Meet Treasury’s debt limit team

Presented by the Investment Company Institute: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy.

May 22, 2023 View in browser   By Zachary Warmbrodt Presented by 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. Washington is in political paralysis and faces a catastrophic cash crunch in as little as 10 days. Treasury Secretary Janet Yellen isn’t at the negotiating table with House Republicans. But she is coordinating with the White House at a senior level, with several meetings between the department and the White House happening weekly, according to administration officials. Even further behind the scenes, a team of Treasury Department officials — including career bureaucrats with decades of government experience — is working daily to manage the fallout. The White House is taking a somewhat arms-length approach to how Treasury goes about its work. The two operate closely on messaging, but one White House official told MM that the intention is for Treasury to be seen as having a degree of independence. It’s so Yellen’s default warnings are taken seriously and so the “X-date” — the projection of when the government can’t pay all its bills — doesn’t become politicized. Treasury appears to have maintained its role as a trusted source. Asked last week if he doubted the administration’s latest default deadline, Speaker Kevin McCarthy told reporters: “No. Whatever Janet Yellen says is the date. I’m not going to argue about that.” Inside the building, a Treasury spokesperson said Yellen and Deputy Secretary Wally Adeyemo are on a daily call with the Treasury office that tracks developments in global trading, known as the markets room. Yellen has been getting a daily briefing on the X-date forecast for the last few months. Ben Harris, who recently stepped down as Treasury’s chief economist, said the department’s “apolitical role” is underappreciated. He said “a lot of the people who are engaged in these discussions are career civil servants whose only real interest is the health of the financial system.” Who are they? Treasury fiscal assistant secretary David Lebryk, the highest-ranking career official at the department, is responsible for financing the government’s operations and overseeing the forecast of when it will run out of cash. Lebryk, who has Harvard degrees in economics and public administration, joined Treasury as an intern in 1989. In addition to determining the X-date, his group would also play an important role in potential payment prioritization after the deadline. Assistant secretary for financial markets Joshua Frost, a political appointee confirmed by the Senate about a year ago, is tasked with understanding how the market is reacting – including bank executives and credit rating agencies. He spent more than two decades at the Federal Reserve Bank of New York. Like Lebryk, he reports to Under Secretary for Domestic Finance Nellie Liang, another Fed veteran. Treasury is also part of the administration’s review of debt-limit related legal questions, including the potential invocation of the 14th Amendment. Key players on Treasury’s legal team include general counsel Neil MacBride and principal deputy general counsel Laurie Schaffer, who earlier served at the Fed. Treasury’s main liaison to Capitol Hill is assistant secretary for legislative affairs Jonathan Davidson, a long-time congressional aide who was previously chief of staff to Sen.Michael Bennet (D-Colo.). “For the average American, you could plop them down in a discussion at the Treasury Department and you wouldn’t hear discussions about Democrats and Republicans,” Harris said. “You would hear discussions about avoiding recessions and keeping credit markets well-functioning. It’s a very technocratic discussion, where the primary concern is around the full faith and credit of the United States. It’s not over which political party will come out ahead.” It’s Monday – We’ve got a long week before the Memorial Day break. Keep us posted on what you’re hearing: Zach Warmbrodt, Sam Sutton. A message from the Investment Company Institute: Looking for the most up-to-date analysis and insights into the asset management industry? You’re already reading Morning Money—now check out the ICI Daily! ICI’s daily newsletter provides the latest news and updates covering market trends in asset management, analysis of the most pressing policy and regulatory changes affecting the industry, ICI events, and more. Click here to subscribe.   Driving the Week Monday … President Joe Biden and McCarthy meet on the debt limit … Tuesday … FHFA Director Sandra Thompson testifies at House Financial Services at 10 a.m. … Wednesday …House Financial Services marks up capital formation and bank regulator transparency bills at 10 a.m. … House Oversight holds a hearing on San Francisco Fed supervision failures at 2 p.m. … Thursday … An updated first-quarter GDP estimate is out at 8:30 a.m. …Richmond Fed President Tom Barkin speaks and takes questions at the SWVA Economic Forum in Wise, Virginia at 9:50 a.m. It’s back to Biden and McCarthy — The president and the speaker are set to meet later today on the debt ceiling. Staff negotiations broke down over the weekend before resuming Sunday evening. Where talks fell apart — Republican negotiators rejected a White House offer to limit spending on defense and a series of domestic programs. The White House turned down a GOP request for more military money, which would entail cutting other programs. Yellen: Early June X-date is a ‘hard deadline’ — Yellen on Sunday’s “Meet the Press” said the odds are "quite low" that the government will be able to pay all its bills through June 15. Yellen hinted at potential Treasury payment prioritization if the two sides fail to reach a deal, citing “hard choices to make about what bills go unpaid.” Biden’s constitutional threat sounds a little more real — Biden said at the end of his G-7 trip to Japan that “I think we have the authority” to invoke the 14th Amendment to avoid default. “The question is could it be done and invoked in time,” he said. The U.S. Chamber of Commerce on Friday warned Biden against using the 14th Amendment. Chamber chief policy officer Neil Bradley argued that the legal uncertainty and increased interest costs would “impose significant and long-term costs on the economy similar to default.” Victoria Guida and your MM host have a new piece looking at how politicians’ increasing reliance on “break-the-glass” backup options is just one of several lingering dynamics born out of the 2011 debt-limit fight.   GET READY FOR GLOBAL TECH DAY: Join POLITICO Live as we launch our first Global Tech Day alongside London Tech Week on Thursday, June 15. Register now for continuing updates and to be a part of this momentous and program-packed day! From the blockchain, to AI, and autonomous vehicles, technology is changing how power is exercised around the world, so who will write the rules? REGISTER HERE.     Markets Breaking: A big move in Wall Street’s ESG battle — State Street’s giant asset management business will announce this morning that it’s planning to give more investors the power to choose how to direct proxy votes in their index equity funds later this year, including investors in its U.S. ETFs and U.S. mutual funds. The news matters in Washington because Republicans are scrutinizing money managers like State Street over how they implement climate and social investing goals. GOP lawmakers have legislation that would require asset managers to follow instructions from investors when voting on corporate shareholder proposals. State Street’s investor voting choice initiative will cover 82 percent of its eligible index equity assets — including all institutional equity index funds — by the end of the year, up from 49 percent today. Companies speed up bond deals thanks to U.S. debt fight — The FT reports that U.S. corporations are rushing to borrow money in the market before Washington’s debt-ceiling battle triggers volatility.   A message from the Investment Company Institute:   In Congress A crypto vote? — Eleanor Mueller reports that House Financial Services Committee members are booked for an all-day markup on June 13. The legislative agenda is unclear but the timing makes sense for a potential vote on stablecoin and crypto market structure bills that Chair Patrick McHenry has said he wants to advance next month. Crypto Coinbase ramps up PR campaign — The U.S. exchange, which is at odds with the SEC in court and bracing for an enforcement action, is launching a national campaign to tout what it sees as crypto’s importance to America and to highlight regulatory issues the industry faces. The push includes: four FTN spots featuring Coinbase CEO Brian Armstrong, a blanketing of advertising on Wall Street, a New York “State of Crypto” summit in June and a national “Stand with Crypto” day in Washington July 19.   DON’T MISS POLITICO’S HEALTH CARE SUMMIT: The Covid-19 pandemic helped spur innovation in health care, from the wide adoption of telemedicine, health apps and online pharmacies to mRNA vaccines. But what will the next health care innovations look like? Join POLITICO on Wednesday June 7 for our Health Care Summit to explore how tech and innovation are transforming care and the challenges ahead for access and delivery in the United States. REGISTER NOW.     Fly Around People moves — Aaron Stetter is joining the Electronic Payments Coalition as executive director. He previously served as executive vice president of advocacy and strategic engagement at the Independent Community Bankers of America. A message from the Investment Company Institute: The Investment Company Institute (ICI) is the leading association representing regulated investment funds around the world. Its mission is to strengthen the foundation of the asset management industry for the ultimate benefit of the long-term individual investor. ICI members help more than 100 million Americans save for retirement, education, and other life goals, putting $38 trillion into the capital markets to fuel the real economy. Its members include mutual funds, ETFs, closed-end funds, and UITs in the United States, and UCITS and similar funds offered to investors in Europe, Asia, and elsewhere. Learn more.     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

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings This email was sent to rouf@idiot.cloudns.cc by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA Please click here and follow the steps to unsubscribe.