Friday, March 1, 2024

McHenry’s ‘extreme candor’ era

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POLITICO Morning Money

By Zachary Warmbrodt, Eleanor Mueller and Jasper Goodman

Presented by

Electronic Payments Coalition

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QUICK FIX

Rep. Patrick McHenry is closing out two decades in Congress by returning to the bomb-throwing days of his youth. His new target is Speaker Mike Johnson, and it’s starting to rattle fellow conservatives.

McHenry, the bow-tied North Carolina Republican who plans to retire at the end of this session, has been ratcheting up his criticism of Johnson in recent weeks over what he views as a serial mishandling of big issues before the House, including government funding, the border and Ukraine aid.

The underlying tension is that McHenry believes Johnson is holding back activity in the House because of fears that he’ll suffer the same fate as his predecessor, Kevin McCarthy. McHenry told reporters last month that under Johnson’s leadership “we've yet to actually fulfill and execute policy.” He went further in a CBS News interview last week, warning of a “50-50” chance of a shutdown and calling it a “preventable disaster.”

Some House and Senate Republicans say it’s not helpful, but McHenry told POLITICO Thursday that he’s voicing concerns shared by others in his party.

"I've been around leadership decisions for quite a while, he said. “I've never been bashful about sharing my views, either in the room or outside the room. And what I'm saying is obvious to a majority of the House Republican Conference.”

McHenry’s public critique of Johnson and the path that led him here is an illustration of the extent to which the House GOP has been turned upside down during his tenure. The 48-year-old lawmaker was once a self-described “bomb-thrower” — referred to by others as the “the GOP’s attack dog-in-training” — but then took on the mantle as an aspiring dealmaker and McCarthy fixer before finding himself on the outside again in the Johnson era.

“You're getting extreme candor from Patrick based upon his 20 years of work on the Hill,” Rep. Garret Graves (R-La.), another McCarthy ally, said in an interview. “Patrick's candor is not just motivated by the fact that he's leaving. But I think it's motivated by an extraordinary amount of frustration that he feels.”

As he picks a public fight with leadership, some fellow Republicans and K Street lobbyists are questioning whether McHenry is sacrificing a shot at advancing legislative priorities he has as Financial Services chairman. GOP allies are coming to his defense.

“That’s just Patrick McHenry being Patrick McHenry,” Sen. Thom Tillis (R-N.C.) said. “He’s willing to speak out. That’s good leadership.”

Others are less admiring. Sen. J.D. Vance (R-Ohio) said, “if you want to criticize leadership in your own chamber, you should stick around and actually fight for the future." Johnson’s office did not respond to requests for comment.

“I don't think that's constructive,” House Foreign Affairs Chair Michael McCaul (R-Texas) said of McHenry’s approach. “[Johnson’s] in an extremely difficult position with the motion to vacate over his head and a very difficult process to go through. … We can't afford a vacant chair again. We gotta solidify around our leader and try to do something constructive.”

It’s been a brutal ride for McHenry. He said he felt “pure anger” in the moments after McCarthy was deposed. He was left to serve as acting speaker for three weeks as Republicans struggled to coalesce around new leadership. Once Johnson got the job, McHenry found himself on the periphery, and he’s grown increasingly frustrated.

“He's watching as people that are out there under the banner of being conservatives … [are] actually forcing decisions that are resulting in higher spending and really playing into the White House's hands,” Graves said.

McHenry told reporters last month that “many House Republicans that took out McCarthy recognize that we're in a much worse public policy position now because of this.” He slammed colleagues for becoming “enamored with all this other bullshit.”

Rep. Andy Barr (R-Ky.), one of McHenry’s top deputies at House Financial Services and a potential successor at the committee, said he has confidence in Johnson but that “Patrick is one of those voices who should be listened to because he’s got a perspective.”

“I don't think it's destructive,” said Rep. Dan Meuser (R-Pa.), who also serves on Financial Services. “I think it's truly intended to help. And if he wants to voice that, I think it's fine. Being speaker right now is a tough job for Mike Johnson. Because I don't have that level of experience at all, I try to be constructive with him privately. But I think Patrick feels it could probably be more effective doing it in the manner he’s doing it.”

Asked whether it’s more effective to speak out publicly versus privately, McHenry told POLITICO “you take the venues you're given.” He commended Johnson for passing a stop-gap funding bill Thursday and “dealing with the reality of the situation.”

"I'm doing what I think is the responsibility of any leader in this place, which is to try to make things better," McHenry said. "I'm making my point of view clear. And I think there are other members that have larger concerns that don't want to do that, and that's OK."

One banking lobbyist granted anonymity to speak candidly said McHenry “speaks for what I would call the leadership class of the conference.”

"Patrick uses the Shawshank Redemption metaphor,” the person said. “Andy Dufresne has to crawl three miles through a pipe full of human shit to go and reach freedom. And Patrick's like well, you can crawl slowly, or you can crawl quickly. … The analogy is supposed to be like, just make a decision.”

Happy Friday — What do you want to hear from Fed Chair Jerome Powell next week? Send thoughts and tips 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

Updated consumer confidence from the University of Michigan is released at 10 a.m. … Fed Governor Christopher Waller talks about global quantitative tightening at the U.S. Monetary Policy Forum at 10:15 a.m. … Yellen appears at a press conference with Chile’s minister of finance at 2:45 p.m. … Fed Governor Adriana Kugler gives a speech on the central bank’s dual mandate at 3:20 p.m.

New banking jitters — New York Community Bancorp is facing a fresh wave of problems. Bloomberg reports that the lender took a $2.4 billion hit to earnings as it identified weaknesses with its loan review process and wrote down the value of past deals. It also named a new CEO.

Separately, a planned $35 million cash injection into Republic First Bancorp collapsed. The bank has been struggling with unrealized losses on loans and securities.

On a related note, check out Victoria Guida’s new column that digs into a big question at the heart of it all: Does America need more big banks?

A Fed hiccup on the Hill — Congress ran into some last-minute Fed drama as it tried to avert a shutdown. Sen. Rand Paul forced a vote to prevent the central bank from buying debt from states and municipalities. The Senate rejected the amendment in a 37-53 vote, then sent the funding bill to President Joe Biden for his signature.

New Trump SPAC drama — The FT reports that co-founders of Trump Media & Technology Group are alleging that executives, including Donald Trump, are trying to dilute their stake in a “last-minute stock grab” as the former president faces growing legal bills.

Crypto feedback Todd Phillips, Georgia State University assistant professor and Roosevelt Institute fellow, wrote to MM in response to comments from Better Markets CEO Dennis Kelleher in yesterday’s newsletter. Kelleher spoke out against Sen. Debbie Stabenow’s crypto legislation, and Phillips wants to push back on his criticism a bit. The proposal at issue would give the CFTC new authorities over the spot market for digital assets.

"Dennis is right that the CFTC would need a funding increase to tackle the crypto commodity spot markets, but to say that this increase must come before substantive legislation is just not how Congress works,” Phillips said.

"The fact that the crypto commodity markets are not regulated is hugely problematic, and, as Dennis rightfully noted, it is important that the CFTC and SEC fully retain their jurisdictions. The DCCPA [Stabenow’s bill] in 2022 strived to do this, and although the marked-up legislation had provisions that inadvertently crossed that line, Better Markets' identification of those provisions after the markup helped improve the bill,” he added.

The big picture: "What should be of more concern to crypto skeptics than the DCCPA is that this Supreme Court is poised to weigh in on the question of whether or when crypto assets are securities. I doubt that this 6-3 court will retain the broadest version of the Howey Test, and if the court narrows Howey so that more crypto assets are commodities, it becomes even more important that spot legislation is in place. Just as Congress works to craft commodity legislation, it should work to codify an expansive vision of Howey."

 

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Economy

Inflation update — MarketWatch reports that January’s core PCE index, the Fed’s preferred inflation gauge, saw its biggest uptick in more than a year. The increase was in line with expectations, and it underscored the view that the central bank may not cut rates until June.

The S&P 500 and Nasdaq still closed at record highs, thanks to a boost from tech stocks tied to AI, per Reuters.

A shift in credit scoring — Katy O’Donnell reports that the FHFA will take until the fourth quarter of 2025 to implement a controversial plan to reduce credit report requirements for loans sold to Fannie Mae and Freddie Mac. The FHFA will require lenders to use two rather than three reports from credit-reporting companies Equifax, Experian and TransUnion.

 

CONGRESS OVERDRIVE: Since day one, POLITICO has been laser-focused on Capitol Hill, serving up the juiciest Congress coverage. Now, we’re upping our game to ensure you’re up to speed and in the know on every tasty morsel and newsy nugget from inside the Capitol Dome, around the clock. Wake up, read Playbook AM, get up to speed at midday with our Playbook PM halftime report, and fuel your nightly conversations with Inside Congress in the evening. Plus, never miss a beat with buzzy, real-time updates throughout the day via our Inside Congress Live feature. Learn more and subscribe here.

 
 
On the Hill

China negotiations delayed — Rep. Andy Barr said in an interview that GOP talks on a compromise to restrict outbound investment in China have been on pause amid government funding negotiations.

The working group that’s trying to hash out a deal has yet to set a date for its next meeting, Barr said. He added that he remained optimistic at their chances at reaching agreement given "fruitful conversations" thus far and potential compromises floated by experts.

People moves — The staff director of the House Financial Services capital markets panel, Will Anderson, has left the Hill for a job as vice president of corporate governance at the Business Roundtable. Mike Lucia, who previously served as the committee's capital markets counsel, will take over the job.

 

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.

 
Crypto

Dems buck SEC — Three House Financial Services Democrats joined Republicans to advance a resolution that would undo SEC guidance on how banks custody digital assets. The Democrats who crossed over were Josh Gottheimer, Ritchie Torres and Wiley Nickel.

DOE to stop mining survey — Crypto advocates say they’ve reached an agreement with the Energy Department to halt a survey that would collect energy consumption info from bitcoin miners.

A federal judge last week temporarily stopped an effort by the DOE’s Energy Information Administration to gather details from miners about their electricity use, following a lawsuit brought by the Texas Blockchain Council and Riot Platforms, a bitcoin mining firm.

Texas Blockchain Council President Lee Bratcher said in a statement that the Energy Department has "agreed to halt" its survey.

"It is unfortunate that our clients had to pursue legal action to make the federal government simply follow the law, but we are grateful for the court’s thoughtful analysis that led to this result," he said.

The EIA declined to comment.

 

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