News: Fed politics

Friday, September 8, 2023

Fed politics

Sep 08, 2023

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QUICK FIX

The Federal Reserve has a full board again, now with its most diverse makeup in history and a Biden-picked majority that could last well after 2024.

But the most interesting story out of three Senate confirmation votes on Fed officials this week is that the central bank is still on pretty safe ground with Congress.

Philip Jefferson, confirmed as No. 2 to Chair Jerome Powell, sailed through easily, with opposition comprised mostly of the Fed’s most vehement critics. (Sen. Rand Paul has only voted for one Fed nominee during his time in office; points for anyone who can guess which one.)

Lisa Cook and Adriana Kugler were much closer to being party-line votes. But even Cook, who squeaked by last year on Vice President Kamala Harris’ tie-breaking vote, picked up two Republicans this time around — Sens. Susan Collins and Mike Rounds, the latter of whom voted for all three Fed nominees.

Close Fed confirmation votes have just become the norm. Trump nominee Christopher Waller, for example, cleared the Senate in a 48-47 vote nearly three years ago. Sarah Binder, a George Washington University professor who’s an expert on central bank politics, has a fresh chart on X showing declining bipartisan support for Fed nominees.

But this week’s votes are still evidence that the Fed's rate-hike campaign against inflation has gone more smoothly than expected so far, and lawmakers for the most part are willing to let it keep on keeping on.

Jefferson, who got support from 39 Republicans and saw no opposition from Democrats, seems more in sync with Powell than Biden’s previous pick for vice chair, Lael Brainard. She never openly dissented, but speeches suggested at least some daylight between her and the Fed chief.

Who knows what the political situation will look like for the Fed after 2024. If a Republican wins the presidency, Powell could face a rehash of his toxic Trump relationship until the end of his chairmanship in 2026. That scenario would also amplify Republican criticisms of Biden-appointed Vice Chair for Supervision Michael Barr, who runs the much more politically charged bank regulation side of the Fed. Barr’s term extends through 2026.

But for now, Congress and the White House are not making more trouble than usual for the Fed.

Happy Friday – The House is back next week. Rest up, and send tips: Zach Warmbrodt, Sam Sutton.

A message from Electronic Payments Coalition:

STOP THE BIG-BOX BAIT AND SWITCH: Big-box retailers, led by Walmart and Target, are seeking a massive handout from Congress, paid for by consumers. Mega-retailers are trying to trick Congress into enacting harmful credit card routing legislation (S. 1838/H.R. 3881), falsely claiming that it will help small businesses. In reality, this bill transfers billions from consumers to big-box corporations while eliminating popular credit card rewards programs, weakening cybersecurity protections, and reducing access to credit. Congress: reject this Big-Box Bait and Switch. www.stopthebigboxbaitandswitch.com

Driving the day

Fed Vice Chair for Supervision Michael Barr speaks at the Philadelphia Fed’s fintech conference at 9 a.m.

Chopra targets Apple, Google — CFPB Director Rohit Chopra on Thursday called for more vigilant oversight of Big Tech companies in the payments space, warning of the power that Apple and Google are poised to hold via their dominant mobile operating systems. Chopra outlined his concerns in a speech at a Philadelphia Fed fintech conference, and the bureau released a report.

“The blurring of digital commerce, lending, and payments raises fundamental questions around the separation of banking and commerce — providing a new twist on debates that date back to the earliest days of the Republic,” he said.

Apple has bigger problems in the near-term. Its stock lost $200 billion in value this week amid reports that China will restrict government officials from using iPhones, according to Bloomberg.

What’s next for bank CEOs in the Senate — Senate Banking Chair Sherrod Brown told our Eleanor Mueller that he’s not planning to make any changes to his bipartisan bank executive accountability bill before it hits the floor. That’s unwelcome news for banking groups and conservative advocates unhappy with a provision that would expand regulators’ authority to remove senior bank executives.

Any amendment process will be up to Senate Majority Leader Chuck Schumer, according to Brown.

“I’m not unwilling to look at things, but we like it in this form," Brown said. "It was a well-negotiated bill to get something to stand up to the banks like that. To get it through [committee] with that kind of vote? It had to be in the right place.”

Brown also indicated to reporters Thursday that his committee will vote on cannabis banking legislation this fall.

Former FTX exec pleads guilty to illegal contributions — Ryan Salame, a one-time executive of the crypto exchange FTX and a key player in its political influence operations, pleaded guilty on Thursday to charges including unlawful campaign contributions, according to CoinDesk.

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Economy

Pay cuts coming — WSJ reports that Walmart is paying some new store workers less than it would have three months ago, in a sign that companies are trying to lower labor costs as the market for hourly workers cools.

A message from Electronic Payments Coalition:

Crypto

A flurry of G-20 action — The IMF and the Financial Stability Board, in a report timed with global leaders gathering in New Delhi, urged regulators Thursday to adopt a "comprehensive" approach to cryptocurrency risks that may pose a threat to the economy. Separately, the International Organization of Securities Commissions, a standards group that includes the SEC, issued a set of recommendations for regulating decentralized financial services.

CFTC official wants to test new rules — Our Declan Harty reports that CFTC Commissioner Caroline Pham is calling on her agency to take the initiative and start adopting cryptocurrency regulations on a pilot basis. The Republican said the broader U.S. approach to digital assets is stuck in “wait and see” mode.

Exclusive: Emmer plans crypto rider for SEC — Declan also reports that House Majority Whip Tom Emmer plans to push for new restrictions on the SEC’s ability to bring crypto enforcement cases as part of an upcoming funding bill for the agency. The outspoken crypto ally wants to tie the SEC’s hands until “clear rules and regulations” are in place, according to the Minnesota Republican’s office. The rider will probably be DOA with House and Senate Democrats.

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Fly Around

Bono x Larry Summers — The U2 vocalist and the former Treasury secretary have a three-point plan for G-20 leaders to "put out and prevent future economic fires."

David Solomon versus the Fed — The Goldman Sachs CEO said on CNBC that bank regulators' proposal to raise capital requirements will hurt economic growth. Bank CEOs are "expressing that view to the regulators and also to members of Congress," he said.

A message from Electronic Payments Coalition:

CONGRESS: DON’T FALL FOR THE BIG-BOX BAIT-AND-SWITCH: Despite vigorous lobbying efforts from mega-retailers like Walmart and Target, proposed credit routing mandates (S. 1838/H.R. 3881) face steep bipartisan opposition. Consumers and small businesses don’t want to lose valuable credit card benefits or suffer from weakened cybersecurity protections– both consequences of proposed credit card routing mandates. Americans didn’t send their lawmakers to Washington to be fooled by the retail giants’ massive corporate welfare scheme--and they won’t forget those who sold out Main Street so that big-box retailers could line their pockets while consumers and small businesses suffer. Last year, Congress wisely rejected a similar Big-Box Bill, and they must do so again. Congress must protect consumers, preserve the integrity of the payment ecosystem, and reject this detrimental and unnecessary government intervention. www.stopthebigboxbaitandswitch.com