News: A regulator strikes back at Elizabeth Warren

Tuesday, October 29, 2024

A regulator strikes back at Elizabeth Warren

Oct 29, 2024

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QUICK FIX

The Public Company Accounting Oversight Board is a small government watchdog that supervises auditing firms, hardly the typical home for the type of personality who would escalate a fight with Sen. Elizabeth Warren.

But PCAOB Board Member Christina Ho is on the offensive against the progressive icon. After Warren, a Massachusetts Democrat, co-authored a letter with Sen. Sheldon Whitehouse (D-R.I.) raising alarms about deficiency rates at auditing firms — and singled out Ho for a recent speech in which she compared most violations to jaywalking tickets — Ho responded publicly and in personal terms.

In a provocative LinkedIn essay titled “ Senators, why are you persecuting me?” the former Treasury official claimed that Warren and Whitehouse’s letter represented an attempt to “stifle” her voice at the agency. What’s more, Ho wrote that the letter’s inclusion of a sentence that described Warren’s successful efforts to oust the previous PCAOB board represented a “thinly veiled threat” to her livelihood.

“Is there anything more abusive than U.S. Senators’ thinly veiled threat to take away the jobs of public servants just because they have different perspectives?” she wrote. “Is there anything more hypocritical than Senators who claim to serve underprivileged and underrepresented populations, but do not think twice about threatening a woman of color for simply doing what she believes is right?”

Suffice it to say, this is not how regulators typically respond to letters from Warren, one of the most forceful voices in Democratic policy circles. Warren has used her perch on the Senate Banking Committee to battle with power brokers like Federal Reserve Chair Jerome Powell and JPMorgan Chase CEO Jamie Dimon. She once called on President Barack Obama to fire former Securities and Exchange Commission Chair Mary Jo White. Her (many) letters criticizing the performance of industry regulators are not trifles.

That doesn’t seem to bother Ho, who told MM that senators “have every right” to conduct oversight and call people out “when they see something inappropriate.”

But Warren and Whitehouse’s letter alleged that Ho made false claims about how the results of PCAOB’s audit inspections are presented, and “what I took issue with was this approach that made an accusation of me with no real evidence [or] even an opportunity to engage and ask questions and defend myself,” Ho said.

Senators “should be even more careful when they're in a position of power, to not to come across like they're just intimidating people,” she added.

A spokesperson for Warren said her letter with Whitehouse was “just the latest in her years-long efforts to hold PCAOB accountable when it fails to uphold its mission of protecting investors and the public.” The letter was addressed to PCAOB Chair Erica Williams, who was recently sworn into a second term and also references her recent commentary on inspection results.

Whitehouse’s office did not respond to a request for comment.

This will not be the last you’ll hear of Ho, who has occasionally courted controversy since she was appointed to the PCAOB by SEC Chair Gary Gensler in 2021. The accounting watchdog’s board is typically consensus-driven but Ho — a self-proclaimed "data nerd” — has repeatedly cast dissenting votes on new rules and proposals. The Wall Street Journal floated her as a possible PCAOB chair if Donald Trump wins a second term.

Ho acknowledged that it’s hard for people “in this town” to not assume there’s a political motive for the statements she’s made but insisted that she’s “not here to try to wield power or get attention.”

“I am not a political person,” Ho said. “But I do hope that you know what I'm doing can give other people hope that there are public servants who are willing to take a stand when necessary.”

IT’S TUESDAY — Politics, gotta love it. Got tips? Let me know at ssutton@politico.com.

A message from the American Bankers Association:

Join us starting at 8:00 a.m. ET for Day Two of ABA’s Annual Convention. The morning session will honor ABA Community Commitment Award winners, followed by a panel focused on the banking policy outlook post-election. In the afternoon, U.S. Treasury Secretary Janet Yellen shares her thoughts on the state of the economy. We’ll also hear from Rep. Ritchie Torres (D-NY) on what can be accomplished in the final weeks of this Congress. View Tuesday’s livestream.

Driving the Day

Treasury Secretary Janet Yellen and Rep. Ritchie Torres (D-N.Y.) will speak on the second day of the ABA conference … The Consumer Confidence Index for October will be out at 10 a.m. … The September job openings report will be out at 10 a.m. …

The FDIC

Brawl — The fight over a Federal Deposit Insurance Corp. proposal that targets how asset management firms invest in banks is starting to heat up.

Industry groups are homing in on Consumer Financial Protection Bureau Director Rohit Chopra’s recent speech delivered at Harvard where he identified firms like BlackRock and Vanguard as a “natural oligopoly.” Industry leaders and their allies contend that Chopra’s remarks signal that he’s already made up his mind on the proposal even though the comment period was extended to Nov. 18.

Chopra, who holds a seat on the FDIC’s board and is a primary architect of the proposal, said the trillions of assets managed by those firms provide them with “an extraordinary amount of power to impose their preferences and regulations on businesses throughout the economy” — even when they’re only “passive” investors.

“It’s a pretty outrageous speech,” Eric Pan , the chief executive officer of the Investment Company Institute, told MM. “What’s the point of a notice and comment process if you’ve already decided that you know what the outcome is?”

The flare-up over Chopra’s speech reflects the challenges the rule could face if it’s finalized.

“That's bullshit,” Mick Mulvaney , who led the consumer watchdog during the Trump administration, told MM when asked for comment on Chopra’s speech. “That's actually probably grounds for a lawsuit.”

The proposal would require firms to provide the FDIC with advance notice if they acquire shares in banks above a certain threshold. The FDIC has also demanded that BlackRock and Vanguard strike separate “passivity” agreements with the agency by Oct. 31 — well before the proposed rule change’s deadline for public comment — that would set terms around how those firms invest in financial institutions.

In a recent comment letter, BlackRock’s Head of Regulatory Affairs Benjamin Tecmire wrote that the changes sought by the regulator through a separate agreement “are closely related” to the rule, “yet the FDIC is applying them to certain firms as a fait accompli before reviewing comments.”

While progressive watchdogs like Better Markets have praised the proposal, groups representing the asset management industry are calling foul. Comment letters from industry groups have dinged the rulemaking process as flawed. The Conference of State Bank Supervisors argued that the proposal was “premature and lacks both factual and legal support” and that the FDIC “has the ability to raise any concerns over change in control notices filed with the [Federal Reserve] under existing processes.”

To that end, on Monday Tecmire sent a letter to top attorneys at the FDIC, the Office of the Comptroller of the Currency and the Fed contending that the “appropriate path forward is a joint, interagency approach that considers public feedback,” according to a copy obtained by MM.

In a statement, an FDIC spokesperson said the agency “will consider all comments received over the course of the rulemaking in the development of a final rule.”

Spokespeople for the CFPB and the Fed declined to comment. The OCC did not respond to a request for comment.

REGISTER NOW: Join POLITICO and Capital One for a deep-dive discussion with Acting HUD Secretary Adrianne Todman, Rep. Darin LaHood (R-IL), Rep. Ritchie Torres (D-NY) and other housing experts on how to fix America’s housing crisis and build a foundation for financial prosperity. Register to attend in-person or virtually here.

At the regulators

Treasury finalizes China investment crackdown — Ari Hawkins reports that the Biden administration finalized an outbound investment measure Monday aimed at cracking down on U.S. investment into China. The long-awaited rule from the Treasury Department targets advanced technology sectors such as semiconductors, quantum technologies and artificial intelligence.

The move comes as lawmakers are working to finalize their own agreement to curb investments in China — but the reaction from Capitol Hill signaled that agreement could remain elusive.

Key lawmakers have said they are nearing an agreement to overcome a long-running stalemate between national security hawks who want to ban investments in some sectors of the Chinese economy and the business-friendly leaders of the House Financial Services Committee, who back a sanctions-based approach.

House Financial Services Chair Patrick McHenry said in a statement following the announcement that he remains “skeptical of a sectoral approach to regulating outbound investment” — a sign that he remains dug in on the issue.

“To have a strong, immediate, and global impact on the CCP’s ability to wage war, policymakers in Congress and the Administration must embrace our time-tested sanctions regime,” he said. “I will continue to oppose efforts that unwittingly advance Chairman Xi’s crackdown on Western influence in China, and I look forward to examining this rulemaking in more detail.”

A spokesperson for House Foreign Affairs Chair Michael McCaul (R-Texas), a leading China hawk who has been at odds with McHenry, said he "is glad the admin is moving forward with a final rule" and "remains fully supportive of Speaker [Mike] Johnson’s leadership to deliver legislative action on outbound investment this year." — Jasper Goodman

A message from the American Bankers Association:

2024 ELECTION

CEO vibe check — WaPo’s Jeff Stein, Jacqueline Alemany and Josh Dawsey report that corporate leaders are trying to avoid drawing fire from former President Donald Trump as more people become convinced that he’s likely to return to the White House. “I’ve told CEOs to engage as fast as possible because the clock is ticking. … If you’re somebody who has endorsed Harris, and we’ve never heard from you at any point until after the election, you’ve got an uphill battle,” a Trump adviser told WaPo . “People are back-channeling, looking at their networks — they’re talking to lobbyists to see what they can do to connect with the president and his team.”

— The NYT’s Ben Casselman: “Wages Have Outpaced Inflation. But Not for Everyone.”

More options — Declan Harty reports that Robinhood is rolling out election-betting products with just a week to go before the election. Customers can trade on whether they believe Harris or Trump will win.

First in MM: French Hill taps Silicon Valley campaign cash — Rep. French Hill , the Arkansas Republican vying to lead House Financial Services next year, is hosting a Silicon Valley fundraiser Tuesday night with 20 founders and CEOs, a person with knowledge of the event told Zach Warmbrodt. It's expected to raise more than $525,000 for Hill and the House GOP's campaign arm.

Hill and three Republican competitors for the Financial Services gavel have been ramping up fundraising. Hill has paid nearly $2.6 million in dues to the NRCC this cycle.

Tuesday night's event is expected to bring in $400,000 for the NRCC, including $350,000 from donors who have never given to it. The event will also support Hill's leadership PAC, the "In the Arena PAC," which has given more than $720,000 this cycle to GOP members and candidates.

The Economy

Recession fears are fading — A Wells Fargo survey of CEOs and CFOs found that recession fears dissipated in the third quarter. Just 44 percent of those surveyed said they believe a recession is likely and only 35 percent of companies are concerned about a near-term downturn.

Oil falls — The FT: “Oil prices fell sharply on Monday after Israel’s attack on Iran at the weekend avoided oil and nuclear facilities and Tehran gave a measured response to the strikes.”

Crypto

First in MM: Paxos urges Harris, Trump to act on stablecoins — The CEO of stablecoin issuer Paxos, Charles Cascarilla, will send a letter to Harris and Trump today warning of the "threat to our economic competitiveness and national security" if whoever wins the White House does not enact a regulatory overhaul, Eleanor Mueller reports.

"There is bipartisan interest in fixing this broken status quo," Cascarilla writes . "We look forward to collaborating with the next administration and lawmakers of both parties to craft and implement a stablecoin framework."

Jobs report

FIRST IN MM — Zack Rosenblum is joining American Express as vice president and head of U.S. government affairs. He most recently was counselor to the secretary of the Treasury where he led policy on payments and emerging technologies, including digital assets, and also worked on a number of other issues including housing policy and anticorruption. Rosenblum previously worked for Senate Majority Leader Chuck Schumer (D-N.Y.) for eight years as his financial services policy adviser. — Daniel Lippman

A message from the American Bankers Association:

Join us starting at 8:00 a.m. this morning for Day Two of ABA’s Annual Convention in New York as bank leaders from across the country gather to discuss the industry’s future. After morning sessions honoring ABA Community Commitment Award winners and a panel focused on the banking policy outlook post-election, U.S. Treasury Secretary Janet Yellen shares her thoughts on the state of the economy and more. We’ll also hear from Rep. Ritchie Torres (D-NY) on what can be accomplished in the final weeks of this Congress. View Tuesday’s livestream.