Wall Street’s No. 1 enemy isn’t going away

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Nov 06, 2023 View in browser   By Marcia Brown and Victoria Guida Presented by Goldman Sachs 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 In taking on tech giants and forcing the collapse of lucrative deals, Lina Khan has earned the status of Wall Street nemesis. But she won’t be chair of the Federal Trade Commission forever. That’s why she and the Justice Department’s top antitrust enforcer, Jonathan Kanter, are developing a pipeline of legal talent— and experiencing celebrity along the way. They want to ensure that their interpretation of antitrust laws, which they maintain is Congress’ original intent, is not just a blip. It’s been decades since government regulators were seen as anything but a punchline. Derided on the right as drags on the economy and on the left as rubber stamps for business, those in the federal bureaucracy aren’t accustomed to tributes. Now, as they aim to build an antitrust movement that would transform the economy, they’re on the receiving end of a kind of hero worship — especially among law students. The movement that Khan helped build has reached law schools across the country, attracting scores of trustbuster mini-me’s. Once empty antitrust classrooms are bursting at Loyola University Chicago Law School. A quarter of students’ submissions to the Georgetown Law Review focused on antitrust last year. And when Kanter filled a 200-person room at Columbia Law School, he stayed so long afterward to shake hands he missed his flight. Khan and Kanter are not just courting public opinion. They’re actively recruiting the next generation of enforcers to work at the agencies and join the movement. Kanter has visited more than a dozen law schools and several business schools. The FTC recently started an honors program, which places high-achieving recent law school graduates at the agency. Whether it’s a force with real staying power or a passing fad is yet unknown. But Khan, Kanter and their allies clearly hope that cultivating the next generation can help ground it. “I’m kind of keeping the chair warm until they take over,” said Kanter in an interview. “I firmly believe that there’s this next generation that’s waiting in the wings.” Read more from your host in POLITICO Magazine. HAPPY MONDAY — Hope everyone made the most of an extra hour of sleep this weekend. Send tips to your regular MM host, Zach: zwarmbrodt@politico.com.   A message from Goldman Sachs: Small business owners are already facing a credit crunch, but the Federal Reserve is planning to implement the Basel III Endgame — a new bank capital requirement which will further reduce the amount of capital available and make it more expensive for small business owners to access capital. Only 29% of small business owners say their business can currently afford to take out a loan. Tell the Fed: Stop the Squeeze on Small Businesses.   Driving the Week Monday … Federal Reserve Governor Lisa Cook speaks on financial stability at Duke University at 11 a.m. … Tuesday … DC Fintech Week, featuring Fed Vice Chair Michael Barr at 9:15 a.m., Acting Comptroller of the Currency Michael Hsu at 10:20 a.m., Treasury Undersecretary Nellie Liang at 2:15 p.m., New York Financial Services Superintendent Adrienne Harris at 2:40 p.m., Treasury official Josh Frost at 3:05 p.m., and Reps. French Hill and Wiley Nickel at 3:30 p.m. … Fed Governor Christopher Waller speaks at the St. Louis Fed on economic data at 10 a.m. … Dallas Fed President Lorie Logan and Kansas City Fed President Jeffrey Schmid speak at KC Fed energy conference Wednesday … DC Fintech Week continues, with CFTC Chair Rostin Behnam at 9:25 a.m., SEC Chair Gary Gensler at 11:30 a.m., and others … Fed Governor Cook speaks on financial stability in Ireland at 5:15 a.m. … Fed’s Barr speaks on the Community Reinvestment Act at National Association of Affordable Housing Lenders event at 2 p.m. … Thursday … Fed Chair Jerome Powell speaks on a panel at an International Monetary Fund event at 2 p.m. … SIFI designation is back on the menu, boys — Treasury Secretary Janet Yellen and other U.S. financial officials on Friday revived the threat of tougher regulation for individual nonbank firms that could pose a risk to the financial system, an authority that had been de-emphasized under Yellen’s predecessor, our Victoria Guida reports. The Financial Stability Oversight Council voted to approve guidance that would give FSOC more flexibility to designate a company as “systemically important,” a tag that puts it under the Fed’s oversight. Pro-regulation advocates were quick to urge the council to ramp up oversight of a range of firms, but industry is gearing up to fight efforts to do so. The Managed Funds Association, which represents hedge funds, argued, “FSOC’s adoption of the flawed Guidance will hurt financial stability.” “SIFI designation for alternative asset managers is inappropriate — as they do not carry the same risks as banks -- and will do nothing to curtail systemic risk in the market,” MFA President Bryan Corbett said in a statement. Per the final guidance: “Some commenters stated that entity-based designation is not suitable for their industry, including life insurers, property and casualty insurers, reinsurers, asset managers, nonbank mortgage lenders, nonbank mortgage servicers, mutual funds (including money market mutual funds), private funds, fintech companies (including certain payment providers), and issuers of asset-backed securities.” House advances Iran sanctions legislation — The House passed a pair of bills Wednesday and Friday under suspension of the rules that would force the Biden administration to step up its sanctions on Iran given its role in the Hamas attacks, Eleanor reports. The House Foreign Affairs Committee approved both measures on a bipartisan basis last month. One, which was also referred to the House Financial Services Committee, would impose sanctions on financial backers of Hamas. Another would impose sanctions on anyone who handles Iranian oil products. (Its sponsor, Rep. Mike Lawler (R-N.Y.), has a similar bill in Financial Services.) Iran is “a partner to Russia fighting Ukraine, a partner in defeating Israel through Gaza,” Rep. French Hill (R-Ark.) said on the floor. “Why? Because they are selling oil on the market against global sanctions.” This bill "goes far beyond the administration's $6 billion of sanctions relief.” ICYMI: Eleanor broke down all of Congress’ Iran sanctions proposals last week. Yellen to meet with Chinese vice premier — The U.S. Treasury chief is set to meet later this week with Chinese Vice Premier He Lifeng in San Francisco, her latest effort to improve communication between the two economies. A senior Treasury official told reporters Sunday that Yellen and He would discuss the outlook for the Chinese economy, unfair trade practices, climate change, and debt distress in low-income countries, among other topics. Just in: Read more on the Nov. 9-10 meetings from Yellen herself in a WaPo op-ed.   JOIN US ON 11/15 FOR A TALK ON OUR SUSTAINABLE FUTURE: As the sustainability movement heats up, so have calls for a national standard for clean fuel. Join POLITICO on Nov. 15 in Washington D.C. as we convene leading officials from the administration, key congressional committees, states and other stakeholders to explore the role of EVs, biofuels, hydrogen and other options in the clean fuel sector and how evolving consumer behaviors are influencing sustainable energy practices. REGISTER HERE.     Regulatory Corner Mark your calendars — Federal bank regulators and National Credit Union Administration Chair Todd Harper will testify before the Senate Banking Committee on Nov. 14. Want to work at the SEC? — You’ll need to dump your crypto first. As the SEC goes to war over the $1 trillion market, the agency is looking to bring aboard a number of crypto experts, our Declan Harty reports. But the SEC is running into a problem, according to a report from its Office of the Inspector General. Ethics attorneys at the agency say candidates will need to cash out on any digital assets they own to work on crypto issues. But “candidates are often unwilling to divest their crypto assets to work for the SEC,” the report said. Wall Street’s top regulator has also frozen most hiring amid questions about the agency’s funding for fiscal 2024, as yet another government shutdown looms, Declan writes.   A message from Goldman Sachs:   Jobs Report Cheyenne Hopkins recently joined Visa as Vice President, Global Corporate Affairs. She previously was a Managing Director at FTI Consulting.   PLAYBOOK IS GOING GLOBAL! We’re excited to introduce Global Playbook, POLITICO’s premier newsletter that brings you inside the most important conversations at the most influential events in the world. From the buzzy echoes emanating from the snowy peaks at the WEF in Davos to the discussions and personalities at Milken Global in Beverly Hills, to the heart of diplomacy at UNGA in New York City – author Suzanne Lynch brings it all to your fingertips. Experience the elite. Witness the influential. And never miss a global beat. BE PART OF THE CONVERSATION. SUBSCRIBE NOW.     Fly Around When de-risking strikes — Sometimes banks close accounts of individuals, families and small businesses without telling them why. The NYT looks at 500 such cases and the chaos that ensues afterward. Global risks on the Fed dashboard — WSJ reports that conflicts around the globe are making it harder for investors to pick safe investments, with bonds serving as less of a good hedge against stocks. Not gonna cut it? — Bond investors are betting there will be interest rate cuts by summer, with almost a percentage point in reductions by year end, Bloomberg reports, challenging what the Fed is projecting it will do. Payment problems — CNN reports that multiple U.S. banks were hit by deposit delays on Friday, caused by an error at a payment processing network.   A message from Goldman Sachs: If the Federal Reserve implements higher capital requirements for banks, it will reduce the amount of capital available and make it more expensive for small business owners looking to expand and invest in their communities. - Only 29% of small business owners say their business can currently afford to take out a loan given current interest rates. - 85% say if access to capital continues to tighten it will impact their growth forecast. Basel III Endgame would be harmful for small businesses, which are still recovering from the pandemic and are already facing high interest rates and inflation challenges. Tell the Fed: Stop the Squeeze on Small Businesses. Source: Survey of 1,240 Goldman Sachs 10,000 Small Businesses participants conducted by Babson College and David Binder Research from October 9-12, 2023. The survey included small business owners from 48 U.S. states, Washington, D.C., and Puerto Rico.     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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