| | | | |  | | By Michael Stratford, Katy O'Donnell and Sam Sutton | Presented by Structured Finance Association | Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.
| | In the wake of the Supreme Court’s ruling earlier this year upholding the constitutionality of the Consumer Financial Protection Bureau, some conservatives elevated a new line of attack on how the agency is funded by the Federal Reserve. But their legal theory — that the CFPB must draw its budget from Fed “earnings” that the central bank hasn’t generated for years — is off to a slow start in Texas. Even state Attorney General Ken Paxton — one of the agency’s most powerful critics — says it doesn’t pass the smell test. Two federal judges in the Lone Star State over the past week rejected efforts to dismiss lawsuits in which companies raised the argument about the CFPB’s funding through the Fed as a reason to toss the case. In one of those cases, Paxton — who has repeatedly urged the Supreme Court to kill the agency — trashed the legal strategy in a June court filing . He labeled the argument “strange” and unpersuasive because the Supreme Court already ruled that the “CFPB is constitutionally funded.” The theory “rests on the flawed premise that the CFPB can draw funds only from a Federal Reserve ‘surplus,’” Paxton’s office wrote, adding that “even if for some reason the Federal Reserve could not fund the Bureau one year, the Bureau would nevertheless have alternative and legitimate sources of funding.” GOP policymakers have sought to defang, defund or legally dismantle the consumer watchdog agency for years, arguing that it’s an out-of-control regulator that’s created impediments for lenders and other businesses. Paxton’s outright dismissal of the latest legal theory is indicative of the uphill challenge Republicans could face in those attempts, particularly now that a conservative Supreme Court has sided with the bureau in cases that challenged its constitutionality. Paxton was responding to an effort by Houston-area housing development Colony Ridge to toss his federal consumer protection lawsuit that accuses the company of deceptive practices and fraud. Colony Ridge argued that the CFPB—which receives notices of states filing such lawsuits—was invalidly funded and therefore the case should be dismissed. (The Biden DOJ and CFPB have a parallel case against Colony Ridge that’s ongoing). A federal magistrate judge, Peter Bray, last week agreed with Paxton, ruling that the “Supreme Court found that the CFPB is constitutionally funded” and rejecting the company’s effort to throw out the case. In the other case, Judge Amos Mazzant of the Eastern District of Texas, a conservative Obama appointee, rejected online registration company Active Network’s motion to dismiss a CFPB complaint on the grounds that the CFPB’s “current funding is illegal.” The CFPB is accusing the company of illegally charging fees and deceiving customers. In its bid to toss the case, Active Network argued that the Supreme Court ruled that the bureau’s funding mechanism “is constitutional only so long as the Federal Reserve recognizes a surplus to fund the CFPB” and the Fed has been operating a deficit since 2022. To be sure, the legal fights over the CFPB are far from over. Other companies are continuing to raise the funding argument against the bureau elsewhere. And other judges who contend with the issue could reach a different conclusion and side with the conservative legal scholars against the CFPB. A spokesperson for Paxton did not respond to a request for comment. The CFPB declined to comment. IT’S THURSDAY — If you’ve got tips, let me know at ssutton@politico.com.
| | | | A message from Structured Finance Association: Invested in Your Future: The Structured Finance Association represents the market where loans to consumers of all stripes are bundled together into a bond to lower financing costs and reduce the risk of default. We also bring together every market participant, from banks to issuers to investors, to build consensus on the safest and most efficient way to finance America’s real economy. Learn more at www.structuredfinance.org. | | | | | | Weekly jobless claims data will be out at 8:30 a.m. … Retail sales data for September at 8:30 a.m. … Industrial production and capacity data at 9:15 a.m. … The Federal Deposit Insurance Corp. meets at 10 a.m. … The SEC has a closed meeting at 2 p.m. Never post — A top policy adviser to JD Vance for years detailed his use of cocaine and opiates in a series of posts on Reddit and at one point described the senator from Ohio as a “a Trump boot licker,” according to Wired’s Makena Kelly. Aaron Kofsky , who advises the vice presidential contender on banking and financial services policy, has been a key voice in shaping his agenda. He also played a lead role in crafting Vance’s crypto proposal, a person with direct knowledge of the process told Eleanor Mueller, including by drafting much of the language and shopping it among crypto firms. “I’ve struggled with drug use, which in my case was mostly an attempt to self-medicate against the effects of epilepsy and epilepsy medication,” Kofsky said in a statement to Wired that was provided by a spokesperson from Vance’s Senate office. “I deeply regret posting these comments. I’m not proud of this and I’m embarrassed it’s being publicized in this way, but I am thankful to say that part of my life is behind me.” Druckenmiller: The markets say Trump — Billionaire investor Stan Druckenmiller thinks markets are pricing in a Donald Trump victory. “You can see it in the bank stocks, you can see it in crypto,” he said in a Bloomberg Television interview. Druckenmiller, who was a major donor to Nikki Haley’s primary campaign, said he won’t be voting for Trump or Kamala Harris, who he said would be bad for business. Tariffs — WaPo’s Jeff Stein and David Lynch on Trump’s tariff plan: “The consequences would be far-reaching: Americans would be hit by higher prices for grocery staples from abroad, such as fruit, vegetables and coffee. Domestic firms dependent on imports would need to either figure out new supply chains or raise costs for consumers. U.S. manufacturers would almost certainly see sharp declines in orders from abroad as foreign nations impose retaliatory tariffs.”
| | | | A message from Structured Finance Association:   | | | | | Wall Street’s favorite candidate — Major Republican donors plowed more than $21 million into a super PAC supporting former Bridgewater Associates CEO Dave McCormick’s Senate campaign in Pennsylvania, according to the group’s quarterly filing. The Super PAC, Keystone Renewal, is largely funded by investment heavyweights like Citadel founder Ken Griffin, Blackstone Group Chairman Stephen Schwarzman , Interactive Brokers CEO Thomas Peterffy and Paul Tudor Jones, the founder of Tudor Investment Corp — all of whom wrote checks during the previous quarter. The haul is a big reason why Keystone Renewal has been the top Republican outside spending group in Pennsylvania’s Senate race, where McCormick is angling to oust three-term Democrat Bob Casey . The group has already spent more than $33 million on ads and has roughly $14 million booked between now and Election Day, according to AdImpact. (The themes: Inflation and immigration.) McCormick has deep ties to the investment world and Wall Street Republicans have been bullish on his candidacy. The former Bush administration official was a top executive at Bridgewater — the world’s largest hedge fund — for more than a decade before leaving the Westport, Conn.-based firm in 2022 to run for a Senate seat vacated by Republican Pat Toomey. He was defeated in the 2022 GOP primary by celebrity physician Mehmet Oz but remained a top recruit for Republicans in 2024. While McCormick’s investment background has helped with fundraising, Casey has repeatedly referred to it in attack lines. In a Tuesday night debate, the Pennsylvania Democrat said McCormick was “investing in China and our adversaries” while he was serving in the Senate. McCormick has consistently trailed Casey in the polls, though the Democrat’s advantage has narrowed in recent weeks . I take it back. Never stop posting — Your MM host’s eyes shot up late Tuesday night when The NYT’s Teddy Schleifer reported that longtime GOP donor and venture capitalist Tim Draper had contributed to the Harris Victory Fund last quarter. Draper, who famously tried to pass a ballot initiative that would have split California into six separate states, clarified his thoughts on the race on Wednesday. “I have donated to both the Harris and Trump campaigns. Roughly equal amounts,” he posted on X . “It allowed my wife and me to meet both candidates and make a more informed decision. I have come to the conclusion that both candidates have their hearts in the right place, and while they would set different paths for America, I am optimistic that either path will be a positive step. I am endorsing both candidates.”
| | Let the good times roll — Morgan Stanley announced blockbuster earnings on Wednesday as revenue from the trading business rose by 13 percent, Bloomberg’s Sridhar Natarajan reports. — The Dow Jones Industrial Average climbed to a record high (again) and oil prices dipped to a two-week low, according to Reuters.
| | | | A message from Structured Finance Association: Pooling loans together into bonds creates a safer financial system for everyone. This process, called securitization, allows banks to sell loans and to make new loans at prevailing market rates. We took that same logic to form the Structured Finance Association. Our members represent every aspect of the industry – over 370 accounting firms, broker-dealers, financial intermediaries, investors, issuers, insurers, and rating agencies, among others. We are the unified voice of securitization in Washington on Capitol Hill, in federal agencies and in the courts. Our goal? Bonding together to safely enable greater credit access to small businesses, consumers, and investors. Find out more at www.structuredfinance.org. | | | | | | Swipe fees — Banking groups spent years trying to repeal the Durbin Amendment, a provision of the Dodd-Frank Act that instructs the Fed to keep swipe fees “reasonable and proportional” to the cost of processing debit card transactions. Now they have to defend it. The Bank Policy Institute and The Clearing House on Wednesday filed a motion to intervene in the lawsuit brought by a North Dakota truck stop that claims the Fed’s 2011 rule permitted lenders to charge higher interchange fees than the law allows, Michael Stratford reports. “Banks oppose the Durbin Amendment’s price fixing requirement as a matter of policy but stand with the Federal Reserve to defend the legality of its 2011 implementing regulation,” Greg Baer, the head of the Bank Policy Institute, said in a statement. — ICYMI from my POLITICO Influence colleagues: “Swipe fee opponents’ lame-duck lobbying blitz” Under pressure — From Jasper Goodman: “House Financial Services Chair Patrick McHenry on Wednesday slammed FDIC Chair Martin Gruenberg for “continued obstruction” of the panel’s investigation into the agency's workplace culture, calling on the bank regulator to schedule a transcribed interview by the end of the day.” Eleanor reports that House Financial Services spokesperson Laura Peavey confirmed that the agency’s general counsel and director of legislative affairs made themselves available for interviews on Monday, but that Gruenberg has not.
| | Private credit — The Managed Funds Association is pushing back on claims that the private credit industry is opaque with a new report on how regulators can obtain private lending data. According to the industry group , information on private loans can be obtained through bank call reports, SEC filings and state-level licensing reports. EWA — A new report from the Center for Responsible Lending found that earned wage access customers incurred more overdraft fees and were more likely to “stack” loans. The CFPB has proposed an interpretive rule clarifying that providers must disclose the cost and fees of the loans to consumers under the Truth in Lending Act. | | | | Follow us on Twitter | | | | Follow us | | | | |
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