Wednesday, July 24, 2024

The Republican case for a post-Chevron world

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Jul 24, 2024 View in browser
 
POLITICO Morning Money

By Declan Harty

Presented by 

Capital One

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QUICK FIX

The Supreme Court’s recent decisions knocking back the powers of federal regulators have sparked unease across the government about what the future of policing corporate behavior will look like.

SEC Commissioner Mark Uyeda has a different take on the rulings: It’s about time.

Uyeda, a Republican who has long been critical of the so-called administrative state, told MM that Chevron deference — the legal doctrine that gave agencies broad latitude in the courts until its death last month — allowed regulators to operate with “limitless boundaries,” sometimes leading them to create rules outside their own authority.

Now, the fall of Chevron, coupled with several other administrative law rulings from the high court, is forging a new legal landscape that Uyeda says is better off for both regulators and the regulated. SEC Chair Gary Gensler and others have argued that the court’s decisions are no cause for panic. But Uyeda’s comments offer a glimpse into how GOP financial regulators are reading the court’s historic decisions just months before some may find themselves in new positions of authority should Donald Trump win in November.

Uyeda won’t say whether he would be interested in heading the SEC in that scenario. But he said there’s “strong optimism” that a second Trump administration would mark a “return to a lot more thoughtful approach in financial regulation.”

“We need to go back and make sure that we in fact are doing data-driven rulemaking and policymaking and move away from an approach that seems to be based on ‘This seems to be the right thing to do,’” he said.

The following are highlights from the conversation, edited for length and clarity.

We’ve seen a shift in the last decade where questions of agency authority have become more common, capped off by these recent Supreme Court decisions. How do you think about what agencies and regulators are facing in the courts today?

These decisions are bringing back the notion of accountability on regulators and administrative agencies.

Congress cannot generally give administrative agencies broad law-making ability. So when we do have to interpret the law we need to show our work. We need to demonstrate that our actions are consistent with the laws, they are supported legally and that we do the appropriate analysis to back those views up, and we make that transparent in some public fashion.

It’s like being a student turning in your fourth-grade algebra assignment, you need to show your work.

Do you think the fall of Chevron will hit some of the current lawsuits that are pending against the agency?

It removes the argument … that the commission receives automatic deference to its view by the courts. That does mean that when we do new rulemaking, we’re going to need to be more thoughtful to make sure that we have the authority [and] that any interpretation that we have is consistent with law.

We’ll need to put more work into our rulemaking and into any other legal positions we put before the courts, whether it’s in the context of an enforcement action or an amicus brief. In my view, that’s a good thing. We need there to be scrutiny of our work. Otherwise, we’re going to be too tempted to take shortcuts, and when administrative agencies take shortcuts, especially to meet a preordained outcome, that’s when we run into trouble.

Do you worry about Congress’s ability to craft legislation on something as highly specialized and technical as the securities laws? 

It works best when the agencies work with Congress to make sure we understand the concerns that gave rise to the legislation. I think that’s what the American public expects.

What we have done in some areas is take laws that Congress had written and try to extend that far beyond what the intent behind those laws was — for instance, the climate rule we adopted on disclosures. We are taking a provision in law that suggests we have rulemaking authority as long as it’s in the public interest and the protection of investors. We have exerted that authority means we can disclose anything we want, irrespective of financial materiality, as long as we can make the claim that it’s in the public interest and protection of investors. In essence, we can use that to adopt backdoor rules to regulate behavior through disclosures.

When Congress passes a law, we shouldn’t be… trying to be very creative in how to read this in the broadest possible way to achieve things that were never contemplated by Congress.

IT’S WEDNESDAY — And, given the way this week has gone, Liz Lemon would be passed out by now. Want to talk SEC in a Trump 2.0 admin? Give me a shout: dharty@politico.com. And as always, Sam can be found at ssutton@politico.com.

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Driving the day

The Peterson Institute for International Economics holds a virtual discussion on “The Evolution of European Banking Supervision” at 9 a.m.… House Financial Services National Security Subcommittee holds a hearing on “Examining DoD Platform Performance and Costs” at 10 a.m…. House Financial Services holds a hearing on “Housing Solutions” at 10:30 a.m…. The Brookings Institution holds a virtual discussion on “The changing landscape of economic opportunity by race and class in America” at 1 p.m…. Federal Reserve Governor Michelle Bowman delivers opening remarks at a Dallas Fed conference at 4:05 p.m.

Biden’s back — President Joe Biden is scheduled to address the nation tonight for the first time about his withdrawal from the 2024 race and endorsement of Vice President Kamala Harris, Eli Stokols reports.

Inside the race to decipher HarrisFrom Megan Messerly: “Washington’s most powerful business interests have had five decades to learn what makes Joe Biden tick. They went through four years of Donald Trump in the White House.”

“Kamala Harris’ quick rise to potential Democratic nominee has them wondering what to expect — and worrying about whether her presidency would bring Biden 2.0, a tack to the left or something else entirely.”

Tune in — FDIC Vice Chair Travis Hill will give a policy speech at the American Enterprise Institute this afternoon. Hill — a potential candidate to lead the agency under a future Republican president — plans to talk about a wide range of topics, such as liquidity regulation, including proposals to encourage greater use of the Fed’s discount window; funding for dealing with failed banks; lessons from the collapse of multiple regional banks in 2023, and the FDIC’s approach to deposits made through third-party brokers, Victoria Guida reports. He'll also touch on the path forward for the proposal raising capital requirements on big banks, known as the Basel III Endgame.

 

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On the Hill

Goldsmith Romero vote nears — Senate Banking Chair Sherrod Brown is eyeing a July 31 vote for Christy Goldsmith Romero’s nomination to chair the FDIC, Eleanor Mueller reports.

“If convicted Sen. Bob Menendez (D-N.J.) does not appear, Senate Banking Democrats lose their one-seat majority. That means Brown will need at least some GOP support to advance Goldsmith Romero and President Joe Biden's choices of Caroline Crenshaw to stay on at the SEC and Kristin Johnson and Gordon Ito to join Treasury and FSOC,” Eleanor adds.

‘I was angry at first’ — The House Financial Services Committee’s top Democrat, Rep. Maxine Waters of California, told POLITICO’s Catherine Allen that she was frustrated Sunday when she learned of Biden’s decision to drop out of the election. In an interview, the Congressional Black Caucus member discussed why she hadn’t wavered on supporting the president, her quick decision to back Harris and her advice for the vice president.

A duel over ChevronCongress is quickly fracturing along party lines over what to do following the Supreme Court’s decision to strike down Chevron deference, as Lawrence Ukenye reports. Sen. Bill Cassidy (R-La.) is now pushing legislation that would thrust Congress further into the rulemaking process, while Democrats like Sen. Elizabeth Warren (D-Mass.) are seeking to empower agencies.

Elections

Let the parlor games continue — Donald Trump is keeping Wall Street guessing as to who could lead the Treasury if he’s elected come November. The former president wrote in a post on Truth Social that he “never discussed, or thought of” JPMorgan Chase CEO Jamie Dimon or BlackRock CEO Larry Fink for Treasury secretary. The post came just one month after Trump reportedly told Bloomberg Businessweek that Dimon was someone he “would consider” when asked if the CEO of the country’s largest bank could be a future Treasury secretary.

Debate it out If you thought debate season ended with Biden’s exit from the presidential race, sorry to disappoint. Trump committed on Tuesday to debating Harris, Alex Isenstadt reports, adding that the former president said he’d be willing to do it more than once, too.

Crypto

Crypto PACs’ latest targets — Spending by pro-crypto super PACs is set to shake up two primaries featuring high-profile House progressives — in opposite ways, Jasper Goodman reports.

Crypto PACs are set to go on the air soon with ads boosting progressive Democrat Shri Thanedar, who is running for reelection in Michigan, and attacking “squad” member Cori Bush, who faces a tough primary race in Missouri, according to spokesperson Josh Vlasto.

The crypto PAC Fairshake is launching a $1 million ad blitz going after Bush, who hasn’t been a prominent player in crypto politics but has voted against industry-favored legislation. She is the second squad member that Fairshake has targeted after it spent more than $2 million to help take down Rep. Jamaal Bowman of New York in a primary last month.

Fairshake’s sister PAC, Protect Progress, is launching a $1 million campaign to support Thanedar, who is pro-crypto. He has backed industry-friendly legislation and invested his campaign funds in Bitcoin.

An ether-linked trading frenzy — More than $1 billion worth of shares traded in the first U.S. exchange-traded products directly tracking the cryptocurrency ether on Tuesday, the products’ launch day, according to Bloomberg. “While that’s far from the $4.6 billion traded during the launch of spot-Bitcoin ETFs in January, it’s still a robust start for first-day ETFs,” Bloomberg reports.

 

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At the regulators

Surveilling ‘surveillance pricing’ — The Federal Trade Commission wants Mastercard, JPMorgan and Accenture, among others, to start handing over information on how they use consumer data to adjust prices, Alfred Ng reports. FTC Chair Lina Khan said, “the FTC’s inquiry will shed light on this shadowy ecosystem of pricing middlemen.”

 

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Wall Street

The veep’s boring investments — Vice President Kamala Harris and Second Gentleman Doug Emhoff are no day traders, as the Wall Street Journal reports. Rather, the most famous couple in Washington “keep much of their money in plain-vanilla index funds—with a fair amount in cash,” they report.

Jobs report

Arjun Malhotra has joined Chime as director of regulatory affairs and public policy. He previously served as a senior policy adviser on capital markets at Treasury and is a Rep. Rosa DeLauro (D-Conn.) alum. … Nicole Petrosino has joined MetLife as a vice president on its U.S. government relations team. She was previously a senior vice president for government relations at LPL Financial.

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