A post-McHenry ‘melee’

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Dec 06, 2023 View in browser   By Zachary Warmbrodt and Eleanor Mueller 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. QUICK FIX One of the finance world’s most powerful allies on Capitol Hill is calling it quits. The race to succeed him is on — and it could get messy. House Financial Services Chair Patrick McHenry announced Tuesday that he plans to leave Congress at the end of his term. The timing might have caught people off-guard, but McHenry watchers — and MM readers — have been bracing for this moment for a while. The 18-year House veteran, who has served in Congress since he was 29, is term-limited as Financial Services chair after next year and has a young family. “He’s been here 20 years and done a lot,” a person close to McHenry said. “Did leadership, now run a committee and is term-limited. It was time.” Zach was on the phone with Rep. Andy Barr as POLITICO broke the story, before McHenry announced his exit. “If this is his last term, we’ve got a lot more work to solidify Chairman McHenry’s legacy, which is an incredible legacy of legislating,” Barr said. “He’s a political machine. He’s a real leader.” MM has dug deep into McHenry’s career arc from conservative bomb-thrower to Wall Street’s “adult in the room” in the chaotic GOP conference. It’s a phrase industry representatives have used time and again to describe late-era McHenry, including in conversation with MM Tuesday just before his retirement news broke. “This country will always be indebted to his calm and steadfast hand during this year’s leadership transition,” said Richard Hunt, executive chairman of the Electronic Payments Coalition. The crypto industry is also mourning the loss. McHenry is behind the most sweeping crypto regulatory revamp ever approved by a congressional committee. The Blockchain Association last week gave McHenry an award for his support of the industry. Even some Democrats took the exit of another GOP dealmaker as a blow. Rep. Jim Himes of Connecticut, a senior Democrat on Financial Services, said he was "devastated.” McHenry for years has tried to work across the aisle on the committee, in particular with ranking member Maxine Waters (D-Calif.). "This institution is gonna be a lot weaker for his absence,” Himes said. So what’s next? McHenry was the heir apparent heading into his reign as the panel’s top Republican, following the chairmanship of former Rep. Jeb Hensarling. But GOP lawmakers said the process of picking McHenry’s successor could be more contentious. It could also mean a more complicated committee relationship with Wall Street. "You're going to have an absolute melee on the Financial Services Committee," said Rep. Frank Lucas (R-Okla.), the panel’s most senior member. Rep. Blaine Luetkemeyer, a Missouri conservative who has long been one of the banking industry’s most prominent allies on the committee, is going for it and is likely the lead contender. He’s largely aligned with McHenry on policy, though he’s been notably less enthusiastic about crypto. Luetkemeyer said in an interview in October that if he were chair and Republicans controlled Washington: “You can do a lot of pulling back on some of the regulations.” One wrinkle with Luetkemeyer — more an awkward dynamic than a deal-breaker among GOP lawmakers – is that he was among the 147 Republicans who voted to overturn the 2020 election on Jan. 6, 2021. Some companies cut political contributions to that group, and committee watchers believe there could be lingering tension between Luetkemeyer and certain industry interests. One source close to the issue pushed back on potential Jan. 6 concerns: “Luetkemeyer being more aligned with Speaker [Mike] Johnson and the majority of Republicans across the U.S. is more important than liberal-leaning Wall Street execs” and it “might further cement his case for chair.” Other Republicans might also go for it. Lucas said he’s not ruling it out. Rep. Bill Huizenga of Michigan, a long-time committee leader on capital markets issues and more recently on oversight, said he’s interested. Rep. French Hill of Arkansas declined to comment, but the former banker and Treasury official has been eyed as a potential successor after serving this year as McHenry’s vice chair, his top deputy on crypto issues and a lead player on the panel’s response to March banking turmoil. Barr said he planned to file for reelection in the next couple weeks but also declined to comment on whether he'd be interested in McHenry's committee post. "That committee has an embarrassment of riches when it comes to talented lawmakers and potential leaders," House Budget Chair Jodey Arrington of Texas said. "That's going to be quite a competition." Happy Wednesday – What do you think of the Republicans vying to lead House Financial Services? Send thoughts and tips to Zach at zwarmbrodt@politico.com and Sam Sutton at ssutton@politico.com. A message from the Financial Services Forum: The nation’s largest banks are essential in today’s economy, providing loans to consumers and small businesses, and helping U.S. companies compete. Fed Chairman Powell said it best: “The large banks in the US are very strong, well-capitalized, with a lot of liquidity, and they've been a source of strength during the last few events.” However, a recent proposal would hinder banks’ ability to lend in an already uncertain economy. Don’t undermine a strong financial system.   Driving the day ADP job numbers for November are out at 8:15 a.m. … Big bank CEOs testify at Senate Banking at 9:30 a.m. … House Financial Services holds a hearing on housing affordability at 10 a.m. … House Ways and Means has a hearing on federal debt at 10 a.m. … Republican presidential contenders appear at the fourth GOP primary debate Bank CEOs on the Hill — The chief executives from eight of the largest U.S. banks will appear before Senate Banking this morning for Chair Sherrod Brown’s annual industry oversight hearing. Banks have prepared their executives to be hit with just about anything on the economy, ESG and DEI, the FDIC misconduct scandal and a long list of other topics. There’s one critical issue that the executives are on a mission to talk about at the hearing — one where, to the surprise of some lobbyists, Wall Street’s getting real political traction: The impact of proposed capital rules for big banks. The committee had a hearing last month where regulators faced a barrage of bipartisan concern about the potential economic drag. Republicans are planning to tee up the issue of regulatory burden. A spokesperson for the panel’s top Republican, Sen. Tim Scott, said GOP members expect to question the bank execs about the “downstream effects” of new rules including the planned hike in capital requirements. JPMorgan Chase CEO Jamie Dimon will tell the committee that the capital proposal “will have a harmful ripple effect on the economy, markets, businesses of all sizes and American households.” He’ll testify with the heads of Bank of America, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley, BNY Mellon and State Street. You can read their prepared statements here. Brown will kick off the hearing with a rebuttal. The proposal to beef up bank capital is intended to head off future bailouts, and Brown will remind the giant lenders that mistakes they make “affect the whole economy, and — as we all remember from 2008 and 2009 — they can certainly affect American taxpayers.” “Wall Street pours money into high-priced lobbyists to fight any effort to put the most basic guardrails on your ability to do whatever you want,” he’ll say, according to an excerpt of his opening statement. “And what your banks want is to maximize quarterly profits – the cost to everything and everyone else be damned.” Brown’s fellow populist Ohioan — the Republican Sen. J.D. Vance — may also have some uncomfortable points to make. “I always make the decision the morning of,” Vance told our Jasper Goodman. “But one of the things I am very interested in is why these banks have allowed the financial system to become so politicized.”   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.     Taxes SCOTUS may steer clear of wealth tax upheaval — Per Josh Gerstein and Brian Faler, the Supreme Court Tuesday sounded skeptical of a conservative-backed bid to block Congress from passing a tax on wealth. Conservative and liberal justices asked tough questions of a lawyer representing a couple who’s trying to throw out a repatriation tax on big companies’ overseas earnings. Economy Job openings fall to two-year low — The Labor Department said the number of available jobs at the end of October was the lowest since March 2021, the WSJ reports. Friday’s jobs report for November could provide more intel on how loose the labor market has become.   A message from the Financial Services Forum:   Artificial Intelligence Gary Gensler’s new warning — The SEC chair says companies should not “AI-wash,” Declan Harty reports. "When new trends come along, when new technologies catch the attention of the investing public, one does see that issuers may start to use words around those trends and those technologies. We saw this in the late '90s with the internet bubble," Gensler told reporters Tuesday. "Issuers should be thoughtful and careful to make sure they are doing things that are accurate and not misleading the public."   JOIN WOMEN RULE ON 12/12: For centuries, women were left out of the rooms that shaped policy, built companies and led countries. Now, society needs the creativity and entrepreneurship of women more than ever. How can we make sure that women are given the space and opportunity to shape the world’s future for the better? Join POLITICO's Women Rule on Dec. 12 for Leading with Purpose: How Women Are Reinventing the World to explore this and more. REGISTER HERE.     Markets Stock buyback rule stalls in court — The SEC’s stock buyback reporting rule is in limbo after the agency missed a deadline to address issues flagged by a court, per Declan. The rule is poised to be the first major reform from Gensler’s agenda to be struck down in a lawsuit. A message from the Financial Services Forum: The nation’s largest banks are essential in today’s economy, providing loans to consumers and small businesses, supporting underserved communities, and helping U.S. companies compete. In June 2023, Fed Chairman Powell said it best: “The large banks in the US are very strong, well-capitalized, with a lot of liquidity, and they've been a source of strength during the last few events.” Despite this strength, a recent Fed proposal would impose unnecessary new capital requirements that would drive up costs for American families and hinder large banks' ability to lend in an already uncertain economy. Let’s ensure our nation’s largest banks can continue to be a driving force behind economic recovery and prosperity in America. Don’t undermine a strong financial system.     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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