing technology, “it’s appropriate that the SEC freshen up its rules to promote efficiency and competition” in stock trading. Happy Tuesday — Send tips — or just say hi: Zach Warmbrodt, Sam Sutton. A message from Sallie Mae®: The current federal student loan system too often fails the very people it was designed to help—those who truly need the most financial support. Students, families and taxpayers deserve a better, more transparent system that works as it was originally intended and protects against overborrowing. Learn more about solutions to reform the federal student loan program.   Driving the day Gensler testifies at House Financial Services at 10 a.m. … Senate Banking holds a hearing for CEA nominee Jared Bernstein and others at 10 a.m. … HUD Secretary Marcia Fudge testifies at House Appropriations at 10 a.m. … Bernstein in the hot seat – AP reports that Jared Bernstein, President Joe Biden’s nominee to lead the Council of Economic Advisers, will likely face political attacks on the White House's handling of inflation when he testifies in the Senate today. “GOP aides have spent weeks poring over Bernstein’s public writings and media appearances dating back at least a dozen years, finding a slew of statements they believe could be damaging to his confirmation prospects.”   GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat.     In other CEA news, Ernie Tedeschi will be the council’s new chief economist, Victoria Guida and Katy O’Donnell report. After Wall Street visit, McCarthy faces tough sell in Washington — Speaker Kevin McCarthy tried to convince the financial community Monday that he has a viable plan to lift the debt ceiling. He’ll have a much more important audience to woo this morning when House Republicans meet in private about the path forward. McCarthy said in the next few weeks, “the House will vote on a bill to lift the debt ceiling into next year, save taxpayers trillions of dollars, make us less dependent on China, and curb high inflation — all without touching Social Security or Medicare.” McCarthy said a “no-strings-attached debt limit increase cannot pass,” which is what Democrats are demanding.   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.     In Congress Lawmakers, lenders look to reverse fintech-friendly SBA rules – Bank trade groups are calling on Congress to undo new Small Business Administration rules that opened a flagship government-backed lending program to fintech firms and loosened lending requirements. The groups are likely to get traction. Senior Republicans and Democrats on key committees have also raised concerns about the changes, which critics say could end up being a financial burden on the government. The Biden administration has countered that the new rules will help expand lending to underserved business owners. A spokesperson for the House Small Business Committee said the panel is exploring legislative options. The SBA’s inspector general will testify before the committee on Wednesday. The National Association of Government Guaranteed Lenders wants Congress to intervene to chart a "much more slow and steady course, to even potentially test some of these concepts, rather than open the floodgates,” said Kristen Granchelli, its senior vice president of Government Affairs and Public Policy. The Independent Community Bankers of America is open to a “wholesale striking of the rule,” as Congress did with a previous SBA regulation in the CARES Act, or “a more targeted fix,” said its vice president of congressional relations, Stephen Keen.   A message from Sallie Mae®:   Economy Schwab, State Street see deposit decline – WSJ reports that $41 billion in deposits left Charles Schwab and $11.18 billion left State Street during the first quarter, as banks struggled to keep up with rising interest rates. Schwab’s shares are down by 37 percent so far this year amid concerns about bank balance sheets. The company said Monday it is pausing stock buyback plans. In what the FT described as another sign of the threat facing traditional banks, Apple and Goldman Sachs on Monday announced a new savings account that will pay a market-leading 4.15 percent. Lagarde: Global rifts could drive up inflation — European Central Bank President Christine Lagarde said Monday that geopolitical divides could push inflation up by as much as 5 percent in the near term. First in MM: New polling on the deficit, taxes — Nearly 7 in 10 voters believe the best way to reduce the federal deficit is by hiking taxes on the wealthy and on corporations, according to a new poll by Hart Research for Groundwork Action, an affiliate of the left-leaning Groundwork Collaborative. Those voters chose that option over others that would involve cuts to spending, including restrictions on Medicare and Social Security (10 percent and 12 percent), cuts to Medicaid (9 percent) or changes to food stamps and school meals (17 percent). A message from Sallie Mae®: Students and families are borrowing more, and often too much, to pay for higher education. Of the $1.7 trillion outstanding student loan debt in 2022, $1.59 trillion—about 93%—is made and held by the federal government. Complicated applications, confusing financial aid offers and federal loan programs with virtually unlimited access to funds are contributing to this cycle of growing federal student loan debt. As a responsible private lender and education solutions provider, see how Sallie Mae is promoting meaningful reform in higher education financing.     Follow us on Twitter Mark McQuillian @mcqdc Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Sam Sutton @samjsutton   Follow us

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