Sherrod Brown’s next big challenge

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Jul 12, 2023 View in browser   By Zachary Warmbrodt Presented by Fidelity Investments 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. Senate Banking Chair Sherrod Brown just pulled off a minor miracle — a bipartisan, 21-2 committee vote to crack down on reckless bank executives. His next act: An historic change in cannabis policy. At issue for the Ohio Democrat is whether he can help resolve one of the trickiest federal-state conflicts of our time. The problem: A growing number of states are legalizing cannabis businesses but the industry is struggling to access banking services because of the federal prohibition on the drug. MM spoke with Brown about his next steps to advance a bill that would provide legal protections for lenders in the cannabis space. It’s a top banking industry priority that has been percolating in Congress without resolution for several years. Brown has complications on the right and the left.  A top concern is avoiding a situation where he has the votes to advance the legislation out of committee but Republicans block it on the floor. So Brown is putting the onus on Sen. Steve Daines of Montana, a leading GOP backer of the cannabis banking bill, to deliver more Republican co-sponsors. "We're not going to take a bill to the floor and have [Minority Leader Mitch] McConnell undercut it with 58 or 59 votes," Brown said. "He's done that many times. So, we want Daines … to sign on the dotted line on this and really commit to get members to co-sponsor. If they're serious, they co-sponsor." It’s a demand that Daines’s office rebuffed on Tuesday, telling my colleague and cannabis beat reporter Natalie Fertig: “Senator Daines and Chairman Brown had an agreement when he reintroduced the bill and now Democrats are demanding changes. We have enough Republican votes to get it passed but Democrats keep moving the goalposts.” (A Brown spokesperson responded by saying he’s committed to working with members on both sides of the aisle on at path forward.) We’ll see how that goes. But it’s not Brown’s only challenge. Another issue that he needs to work out is a concern raised by Sen. Jack Reed (D-R.I.) about a section of the bill designed to make it harder for regulators to pressure banks to cut ties with certain customers, in particular for reasons of reputational risk. Its inclusion in cannabis banking bills over the years is tied to Republican concerns about initiatives like the Obama-era "Operation Choke Point,"a government effort to combat fraud that drew attacks from the right for sweeping up payday lenders and firearms dealers. Reed, a senior Banking Committee member, has warned the measure would make it harder for regulators to raise alarm about customer relationships that endanger banks. Consumer advocates have said it could hinder the policing of payment fraud. "It’s a concern, and Jack is very much a straight shooter in this as he is everything else," Brown said. "We’ve got to work it out." But that’s not all. Brown is working to schedule a floor vote for the aforementioned bank executive accountability bill. He doesn’t know the timing but expects it will most likely be considered as a standalone piece of legislation. He predicts that the committee’s fentanyl trafficking bill will be attached to a China package or the NDAA. Happy Wednesday — Whether it’s cannabis, capital, climate or crypto, we want tips: Zach Warmbrodt, Sam Sutton.   A message from Fidelity Investments: Fidelity Investments supports eDelivery. Let’s enact it into law. Learn More.   Driving the day June CPI is out at 8:30 a.m. … House Financial Services has its first “ESG month” hearing at 10 a.m. … NEC Director Lael Brainard speaks to the Economic Club of New York at noon …Senate Banking votes on Fed nominees at 2 p.m. … Sen. Elizabeth Warren chairs a subcommittee hearing on bank M&A at 2:30 p.m. Watchdog groups blast House crypto bill — Declan Harty reports that nearly two dozen groups — including prominent consumer advocates and industry watchdogs — are coming out against a plan by House Financial Services Chair Patrick McHenry and Agriculture Chair G.T. Thompson to revamp crypto regulation. The bill would empower the CFTC and put new restrictions on the SEC. The opposition is a signal that Democrats – many of whom are aligned with the organizations and have already voiced reservations – will be under pressure to vote against the proposal when McHenry holds a markup next week. The groups, including Americans for Financial Reform, Public Citizen and the Consumer Federation of America, describe the crypto market structure bill in a letter to lawmakers as a “policy ‘cure’ that would be far worse than the disease.” They also warn that the bill has the potential to undermine the SEC’s authority over crypto and Wall Street. They don’t like “ESG month,” either — Americans for Financial Reform sent a letter with nearly 60 organizations – including a number of labor unions and asset managers – warning House Financial Services leaders that the policies Republicans are proposing during their “ESG month” would insulate corporate management from investor input and undermine regulations that would equip investors with more information. In other ESG politics, our Jordan Wolman reports that a nonprofit tied to the Democratic Attorneys General Association is launching a six-figure spending campaign to push back against Republican attacks on sustainable investing and highlight their “undue interference in free markets.” BofA’s bad day — The CFPB, OCC, SEC and FINRA on Tuesday hit Bank of America with enforcement actions that will cost the second-largest U.S. lender about $260 million, Sam reports. Bank regulators alleged that BofA levied excessive overdraft fees, opened fake accounts and didn’t deliver on promised credit card rewards. The SEC and FINRA settled with the bank’s Merrill Lynch division for failing to follow anti-money laundering rules.   SUBSCRIBE TO POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don’t miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY.     Crypto Senate Finance launches crypto tax review — Our Benjamin Guggenheim reports that Senate Finance Chair Ron Wyden (D-Ore.) and ranking member Mike Crapo (R-Idaho) are asking for public feedback on the tax treatment of crypto. “The [tax code] draws distinctions between types of property, with no straightforward classification for digital assets,” Wyden and Crapo said. “This uncertainty creates complex reporting issues for taxpayers, and warrants examining how the [code] can provide clearer guidance for taxpayers on the treatment of digital asset transactions.” Don’t forget: Wyden challenged the White House and fought to shield digital currency players when new tax rules for crypto appeared in the bill that became the 2021 infrastructure law.   A message from Fidelity Investments:   Regulatory Corner House hands Wall Street a win in research conflict — Declan reports that the House with bipartisan support Tuesday passed a bill that would offer banks and brokers a break in a clash between U.S. and EU rules for investment research. The legislation would codify expired SEC relief that allowed broker-dealers to accept separate payments for trading and research from European investors without having to register as investment advisers.   UNLEASH THE FUTURE OF HEALTHCARE WITH POLITICO, A 7/20 INTERACTIVE EVENT: Imagine a future where rare genetic diseases are not only treatable, but potentially curable. Where our approach to chronic illness takes a monumental leap forward. That future is already taking shape in the form of next-generation health care treatments such as gene therapy. Join POLITICO on Thursday, July 20 and delve into the burgeoning field of gene therapies, which hold the power to redefine our health care landscape. Are you ready to explore this new frontier in health care? Don't miss this chance to be part of the conversation. REGISTER NOW.     Fly Around People moves — Scott Lee has joined CFTC Commissioner Christy Goldsmith Romero’s staff as senior counsel and policy advisor. Lee is returning to the agency from the SEC, where he worked within the Division of Investment Management. He previously spent seven years at the CFTC in what is now known as the Market Participants Division.   A message from Fidelity Investments: Fidelity Investments supports eDelivery. Remember, investors will retain the right to receive documents by postal mail. Let’s enact it into law. Learn More.     Follow us on Twitter Mark McQuillian @mcqdc Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Sam Sutton @samjsutton   Follow us

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