Biden's next big bank problem

Presented by Electronic Payments Coalition: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy.

Oct 31, 2023 View in browser   By Jasper Goodman and Zachary Warmbrodt 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 President Joe Biden’s clean energy plan is facing an unexpected threat: banking regulators. Impending rules intended to bolster America’s big banks against risk would make it a lot more expensive for them to provide a key type of investment in things like wind and solar power. Renewable energy developers warn the push could derail Biden’s attempts to curb greenhouse gas emissions. Democrats are now scrambling to prevent a conflict between their goals of fighting climate change and shoring up big banks, Jasper reports in a new story. “The implication is a massive reduction in the amount of capital that’s available to decarbonize our energy system and make investments in cheaper energy assets,” Rep. Sean Casten (D-Ill.) told MM. The pushback is good news for Wall Street, which is running a full-court press to fight off the proposed bank capital rules and now has an ally in the renewables industry. Banking agencies appear to have received the message. The Federal Reserve’s Biden-appointed bank cop, Michael Barr, acknowledged the concerns in a speech at the American Bankers Association Annual Convention in Nashville, Tenn., this month. “We welcome all comments that provide the agencies with additional data and perspectives to help ensure the rules accurately reflect risk,” he said. The clash centers on certain types of investments that banks make in clean energy projects. Laws like the Inflation Reduction Act incentivize clean energy by offering tax breaks to developers. But because renewable energy developers often don’t have enough tax liability to fully use the subsidies they qualify for, they rely on partnerships with banks. Investors in the deals provide financing in exchange for tax credits and other benefits. The new rules would quadruple the capital that banks must have to back up investments involving the renewable energy tax credits, decreasing the financial benefit. Some big banks have started to warn developers that they would dramatically reduce their exposure to the tax credits if the capital hike takes effect. The American Council on Renewable Energy told the White House in a letter that the proposed rules “threaten to derail the clean energy transition.” Banks and clean energy advocates say the credits deserve an exemption. “There’s been no one on any side of this issue that has made an argument that the assets are risky,” said Casten, who co-chairs the Congressional Sustainable Investment Caucus. Happy Halloween — If you spot a Gremlin roaming the streets with a T-Rex and the Cookie Monster, take a chance and say hi to one of your MM hosts. Or just shoot an email: zwarmbrodt@politico.com.   A message from Electronic Payments Coalition: Don’t Buy What Mega-Retailers Are Selling About Durbin 2.0: Superstores like Walmart, Target, and Home Depot are pushing for legislation that's essentially corporate welfare at the expense of consumers. They're seeking new government mandates on credit card routing, which may appear harmless but would jeopardize YOUR data security and fraud protection, rewards for everyday purchases, and the convenience of using credit cards. Congress: reject the Durbin credit card interchange bill. Click HERE to get the facts.   Driving the day The FOMC begins its two-day monetary policy meeting. … The Senate plans to vote on former Treasury Secretary Jack Lew’s nomination as ambassador to Israel Biden to revive Obama fiduciary rule — The Biden administration on Tuesday plans to propose rules for retirement investment advisers to ensure they base their decisions on a client’s best interest, returning to an Obama-era policy that ran into trouble in the courts, Nick Niedzwiadek and Declan Harty report. This is the third rewrite of the rules on investment advice in as many administrations. First in MM: Republicans press bank regulators on mergers — Reps. Andy Barr (R-Ky.) and Scott Fitzgerald (R-Wis.) are urging the leaders of the Fed, FDIC and OCC to speed up bank merger reviews, Eleanor Mueller reports. The lawmakers in a letter today will tell the officials they’re concerned about delays in prospective mergers “with little transparency into what problems need to be addressed.” They want the agencies to respond with proposals that would provide “greater clarity and timeliness” in the M&A review process for banks. Treasury cuts borrowing target — Bloomberg reports that the Treasury Department reduced its estimate for how much the federal government will need to borrow this quarter, providing some relief to investors concerned about the deficit. Treasury cut its borrowing estimate to $776 billion from $852 billion, putting it below many forecasts. The projection would still be a record amount for the quarter. Durbin, Marshall target airline rewards — Sens. Dick Durbin and Roger Marshall, who are trying to crack down on credit card fees, asked CFPB Director Rohit Chopra and Transportation Secretary Pete Buttigieg what they’re doing to protect consumers when it comes to airline frequent flyer and loyalty programs. Electronic Payments Coalition executive chairman Richard Hunt, who is leading efforts to fight Durbin and Marshall's credit card bill, slammed the letter and called it an attempt to "weaponize" the government against the legislation's opponents.   The World Strategic Forum (WSF) is taking place on November 6-7th in Miami, Florida at the Biltmore Hotel Coral Gables. WSF 2023 will discuss ‘Mastering the New Economy’, examining the ways in which business and society can thrive despite current economic and environmental challenges. The conference will gather 100+ speakers from companies including Volkswagen, Siemens and C3.ai, as well as U.S. Senator for Tennessee Bill Hagerty; Florida’s Chief Financial Officer Jimmy Patronis; Former President of Colombia Iván Duque Márquez and Former President of Ecuador Jamil Mahuad. Learn more and register now at www.worldstrategicforum.com.     Economy End in sight for UAW strike — The United Auto Workers struck a tentative deal with General Motors, meaning all three of the major automakers now have a draft agreement to resolve their nearly seven-week walkout. Per the WSJ, the deals are a big win for the union but will push the companies’ labor costs higher than initially expected when talks began. Biden preps student debt relief — The Education Department revealed proposals for canceling student debt, after the Supreme Court struck down the administration’s first attempt at mass loan forgiveness. The department also disclosed that one of its contracted loan servicing companies failed to send timely billing statements to 2.5 million borrowers, resulting in hundreds of thousands of borrowers missing their payments.   A message from Electronic Payments Coalition:   Artificial Intelligence Read the full EO – MM previewed the finance-related tidbits Monday, and now you can peruse the whole document. Out Brendan Bordelon reports that key provisions of the order “seem tailor-made to appease various factions in the AI landscape.” POLITICO EU’s Mark Scott, with the global view, reports that Western governments are scrambling to project themselves as leaders in the AI race. “Many EU, U.K. and U.S. officials who spoke with POLITICO were eager to play up how democracies were pulling in the same direction. But several of them still took petty potshots at their counterparts in other jurisdictions, either for not legislating quickly enough or for failing to promote innovation.”   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.     Climate Maxine Waters writes to Gary Gensler – Eleanor reports that the House Financial Services ranking member warned the SEC chair against scaling back planned climate disclosure requirements, after he hinted at potential changes last week. Waters urged Gensler in a letter to "quickly" finalize the rule without abandoning a mandate for companies to disclose their so-called Scope 3 emissions, which cover climate impacts throughout their supply chains. She also asked Gensler to include attestation requirements and transition plan disclosures. Cannabis Tokelahoma, USA — Our cannabis editor Paul Demko has a look at an unexpected problem facing the Sooner State: It’s producing so much weed that it’s impossible to make any money. “Oklahoma has become a cautionary tale over the past five years for the country’s experiment with marijuana legalization. Many of the problems that have plagued fledgling markets across the country are magnified in the staunchly conservative state.”   A message from Electronic Payments Coalition: Don’t Buy What Mega-Retailers Are Selling About Durbin 2.0: FACT: Accepting Credit Cards Costs Merchants ~2%, But Leads to Increased Sales and is Cheaper Than Handling Cash Data shows that credit card interchange is NOT among small businesses' top expenses. The average small business pays for rent, wages and benefits, taxes, advertising, inventory, utilities, insurance, and cost of managing cash – one of the very smallest costs, at ~2%, is accepting credit card payments. Handling cash, on the other hand, costs merchants as much as 15%. Congress: reject the Durbin credit card interchange bill. Click HERE to get the facts.     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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