| | | | |  | | By Sam Sutton | Presented by Sallie Mae® | 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. If you want to know how hard it is to craft crypto legislation, take a gander at the draft stablecoin bill that House Financial Services quietly posted this weekend in advance of Wednesday’s hearing on dollar-pegged digital tokens. If it looks familiar, it’s because it’s the same draft bill your MM host obtained and published last September. Seven months and several massive crypto industry scandals later, lawmakers are basically in the exact same place where they left off. Rank-and-file Democrats — along with Biden administration and Federal Reserve officials — shot down the bill last fall with objections to how it addressed state-level crypto regulation and digital wallets, as well as anti-money laundering rules and potential financial system risks. Republicans also flagged concerns with the draft, which was the product of months of negotiations between current Chair Patrick McHenry (R-N.C.) and former chair Maxine Waters (D-Calif.). In other words, it had a lot of problems. McHenry dubbed the bipartisan measure an “ugly baby” last fall after he and Waters scuttled plans to formally introduce and mark up the measure. “We’re grateful and hopeful that this ugly baby can grow and prosper into something that is a little more attractive,” he added. As many of us can attest, there are limits to how attractive we can actually become. The fact House lawmakers were unable to produce a new stablecoin draft after seven months of talk is indicative of the opposition any such measure would face — from big banks, the digital asset lobby, state and federal regulators, Senate Banking Chair Sherrod Brown, etc. — no matter how it’s crafted. IT’S MONDAY — And like ATN News, We Hear for You. But we can’t do that without tips, suggestions and gossip. Send all the above to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com.
| | A message from Sallie Mae®: The current federal student loan system too often fails the very people it was designed to help—those who truly need the most financial support. Students, families and taxpayers deserve a better, more transparent system that works as it was originally intended and protects against overborrowing. Learn more about solutions to reform the federal student loan program. | | | | | MONDAY … Empire State manufacturing will be released at 8:30 a.m. … Deputy Treasury Secretary Wally Adeyemo will speak at an Urban Institute and Brookings Institution Tax Policy Center event at noon TUESDAY … Sens. Thomas Carper (D-Del.), Sen. Shelley Moore Capito (R-W.Va.) and Rep. Scott Peters (D-Calif.) will speak at a U.S. Chamber of Commerce permitting reform event at 8 a.m. … Housing starts and building permits data will be released at 8:30 a.m. … The FDIC has a meeting on its Deposit Insurance Fund Restoration Plan at 10 a.m. … House Financial Services has an SEC oversight hearing at 10 a.m. … Senate Banking will hold a confirmation hearing for Jared Bernstein to be chair of the White House Council of Economic Advisers, Ron Borzekowski to be Treasury’s financial research director, as well as Solomon Jeffrey Greene and David Uejio to be assistant HUD secretaries at 10 a.m. … Fed Gov. Michelle Bowman will deliver remarks on CBDCs at 1 p.m. at Georgetown University. WEDNESDAY … House Financial Services will hold a hearing on stablecoin legislation at 10 a.m. … SIFMA is hosting a webinar on market structure reforms with SEC Chief Economist Jessica Wachter at 10 a.m… The Fed beige book will be released at 2 p.m. … New York Fed President John Williams speaks at 7 p.m. THURSDAY … Reps. Josh Gottheimer (D-N.J.) and Brian Fitzpatrick (R-Pa.) will speak at a Punchbowl News event on small business at 9 a.m. … Senate Appropriations has a subcommittee hearing on HUD’s budget at 10 a.m. … FRIDAY … Fed Gov Lisa Cook speaks at 4:35 p.m. McCarthy heads to Wall Street — Speaker Kevin McCarthy (R-Calif.) will give a speech from the floor of the New York Stock Exchange at 10 a.m. that’s expected to make the case for attaching spending cuts to a debt ceiling vote. The California Republican has struggled to unite his caucus on a debt limit plan and “the stakes couldn’t be higher,” our Sarah Ferris and Jordain Carney reported on Friday. The path forward on a deal that would allow the U.S. government to pay its bills — the bedrock to global financial markets — is “clear as mud,” BTIG director of policy research Isaac Boltansky wrote over the weekend. “Both Washington and Wall Street are too sanguine regarding the political and procedural headwinds.” Remember the “real estate in the metaverse” hype? — Our Katy O’Donnell: “The Federal Home Loan Banks, a group of government-sponsored lenders whose mission is to finance housing and community development, loaned tens of billions of dollars to three crypto-friendly banks before they failed last month. Those loans are raising alarms among U.S. lawmakers, including Senate Banking Chair Sherrod Brown, and sparking calls for stricter supervision.” Wall Street loves Sinema — Sen. Kyrsten Sinema’s (I-Ariz.) campaign committee raised $2.1 million in the first quarter, hauling in more than $475,000 from employees of Blackstone Group and the Carlyle Group alone, our Jessica Piper reports. Sinema played a pivotal role in axing private equity taxes from the Inflation Reduction Act last year. — The FT: “Top Republican donor sours on Florida governor’s stance on social issues”
| | | | A message from Sallie Mae®:   | | | | | Why Washington should tune in to regional bank earnings — First-quarter earnings from big banks and BlackRock highlighted just how much depositor behavior has changed since the Silicon Valley Bank debacle. As people ditch savings accounts for money market funds and bond products — sending a chill through credit markets and amplifying the risk of a recession — BlackRock’s senior ranks are mulling new opportunities for lending businesses that were already competing with tightly regulated banks, one senior executive told MM. Meanwhile, even as deposits fell across the banking sector, JPMorgan Chase — the largest commercial bank in the U.S. — “reported an unexpected increase in deposits and boosted its guidance for NII — a key driver of profitability tied to loan operations,” writes Bloomberg’s Breanna Bradham. (CFO Jeremy Barnum on Friday cautioned that those deposits “are somewhat flighty” and that “it’s entirely possible that people temporarily come to us and then over time, decide to go elsewhere.”) These results come up at the expense of smaller institutions — including banks like First Republic, Western Alliance Bancorp and Zions Bank — that were rattled by Silicon Valley Bank’s demise. They’re slated to report earnings over the next two weeks. “You have to keep your money somewhere, right? And the two safest places to be are the largest banks and the Treasury market — money market Treasury funds,” Keith Noreika, a former acting Comptroller of the Currency who’s now with Patomak Global Partners, told MM. “We haven't yet seen the second tier [financial institutions] and all the banks that we've kind of been worried about.” Fed officials are watching closely to see how banks react to the change in depositor behavior. If credit markets tighten, that “could obviate the need for some additional monetary policy tightening,” Fed. Gov. Christopher Waller said on Friday. That said, “making such a judgment is difficult, especially in real time.” — The WSJ’s Gina Heeb: “Small and midsize U.S. banks lost hundreds of billions of dollars in recent weeks to their bigger peers and to money-market funds offering higher yields. That is likely to force many of them to increase the interest rates they are paying to avoid losing more customers.” Next steps — The WSJ’s Miriam Gottfried on KKR’s succession plan: “Kravis and Roberts, both 79 years old, have agreed to give up the supervoting stock through which they control the firm at the end of 2026 … In the hotly competitive industry, shaped by the big personalities of its founders, making the transition to new leadership has proven messy for some private-equity giants and disastrous for others.” I seriously doubt it! — NYT’s Erin Griffith: “Faking it is over. That’s the feeling in Silicon Valley, along with some schadenfreude and a pinch of paranoia. … The chorus of charges, convictions and sentences have created a feeling that the start-up world’s fast and loose fakery actually has consequences.”
| | | | GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat. | | | | | | | | | SEC Commissioner Hester Peirce is “fed up.” The Wall Street regulator hammered the SEC’s approach to innovation in an interview Friday, hours after rebuking a now-reopened-for-comments plan spelling out that certain trading platforms — including cryptocurrency venues — need to register as exchanges. “I’m just very disappointed in how the commission is behaving,” said Peirce, the SEC’s senior Republican commissioner. “We could be so productive, and, at every opportunity, we’ve chosen not only to not be productive but to be counterproductive.” Underpinning Peirce’s comments is a fundamental disagreement within the SEC’s walls over new markets, like crypto. SEC Chair Gary Gensler has long called on the industry to come into compliance. But Peirce said the SEC has been “extremely inflexible” in providing clarity — a common point of frustration for executives. Peirce, however, is not giving up. When asked about Christine Wilson’s recent resignation from the FTC after clashing with Chair Lina Khan, Peirce said: “I still think I have work to do at this agency.” — Declan Harty
| | | | 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. | | | | | | | | | Big ruling — Our Josh Sisco and Declan Harty: “The U.S. Supreme Court handed down a ruling Friday that could curb the way two of corporate America’s most powerful overseers handle cases in their in-house courts.” The ICBA ask — With the FDIC scheduled to discuss how it will replenish the deposit insurance fund later this week, the Independent Community Bankers of America’s Rebeca Romero Rainey sent a letter warning Chair Martin Gruenberg to not subject smaller financial institutions to any new fees.
| | Yevgeny Shrago, the now-former policy director at Public Citizen, is joining CFTC Commissioner Christy Goldsmith Romero’s staff as senior counsel and policy adviser. Shrago comes to the CFTC after prior stops in Washington at the White House, Treasury Department and CFPB. — Declan Samantha Russell has joined the Financial Technology Association as a research analyst. She was previously a policy advisor at the House Rules Committee.
| | A message from Sallie Mae®: Students and families are borrowing more, and often too much, to pay for higher education. Of the $1.7 trillion outstanding student loan debt in 2022, $1.59 trillion—about 93%—is made and held by the federal government. Complicated applications, confusing financial aid offers and federal loan programs with virtually unlimited access to funds are contributing to this cycle of growing federal student loan debt. As a responsible private lender and education solutions provider, see how Sallie Mae is promoting meaningful reform in higher education financing. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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