Shutdown’s off. Next up: Nail-biters in the courts.

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Oct 02, 2023 View in browser   By Zachary Warmbrodt 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 If you thought the shutdown fight was stressful, brace yourself for a week of tense legal wrangling over the future of the Consumer Financial Protection Bureau and the alleged crypto crimes of Sam Bankman-Fried. First up is the CFPB. The Supreme Court on Tuesday will hear a case in which payday lenders argue that its funding stream is unconstitutional — a challenge that could not only upend the bureau but also other federal agencies that operate outside of congressional appropriations. The stakes are huge, and it’s not just consumer watchdogs like Sen. Elizabeth Warren who are unnerved by what the court’s conservative majority may do. As Katy O’Donnell reports, lenders, homebuilders and Realtors are urging SCOTUS of “potentially catastrophic consequences” for the mortgage market if the case impacts existing CFPB regulations. The CFPB case may also hand Congress a problem that’s even more difficult to resolve than funding the government: Forcing Democrats and Republicans to compromise on revamping the polarizing agency. Democrats largely back the CFPB — an Obama-era legacy — but their devotion to its current structure has varied among progressives and moderates. Republicans have sought to curb the CFPB’s powers since its creation, and many would like to see it just go away. In Manhattan on Tuesday, a federal court will start jury selection for the fraud trial of Bankman-Fried. The 31-year-old could spend the rest of his life behind bars if convicted for one of the biggest alleged financial scams in U.S. history. Former senior figures in Bankman-Fried’s failed crypto empire — including his ex-girlfriend — are set to appear as star witnesses, per the WSJ. The trial is expected to last for several weeks. In Washington, the daily headlines about SBF’s mismanagement of FTX are landing at the worst possible time for crypto executives and lobbyists. They’re fighting to rally House members behind bills that would set up a specialized regulatory regime that crypto firms have long sought. They’re also trying to fend off a Senate push by Warren and other crypto skeptics who want to impose new financial crime safeguards on the digital asset market. The re-airing of SBF’s dirty laundry is set to complicate everything, per reporting from Declan Harty, Eleanor Mueller, Jasper Goodman and Sam. Rep. Bill Huizenga (R-Mich.) said he thinks more Democrats would be supporting the House legislation if not for Bankman-Fried's downfall. "That flame burned pretty close and hot next to a number of them," he said, referring to the millions of dollars Bankman-Fried spent to back Democrats. Warren expects the trial will strengthen the case for her proposed crackdown. “Sam Bankman-Fried’s trial will remind everyone in Congress about the risks that an unregulated crypto industry poses for all of our constituents, for our economy and for international stability,” she said. Happy Monday — No shutdown, so what’s next? Send tips: Zach Warmbrodt, Sam Sutton.   A NEW POLITICO PODCAST: POLITICO Tech is an authoritative insider briefing on the politics and policy of technology. From crypto and the metaverse to cybersecurity and AI, we explore the who, what and how of policy shaping future industries. We’re kicking off with a series exploring darknet marketplaces, the virtual platforms that enable actors from all corners of the online world to traffic illicit goods. As malware and cybercrime attacks become increasingly frequent, regulators and law enforcement agencies work different angles to shut these platforms down, but new, often more unassailable marketplaces pop up. SUBSCRIBE AND START LISTENING TODAY.     Driving the Week Monday … Fed Vice Chair for Supervision Michael Barr talks monetary policy and financial stability at the Forecasters Club luncheon at 1 p.m. … Tuesday … The Supreme Court hears arguments in the CFPB funding case … Jury selection begins in SBF’s fraud trial in New York … August job openings data is out at 10 a.m. … Wednesday … FDIC director Jonathan McKernan gives a keynote address at Mayer Brown’s Basel Endgame event at 10 a.m. … Fed board member Michelle Bowman discusses the role of data and analysis in banking reforms at the St. Louis Fed’s community banking conference at 10:25 a.m. Thursday … August trade deficit data is out at 8:30 a.m. … FTC Chair Lina Khan and assistant attorney general Jonathan Kanter talk antitrust enforcement at Brookings at 10 a.m. … Barr discusses cyber risks at a conference hosted by the Cleveland Fed at 12:15 p.m. … Friday … September jobs numbers are out at 8:30 a.m. … Fed board member Christopher Waller talks payments at Brookings at 12 p.m. Driving the day What’s next in the funding saga — Washington now has until Nov. 17 to prevent a government shutdown. In the meantime, Speaker Kevin McCarthy may have to fight to keep his job (the big question is whether Dems will ride to the rescue) and there will probably be a battle over Ukraine aid. ICYMI — Congress agreed to extend the National Flood Insurance Program as part of the stop-gap government funding bill, averting a lapse until Nov. 17. A break in authorization could have threatened 1,300 property sales per day, according to the National Association of Realtors. Bank CEOs will be back on Capitol Hill — Leaders from eight of the biggest U.S. banks will testify before the Senate Banking Committee on Dec. 6. The hearing will feature the heads of JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, BNY Mellon, Morgan Stanley and State Street. IRS consultant charged in massive leak — Brian Faler reports that a consultant for the IRS has been charged with leaking to news outlets private tax information about former President Donald Trump and thousands of the nation’s wealthiest people. SCOTUS situational awareness — For further reading on the CFPB case and beyond, check out Josh Gerstein’s look at the issues that might dominate the Supreme Court’s agenda this year. Among them: agency power, guns, affirmative action and social media. Crypto What’s next on the Hill — With the House expected to pass landmark crypto legislation this fall, lawmakers are looking ahead to whether there’s a deal to be had with the Senate. It’s unclear to your MM host how the pieces would fit together, given how far apart House Financial Services Chair Patrick McHenry (R-N.C.) and Senate Banking Chair Sherrod Brown (D-Ohio) are on the issue. McHenry might be crypto’s most powerful ally on the Hill and Brown is one of the industry’s biggest critics. McHenry told Eleanor: "My hope is that we'll have a couple of opportunities this fall to talk about broader sets of policy." Lawmakers and lobbyists have speculated that Brown and McHenry could negotiate a kind of trade. “The number one question is: Can Patrick McHenry and Sherrod Brown work out a deal?” Rep. Jim Himes (D-Conn.) said. “It would appear that Sherrod would like to move the cannabis legislation. I think Patrick has a list of things he would like to. So I think that's the key question." Brown is also facing pressure from Warren to hold a vote on her bipartisan bill to crack down on crypto money laundering. But Brown told Eleanor he doesn’t plan to take it up any time soon.  "We're all trying to figure out what regulators can do and where the holes are that we need legislation,” he said. “That's the real problem. And I don't know that Warren's bill does that."   Enter the “room where it happens”, where global power players shape policy and politics, with Power Play. POLITICO’s brand-new podcast will host conversations with the leaders and power players shaping the biggest ideas and driving the global conversations, moderated by award-winning journalist Anne McElvoy. Sign up today to be notified of new episodes – click here.     Markets A big haul — The WSJ reports that the SEC on Friday brought in $218 million in fines, about equal to 10 percent of its budget, as the agency closed out its fiscal year with a surge of enforcement actions. Ackman’s SPARC — Reuters reports that activist investor Bill Ackman won regulatory approval Friday to launch his new take on the SPAC model, what he’s calling "SPARC." It will seek out investments in privately-held companies. Student Loans Republicans press CFPB on student loan servicers — Michael Stratford and Eleanor Mueller report that seven House Financial Services Republicans are warning the CFPB against fining federal student loan servicers for degrading servicing quality. They argue in a letter that it’s the fault of Education Department funding cuts and Biden administration mismanagement.   Follow us on Twitter Mark McQuillan @mcqdc Zachary Warmbrodt @Zachary Victoria Guida @vtg2 Declan Harty @ @declanharty Eleanor Mueller @eleanor_mueller Katy O'Donnell @katyodonnell_ Sam Sutton @samjsutton   Follow us

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