The Lina Khan charm offensive

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Jun 06, 2023 View in browser   By Sam Sutton Presented by NEW YORK — FTC Chair Lina Khan hasn’t made many friends around Silicon Valley or Wall Street over the last two years. Now she’s making the case that an aggressive approach to antitrust enforcement can yield big bucks for investors and startup founders. “If you're an investor, you want to make sure that if somebody has a good idea, that they're able to get that good idea to market,” she told MM on Monday afternoon. The success of that business should depend “on the merits of whether people liked that product. And not on whether one of the existing giants feels threatened.” Khan made a similar pitch at an event hosted by New York investor Bradley Tusk in his Lower East Side bookstore last week, where she compared tech conglomerates to Gilded Age railroad barons. In both cases, control over critical networks gave big businesses the power to pick “winners and losers” across other regions and industries. Startups are more likely to thrive if they can’t get snuffed out by larger competitors. So if the FTC’s crackdown on market consolidation has had a chilling effect on mergers and acquisitions, so be it. “In recent decades, there had been a trend where deals were getting out of the boardroom that were facially anti-competitive,” Khan told the audience on Thursday. “If now we're at a stage where there are discussions happening in the boardroom that are preventing those deals from actually seeing the light of day, I think that's a good thing.”   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.     In Khan’s telling, The event was part of the agency’s public outreach efforts “to hear from folks [and to] make sure we're explaining how the FTC has worked to both promote fair competition and to prevent unfair deceptive practices.” Tusk — a venture capitalist and Democratic strategist who has advised former New York City Mayor Michael Bloomberg and Andrew Yang – told your host that Khan’s team requested he hold the event after hearing him argue for breaking up big tech companies to clear the way for early-stage startups. (Tusk was an early investor in Uber and guided its founder, Travis Kalanick, in his yearslong battle with New York taxi regulators.) He also organized an off-record lunch meeting between Khan and other VCs earlier in the day, where she explained the rationale behind an enforcement strategy that has moved to block Meta and Microsoft from buying smaller competitors. Tusk says the feedback he’s received from his colleagues has been positive: “Almost every attendee [said] how impressed they were with her,” he told your host in an email. “She wanted to learn and didn't seem to want or need anything from them (as you know, that never happens in politics).” To date, venture firms and pro-business groups haven’t shared that perspective. Organizations like the National Venture Capital Association have bristled at Khan’s antitrust strategy, claiming that it threatens to choke off their ability to monetize their investments in startups that are unlikely to go public or meaningfully expand. “It’s a counterproductive policy,” Justin Field, NVCA’s senior vice president of government affairs, told MM. “It may feel good in the short term, but driving down returns on investments in corporate challengers makes it harder to build the next set of corporate challengers.” IT’S TUESDAY — And your MM host can’t believe the Miami Heat keep finding ways to win. Send tips, gossip and suggestions to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com. A message from the American Bankers Association: Despite recent stress, the U.S. banking sector remains remarkably resilient. The latest data show that lending rose 7.5% over the last year, deposits remain well above pre-pandemic levels and banks remain well-capitalized and highly liquid. Learn more about the health of America’s banks.   Driving the day CFTC Chair Rostin Behnam will testify at House Agriculture’s crypto hearing at 10 a.m. … House Financial Services has a subcommittee hearing at 10 a.m. on Treasury markets and financial institutions Binance in the barrel — Our Declan Harty: “The SEC filed more than a dozen charges against Binance and CEO Changpeng Zhao on Monday stemming from what the agency called the company’s “blatant disregard” for U.S. law as it grew into the world’s largest cryptocurrency exchange. In a 136-page complaint, the Wall Street regulator alleged that Binance, its American affiliate, Binance U.S., and Zhao have been operating unregistered U.S. financial institutions, misleading investors about the companies’ risk controls, inflating trading volumes and mixing “billions of dollars of investor assets” and sending them to a third-party entity owned by Zhao.” The enforcement action against Binance — which the company says the SEC filed despite its attempts to settle — dropped less than 24 hours before House Ag holds a hearing on a bill that would create regulatory guardrails around the industry. Coinbase chief legal officer Paul Grewal will likely sound supportive of the House Republican crypto revamp of the SEC and CFTC when he testifies on the plan at the Agriculture Committee today. But he told Zach in an interview that lawmakers will need to consider more funding for the CFTC if they grant the agency greater oversight over digital assets. “Congress is certainly going to have to work out properly resourcing the CFTC, just as it would have to provide additional resources to any other agency if it were to take on additional responsibilities,” he said. “But the CFTC here is not new to digital assets.” Grewal’s overall take on the bill: “My initial assessment is that this is a very good first step toward a comprehensive legislative scheme for crypto that is long overdue in the U.S.” Key players in traditional financial markets are also starting to echo some of the crypto industry’s claims that SEC Chair Gary Gensler’s positions on crypto have made it impossible for exchanges and token issuers to comply. The Committee on Capital Markets Regulation — whose members include Bank Policy Institute President and CEO Greg Baer, SIFMA President and CEO Kenneth Bentsen as well as top executives at big banks and asset managers — shared a new report with MM claiming that SEC rules “in fact make it impossible for cryptoasset trading platforms to do what the SEC now insists that they do — that is, registering and operating in compliance with the regulatory framework for securities exchanges.”   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.     Regulatory Corner First in MM: Slogging toward an executive pay rule — Agencies are looking to propose (for the third time) restrictions around executive pay that were mandated by Dodd-Frank, but five administrative law professors have some legal advice: You don’t need to do all that again. They assured the six regulators with jurisdiction over the rule that they could simply reopen the comment period on the 2016 proposal. Read the letter here. — Victoria Guida Bank capital requirement overhaul incoming — The WSJ’s Andrew Ackerman: “The changes, which regulators are on track to propose as early as this month, could raise overall capital requirements by roughly 20% at larger banks on average, people familiar with the plans said … Institutions with at least $100 billion in assets might have to comply, effectively lowering an existing $250 billion threshold for which regulators have reserved their toughest rules.” CBA pushes back on CFPB’s credit card proposal — Consumer Bankers Association President and CEO Lindsey Johnson labeled the consumer protection agency’s bid to crack down on late fees as “obscene” in an appearance on IntraFi’s Banking with Interest podcast. There’s been a political campaign to conflate credit card fees with “with Taylor Swift/Ticketmaster fees,” she said. “That is obscene. That is really unbelievable that you can even put the two in the same sentence.”   A message from the American Bankers Association:   In the markets A pause on cut bets — The WSJ’s Matt Grossman: “Persistent strength in the economy has wrong-footed bets that the Federal Reserve will make large interest-rate cuts this year, potentially undermining a key element of support for the 2023 stock rally.” ICYMI — Read Katy O’Donnell’s story about the commercial real estate market. — Reuters’ Bianca Flowers and Priyamvada C: “Hotel developers, private equity firms, and general contractors told Reuters the financial stress on regional banks — the largest lenders to hotels and other commercial real estate markets — has forced developers to postpone projects or find other creative ways to raise capital.” — Bloomberg’s Heather Perlberg, Ann Choi and Noah Buhayar: “The 90-year-old Federal Home Loan Bank system … has ballooned to more than $1.5 trillion while playing a growing role as a backstop for banks taking all kinds of risks — and a diminishing role in funding new mortgages. That’s raising questions about the purpose of FHLBs and why the private institutions enjoy so much government support.” A message from the American Bankers Association: With more than 4,600 banks of all sizes, the U.S. has one of the deepest and most diverse banking systems in the world. Community, midsize, regional and large, globally active banks compete every day for individual and business customers. The diversity of the U.S. banking system remains one of the unique strengths of our economy. Today, despite recent stress, the banking sector remains resilient, and America’s banks continue to provide critical support to the U.S. economy. The latest data demonstrate that banks of all sizes remain well-capitalized, highly liquid and ready to navigate challenges ahead. View ABA’s Banking Snapshot.     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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