News: Sherrod Brown, Tim Scott have a deal

Friday, June 16, 2023

Sherrod Brown, Tim Scott have a deal

Jun 16, 2023

Presented by the Consumer Credit Card Protection Coalition

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Programming note: We’ll be off this Monday for Juneteenth, but we’ll be back in your inboxes on Tuesday.

They did it: Three months after the SVB meltdown, Senate Banking Chair Sherrod Brown and Sen. Tim Scott late Thursday revealed a bill that would crack down on the management of failed banks.

The big question now is whether they can sell it to Sen. Elizabeth Warren.

Before we get to the drama, a quick swing through a few details: The Brown-Scott bill would allow regulators and bank boards to claw back executive compensation at failed lenders going back two years. It would also increase potential penalties the executives face. It carves out “community” banks with assets under $10 billion.

Brown and Scott’s breakthrough is a big deal at the Banking Committee. It shows a bipartisan appetite to challenge — to an extent that is already being debated — a powerful industry lobby. Wednesday’s planned vote on the bill will be the first-ever markup under Brown’s tenure.

And, oh yeah, Scott, of South Carolina, is running for president. Brown, of Ohio, faces a tough re-election in a state that’s looking pretty red.

Now they have to win over Warren and other lawmakers who wanted to be even tougher on bank executives.

Warren had her own breakthrough earlier this month, when she revealed a bipartisan bill that would also claw back pay from the leaders of failed banks. At the time, it seemed like the most politically viable option yet for Congress to respond to the SVB crisis.

The bill had Sen. Josh Hawley (R-Mo.) as a lead co-sponsor. It had critical backing from Sen. J.D. Vance, Brown’s Republican counterpart in Ohio, who negotiated changes that helped Warren attract nearly half of the Banking Committee’s members as co-sponsors.

Warren wanted Brown to hold a vote on her bill but he opted to work out a compromise with Scott. The Brown-Scott legislation covers more ground than clawbacks but on that issue appears to be scaled-back in comparison.

Warren’s bill would make it a requirement that the FDIC claw back pay, while the Brown-Scott bill would just enable such a move. Warren’s bill would cover three years of compensation, while the Brown-Scott plan would only go back two.

Brown may end up getting the votes he needs, despite the disagreements over the process and the final product. But it’s been a window into how populist politics are shifting in the run-up to 2024. It’s a moment when Republicans like Hawley and Vance are chafing at the pragmatism of someone who hasn’t been known to hold back against Wall Street.

“I’m just really worried that that’s going to get watered down,” Hawley told our Eleanor Mueller Thursday. “If they don’t mark it up, maybe I should just go to the floor and try passing it.”

Happy Friday — What do you think of the Brown-Scott plan? Let me know.

A message from the Consumer Credit Card Protection Coalition:

Defunding data security for credit cards and ripping away hard-earned rewards from working families would be a disaster for consumers, but that’s exactly what the Durbin-Marshall credit card bill would do. Thousands of Americans are mobilizing to demand Washington stay out of their wallets by stopping the Durbin-Marshall credit card bill. Learn more by clicking here.

Driving the day

Fed Governor Christopher Waller talks financial stability and macroeconomic policy at a Norges Bank-IMF conference at 7:45 a.m.

BlackRock makes a Bitcoin bet — BlackRock on Thursday filed an application with the SEC to offer a spot Bitcoin exchange-traded fund, which, if approved, would be the first ever in the U.S.

As our Declan Harty points out, the SEC has shot down request after request to list exchange-traded funds that directly track Bitcoin. Another wrinkle: BlackRock is partnering on the fund with Coinbase, a week after the agency accused the crypto exchange of operating illegally.

Goldman under investigation for SVB role — The WSJ reports that the Federal Reserve and the SEC are investigating Goldman Sachs’s dealings with SVB before its collapse. The DOJ has also subpoenaed Goldman as part of an investigation into SVB’s failure.

The Fed and the SEC are reportedly looking into whether Goldman’s investment banking side and its trading division were improperly communicating as Goldman acted as a buyer of SVB’s securities portfolio and an adviser on its doomed capital raise.

Biden touts ‘junk fees’ progress — President Joe Biden on Thursday appeared with reps of Airbnb, SeatGeek and Ticketmaster to highlight pledges they’re making to adopt more transparent pricing. It’s part of Biden’s campaign against “junk fees.”

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Economy

Europe raises rates after Fed reprieve — The ECB on Thursday raised interest rates to their highest level in more than two decades and warned of more to come to fight inflation, the NYT reports.

“Are we done? Have we finished the journey? No, we are not at [the] destination,” ECB President Christine Lagarde said.

A July Fed hike looks likely — The WSJ reports that analysts expect the Federal Reserve to raise rates again next month, after Fed Chair Jerome Powell inadvertently described this week’s decision to hold steady as a “skip.”

A message from the Consumer Credit Card Protection Coalition:

On the Hill

SEC officials to testify — Declan reports that a trio of SEC Chair Gary Gensler’s top deputies will appear on Capitol Hill next week, as House Financial Services Republicans ramp up oversight of the agency.

SEC General Counsel Megan Barbero, Trading and Markets Director Haoxiang Zhu and Chief Economist Jessica Wachter are expected to testify at Thursday hearings held by the committee’s oversight and capital markets panels, according to people familiar with the matter.

Republicans blast EU reporting rules — House Financial Services Republicans in a letter to Treasury Secretary Janet Yellen this week accused the EU of breaching international norms with upcoming rules that would require companies to disclose climate and social impacts, including U.S. companies operating in Europe.

Yellen said Tuesday that the rules could have “unintended negative consequences for U.S. firms” and said she was concerned about the “extraterritorial scope.”

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Crypto

A mystery at the IRS — Our Brian Faler has a new piece looking at the apparent lack of urgency around the implementation of crypto tax reporting requirements from the 2021 infrastructure law. While the IRS considers crypto a major source of tax avoidance, Treasury hasn’t released even an initial draft of the regulations needed to implement the rules sought by Congress.

Asked about the holdup by Rep. Brad Sherman on Tuesday, Secretary Yellen said: “We’ll get back to you on that shortly.”

Fly Around

People moves — John Kelly, a former Microsoft and Starbucks executive, will oversee BlackRock’s public policy and communications (h/t Bloomberg) … Benjamin Schiffrin, who was most recently associate general counsel at the SEC, has joined Better Markets as director of securities policy.

A message from the Consumer Credit Card Protection Coalition:

Millions of Americans rely on their credit card points and cash back rewards to pay for gas, groceries, travel and more. But the Durbin-Marshall credit card bill would steal the rewards that millions of Americans have earned, all to pay for a bailout for multibillion dollar retailer special interests. Worse yet, the Durbin-Marshall credit card bill would defund data security for credit cards, making it easier for cyber criminals to steal the personal and financial data of millions of Americans. Congress should protect American families, not find new ways to put Washington into the wallets of millions of consumers. Learn more about the disastrous Durbin-Marshall bill by clicking here.