Fulcrum Perspectives
An interactive blog sharing the Fulcrum team's policy updates and analysis, as well as book recommendations, travel observations, and cultural experiences - all of which we hope will be of interest to you.
Here Come the Confirmation Hearings
Next Week Most of President-elect Trump's Cabinet Picks Get Their Senate Confirmation Hearings – But Will They Tell Markets Anything on Policy?
The Presidential Inauguration is 13 days away, but the new Congress is up and running. The first order of business for the new Senate Republican majority - aside from its ongoing wrestling match with President-elect Trump on how to proceed on renewing the Tax Cuts and Jobs Act (Trump's 2017 Trump tax bill), moving border security legislation and the 2025 budget (one Reconciliation bill or two?) – is successfully conducting the confirmation hearings of Trump's cabinet selections. The schedule from the respective Senate committees for those hearings is now out (see the hearing schedule below).
At this point, we believe most - if not all - of the President-elect's nominees will ultimately be confirmed (although we are expecting serious opposition to several of the nominees, including Defense Secretary-nominee Pete Hegseth and Director of National Intelligence nominee Tulsi Gabbard.) But this set of confirmation hearings is likely to be uniquely important to markets as they will shed significant light on, we believe, two major factors for the next two years:
How coordinated are Trump's nominees with the President-elect on policy issues? Are they helping to set the policy agenda for their respective agencies with Trump and the incoming White House team, or are they simply executing policies the President himself alone truly sets? And – putting aside President-elect Trump's massive and wide-reaching commentary on policy issues either verbally or by tweet, which policy issues will actually be the primary focus of the respective departments and agencies, and which look to be secondary or tertiary? And how will the nominees actually carry them out?
Now that Republicans control the Senate, just how compliant and deferential will Senate Republicans be to President Trump on his major policy proposals? Our view is, based on our conversations and observations, that while Republicans will do their utmost to show a strongly unified front in showing their support for President Trump and his policy agenda, careful listening to the hearings may show pressure points – even tiny cracks. What we see and hear from Republican Senators and staff behind closed doors about many of Trump's policies publicly is not the same as what they say publicly. Three examples:
Tariffs: What will Treasury Secretary-nominee Scott Bessent, Commerce Secretary-nominee Howard Lutnick, and State Department-nominee Marco Rubio say in response to a likely barrage of questions about Trump’s much-discussed tariff regime? How will they explain – in more detail than Trump has done – how it will work, when will it be implemented, and their views on retaliatory tariffs on US goods and services?
Mass-Deportation: Despite all the talk of mass deportations, we are starting to hear businesses weighing in (carefully, quietly) that mass deportations would, in fact, hurt the economy. Many small businesses simply need the workforce illegal immigrants have provided them, and mass deportations will damage their businesses and, ultimately, economic growth. Will we get a sense of Republican Senators trying to navigate this issue in the confirmation hearings of Homeland Security Secretary-nominee Kristi Noel, Attorney General-nominee Pam Bondi, and Office of Management and Budget-nominee Russell Voight (who will likely be asked how it will be paid for)?
Greenland/Canada/Panama Canal: What does Secretary of State-nominee Marco Rubio say to questions around Trump's statements of wanting to buy Greenland, making Canada the 51st state, and possibly using the military to take back the Panama Canal? What does Defense Secretary-nominee Pete Hegseth say in response to questions about the use of the military in Panama (as President-elect Trump has suggested), and doesn’t Congress have to authorize the use of troops?
Once we get through these hearings, the next step will be each of the nominees being approved by the respective committees and then having their nominations reported to the full Senate for approval. How that goes depends largely on the confirmation hearings. Senate Majority Leader John Thune (R-SD) can only lose three Republicans on a nomination or risk defeat for a nominee.
We would also note that Thune is gaming out which cabinet nominees he can actually get confirmed on Inaugural Day (January 20) and sworn immediately into office. Top of that list is Marco Rubio and Scott Bessent.
Normally, confirmation hearings are tightly scripted, and nominees are well-prepared to avoid getting into policy debates. These will not be "normal" hearings, and this is not going to be a normal presidential administration. Our view is markets should plan to pay closer attention to the confirmation hearings that most impact the sectors they are focused on.
Tuesday, January 14th
Senate Armed Services Committee: Pete Hegseth, Secretary of Defense
Senate Energy and Natural Resources Committee: Doug Burgum, Secretary of the Interior
Senate Committee on Veterans Affairs: Doug Collins, Secretary of Veterans Affairs
Wednesday, January 15th
Senate Agriculture Committee: Brooke Rollins, Secretary of Agriculture
Senate Energy and Natural Resources Committee: Chris Wright, Secretary of Energy
Senate Judiciary Committee: Pam Bondi, Attorney General
Senate Environment and Public Works Committee: Lee Zeldin, Administrator of the Environmental Protection Agency (Possibly Thursday, 1/16)
Senate Foreign Relations Committee: Marco Rubio, Secretary of State
Senate Intelligence Committee: John Ratcliffe, Director of the Central Intelligence Agency
Senate Committee on Homeland Security and Government Affairs (Morning): Kristi Noem, Homeland Security Secretary
Senate Committee on Homeland Security and Government Affairs (Afternoon): Russell Vought, Office of Management and Budget Director
Thursday, January 16th
Senate Finance Committee: Scott Bessent, Secretary of the Treasury
Senate Foreign Relations Committee: Elise Stefanik, U.S. Ambassador to the United Nations
Monday, January 27th
Senate Finance Committee: Robert F. Kennedy Jr., Secretary of the Department of Health and Human Services (Not Confirmed)
U.S. Financial Regulatory Week Ahead
Washington’s Regulatory World Continues to Get Quieter and Quieter; Elon Musk Wants to “Delete” The CFPB
December 2 - 6, 2024
There really is not much going on in the regulatory world this coming week. Some Fed Governor speeches, a couple of fireside chats with SEC Chair Gary Gensler, and a House Financial Services Committee hearing on the future of technology and the future of finance sum it all up.
Last week (on Friday, when we were all recovering from our Thanksgiving feasts), there was an unannounced Financial Stability Oversight Council (FSOC) meeting at the Treasury Department. Why they held it on an otherwise sleepy Thanksgiving Friday is anyone’s guess. According to the post-meeting press release, “the preliminary agenda for the executive session includes an update on the Council’s Hedge Fund Working Group; a presentation on the life insurance sector; and an update on the Council’s Nonbank Mortgage Servicing Task Force. The preliminary agenda for the open session includes the Council’s 2024 annual report.”
Elsewhere, President-elect Trump’s friend and confidant, Elon Musk – who is co-chairing the President’s so-called “Department of Government Efficiency” (DOGE) tweeted out, “Delete the CFPB [Consumer Finance Protection Bureau] There are too many duplicative regulatory agencies.” We will see how that turns out when Musk and his co-chair, Vivek Ramaswamy, get rolling on DOGE. And we are sure Congress (starting with Senator Elizabeth Warren (D-MA), who almost single-handedly created the agency) will have much to say – pro and con – if the duo includes eliminating the CFPB.
Finally, we would note—as we noted last week—that the Great Washington Parlor Game of Who Gets What Presidential Nomination continues apace. Just before Thanksgiving, there were numerous reports that President-elect Trump was on the verge of nominating former Securities and Exchange Commissioner Paul Atkins as the next Chair of the SEC. We expect a number of financial regulatory nominations will be made in the coming week.
Below is all we see happening in the coming week. Please let us know if you have any questions.
see happening in the coming week. Please let us know if you have any questions.
U.S. Congressional Hearings
U.S. Senate
· There are no significant events scheduled at this time.
House of Representatives
· Wednesday, December 4, 10:00 a.m. – The House Financial Services Committee holds a hearing entitled Innovation Revolution: How Technology is Shaping the Future of Finance.
Federal Department & Regulatory Agency Meetings & Events
Federal Reserve Board and Federal Reserve Banks
· Monday, December 2, 3:15 p.m. – Federal Reserve Board Governor Christopher J. Waller gives a speech on the economic outlook at the American Institute for Economic Research (AIER) Monetary Conference, Washington, D.C.
· Tuesday, December 3, 12:35 p.m. – Federal Reserve Board Governor Adriana D. Kugler gives a speech on the labor market and monetary policy at a Detroit Economic Club Event with Governor Adriana Kugler, Detroit, Michigan.
· Wednesday, December 4, 1:45 p.m. – Federal Reserve Board Chair Jerome H. Powell participated in a moderated discussion at the New York Times DealBook Summit, New York, N.Y.
· Friday, December 6, 9:15 a.m. – Federal Reserve Board Governor Michelle Bowman delivers remarks at the Missouri Bankers Association Executive Management Conference (virtual).
U.S. Treasury Department
· There are no significant events scheduled at this time.
Department of Commerce
· There are no significant events scheduled at this time.
Department of Housing and Urban Development
· There are no significant events scheduled at this time.
Small Business Administration
· There are no significant events scheduled at this time.
Securities and Exchange Commission
· Tuesday, December 3, 3:00 p.m. – SEC Chair Gary Gensler will participate in a fireside chat at the 2024 Healthy Markets Association Conference in Washington, D.C.
· Thursday, December 5, 10:00 a.m. – SEC Chair Gary Gensler will give remarks followed by a brief moderated Q&A session at the American Bar Association’s Federal Regulation of Securities Winter Meeting in Washington D.C.
· Thursday, December 5, 2:00 a.m. – The SEC will hold a Closed Meeting.
Commodities Futures Trading Commission
· Tuesday, December 3, 4:00 a.m. EST – CFTC Commissioner Kristin N. Johnson will participate in a fire-side chat “U.S. Regulatory Outlook for Digital Assets: Navigating Post Policy Elections” at the 2024 DigiAssets Connect in Geneva, Switzerland.
Federal Deposit Insurance Corporation
· There are no significant events scheduled at this time.
Office of the Comptroller of the Currency
· There are no significant events scheduled at this time.
The Consumer Financial Protection Bureau
· There are no significant events scheduled at this time.
FINRA
· There are no significant events scheduled at this time.
National Credit Union Administration
· There are no significant events scheduled at this time.
Federal Trade Commission & Department of Justice Antitrust Division
· There are no significant events scheduled at this time.
Farm Credit Administration Wagner Labor Initiative in New York.
Farm Credit Insurance Corporation
· There are no significant events scheduled at this time.
International Monetary Fund & World Bank
· There are no significant events scheduled at this time.
North American Securities Administrators Association
· There are no significant events scheduled at this time.
Trade Associations & Think Tank Events
Trade Associations
· December 5 – 6 – The American Bar Association holds its Federal Regulation of Securities Winter Meeting in Washington, D.C.
Think Tanks and Other Events
· Wednesday, December 4, 10:00 a.m. – The American Enterprise Institute for Public Policy Research holds a virtual discussion on "Farming and the Federal Budget: Will Farmers Face a New Age of Austerity?"
Please let us know if you have any questions or would like to be added to our email distribution list.
U.S. Financial Regulatory Week Ahead
Summer Break Comes to Washington
August 5 - 9 , 2024
Last week, we said the Dog Days of Summer were not officially here. Well, this week, they are here in force. Washington collectively ran out of town for the summer holidays. There is very little going on this coming week – no Fed speeches, no big regulatory agency meetings, no Congressional hearings, not many think tank events or trade association events. So, for now, we should all enjoy the quiet.
But last week was anything but quiet. The Federal Deposit Insurance Corporation (FDIC) issued a bipartisan agreement among the board on a proposed rulemaking to step up oversight of asset managers and the amount of shares in banks that they own. Until now, this has been a self-certification process with the asset managers promising to live by the rules. No more. Bank examiners will be looking much more closely at who owns what amount of shares in banks – something the asset management industry does not like. But when you have the FDIC Board – Republicans included – agreeing more has to be done, that is tough to fight back against. You can read all the materials and proposed rulemaking by the FDIC HERE.
But that was not the only action happening at the FDIC last week: The agency’s Inspector General released a scathing report further detailing the abusive atmosphere allowed to persist among employees, including how FDIC leadership failed to properly address allegations of sexual harassment of employees or to implement programs designed to prevent such misconduct. The Inspector General also revealed a separate report is forthcoming detailing “FDIC executives’ knowledge of harassment and related misconduct” as well as “factual findings regarding selected allegations that senior officials personally engaged in harassment or related misconduct.”
Somehow, FDIC Chair Martin Gruenberg continues to hold onto his seat, saying he will step down only when a replacement is confirmed by the Senate – which, considering the Senate Banking Committee failed to move on an expected confirmation vote last week, kicking it into September – makes us believe Gruenberg could be still sitting in the chair for months and months to come. That is a true scandal in and of itself.
Turning to Congress, the House of Representatives left for the summer break two weeks ago while the Senate was in session last week. Despite hanging around and extra week, they did not get two expected actions done: First, as mentioned above, the Senate Banking Committee did not move on the nomination of Christy Goldsmith Romero as the next FDIC Chair. Senate Banking Committee Chair Sherrod Brown (D-OH) put it off until September. But we think he will still have trouble moving the nomination forward as – so far – all Republicans oppose her nomination.
Over at the Senate Agriculture Committee, Chair Debbie Stabenow (D-MI) pulled back from marking up her crypto regulatory bill, also choosing to wait until the Senate comes back in September. We have a feeling the dynamics and concerns over the draft bill will be pretty much unchanged by then, ending Stabenow’s efforts (she is retiring at the end of this session).
Meanwhile, the House of Representatives – while out of session – still fired off two missives of note. First, the House Republican Environmental, Social, and Governance (ESG) Working Group—led by Oversight and Investigations Subcommittee Chairman Bill Huizenga (MI-04)—released its final staff report Thursday. The report is the culmination of the Working Group’s comprehensive examination of the factors contributing to the rise of ESG initiatives and the consequences for everyday investors, in addition to recommendations to protect American capital markets from the threats posed by these politically motivated mandates.
The report calls for legislative action on a number of major points, including:
Reform the proxy voting system to safeguard the interests of retail investors.
Promote transparency, accountability, and accuracy in the proxy advisory system.
Enhance accountability in shareholder voting by aligning voting decisions with the economic interests of shareholders.
Increase transparency and oversight of large asset managers to ensure their practices reflect the pecuniary interest of retail investors.
Improve ESG rating agency accountability and transparency to safeguard retail shareholders.
Strengthen oversight and conduct thorough investigations into federal regulatory efforts that would contort our financial system into a vehicle to implement climate policy.
Demand transparency, responsibility, and adherence to statutory limits from financial and consumer regulatory agencies.
Protect U.S. companies from burdensome European Union (“EU”) regulations, safeguarding American interests in global markets.
You can read the full report HERE.
And second, this past Wednesday, the Chairman of the House Financial Services Committee, Patrick McHenry (R-NC), and all the Committee Republicans sent a letter to Federal Reserve Chairman Jay Powell demanding the Fed withdraw and re-propose the Basel III Endgame rulemaking in its entirety, given the substantial changes to its original form. The letter follows Chairman Powell’s testimony before the Committee in support of re-proposal where he suggested it needed substantial re-writes. You can read the full letter HERE. It is another hammer blow against the draft rules, which are already on life-support as Fed Vice Chair for Supervision Michael Barr scrambles to salvage the proposal.
Below is a listing of all the other (very few) significant regulatory-related events this coming week:
U.S. Congressional Hearings
U.S. Senate
The Senate is out for the month of August and returns on September 9. No events are scheduled at this time.
House of Representatives
The House is out for the month of August and returns on September 9. No events are scheduled at this time.
US Regulatory Meetings & Events
Federal Reserve Board and Federal Reserve Banks
Monday, August 5, 4 p.m. – San Francisco Federal Reserve Bank President Mary Daly will discuss monetary policy and economic trends before moderated conversation hosted in partnership with the Hawaii Executive Collaborative in Hawaii.
Thursday, August 8, 3:00 p.m. – Federal Reserve Bank of Richmond Tom Barkin speaks virtually at The National Association for Business Economics.
U.S. Treasury Department
There are no significant events scheduled at this time.
Department of Commerce
There are no significant events scheduled at this time.
Securities and Exchange Commission
Thursday, August 8, 2:00 p.m. – The SEC holds a Closed Meeting.
Commodities Futures Trading Commission
There are no significant events scheduled at this time.
FINRA
There are no significant events scheduled at this time.
Federal Deposit Insurance Corporation
There are no significant events scheduled at this time.
Office of the Comptroller of the Currency
There are no significant events scheduled at this time.
The Consumer Financial Protection Bureau
There are no significant events scheduled at this time.
National Credit Union Administration
There are no significant events scheduled at this time.
Federal Trade Commission & Department of Justice Antitrust Division
There are no significant events scheduled at this time.
Farm Credit Administration
Thursday, August 8, 10:00 a.m. – The FCA Board will meet to receive the annual report on the Farm Credit System’s Young, Beginning, and Small Farmers and Ranchers Mission Performance.
International Monetary Fund & World Bank
There are no significant events scheduled at this time.
North American Securities Administrators Association
There are no significant events scheduled at this time.
Trade Associations & Think Tank Events
Trade Associations
Wednesday, August 7, 12:30 p.m. – The Competitive Enterprise Institute holds a discussion on "A Global Antitrust Paradox?," focusing on "the effects of heightened antitrust scrutiny on U.S. industry and national security."
Think Tanks and Other Events
Wednesday, August 7, 8:30 a.m. – Politico is hosting an event entitled “Finding Balance: What’s Next for Social Security” in New York.
Thursday, August 8, 3:00 p.m. – The National Association for Business Economics holds a virtual discussion with Tom Barkin, president and CEO of the Federal Reserve Bank of Richmond.
Please let us know if you have any questions or would like to be added to our email distribution list.
U.S. Financial Regulatory Week Ahead
June 3 - 7, 2024
It was 90 years ago this week that President Franklin Roosevelt established the Securities and Exchange Commission. The SEC will celebrate the historic event on Wednesday with a gathering of former SEC Chairs in Washington.
We will also be watching this week as Treasury Secretary Janet Yellen and Acting Comptroller of the Currency Michael Hsu take part, on behalf of the Financial Stability Oversight Council FSOC) in a Brookings Institution conference entitled "Artificial Intelligence & Financial Stability.” The development of AI is of growing concern to financial regulators on a number of fronts and this conference and the high-level engagement of the Treasury Secretary and Head of the OCC are good examples of how high-level that concern has gotten recently.
Looking back on the last week, the US Supreme Court handed down an important (and unanimous) decision that rejected a broad approach to exempting national banks from state regulations. The decision requires courts to take a “nuanced” approach to federal laws when coming in conflict with state laws.
Also last week, House Financial Services Committee Chair Patrick McHenry (R-NC) announced he will hold a hearing on the scandals at the FDIC. He intends to call FDIC Chair Martin Gruenberg up to testify before the full committee where he will face renewed calls to step down immediately (Gruenberg has steadfastly said he is staying until a replacement is nominated and confirmed by the US Senate, which will likely take not happen until early 2025).
Below is a full listing of what is happening at the financial regulatory agencies this week and in Congress. Please let us know if you have any questions.
U.S. Congressional Hearings
U.S. Senate
· Wednesday, June 5, 10:00 a.m. – The Senate Budget Committee holds a hearing on "Riskier Business: How Climate is Already Challenging Insurance Markets."
House of Representatives
· Tuesday, June 4, 11:00 a.m. – The House Ways and Means Social Security Subcommittee holds a hearing on "The Social Security Trust Funds in 2024 and Beyond."
· Wednesday, June 5, 9:00 a.m. – The House Financial Services Digital Assets, Financial Technology and Inclusion Subcommittee holds a hearing on "Next Generation Infrastructure: How Tokenization of Real-World Assets Will Facilitate Efficient Markets."
Joint Committees
· Tuesday, June 4, 2:30 p.m. – The Joint Economic Committee holds a hearing on "Artificial Intelligence and Its Potential to Fuel Economic Growth and Improve Governance."
US Regulatory Meetings & Events
Federal Reserve Board and Federal Reserve Banks
· Thursday, June 6, 12:00 p.m. – Federal Reserve Board Governor Lisa D. Cook at the Girls Global Academy 2024 Commencement Ceremony, University of the District of Columbia, Washington, D.C.
U.S. Treasury Department
· Tuesday, June 4, 1:00 p.m. – The Treasury Department holds a virtual meeting of the Federal Advisory Committee on Insurance to discuss climate-related financial risk and the insurance sector, discuss cyber insurance developments and international insurance issues and receive status updates from each of its subcommittees and from the Federal Insurance Office on its activities.
· Thursday, June 6 & 7 – The Financial Stability Oversight Council (FSOC) and the Brookings Institution hold a conference on "Artificial Intelligence & Financial Stability.” Treasury Secretary Janet Yellen and Acting Comptroller of the Currency Michael Hsu will give keynote speeches.
Securities and Exchange Commission
· Tuesday, June 5, 11:10 a.m. – SEC Chair Gary Gensler will speak at the ISDA/SIFMA Treasury Forum in New York.
· Wednesday, June 6, 10:00 a.m. – The SEC holds a virtual meeting of the SEC Investor Advisory Committee for a panel discussion examining the new frontier for investment advice, a panel discussion regarding AI regulation: embracing the future, a discussion of a recommendation regarding the protection of self-directed investors when trading complex products and utilizing complex strategies, a discussion of a recommendation on financial literacy and investor education and subcommittee and working group reports.
· Wednesday, June 6, 1:00 p.m. – The SEC hosts the 90th Anniversary of the Securities Exchange Act at the SEC.
Commodities Futures Trading Commission
· Tuesday, June 4, 10:00 a.m. – The Commodity Futures Trading Commission holds a meeting of the Global Markets Advisory Committee to hear a presentation from the GMAC's Global Market Structure Subcommittee, Technical Issues Subcommittee, and Digital Asset Markets Subcommittee on various workstreams, and consider recommendations from the Subcommittees on such workstreams.
· Wednesday, June 5, 12:30 p.m. – CFTC Chairman Rostin Behnam to keynote at the Piper Sandler Global Exchange & Trading Conference 2024 in New York.
FINRA
· There are no significant events scheduled at this time.
Federal Deposit Insurance Corporation
· Tuesday, June 4, 9:00 a.m. – The Federal Deposit Insurance Corporation holds a meeting of the FDIC Advisory Committee on Economic Inclusion for updates from committee members about key challenges facing their communities or organizations and panel discussions on the current environment for economic inclusion, including industry and market trends that affect consumer participation in the banking system.
Office of the Comptroller of the Currency
· Wednesday, June 6, 9:40 a.m. Chicago Time – Acting Comptroller of the Currency Michael Hsu will discuss “The OCC’s Financial Health: Vital Signs Initiative” at the EMERGE Financial Health 2024 Conference in Chicago, Illinois.
The Consumer Financial Protection Bureau
· There are no significant events scheduled at this time.
National Credit Union Administration
· There are no significant events scheduled at this time.
Federal Trade Commission & Department of Justice Antitrust Division
· Tuesday, June 4, 11:20 a.m. – FTC Chair Lina Kahn will participate in a fireside chat at the 2024 CNBC CEO Summit in Washington, D.C.
· Friday, June 7, 10:30 a.m. – FTC Chair Lina Kahn delivers opening comments at the American Constitution Society Annual Conference in Atlanta, Georgia.
Farm Credit Administration
· There are no significant events scheduled at this time.
International Monetary Fund & World Bank
· There are no significant events scheduled at this time.
North American Securities Administrators Association
· There are no significant events scheduled at this time.
Trade Associations & Think Tank Events
Trade Associations
· Tuesday, June 4 – The American Academy of Actuaries holds a symposium on "Looking Back, Moving Forward: The Employee Retirement Income Security Act at 50’ in Washington, D.C.
· Tuesday, June 4, 8:00 a.m. – The U.S. Chamber of Commerce holds its 2024 Sustainability and Circular Economy Summit in Washington, D.C.
· Tuesday, June 4, 1:30 p.m. – The Institute of International Bankers holds their 2024 Foreign Bank Governance Seminar in New York.
Think Tanks and Other Events
Thursday, June 6 & 7 – The Urban Institute holds a summit on "Advancing Housing Justice.”
Please let us know if you have any questions or would like to be added to our email distribution list.
U.S. Financial Regulatory Week Ahead
May 13 - 20, 2024
Last week was electrifying in the otherwise usually staid world of regulation. And the coming week might be just as action-packed. The fireworks were set off when, as we noted in our note last week, an independent investigatory report on the FDIC workplace and FDIC Chair Marty Gruenberg was released, and it was, in a word, damning. Conducted by the law firm Cleary Gottlieb Steen & Hamilton, the report charged, "For too many employees and for far too long, the FDIC has failed to provide a workplace safe from sexual harassment, discrimination, and other interpersonal misconduct."
The report went on to detail numerous incidents of Gruenberg verbally abusing employees and failing to respond to years of employee complaints over workplace culture. Gruenberg has issued a generic apology to staff but refused to step down despite a growing chorus of members of Congress demanding his resignation. As House Financial Services Committee Chair Patrick McHenry (R-NC) said, the report "details his inexcusable behavior and makes clear new leadership is needed at the FDIC."
In an attempt to defend Gruenberg, House Financial Services Committee Ranking Member Representative Maxine Waters (D-CA) issued not one but two strident press releases in response to the report defending Gruenberg. In the first release, Waters tried to divert the fault away from Gruenberg and onto two previous Republican chairs (despite Gruenberg having been Chair for the last three years. Gruenberg first joined the FDIC board in 2005 as Vice Chair, serving until he became Chair in 2011 and serving until 2018. Then he returned to serving as Vice Chair when Jelena McWilliams was named Chair. He then became Chair again in January 2023 after instigating a series of maneuvers to push McWilliams out so he could become Chair again).
Then, later in the day, Waters issued an updated statement, again attempting to divert the issue away from Gruenberg and the institution as a whole – all the while ignoring the detailed evidence of Gruenberg's bullying and abusive behavior over the years.
The scandal will be brought into the public square on Wednesday and Thursday in Congressional hearings, starting at the House Financial Services Committee. The Committee had already scheduled an oversight hearing on banking regulation in general with Gruenberg, Federal Reserve Vice Chair Michael Barr, and Acting Comptroller of the Currency Michael Hsu testifying. But at this point, we expect the lion's share of the hearing will be spent either bashing or defending Gruenberg. The fireworks show will be replicated the next day when the trio of regulators testify before the Senate Banking Committee.
Last week, a federal appellate court also blocked the Consumer Financial Protection Bureau's regulation on capping credit card fees. We expect the CFPB to appeal the case, which is likely to end up before the Supreme Court.
This past Friday, the Commodity Futures Trading Commission (CFTC) approved a move to ban derivatives contracts tied to political elections, sporting events, and awards shows like the Oscars, in a blow to political analysts like me.
Also, last week, the Financial Stability Oversight Council agreed unanimously to examine mortgage servicing companies (NMC) more closely. Secretary Janet Yellen separately called on Congress to establish a system for troubled NMCs.
We will watch closely this coming week as the House Financial Services Committee is expected to markup legislation seeking to limit SEC regulations on consolidated audit trails and crypto regulations.
And circling back to the regulatory calendar this coming week, the big event will be the SEC Division of Investment Management's annual Conference on Emerging Trends in Asset Management. The conference will bring together a variety of asset management industry participants and academics. SEC Chair Gary Gensler will kick off the meeting with a keynote speech.
Below is a listing of all the other significant regulatory-related events this coming week:
U.S. Congressional Hearings
U.S. Senate
· Thursday, May 16, 10:00 a.m. – The Senate Banking Committee holds a hearing entitled “Oversight of the U.S. Financial Regulators: Accountability and Financial Stability”. Testifying will be Michael Barr, Vice Chair for Supervision, Federal Reserve; The Honorable Martin Gruenberg, Chair, Federal Deposit Insurance Corporation; and Mr. Michael Hsu, Acting Comptroller, Office of the Comptroller of the Currency.
House of Representatives
· Wednesday, May 15, 10:00 a.m. – The House Financial Services Committee holds a hearing entitled “Oversight of Prudential Regulators.” Testifying will be Michael Barr, Vice Chair for Supervision, Federal Reserve; The Honorable Martin Gruenberg, Chair, Federal Deposit Insurance Corporation; and Mr. Michael Hsu, Acting Comptroller, Office of the Comptroller of the Currency.
US Regulatory Meetings & Events
Federal Reserve Board and Federal Reserve Banks
· Monday, May 13, 9:00 a.m. – Federal Reserve Board Vice Chair Philip N. Jefferson gives a speech entitled “Communicating About Monetary Policy” at the Cleveland Fed Conference on Central Bank Communications, Cleveland, Ohio.
· Monday, May 13, 9:10 a.m. – Federal Reserve Board Governor Lisa D. Cook gives a speech entitled “Growth and Change at Community Development Financial Institutions” at the Expanding Access to Capital for CDFIs, hosted by the Federal Reserve Bank of New York in New York.
· Monday, May 13, 10:00 a.m. (Amsterdam) – Federal Reserve Board Chair Jerome H. Powell participates in a moderated discussion with De Nederlandsche Bank (DNB) President Klaas Knot at the Annual General Meeting, Foreign Bankers’ Association, Amsterdam.
· Wednesday, May 15, 3:20 p.m. – Federal Reserve Board Governor Michelle W. Bowman gives a speech entitled “Innovation and the Evolving Financial Landscape” at the DC Blockchain Summit 2024 in Washington, D.C.
· Thursday, May 16, 10:00 a.m. – Federal Reserve Board Vice Chair for Supervision Michael S. Barr will testify at a “Oversight of Financial Regulators” hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
· Friday, May 17, 10:15 a.m. – Federal Reserve Board Governor Christopher J. Waller gives a speech entitled “Payments Innovation, Technical Standards and the Federal Reserve’s Roles” at the International Organization for Standardization Technical Committee 68 Financial Services 44th Plenary Meeting in Minneapolis, Minnesota.
· Saturday, May 18, 5:45 p.m. – Federal Reserve Board Governor Adriana D. Kugler gives the Commencement Speech at the University of Virginia 2024 Commencement Ceremony – Frank Batten School of Leadership and Public Policy, Charlottesville, Virginia.
· Sunday, May 19, 3:30 p.m. – Federal Reserve Board Chair Jerome H. Powell gives the Commencement Remarks at the Georgetown Law Commencement Ceremony in Washington, D.C.
U.S. Treasury Department
· There are no significant events scheduled at this time.
Securities and Exchange Commission
· Thursday, May 16, 9:00 a.m. – The SEC Division of Investment Management will host its annual Conference on Emerging Trends in Asset Management. The conference will bring together a variety of asset management industry participants and academics. SEC Chair Gary Gensler will kick off the meeting with a keynote speech.
· Thursday, May 16, 2:00 a.m. – The SEC will hold a Closed Meeting.
Commodities Futures Trading Commission
· Monday, May 13, 11:15 a.m. – CFTC Commissioner Christy Goldsmith Romero will participate on an AI panel at the Asian Pacific American Institute for Congressional Studies (APAICS) at the 2024 Legislative Leadership Summit in Washington, D.C. The panel is titled How AI is Changing the World.
· Thursday, May 16, 1:15 p.m. – CFTC Commissioner Christy Goldsmith Romero will speak at the National Futures Association’s (NFA) Board of Directors Spring meeting in Washington, D.C.
FINRA
· Tuesday, May 14, 10:00 a.m. – FINRA holds its 2024 FINRA Annual Conference in Washington, D.C.
Federal Deposit Insurance Corporation
· Wednesday & Thursday, May 15 & 16 – FDIC Chair Martin Gruenberg will testify before the House Financial Services Committee and then the Senate Banking Committee.
Office of the Comptroller of the Currency
· Wednesday & Thursday, May 15 & 16 – Acting Comptroller of the Currency Michael Hsu will testify before the House Financial Services Committee and then the Senate Banking Committee.
The Consumer Financial Protection Bureau
· Wednesday, May 15, 10:30 a.m. – The Consumer Financial Protection Bureau holds a virtual meeting of the Consumer Advisory Board to discuss broad policy matters related to the Bureau's Unified Regulatory Agenda and general scope of authority.
National Credit Union Administration
· There are no significant events scheduled at this time.
Federal Trade Commission & Department of Justice Antitrust Division
· Tuesday, May 14, 11:00 a.m. – The FTC will hold a Compliance Webinar on the Final Noncompete Rule.
· Thursday, May 16, 10:00 a.m. – The FTC has a scheduling conference before the Administrative Law Judge re: the Tapestry, Inc and Capri Holding Limited deal.
Farm Credit Administration
· There are no significant events scheduled at this time.
International Monetary Fund & World Bank
· There are no significant events scheduled at this time.
North American Securities Administrators Association
· There are no significant events scheduled at this time.
Trade Associations & Think Tank Events
Trade Associations
· Tuesday, May 14, 11:30 a.m. (London) – the Institute for International Finance hosts the IIF-Fitch Ratings Global Debt Roundtable in London.
· Wednesday, May 15, 9:30 a.m. – The Institute for International Finance holds the 2024 IIF/Deloitte Insurance Colloquium in Arlington, Virginia.
· Tuesday, May 14, 4:30 p.m. (Austin, Texas) – The Investment Company Institute and the Association of Securities and Exchange Commission Alumni (ASECA) holds an event entitled “ICI & ASECA: Celebrating 100 Years of the Mutual Fund”
· Wednesday, May 15, 11:00 a.m. – SIFMA holds the third of a four-part webinar series on China. This event is entitled “ U.S. Policy On China: What Might Congress and the White House Do in 2024 and Beyond.”
· Wednesday, May 15, 1:00 p.m. – The National Association for Business Economics holds a virtual discussion on "Climate Change, Risk, and Insurance: How the Landscape for Risk Is Evolving and Implications for Commercial Real Estate Investors/Owners."
Think Tanks and Other Events
· Tuesday, May 14, 9:00 a.m. – The Peterson Institute for International Economics holds an event entitled “Can auditors better serve investors’ needs?”
· Thursday, May 16, 2:00 p.m. – The Brookings Institution holds an event entitled “How can markets better value nature and price the benefits of conservation?”
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CBO Estimates Inflation Reduction Act will Trim $102 Billion off Federal Deficit
The Congressional Budget Office (CBO) has scored the $739 billion “Inflation Reduction Act” (a.k.a. Build Back Better-lite). The CBO forecast the legislation will lead to a net deficit decrease of more than $102 billion over the next ten years.
You can access the CBO report HERE.
The CBO scoring will be seen as a victory for Senate Democrats and clearly helpful to their efforts to get the Reconciliation package voted on in the next week. Moreover, they hope it helps convince Senator Kyrsten Sinema (D-AZ) - whose vote will make or break the deal - to get to a “yes” vote on the deal.
As of this writing, Sinema has yet to comment on the bill, saying she wanted to see how the Senate Parliamentarian ruled on the package (e.g., will it qualify as a Reconciliation worthy bill, or will certain parts be struck as not meeting the Reconciliation standard).
Washington Look Forward:
March 21-25, 2022
Spring is finally in the air in Washington, and the famed Cherry Blossoms are starting to pop on the Tidal Basin in D.C. But it is going to be another busy week in Washington and internationally. Here is a quick run-down of what we are watching:
Ukraine and the Meeting of Western Leaders in Brussels and then Visit Poland: Ukraine continues to dominate Washington’s focus, particularly President Biden’s. We will see President Biden travel to Brussels for meetings Thursday and Friday with fellow NATO heads of state. He will begin Thursday with a NATO Extraordinary Summit to discuss the Russia-Ukraine conflict. In particular, the focus will be to reassess the Alliance’s long-term strategy and also take the opportunity to show strong support for the Baltic nations who are feeling increasingly at risk from Russia.
Biden will then join a meeting of the European Council Thursday and again on Friday to further discuss diplomatic efforts and the US-EU alliance. Watch for the NATO meeting and E.C. meetings to result in further sizeable commitments for increased defense and security spending by all member states.
Biden will then travel on Saturday to Poland to show solidarity with Poland, who, like the Baltic states, are feeling the risk of Russia on their border. There has been chatter of Biden then making a surprise visit to Kyiv, Ukraine, to meet with Ukraine President Zelensky – something British Prime Minister Boris Johnson apparently expected to do later this week. We note the Prime Ministers of Poland, the Czech Republic, and Slovakia made such a trip to Kyiv last week. However, the White House has said the President “has no plans” to make such a dangerous trip, but we will closely watch if this changes.
Is Congress Getting Closer to Passing the CHIPS Act?: We have written previously about this critical piece of investment legislation and how it has struggled for focus and passage in both the House and Senate. To briefly recap, the bill has seen four previous iterations but has languished in Congress for a variety of odd reasons.
However, Senate Majority Leader Chuck Schumer (D-NY) filed motions late Friday for the Senate to take up the House version of the bill (H.R. 4521) this week. The bill would shower tens of billions of dollars on the semiconductor industry to encourage re-shoring of semiconductor chip manufacturing to the U.S. as well as pouring tens of billions of more money on R&D efforts to grow and expand the U.S. technology base. The legislation is seen by both Democrats and Republicans as a means of competing more strongly versus China, and we expect the final product will garner considerable bi-partisan support.
But, with all things Congress, there is one potential sticking point: Several Democratic senators want to include a provision that would give the Federal Maritime Commission more power to regulate large container ships to help “fix” the supply chain challenges out there. There will likely be considerable push-back on this provision from those who do not see the container shipping industry as the culprit to supply chain issues and growing inflation.
The big question we have is around timing. Whatever the Senate ends up passing this week after amendments are added will be different than what the House passed last month, meaning the two chambers will have to iron the differences in a conference session in the coming weeks and maybe months. We believe they are much closer to an agreement than further apart, thus the conference negotiations will likely be short. We will keep you updated.
Russia is about to Lose Normal Trade Relations with the U.S.: Late last week, the House passed legislation revoking Russia’s Normal Trade Relations with the U.S. What does that mean with all the heavy sanctions already in place on Russia? Not much. President Biden would be empowered to bring hefty tariffs on Russian goods and services. But considering the fact Biden has already banned the import of Russian energy, seafood, alcohol, and luxury goods, this may be less impactful than meets the eye.
Supreme Court Confirmation Hearings: This week, Congress will be primarily focused on the confirmation hearing of Judge Ketanji Brown Jackson for the Supreme Court. The hearings kick off today (Monday). Unlike the last few Supreme Court nominations, we do not expect this one to be very controversial. By and large, Republicans seem much more at ease with Judge Jackson’s nomination for two reasons 1) she is clearly qualified, and; 2) she is replacing a liberal justice, not a conservative one. Therefore the balance of the Court is not being altered. Our guess is the full Senate confirms her in the next two to three weeks – and three or four Republican senators will vote for her confirmation.
We hope this helps you get a general perspective of what is going on in Washington this week. Please let us know if you have any questions.
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