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Presented by ExxonMobil: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Kate Davidson and Aubree Eliza Weaver | | | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s 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. | | | The intense focus on President Joe Biden’s forthcoming pick for Federal Reserve chair has overshadowed another key financial nomination battle coming to a head this week. The Senate Banking Committee will hold a hearing today on the nomination of Cornell Law Professor Saule Omarova , a Wall Street critic cheered by progressives, to lead the Office of the Comptroller of the Currency, the nation’s top bank regulator. Her odds are not looking great: Republicans have railed against Omarova. But the Biden administration has also privately told people that at least seven Democratic senators have reservations about her nomination. People familiar with the matter say that includes four members of the committee: Jon Tester of Montana, who has already voiced concerns; moderates Mark Warner of Virginia and Kyrsten Sinema of Arizona; and Raphael Warnock of Georgia, who faces a potentially tough reelection battle next year. A spokesperson for Warner said he looks forward to attending Thursday’s hearing, but she declined to comment on whether he has concerns about the nominee. Spokespeople for Sinema and Warnock did not respond to requests for comment. Separately, a spokesperson for Sen. Mark Kelly of Arizona, who is not on the committee, said the lawmaker also has concerns about Omarova’s nomination. Kelly is up for reelection in 2022. Other senators who have concerns, according to people familiar with the matter, are Tom Carper and Chris Coons of Delaware, where many financial firms are headquartered. (A Coons spokesperson declined to comment; a Carper spokesperson did not respond to a request.) | | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today. | | | | | Senate Banking Chair Sherrod Brown (D-Ohio), a strong Omarova supporter, this week privately urged all the panel’s Democrats to attend the hearing. A committee aide acknowledged some members have expressed reservations but said those who have met with Omarova have been more receptive to her nomination. “From growing up in the Soviet Union, to escaping to build a new life here, to enduring this last month of personal attacks with dignity, Professor Omarova has demonstrated the strength and independence that she’ll need to be a fair, impartial, and tough Comptroller,” Brown will say tomorrow, according to excerpts of his opening remarks obtained by MM. Omarova has faced intense and at times highly personal criticism over the past few months, some of it focused on her background growing up in the then-Soviet state of Kazakhstan, particularly her undergraduate thesis on Karl Marx at Moscow State University. She has also drawn fire for proposing to allow the Fed to provide bank accounts for Americans, rather than private institutions, a move that she said would ‘end banking' as we know it." —A GOP aide tells MM: “Opposition to Professor Omarova has nothing to do with her heritage. Democrats want to change the subject from Omarova’s self-described ‘radical’ ideas and the authorities she would have at her disposal to ‘effectively end banking as we know it.’” Bank industry groups and Republicans have also slammed her over her writings on how the government should be more involved in the provision of financial services. Dozens of progressive groups have backed her confirmation, saying she would fight for equity and take a tough line with big Wall Street firms. Omarova has defended herself in interviews in recent weeks, and in her prepared testimony implicitly pushed back on suggestions that she might be a communist. She said her goal if confirmed will be to help small and medium-size banks compete, our colleague Victoria Guida reported. But that pledge fell flat, as the same lenders vowed to fight her appointment. Why is it significant? The Independent Community Bankers of America, which sent a letter urging the Senate to reject the nomination, represents thousands of small banks in virtually every congressional district and is highly influential. It also rarely weighs in on presidential nominations (your MM host can’t recall a single time in her 13 years covering these issues). Their opposition could make it that much harder for some moderate Democrats to support the pick. Required reading — Rebecca Traister profiles Omarova for New York Magazine: “‘Of course, I expected that Wall Street banks would be strenuously opposing my nomination,’” Omarova tells Traister. “But what has surprised her, she said, ‘is the personal character of those attacks. How it escalated into this, I don’t know.’” IT’S THURSDAY — Your MM host realized today that this coming Saturday is President Biden’s 79th birthday. So any of you bracing for a weekend announcement on the Fed chair nomination can take a deep breath — our money is now on early next week. Let us know if you’re hearing otherwise: kdavidson@politico.com, aweaver@politico.com, and on Twitter @katedavidson. | | | | A message from ExxonMobil: ExxonMobil is reducing our emissions and advancing lower-carbon technologies that support society’s net-zero goals. Expanding business opportunities in lower-carbon technologies where we have competitive advantages – areas like carbon capture and storage, hydrogen and advanced biofuels, which can make a big difference. Our company is uniquely positioned to continue powering economies around the world, while advancing climate solutions that move us all toward a lower-carbon energy future. Learn more at ExxonMobil.com/Solutions. | | | | | | American Enterprise Institute for Public Policy Research holds its virtual housing conference … Cato Institute holds its annual monetary policy conference … Atlanta Fed President Raphael Bostic speaks at 8 a.m. … Chicago Fed President Charles Evans speaks at 2 p.m. … San Francisco Fed President Mary Daly speaks at 3:30 p.m. Q&A WITH TREASURY’S NELLIE LIANG — Victoria sat down this week with Nellie Liang, the Treasury undersecretary for domestic finance, to talk cryptocurrency, climate change, coronavirus, cyber attacks and more. Liang, who served as the first head of financial stability policy at the Federal Reserve, is one of the country’s foremost experts in analyzing threats to the banking system. Liang on the Treasury’s climate report: “It also was a huge 180-degree turn from where we were, where the financial regulatory agencies collectively were, less than a year ago. And it had really some substantive conclusions. ... It brings the U.S. close to where other countries are. We’re getting there. We may get there very fast after this.” NEW SEC RULES AIM TO EMPOWER SHAREHOLDERS — From our Zachary Warmbrodt: “The Securities and Exchange Commission on Wednesday approved a major regulatory overhaul designed to make it easier for investors to influence the operations of public companies, fueling tensions with business groups that have already started to fight back. The SEC's three Democratic commissioners agreed to issue a proposal that would roll back Trump-era restrictions on so-called proxy advisory firms, which advise shareholders on the governance of firms listed on public stock exchanges.” DEMOCRATS WEIGH PRE-SHUTDOWN FUNDING CLIFF — From our colleague Caitlin Emma: “Democrats are floating another short-term spending patch that kicks the next shutdown threat closer to the holidays , hoping to needle Republicans into talks over a sweeping government funding deal. As they approach the Dec. 3 deadline, top Democrats are considering a stopgap further into December as their leading option — potentially Dec. 17 or even closer to Christmas — rather than a longer continuing resolution that pushes the deadline into the new year.” | | | | BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we’ve got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don’t miss out on this influential global community. Subscribe now. | | | | | INFLATION WATCH —Biden’s war on inflation is a battle to change human behavior — Our Lorraine Woellert: “In the weeks after 9/11, President George W. Bush implored Americans to overcome their fears and spend money, in an urgent bid to get the economy back on track after the devastating terrorist attacks. “‘Take your families and enjoy life the way we want it to be enjoyed,’ Bush said in a speech to airline employees. ‘Get down to Disney World.’ “Today, facing a very different kind of economic challenge, President Joe Biden needs people to overcome a new set of fears — and direct their purchases into the areas of the service economy hit hardest by the coronavirus pandemic.” —Treasurys edge toward stability after inflation-driven selloff — WSJ’s Sam Goldfarb: “U.S. government bond yields are showing signs of stabilizing near the top of their 2021 range after a bout of selling precipitated by last week’s surprisingly high inflation data. The yield on the benchmark 10-year U.S. Treasury note fell to 1.604 percent Wednesday from 1.632 percent a day earlier, according to Tradeweb, breaking four straight sessions of gains.” —Rising food, housing costs are hitting military families — Bloomberg’s Roxana Tiron and Peter Martin: “Defense Secretary Lloyd Austin said Wednesday that he’s ordering measures to help military families struggling to manage rising housing and food prices, calling the costs of basic goods a ‘readiness issue’ for the U.S. military. Austin said he’s temporarily raising the payments troops receive in certain locations to help pay for off-base housing. That will apply in areas where rental costs have climbed 10% or more. He also said he’s directing aides to find ways to ‘strengthen food security across the force.’” —Senate Ag's top Republican says he may be open to lifting some China tariffs to ease inflation: “‘I think it depends,’ Sen. John Boozman of Arkansas told POLITICO about whether he could get behind such a move. Boozman said the tariffs put in place by former President Donald Trump are generally helping U.S. producers at this point as China increases purchases of U.S. goods, especially agricultural products.” SUMMERS WEIGHS IN ON CBO SCORE — In an op-ed in the Washington Post, former Treasury Secretary Larry Summers says the Biden administration’s tax enforcement plans will raise much more revenue than the Congressional Budget Office expects. “Over the next 10 years, the IRS is on track to collect $7 trillion less than is owed. This enormous tax gap is around 3 percent of gross domestic product on an annualized basis. President Biden’s proposal to revitalize the IRS is projected to net an amount that is merely 5.7 percent of that tax gap.” “That modest gain is a more-than-reasonable expectation given the starting point,” he adds. | | | | A message from ExxonMobil:   | | | | | | WALL STREET SEES FIRST FED CLIMATE CHANGE REVIEW IN 2023 — Reuters’ Pete Schroeder: “Over the past year ... the Fed has ramped up pressure on big banks to scan their portfolios for climate change risks and could be in a position to run a formal scenario analysis and release broad findings to the public in 2023 , according to seven industry executives with direct knowledge of the discussions who declined to be named.” WHAT HAPPENS NOW TO THE PANDEMIC’S HOTTEST STOCKS? — NYT’s Matt Phillips: “Shares of companies like Peloton, the home fitness equipment maker, and Zoom Video, the online conference software that replaced face-to-face communications for countless schools and businesses, were darlings of the stock market for the better part of last year. But as the economic reopening gains speed — aided by rising vaccination numbers and promising new treatments for those who get sick — some of the stocks at the center of the so-called stay-at-home trade collapsed.” FED’S EVANS: TAPER TO TAKE UNTIL MID-2022 TO COMPLETE — Reuters: “Chicago Federal Reserve President Charles Evans on Wednesday reiterated that it will take until the middle of next year to complete the Fed's wind-down of its bond-buying program, even as the central bank remains 'mindful’ of inflation. “‘We're going to be looking to see how much additional accommodation is boosting inflation; if indeed that is the case, we'll be thinking about when the right time to start raising rates will be,’ Evans said at a virtual conference by the Mid-Size Bank Coalition of America. CITI JOINS MORGAN STANLEY IN BACKING BET ON AGGRESSIVE FED HIKES — Bloomberg’s Edward Bolingbroke: “A growing chorus of Wall Street banks are wagering that the Federal Reserve will hike rates at a faster-than-expected pace, with Citigroup Inc. joining Morgan Stanley in backing trades that will profit if the central bank does just that.”
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