News: Conservatives rally against CBDC

Tuesday, February 27, 2024

Conservatives rally against CBDC

Feb 27, 2024

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QUICK FIX

Some exclusive news to kick off your morning: The Heritage Foundation’s political arm is taking a new swing in the right’s fight to stop a central bank digital currency.

Heritage Action will tell Capitol Hill offices today that it plans to grade lawmakers based on their support for anti-CBDC legislation from Rep. Tom Emmer and Sen. Ted Cruz. It will be part of the group’s conservative scorecard that analyzes where House members and senators stand on “key votes” and, in the case of the CBDC bills, co-sponsorships.

“Anti-CBDC legislation is necessary to safeguard Americans' financial privacy in the face of potential surveillance, control and political intimidation,” Heritage Action Executive Vice President Ryan Walker said in a statement.

Heritage's campaign illustrates the extent to which anti-CBDC skepticism is becoming ingrained on the right, fueled by fear that a revamped digital dollar would give the government new control over everyday life. Former President Donald Trump recently joined the movement, vowing to stop the Federal Reserve from launching a CBDC in the name of protecting Americans from “government tyranny.” It also comes as the GOP increasingly embraces the crypto industry, which is helping stoke opposition against a government-run digital currency.

The upshot is that it’s going to be very hard – and potentially impossible – for the U.S. to get to a place where Congress blesses the idea of the Fed launching a CBDC. Fed Chair Jerome Powell says the central bank needs approval from lawmakers and the executive branch.

The genesis of the effort is Emmer’s bill, which has 97 GOP co-sponsors. Cruz introduced a companion bill Monday with Republican co-sponsors including Sens. Bill Hagerty, Rick Scott, Ted Budd, Mike Braun and Kevin Cramer.

Their legislation would prohibit the Fed from issuing a central bank digital currency directly to consumers or via banks. (Banking and crypto industry groups also support the proposal.)

“We are grateful for the support of Senator Cruz on this important legislation that ensures the United States’ digital currency policy upholds the American values of privacy, individual sovereignty and free-market competitiveness,” Emmer said in a statement.

The move by the lawmakers is a reminder that distrust of the Fed is an inescapable and almost primordial element of U.S. politics. It’s why Powell’s savvy navigation of Congress, and his ability to insulate the Fed from attacks on the left and the right, have been so noteworthy.

“The argument against central bank digital currency echoes other fights against increasing the power of the central bank, a theme in American politics since our founding,” said Aaron Klein, a Brookings Institution senior fellow. “That more members of Congress have not weighed in against an expansion of the Fed's powers like this is evidence of the Fed's incredibly bipartisan political clout in Congress and especially within the Biden Administration.”

It's worth noting that Powell hasn’t tried to rally lawmakers behind a CBDC. Fed Governor Christopher Waller, who heads the central bank's internal payments committee, has voiced more outright skepticism about the idea.

What’s the tradeoff for the U.S.? Beyond the potential harms or benefits for individuals, other countries are moving ahead. The geopolitical fallout may be that America loses an opportunity to put its stamp on standards for the next generation of global payments, including when it comes to privacy and cybersecurity.

According to an Atlantic Council tracker, more than 130 countries are exploring a CBDC. A potential digital euro just entered the ECB’s “preparation phase,” and a digital pound is under consideration by the Bank of England and His Majesty’s Treasury.

“We have to bring something to the table if we don’t like the alternatives that are being built," said Atlantic Council senior director Josh Lipsky. "Or we’ll see a more fractured international payments system get built up around us.”

It’s Tuesday — Have big policy news that MM readers would care about? Send a heads up to zwarmbrodt@politico.com.

A message from Electronic Payments Coalition:

CRS: UNCLEAR IF DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP EITHER CONSUMERS OR SMALL BUSINESSES The independent Congressional Research Service (CRS) released one of many reports questioning whether the Durbin-Marshall Credit Card Bill would help consumers or small businesses. CRS echoed an earlier report by the Richmond Fed noting that consumers failed to see any meaningful cost savings because of similar legislation imposing routing mandates and price caps on debit card interchange. Learn more HERE.

Driving the day

Treasury Secretary Janet Yellen holds a press conference before the G20 finance ministers meeting in Brazil at 7:15 a.m. … Apollo CEO Marc Rowan speaks to the Economic Club of Washington, D.C., at 8 a.m. … Fed Vice Chair for Supervision Michael Barr gives a speech on counterparty credit risk at 9:05 a.m. … The Conference Board reports on February consumer confidence at 10 a.m. … World Bank deputy chief economist M. Ayhan Kose speaks at the Peterson Institute at 1 p.m.

Shutdown update — Top lawmakers sounded more bullish Monday night about avoiding a partial government shutdown at the end of the week. Two people close to negotiations described new progress after Senate Majority Leader Chuck Schumer and Speaker Mike Johnson clashed in statements over the weekend.

Jamie Dimon on Cap One and the economy — The JPMorgan Chase CEO said in a CNBC interview that he isn’t worried about the added competition from Capital One acquiring Discover Financial if the deal’s approved.

“My view is, let them compete,” Dimon said. “Let them try, and if we think it’s unfair, we’ll complain about that.”

On the economy, Dimon signaled he’s less bullish than most about the U.S. avoiding a recession.

“The market is kind of pricing in a soft landing. That may very well happen,” he said. “But the [market’s] odds are 70 to 80 percent. I’ll give you half that, that’s all.”

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First in MM: A funding fight to watch — Leaders of the Competitive Enterprise Institute, Americans for Tax Reform and several other groups are warning top lawmakers against attaching a bank executive crackdown to must-pass spending legislation.

In a new letter, they say the executive accountability bill, which Senate Banking approved in a 21-2 vote last June, would “excessively” increase financial regulators’ powers.

“We are also particularly concerned about provisions of the RECOUP Act being added to a must-pass appropriations bill,” they said. “This approach would deny members of Congress the opportunity for basic debate of the far-reaching impactful provisions of the legislation.”

A bank lobby shakeup — Veteran lobbyist Ed Hill is leaving the Bank Policy Institute after three years as the group's head of government affairs. He’s joining Forbes Tate as a partner.

Hill, who spent nearly two decades at Bank of America before joining BPI, told MM that he’s going to help Forbes Tate grow its financial services practice and also work with clients outside the industry. BPI, which represents the largest U.S. banks, will be his first client.

Erik Rust, BPI’s deputy head of government affairs, will be promoted to replace Hill. Rust previously worked for the U.S. Chamber of Commerce and as a House staffer.

“He’s somebody I’ve always looked up to, and I am really grateful for the opportunity to have worked alongside him,” Rust said of Hill in an interview. “But I’m very grateful for this opportunity to step up.”

Crypto

First in MM: Coinbase CEO to rally voters in California — A pro-crypto group is holding a get-out-the-vote event in Los Angeles on the eve of the California primary next week, Jasper Goodman reports. The event, hosted by the group Stand with Crypto, will feature Coinbase CEO Brian Armstrong and the rapper Nas.

It comes as a super PAC financed by the crypto industry pours money into an effort to sink Rep. Katie Porter’s Senate bid. She is polling behind Rep. Adam Schiff, who is pro-crypto.

A message from Electronic Payments Coalition:

Antitrust

FTC challenges big grocery merger – Per Josh Sisco, The FTC and attorneys general in eight states filed a lawsuit to block the $24.6 billion tie-up between grocery store chains Kroger and Albertsons. The companies are vowing to fight the lawsuit.

On the Hill

House preps for fintech votes – House Financial Services is planning to vote on several bills Thursday, including proposals related to fintech, housing and insurance, per a Monday evening announcement.

The fintech bills include legislation on earned-wage access, a bipartisan resolution to block SEC guidance on how banks custody crypto and a proposal that would let fintech firms win looser regulatory treatment. (MM previewed the earned-wage access dynamics last week.)

Warren rallies opposition to Capital One-Discover deal — Jasper reports that 13 Democrats led by Sen. Elizabeth Warren are calling on regulators to block the Cap One-Discover merger, warning that it would be bad for consumers. Among those signing on to Warren’s letter are Reps. Alexandria Ocasio-Cortez, Katie Porter and Ro Khanna.

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Climate

West Virginia targets more banks — Jordan Wolman reports that West Virginia’s treasurer warned Citigroup, TD Bank, HSBC and three other banks that they could be barred from receiving state contracts, as part of a crackdown on firms deemed hostile to fossil fuel.

“We are winning,” said treasurer Wiley Moore, who is also running for the House. "I am not out here to defeat the banks. What I am here to do is to defeat ESG and liberate the free market.”

A message from Electronic Payments Coalition:

CRS QUESTIONS WHETHER DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP ANYONE AT ALL Every member of Congress should read the CRS analysis which discusses the impact this legislation could have for small businesses and American families. Report after report has plainly demonstrated that consumers and small businesses did not save any money when Congress passed the 2010 Durbin Amendment, imposing new mandates on debit cards. Now, a decade later, why would anyone assume a monumental restructuring of our nation’s secure, worry-free credit card system would yield different results? After considering the facts, the only logical solution would be to strongly OPPOSE the Durbin-Marshall Credit Card Bill. Click HERE to learn more.