‘In our bones’: A UK leader hopes the US stays open

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Feb 15, 2024 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 Wall Street and London are financial market rivals in a global economy that’s being rattled by populism and protectionism. U.K. economic secretary Bim Afolami used his first official visit to Washington this week to try to promote trans-Atlantic ties as the U.S. and Britain brace for elections that could shake up the relationship. Afolami took on his role as the Sunak cabinet’s financial markets point person in November. He sat down with MM at the British ambassador’s residence in between meetings with CFTC Chair Rostin Behnam, Treasury Undersecretary Nellie Liang and the Securities Industry and Financial Markets Association. Part of Afolami’s mission was to address any lingering doubts about the U.K. post-Brexit. “Some of the work that I want to do here … is to make sure that people realize that all these terrible predictions in 2016, almost none of them came true,” he said. “The City of London is still very competitive and open to business.” One of the big topics he discussed in Washington: What the U.K. government is doing to improve London’s competitiveness, and the potential impact on the U.S. “There is always friendly competition because that’s natural in politics and life,” he said. “But fundamentally, it is not a zero sum. London’s success will often benefit American businesses that are in New York as well. … It’s important that we see London’s success and improved competitiveness, which we’re driving very hard toward, as complementary, not contrary, to New York and the U.S.” The other big topic was crypto. Afolami is eager to find ways to make the U.K. more of a destination for the digital currency industry. He expects Britain’s stablecoin regulations will be in place by the middle of this year. (U.S. lawmakers are still hashing out how to proceed on that issue.) “A few years ago, a lot of people were saying, don’t regulate this, you’ll legitimize this weird thing that’s strange,” he said. “That’s a wrong approach. You should regulate it. The responsible actors want to regulate it. If you shine a light on it, if you’re worried about bad actors, the rats will run away.” The U.K. is gearing up for a face-off between Afolami’s Conservative Party and Britain’s Labour Party, which has recently ramped up its pro-business pitch. Shadow Chancellor Rachel Reeves was part of Labour’s contingent in Davos this year. Reeves said last month that she would not reinstate a cap on bankers’ bonuses, arguing that Labour would champion the U.K. financial sector. In response, Afolami said, “The industry knows that we're the guys on our side of the house who really get it and over the long term can be trusted with it.” “I worked in the City of London. The chancellor ran a successful business. The prime minister was very successful in finance,” he said. “We have worked in these industries. We understand them. We understand the people. We are committed to making them successful.” On the U.S. election, Afolami tried to project a hopeful outlook when asked about any potential concerns with a further escalation in populism and protectionism. Chancellor Jeremy Hunt said last month that a return to U.S. protectionism would be a “profound mistake” when your MM host asked him about the possible election of former President Donald Trump and his plan for tariffs. Afolami said “election season in the U.S. can be very rough rhetorically but that doesn’t always bear out in policy.” He said he has faith there are people in both parties “who maintain broadly the right ideas, most of the time.” “I see with the European Union certain tendencies towards a protectionist direction,” he said. “I'm afraid it's not going to work there, either. The US and U.K. retain just that very deep understanding. It's in our bones the importance of that openness and [those] liberal with a small ‘l’ economic opportunities, and what that does to the prosperity of our two countries. And we've got to maintain that. Because political fashions come and go but essential economic truths remain. And I'm confident that whoever wins in November will recognize that.” Want more? Afolami also spoke with our POLITICO Tech podcast. It’s Thursday — Send tips to zwarmbrodt@politico.com.   CONGRESS OVERDRIVE: Since day one, POLITICO has been laser-focused on Capitol Hill, serving up the juiciest Congress coverage. Now, we’re upping our game to ensure you’re up to speed and in the know on every tasty morsel and newsy nugget from inside the Capitol Dome, around the clock. Wake up, read Playbook AM, get up to speed at midday with our Playbook PM halftime report, and fuel your nightly conversations with Inside Congress in the evening. Plus, never miss a beat with buzzy, real-time updates throughout the day via our Inside Congress Live feature. Learn more and subscribe here.     Driving the day House Financial Services has a subcommittee hearing on the Fed discount window and emergency lending at 10 a.m. ... Fed Governor Christopher Waller discusses the dollar’s international role at the Global Interdependence Center and University of the Bahamas conference in Nassau at 1:15 p.m. … House Financial Services has a subcommittee hearing on ways to address crypto AML concerns at 2 p.m. Janet Yellen’s inflation prediction — The Treasury secretary during a visit to Michigan told CBS Evening News: "Americans should feel confident that inflation will come down to levels that will no longer really be noticeable or worrisome to them.” Surprise recession — CNBC reports that Japan’s economy unexpectedly contracted again in the fourth quarter, as inflation squeezed domestic demand. Japan has the world’s fourth-largest economy. Carmakers hit China snag — The FT reports that thousands of Porsche, Bentley and Audi cars have been impounded in U.S. ports after a supplier to parent company Volkswagen found a Chinese component in the vehicles that breached forced labor prohibitions. Rosenberg lands at BofA — Liz Rosenberg, a top Treasury official who was key in the U.S. financial response to Russia’s invasion of Ukraine, will join Bank of America this month as a global financial crimes public policy executive, Katy O’Donnell reports. Regulatory Corner First in MM: Banks warn the Fed on debit revamp — The American Bankers Association and 52 state bankers groups urged the Federal Reserve in a new letter to withdraw its plan to lower the debit interchange price cap. They warned of “potentially severe” impacts on lenders and their customers. Barr downplays NYCB — Per Victoria Guida, Fed Vice Chair for Supervision Michael Barr indicated that recent alarm over New York Community Bancorp. isn’t a cause for broader concern. “A single bank missing its revenue expectations and increasing its provisioning does not change the fact that the overall banking system is strong, and we see no signs of liquidity problems across the system,” he said. Crypto Warren gets results in crypto lobby fight — A first reported by your MM host, former Rep. Sean Patrick Maloney is making a series of crypto-related ethics commitments to Sen. Elizabeth Warren (D-Mass.) as the Senate weighs his nomination to be ambassador to the OECD. Warren had raised concerns about his work advising Coinbase. If confirmed, Maloney committed to recusing himself from digital asset policy at the OECD and to refrain from crypto industry work for four years after leaving the post. In other Warren news, she may face a pro-crypto GOP challenger in her upcoming reelection campaign. John Deaton, a prominent crypto attorney, is looking to enter the race, our Lisa Kashinsky and Jasper Goodman report. Treasury official: Hamas crypto funding overstated — Per Jasper, Treasury Undersecretary Brian Nelson told lawmakers that Hamas has likely used smaller amounts of crypto than previous reports have suggested. The comment undercuts Wall Street Journal reporting that said the group raised tens of millions of dollars in digital assets. The reporting triggered fresh Washington scrutiny of the crypto industry after the Oct. 7 attack in Israel. Stay tuned: The Capitol Hill clash over crypto anti-money laundering safeguards will be the focus of a hearing this afternoon at House Financial Services. Witnesses include representatives of Coinbase and Circle.   YOUR GUIDE TO EMPIRE STATE POLITICS: From the newsroom that doesn’t sleep, POLITICO's New York Playbook is the ultimate guide for power players navigating the intricate landscape of Empire State politics. Stay ahead of the curve with the latest and most important stories from Albany, New York City and around the state, with in-depth, original reporting to stay ahead of policy trends and political developments. Subscribe now to keep up with the daily hustle and bustle of NY politics.      On the Hill Shell company crackdown gets partisan — Per Eleanor Mueller, House Republicans at a hearing with top Treasury officials bashed the department’s rollout of business ownership data collection rules designed to fight criminal activity tied to anonymous shell companies. Democrats defended the effort. More than 430,000 businesses have submitted reports since the rules went into effect at the beginning of this year, FinCEN Director Andrea Gacki told House Financial Services.   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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