Bankers brace for a new sheriff

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Jul 11, 2024 View in browser   By Declan Harty and Michael Stratford 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 If President Joe Biden’s pick to head a top bank regulator talks like a cop and walks like a cop, she’s probably going to be a cop – and that’s making some bankers nervous. Christy Goldsmith Romero, nominated to lead the embattled Federal Deposit Insurance Corp., made her name in Washington as the watchdog for the massive bank bailout after the financial crisis, leading a scrappy agency of roughly 150 people who pursued bankers and Wall Street traders for fraud. Later this morning at her Senate confirmation hearing, Goldsmith Romero will vow to clean up an FDIC that has been reeling for months over revelations of a troubled and toxic workplace that led longtime Chair Marty Gruenberg to announce in May that he’d step down once a successor is confirmed. Goldsmith Romero will pledge “a complete overhaul of the FDIC’s workplace culture” to address “deep-seated cultural issues that have caused pain for many employees,” according to her prepared testimony. “It must not continue, and I would bring accountability.” Those workplace issues are likely to be front and center in the Senate Banking Committee hearing. But as lawmakers weigh Goldsmith Romero’s nomination, they’re also looking at someone with a record that suggests she’s gearing up to take on the banking industry itself. Her history is stirring concern among some bankers that the FDIC may be on the brink of a new enforcement-heavy era. As the special inspector general for the Troubled Asset Relief Program for 12 years, Goldsmith Romero teamed up with U.S. attorneys offices to build cases against the industry, leading to charges against more than 450 people and the recovery of $11 billion of taxpayer money. She sparred with Obama-era Treasury officials over access to bailout information and publicly castigated regulators for failing to spot financial crimes. And she pitched Congress on tougher laws against high-level bank executives and creating a new agency to police fraud. “She’s very long in enforcement experience and very short in banking experience,” said Cam Fine, the former head of Independent Community Bankers of America, which represents small lenders. Veteran banking lobbyist Ed Hill told MM that “many folks have concerns” about Goldsmith Romero policing the financial industry. “The FDIC historically hasn’t been an enforcement agency the way SIGTARP is or the CFTC,” where Goldsmith Romero is currently a commissioner, said Hill, a partner at Forbes Tate who previously worked for Bank of America and at a top industry lobbying group. “They are a supervisory agency with enforcement powers, and someone who comes in with an enforcement approach is certainly going to raise questions for the industry.” Goldsmith Romero’s backers see her experience as an enforcer and reformer as a highlight that will be much needed at the FDIC. “It might be the right person at the right time,” said one financial regulatory official, who was granted anonymity because they are not authorized to speak publicly. “Not just for the internal restructuring and clean slate you’re going to have to do internally at the FDIC, but, in a post-Chevron world, I do think you’re going to see enforcement and supervision in litigating these things as more important than maybe they were in the past.” Despite the alarms, Goldsmith Romero is not lacking support from the business community. The worlds of financial technology and cryptocurrency have thrown their weight behind her candidacy for the FDIC, as our colleague Zach Warmbrodt reported earlier this week. And the Digital Chamber, a trade group that represents crypto companies, sent a letter saying Goldsmith Romero’s nomination “signals a much-needed focus on digital assets.” Lawmakers have mostly signaled support for Goldsmith Romero. A wide range of Democrats, including Senate Banking Chair Sherrod Brown of Ohio, Sen. Elizabeth Warren of Massachusetts and Sen. John Fetterman of Pennsylvania, have cheered her selection since the White House’s announcement last month. She’s also won tentative praise from more moderate corners of the party, including Sen. Jon Tester of Montana. Sen. Mark Warner told our Eleanor Mueller that he plans to introduce Goldsmith Romero, a fellow Virginian, at the hearing on Thursday. So far, only one Republican — Sen. Bill Hagerty of Tennessee — has publicly criticized the pick. Republicans on the Senate Banking panel are planning to focus on the fallout from the FDIC workplace scandal and scrutinize whether Goldsmith Romero and other nominees “will stay true to the important mandates of our financial regulators or follow in the administration’s footsteps to pursue a liberal agenda outside the scope of their authority,” a spokesperson for Ranking Member Tim Scott said in a statement. Sen. John Kennedy of Louisiana, who has called for legislation to make it easier for former FDIC employees to sue the agency, told Eleanor that he wants to hear how Goldsmith Romero plans to “clean up the mess” at the agency and whether “she’s gonna fire somebody.” IT’S THURSDAY. You can ping Declan at dharty@politico.com and Michael at mstratford@politico.com. As always, you can find our usual MM host, Sam Sutton, at ssutton@politico.com and @samjsutton.   A message from the Electronic Payments Coalition: GUARD YOUR ACCESS TO CREDIT: AMERICANS LOSE WHEN POLITICIANS CHOOSE Local credit unions and community banks serve an essential role in supporting Main Street. So, when credit unions and community banks in all 50 states oppose the Durbin-Marshall Credit Card Bill, Congress should pay attention. Durbin-Marshall lines the pockets of corporate mega-stores by shifting costs and risks to credit unions, community banks, and their 135 million customers. Take action now to GUARD YOUR CARD!   Driving the day Senate Banking will hold a hearing at 10 a.m. on the nominations of Goldsmith Romero for FDIC chair; Caroline Crenshaw to be SEC commissioner; Kristin Johnson to be assistant Treasury secretary; and Gordon Ito to be a member of FSOC. … The Senate HELP Committee will hold a hearing on medical debt at 10 a.m. … Alanna McCargo, president of the Federal Home Loan Bank of San Francisco, will speak at an Urban Institute event on racial disparities in homeownership at 2 p.m. All eyes (stay) on Biden — President Joe Biden’s attempts to quell the Democratic panic over his candidacy did not appear to land Wednesday, as a new drumbeat of lawmakers questioned his viability against former President Donald Trump come November. Now, the president is set to deliver what will be his next test: “a rare NATO-themed press conference,” our colleagues Isabella Ramírez, Jared Mitovich, Lauren Egan, Jonathan Lemire and Anthony Adragna report. “Another poor performance from the president would reaffirm fears among Democrats that Biden doesn’t have the stamina or mental acuity to run for president,” they report. On Wednesday evening, Sen. Peter Welch of Vermont became the first Democratic senator to publicly press Biden to withdraw from the race. White House eyes next CFTC commissioner — Biden is expected on Thursday to name OMB official Julie Siegel for a commissioner seat at the CFTC, Meredith Lee Hill scoops. Siegel previously worked as deputy chief of staff at Treasury and as a banking and economic aide to Sen. Warren. Her nomination would likely be for one of two seats at the derivatives regulator that may soon be up for grabs, pending Goldsmith Romero’s and Kristin Johnson’s respective nominations to the FDIC and Treasury. Buyback restrictions in CHIPS program — In a report out this morning, the Institute for Policy Studies and the Americans for Financial Reform Education Fund argue that the Biden administration needs to pursue “explicit restrictions on all stock buyback spending in the final CHIPS subsidy contracts,” according to a statement from the groups. “With such strong pressure from Wall Street to use stock buybacks to boost share prices, the federal government must lay down a firm line against potential abuse,” the groups said, noting that more than $41 billion was dropped on buybacks between 2019 and 2023 by computer chip companies that are currently in store for $30 billion in subsidies.   Understand 2024’s big impacts with Pro’s extensive Campaign Races Dashboard, exclusive insights, and key coverage of federal- and state-level debates. Focus on policy. Learn more.     CRYPTO CORNER Closed-door crypto confab: White House senior adviser Anita Dunn said she had a “good and blunt” discussion Wednesday with critics of the administration’s approach to cryptocurrency, Eleanor and Jasper Goodman report. The private meeting was organized by Rep. Ro Khanna (D-Calif.) and featured prominent industry representatives and advocates, including billionaire Mark Cuban, a Biden supporter who has blasted the administration’s digital assets policies. “There were people who were listening and there were a lot of smart people from the crypto industry who communicated," Cuban said in an interview. "Hopefully that leads to some action items." House delays crypto veto override vote — The House on Wednesday postponed a vote on overriding a presidential veto blocking Congress from undoing an SEC cryptocurrency policy, Jasper reports. The override vote was slated for Wednesday afternoon, but the chamber punted its final votes of the day to Thursday after procedural motions forced it to begin debate on a resolution to hold Attorney General Merrick Garland in contempt of Congress. More Hill crypto action: Senate Agriculture Chair Debbie Stabenow said Wednesday she wants to circulate text of her cryptocurrency regulation bill this week, even as she faces doubts from her committee's top Republican, Eleanor reports. Meanwhile, CFTC Chair Rostin Behnam is dialing up his campaign for new powers to police the cryptocurrency industry. As Declan reports, Behnam warned lawmakers Wednesday about the perils of the current piecemeal approach to the more than $2 trillion market and called for a comprehensive legislation. Trump’s latest crypto play — Trump is making yet another crypto play, this time at the bitcoin2024, according to the website for the purportedly “world’s largest bitcoin conference.” Other speakers include ARK Invest’s Cathie Wood, Russell Brand and Robert F. Kennedy Jr.   A message from the Electronic Payments Coalition:   On the Hill Senate deal on stock-trading ban: A bipartisan group of senators unveiled legislation Wednesday aimed at barring members of Congress and other elected officials from trading stocks while in office. The bill would immediately ban members of Congress, the president and vice president from buying and selling individual stocks. Those elected officials and their spouses would have until 2027 to divest individual stocks they already own. Sen. Gary Peters (D-Mich.), chair of the Homeland Security and Governmental Affairs Committee, said his panel would vote on the measure at a July 24 markup. Peters and Sens. Jon Ossoff (D-Ga.), Jeff Merkley (D-Ore.) and Josh Hawley (R-Mo.) are co-sponsoring the bill.   SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, our newsletter taking you inside pivotal discussions at the most influential gatherings in the world. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW.     At the regulators ‘A rule or guidance’ — From Victoria Guida: “Federal Reserve Chair Jerome Powerll on Wednesday said regulators are not obligated by the Dodd-Frank Act to issue a formal rule to prohibit compensation plans that encourage excessive risk-taking at financial firms.” “It does not require a rule,” Powell told lawmakers. “A rule or guidance.” CFPB moves to codify pandemic-era restrictions — The Consumer Financial Protection Bureau on Wednesday proposed to restrict how mortgage servicing companies can deal with borrowers lagging on payments, Katy O’Donnell reports. More coming from CFPB — Director Rohit Chopra said Wednesday that the CFPB plans to finalize an open banking rule by October, Katy also reports. The proposal, issued last year, is aimed at making it easier to switch banks. Banks want watchdog investigation into FDIC — From Michael: “The Bank Policy Institute is asking a federal watchdog to investigate the Federal Deposit Insurance Corp.’s handling of the spring 2023 bank failures, including how it decided to stick the industry with the bill.” In the Courts Hwang guilty — Archegos Capital Management founder Bill Hwang, whose investment firm’s collapse in 2021 shook Wall Street banks, was found guilty on fraud charges tied to what prosecutors called “a massive market manipulation scheme,” Declan reports.   A message from the Electronic Payments Coalition: CONGRESS: OPPOSE THE DURBIN-MARSHALL CREDIT CARD BILL Credit cards are a staple for millions of Americans, providing secure payments, fraud protection, and valuable rewards helping to pay for everyday purchases. The Durbin-Marshall Credit Card Bill threatens to dismantle these benefits, forcing our credit cards onto untrusted networks. Mega-stores like Walmart and Target stand to gain billions, while Americans lose the convenience, security, and rewards millions of hardworking families rely on to pay for everyday purchases. Congress: oppose the Durbin-Marshall Credit Card Bill. Learn more and GUARD YOUR CARD!     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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