The surprising split over Biden's Fed nominees

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Jan 31, 2022 View in browser   By Kate Davidson and Aubree Eliza Weaver 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. President Joe Biden's pick to be the Federal Reserve's top Wall Street cop is dividing Big Banks and Big Oil. Sarah Bloom Raskin, who served as a Fed governor and as deputy Treasury secretary during the Obama administration, is well-known to financial institutions and widely respected. Sure, she's a more progressive candidate than the banks would pick if they had their druthers, industry sources have told MM. But she's viewed as pragmatic and a known quantity — much preferred over someone they don't know — who will hear them out and understands the issues, even if she takes a different view. (Raskin would likely take a tougher stance than her predecessor on merger approvals, stress tests and climate oversight, analysts have said.) The Institute of International Bankers on Friday said Raskin's experience "demonstrates her intellect, qualifications, and commitment to transparency and integrity." (That followed earlier supportive statements from leaders of the Financial Services Forum and American Bankers Association.) Bottom line: Wall Street isn't coming out swinging against her nomination.  The energy industry is a different story. Forty-one oil and gas trade groups sent a joint letter to the Senate Banking Committee Friday urging them to reject Raskin's nomination , calling her an activist and saying her "favored policies would wreak havoc with the economy." (The American Petroleum Institute, one of the largest oil and gas trades, did not sign the letter and has declined to take a position on Raskin's nomination, though CEO Mike Sommers has said he has "major concerns about the Fed going beyond its dual mandate" on climate-related supervision.) That letter followed a rare missive Thursday from the U.S. Chamber of Commerce, which urged the committee to question Raskin over her calls for the Fed to exclude oil and gas firms from pandemic lending programs, and for regulators to speed up the transition to fossil fuels. So far, that message seems to be carrying more weight with committee Republicans, including Sen. Pat Toomey (R-Pa.), who has warned that Raskin will "choke off credit" to traditional energy firms. Whether that will influence moderate Democrats with energy-heavy constituencies, such as Sen. Joe Manchin (D-W.Va.) or Sen. Jon Tester (D-Mont.), remains to be seen. The committee will meet Thursday to consider Raskin's nomination, as well as the president's two other Fed picks, economists Lisa Cook and Philip Jefferson. Ready for battle — What's clear is that Democrats and supporters of the president's nominees are much better prepared to play defense — on all of the Fed picks — than they were during the nomination battle over Saule Omarova, Biden's choice to lead the Office of the Comptroller of the Currency, who ultimately withdrew. The White House lined up prominent economists on the left and right, including former officials from the George W. Bush and Trump administrations, to vouch for the picks before the president's announcement. Dozens of other economists last week tweeted out messages endorsing Cook after some opponents questioned her credentials for the job. The National Economic Association, a caucus of Black economists, issued a statement Sunday supporting Cook and Jefferson, both of whom are past presidents of the organization. Today, Better Markets is releasing a 13-page memo , shared first with MM, that compares statements on climate change from Fed Chair Jay Powell, former Vice Chair Randal Quarles and financial industry executives to comments from Raskin, and argues that her views on climate risk are "fully aligned" with the others'. They accuse critics of distorting Raskin's views by cherry picking them and taking them out of context — including Toomey's claim that Raskin has said the Fed should pressure banks to choke off credit to traditional energy companies. (Raskin said the Fed should incentivize a rapid and orderly transition away from fossil fuels, "for example, by considering whether high-emission assets will require limits in order to keep them from creating unsafe and unsound conditions to the financial institution that holds them," according to the memo.) "Raskin has been clear that she will focus on the Fed's legal mandates to ensure safety and soundness, financial stability and risk identification and mitigation, regardless of the source, just like Chair Powell and former Vice Chair Quarles," the memo said. Expect the messaging battle to heat up this week ahead of Thursday's hearing. IT'S MONDAY — Wishing we were still curled up by the fire with a good book. (The only way to spend a frigid weekend, blizzard or no blizzard.) But enough of that! We've got Fed nominations and Jobs Day this week. What else do you want to read about? Email us: kdavidson@politico.com, or aweaver@politico.com, or find us on Twitter: @ katedavidson or @ aubreeeweaver.   DON'T MISS CONGRESS MINUTES: Need to follow the action on Capitol Hill blow-by-blow? Check out Minutes, POLITICO's new platform that delivers the latest exclusives, twists and much more in real time. Get it on your desktop or download the POLITICO mobile app for iOS or Android. CHECK OUT CONGRESS MINUTES HERE.     DRIVING THE WEEK House Financial Services subcommittee hearing on challenges serving people experiencing homelessness Wednesday … Senate Commerce votes on nominations of Jed Kolko to be Commerce undersecretary for economic affairs and Alvaro Bedoya to be a Federal Trade Commission member Wednesday … Brookings Institution virtual discussion on fintech in Black-majority communities Wednesday … Senate Banking hearing on Fed nominees Raskin, Cook and Jefferson Thursday … House Financial Services subcommittee hearing on financial barriers to women- and minority-owned businesses Thursday … Bipartisan Policy Center hosts a virtual discussion with FDIC Chair Jelena McWilliams Thursday … Financial Stability Oversight Council meeting Friday. A WORD ON WAGES — MM reader David Lewis, CEO of HR consulting firm OperationsInc, emailed about Friday's newsletter, which discussed how wage pressures could feed into inflation this year: "We can say with certainty that wages are rising and that this is NOT something that may show up later in 2022. It is here now, and at all levels: Higher average increases in annual compensation cycles in December/January. Candidates asking for more in compensation than firms were prepared to offer, resulting in sign-on bonuses and, for some, the mistake of paying it and blowing up internal compensation programs in the process. "'Pay to get the talent' is winning out over 'hold your ground' (which also means you now have that gaping hole on your team even longer)," he adds. Inflationary concerns that have dogged the president's agenda are likely to linger at least into the second half of the year, our Victoria Guida and Adam Cancryn report. Roughly half of Americans say inflation is causing hardship for their families, according to a recent Gallup poll. CRYPTO IS COMING FOR THE SEC — Our Sam Sutton: "In 2021, the SEC went after crypto. In 2022, crypto is coming for the SEC. "Securities and Exchange Commission Chair Gary Gensler has vowed to rein in what he's dubbed "Wild West" abuses in the $1.6 trillion market. Industry leaders, flush with cash and deep-pocketed investors following a trading boom in Bitcoin and other digital assets, are aiming their lawyers at the sheriff of Wall Street in an intensifying legal fight." BIDEN ALLY TAKES OVER ONE OF BBB'S MAIN OPPONENTS — Our Hailey Fuchs: "For months, the Business Roundtable has been a thorn in the side of the Biden administration as it spent millions to lobby Washington, including a push to kill the president's chief piece of domestic policy legislation. But Democrats are hoping that things might be looking up. "That's because the new head of the Business Roundtable — a nonprofit association of the nation's top CEOs — has been a public supporter of the Build Back Better bill. Earlier this year, General Motors CEO Mary Barra took the helm of the Business Roundtable, just as her company was arguing that BBB 'puts the country on the path toward addressing important issues.'" DEAL ON RUSSIA SANCTIONS BILL LIKELY THIS WEEK, SENATORS SAY — "'I would describe it as that we are on the one-yard line ," Sen. Bob Menendez, the Democratic chair of the Senate Foreign Relations Committee said on CNN's "State of the Union," Reuters' Doina Chiacu reported. WALL STREET'S GREEN PUSH EXPOSES NEW CONFLICTS OF INTEREST — WSJ's Jean Eaglesham: "The booming business of green finance is being led by an unlikely group of companies that sits at the heart of the financial system. "The giant firms that audit the books, rate the bonds, advise on proxy voting and categorize the world's companies are spending billions to boost their climate-related operations. That could accelerate the shift away from fossil fuels but could also create a new set of conflicts of interest for industries that struggled to manage them in the past. CHINA SECURITIES REGULATOR MET FOREIGN BANKS TO SOOTHE ECONOMIC CONCERNS — Reuters' Yu Xie and Selena Li: "The China Securities and Regulatory Commission (CSRC) met [last] week with executives at top western banks and asset managers to reassure them about the country's economic prospects after regulatory crackdowns in 2021, three people with direct knowledge of the matter said on Friday … "Senior executives from firms including BlackRock, Credit Suisse, Fidelity International, Goldman Sachs, JPMorgan, Morgan Stanley and UBS attended the meeting, said two of the sources." YELLEN TO PARTICIPATE REMOTELY IN FEBRUARY G20 MEETING — Reuters: "U.S. Treasury Secretary Janet Yellen will participate in a February meeting of the G20 remotely because of a rise in the Omicron variant of the coronavirus, the U.S. Treasury Department said in a statement. The secretary will attend virtual sessions with her counterparts as well as hold bilateral meetings to discuss the world economy, taxation reform, and the need to boost COVID vaccinations."   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Fly Around STOCK MARKET JITTERS DON'T ENDANGER ECONOMY YET — WSJ's David Harrison: "The past few weeks of stock market turmoil don't mean the economy is about to be derailed , but rather that the recovery is maturing and no longer needs low interest rates, economists and Federal Reserve officials say. "While the economy's rebound from the pandemic-induced recession in spring 2020 has been strong, the stock market's has been spectacular. Between its trough in March 2020 and its all-time high Jan. 3, the S&P 500-stock index soared 114 percent. Now, despite the economy growing more in 2021 than at any time since 1984, the S&P 500 index is down about 8 percent from that peak." INFLATION, DEFICITS DON'T DIM THE APPEAL OF U.S. BONDS — NYT's Talmon Joseph Smith: "Markets have been in upheaval. The Federal Reserve is taking steps to cool off the economy, as questions loom about the course of the recovery. And headlines are proclaiming that government bond yields are near two-year highs. But the striking thing about bonds isn't that yields — which influence interest rates throughout the economy — have risen. It's that they remain so low. TRADERS' EMERGING STOCK DREAMS ARE DASHED BY LATE JANUARY CURSE — Bloomberg's Srinivasan Sivabalan and Farah Elbahrawy: "Investors betting emerging-market stocks will best U.S. equities this year have stumbled at the first hurdle. Traditionally, the fourth week of January is when the market punishes investors who bet the trend in the opening days of the year will continue, and 2022 is proving no exception. Developing-nation equities just had their worst week since August after their strongest showing relative to the S&P 500 Index since 1990 in the previous three weeks."   Follow us on Twitter Mark McQuillian @mcqdc Kate Davidson @KateDAvidson Aubree Eliza Weaver @aubreeeweaver Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary   Follow us

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