| | | | |  | | By Sam Sutton | | | 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. SEC Chair Gary Gensler is aware that his bid to reshape markets has detractors. The regulator’s ambitious plan to force public companies to disclose climate risks, rearrange the stock market’s plumbing, shake up private equity funds and browbeat crypto firms into compliance with U.S. securities laws have elicited no shortage of legal threats and angry letters from lawmakers and industry groups. The letters can cause headaches. But lawsuits threaten to undermine the 65-year-old Gensler’s legacy as the type of progressive who decorates his office with pictures of working class families and Ellis Island (a large print of the famed Lewis Hine photo, in fact). In an interview with Declan Harty and your MM hosts this week, he referred to the American public as his agency’s “clients” more than once. Those touches don’t mean much when complex regulatory overhauls of multitrillion-dollar markets are at stake. And as SEC staff comb through thousands of public comments on some of Gensler’s most ambitious proposals, he said that whatever versions make it across the finish line will be tailored to survive any legal challenge. “It doesn’t protect investors, promote capital formation, promote efficiency, if we have a rule overturned in court,” Gensler said. Here’s more from our conversation with Gensler: On the climate rule: “This project [has] really been about trying to bring some consistency to what’s already happening: Climate risk disclosure that hundreds of, if not well over a thousand, companies are already making.” On how competition informs rulemaking: “Every single rule that we work on, we have to focus on competition — that's a congressional mandate. But broadly, the equity market and how to drive greater competition. We haven’t updated that rule set in 17 years. So [we’re] trying to level the playing field more between what's called the dark market and the lit markets, drive greater competition and efficiency in this $25 trillion private funds marketplace that the endowments and pension funds and retirement funds on the one side get the benefit of that competition and through greater transparency, but also in the U.S. Treasury market. The U.S. Treasury market, we have four or five rules outstanding — it's about resiliency, but it's also about competition.” On the emergence of AI and predictive analytics in financial services: “There’s a lot significantly going on in our financial system around the use of data and the like. But we look forward to working with members of Congress, both House and Senate, if they are considering legislative initiatives and supporting that where we can.” On who he trusts in the crypto industry: “What’s your next question?” IT’S THURSDAY — We trust you, dear readers (we also verify). Have tips, gossip or scoops? Let Sam know at ssutton@politico.com and Zachary Warmbrodt at zwarmbrodt@politico.com.
| | | | A message from the Electronic Payments Coalition: CONVENIENCE STORES, NOT CREDIT CARDS, ARE RAISING COSTS FOR CONSUMERS: Corporate convenience store chains and their special interest allies are trying to trick Congress into believing that interchange rates on credit card transactions are increasing. The truth: it’s exactly the opposite. Over the last decade, retailers and merchants have received billions of dollars due to the Durbin Amendment—but haven’t lowered prices for consumers as they promised. Learn more. | | | | | | President Joe Biden will release his annual budget proposal later today … Fed Vice Chair for Supervision Michael Barr will discuss crypto at a Peterson Institute event at 10 a.m. … House Financial Services subcommittees will hold separate hearings on capital formation and the CFPB at 10 a.m. The digital assets subcommittee will meet to discuss the crypto crackdown at 2 p.m. … Rep. Tom Emmer (R-Minn.) will talk central bank digital currencies at a Cato Institute panel at 1 p.m. … The SEC has a closed meeting at 2 p.m. CFPB ON THE HOT SEAT — House Republicans will take their first swing at overhauling the Consumer Financial Protection Bureau in a hearing chaired by Rep. Andy Barr of Kentucky later this morning. The docket includes Barr’s bill to subject the bureau to the appropriations process — an issue that will be considered by the Supreme Court — and convert the CFPB into an independent, five-member commission. Barr, a longtime critic of the bureau, labeled the CFPB ““the most unaccountable and authoritarian agency in the entire federal bureaucracy” in a statement on Wednesday. Progressive watchdogs and allies of CFPB Director Rohit Chopra, including Americans for Financial Reform and the AFL-CIO, fired off letters defending the consumer finance regulator as vital to keeping “financial markets fairer and more transparent,” according to a letter shared exclusively with MM. — The CFPB doesn’t seem to be slowing down. Our Katy O’Donnell: “The CFPB on Wednesday signaled further action is coming to rein in the fees that lenders charge consumers, as part of the Biden administration’s broader effort to crack down on so-called junk fees.” WERFEL CONFIRMATION — Our Brian Faler: “The Senate is poised to confirm President Joe Biden's pick to head the IRS after he cleared a key procedural hurdle, but it postponed a final vote until Thursday.” BUYBACK NONE THE RICHER — One of the biggest revenue raisers in Biden’s budget proposal would quadruple a new tax on share buybacks. While corporate America shrugged at the 1 percent levy that went into effect this year — companies continued to pay out shareholders with repurchases at a very healthy clip during the first two months of the year — Biden’s bid to raise the tax to 4 percent has gotten pushback from the likes of Warren Buffett, who labeled the wholesale rejection of buybacks the work of “an economic illiterate or a silver-tongued demagogue” in his most recent annual letter to Berkshire Hathaway shareholders. Regardless if Congress moves ahead with a new buyback tax, “rising interest rates, and the prospect of a recession could negatively impact repurchase activity,” LPL Research’s Adam Turnquist wrote in a recent research note. — Also in the budget? “A series of new tax increases on billionaires, rich investors and corporations,” write Bloomberg’s Laura Davison and Justin Sink. — Also: Biden will pitch “lower drug prices, raising some business taxes, cracking down on fraud and cutting spending he sees as wasteful,” writes The WSJ’s Andrew Restuccia, Richard Rubin and Stephanie Armour. ANOTHER WRINKLE FOR POWELL — The Bureau of Labor Statistics on Wednesday reported that job openings fell to 10.8 million in January as layoffs and firings climbed. While that’s a sign the labor market could be cooling – something the Federal Reserve is monitoring closely as it weighs more rate hikes – the number of openings is still near record highs.
| | | | A message from the Electronic Payments Coalition:   | | | | | | CRYPTO KILLS A BANK — Silvergate Bank announced Wednesday afternoon it would shut down after sustaining a series of body blows from the collapse of exchange FTX. The La Jolla, Calif.-based bank, whose payments network had been a payments hub for crypto businesses like Coinbase and Circle, was forced to take out a Federal Home Loan Bank loan after its deposits plummeted. Crypto clients raced for the exits as its finances teetered and regulators circled. “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” Silvergate said in a statement. Silvergate marks the first bank failure since the early days of the pandemic, according to FDIC records. Sen.Elizabeth Warren (D-Mass.), who’d been leading a bipartisan probe of Silvergate, called its failure “disappointing, but predictable.” Coinbase exec: McHenry fixes this – Zach spoke with Coinbase chief legal officer Paul Grewal before his appearance tomorrow at the first hearing of the new House Financial Services digital assets subcommittee. Coinbase wants Congress to revamp how crypto is regulated in the U.S., and Grewal sees House Financial Services Chair Patrick McHenry as the right man to lead the charge. “Chairman McHenry has invested many, many, many hours of personal time and study to understand these issues,” Grewal said. “He is deeply engaged in the policy in addition to the politics. We’re confident whatever set of standards he may propose are going to reflect not only market realities but the need to protect consumers and keep investors safe.” McHenry’s plan — McHenry and other committee Republicans have started to float a handful of pro-crypto bills — one basically says Congress likes blockchain — but Eleanor Mueller reports that they have more ambitious plans. “We’re working on a comprehensive regulatory framework that goes beyond the bills,” digital assets subcommittee Chair French Hill (R-Ark.) told Eleanor. “We’re going to spend March and April in a significant effort on listening to stakeholders in the digital assets arena [and] considering other legislative proposals. So that’ll be our principal work plan for the next two months.” They’re not the only ones — Our Declan Harty: “Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) plan to release a new draft of their sweeping cryptocurrency legislation in April.” CRYPTO OVERSIGHT — More from Eleanor: “The SEC has yet to meet House Republicans' demands for documents related to the arrest of former FTX CEO Sam Bankman-Fried, a lawmaker leading the inquiry said Wednesday.”
| | | | 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. | | | | | | | | CFTC EYES THIRD PARTY OVERSIGHT AFTER CYBERATTACK — More from Declan: “Five weeks after a ransomware attack at a Dublin-based technology company called ION Markets rattled trading around the world, [CFTC Chair Rostin] Behnam told lawmakers on Wednesday that the CFTC needs to get a better handle on such third-party service providers. It's a segment of the derivatives markets that he said is heavily used by companies for their technology needs and expertise.” “‘We do not have jurisdiction over third-party service providers,’ Behnam said at a Senate Agriculture Committee hearing. ‘Ultimately, I think it is going to be incumbent on the committee to think about expanded authority for the CFTC.’” REPUBLICANS WANT CLARITY ON THIS — Our Victoria Guida: “Federal Reserve Chair Jerome Powell on Wednesday said the Fed would need Congress’ authorization to issue a central bank digital currency for use by consumers, but perhaps not for a digital dollar for use among banks.”
| | | | DOWNLOAD THE POLITICO MOBILE APP: Stay up to speed with the newly updated POLITICO mobile app, featuring timely political news, insights and analysis from the best journalists in the business. The sleek and navigable design offers a convenient way to access POLITICO's scoops and groundbreaking reporting. Don’t miss out on the app you can rely on for the news you need, reimagined. DOWNLOAD FOR iOS– DOWNLOAD FOR ANDROID. | | | | | | | | Chris Hayden is heading to the Treasury Department to be a senior spokesperson focusing on domestic finance, including crypto and debt limit issues. He most recently was comms director at the DCCC. – Daniel Lippman
| | | SHALE FALL — The WSJ’s Collin Eaton and Benoît Morenne: “The boom in oil production that over the last decade made the U.S.the world’s largest producer is waning, suggesting the era of shale growth is nearing its peak.” FRANK ABAGNALE’S MUSIC? — Our Katy O’Donnell: “Senate Democrats are urging banks to step up their efforts to counter fraudulently altered checks.” EPSTEIN FALLOUT — WSJ’s By David Benoit and Khadeeja Safdar: “JPMorgan Chase & Co. sued former executive Jes Staley over his ties to Jeffrey Epstein, identifying Mr. Staley as the ‘powerful financial executive’ accused of sexual assault in a lawsuit against the bank.” INVENTORY ISSUES — NYT’s Melissa Eddy: “The new chief executive of Adidas has $1.3 billion in Yeezy sneakers he doesn’t know what to do with. Stored in warehouses around the world, the sneakers are a reminder of the once-fruitful tie between Adidas and Kanye West, the rapper now known as Ye.”
| | | | A message from the Electronic Payments Coalition: CONGRESS: OPPOSE HARMFUL CREDIT CARD ROUTING MANDATES: Despite vigorous lobbying attempts from corporate convenience store chains and their allies, credit card routing mandates are deeply unpopular—among both Democrats and Republicans. Credit card routing mandates hurt small businesses by increasing costs, weakening payment security, harming small financial institutions, reducing access to credit for those who need it the most, and ending popular credit card rewards programs. THE CHOICE IS CLEAR: CONGRESS MUST OPPOSE CREDIT CARD ROUTING MANDATES
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