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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. | | | Have you really arrived in Washington until you’ve been called before a congressional committee? Testifying on Capitol Hill isn’t any CEO’s idea of a good time. But for crypto executives, who will appear together for the first time before a House panel this morning, it’s a welcome coming-of-age moment they see as legitimizing their role in financial services. The House Financial Services Committee hearing comes at a pivotal moment as regulators and lawmakers weigh new rules around how digital assets should be regulated and by whom. (Read the full committee briefing memo here.) “There’s a lot on the line,” said Cowen policy analyst Jaret Seiberg. “You have one shot to make a first impression, and this is the industry’s opportunity.” Who’s testifying? —Circle CEO Jeremy Allaire
—FTX CEO Samuel Bankman-Fried
—Bitfury Group CEO Brian Brooks
—Paxos Trust Company CEO Charles Cascarilla
—Stellar Development Foundation CEO Denelle Dixon
—Coinbase Inc. CEO Alesia Jeanne Haas Don’t expect many fireworks. The witnesses are literally and figuratively on the same side of the table, so wary lawmakers won’t have any crypto critics to turn to for questioning. Even the hearing title — “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States” — is fairly anodyne, suggesting it’s more of a fact-finding mission than a chance to take the CEOs to task. (Recall that a May 27 hearing with big bank CEOs was titled “Holding the Megabanks Accountable.”) The executives will likely face questions from the left on consumer and investor protections, financial inclusion and anti-money laundering, and from the right about the risks of cutting off innovation with overzealous regulation. The goal for the firms will be to flesh out for lawmakers what they do for their customers, what the potential is for digital assets in the future and what rules should be in place to make sure people are protected. Nonetheless, appearing before Congress comes with risks. Pushing back too hard can backfire. The best political defense is to focus on the positives, Seiberg says, and for the love of God, don’t be tone deaf. “As the executives answer what I’m sure they will find to be simplistic questions, because the level of understanding in Washington is not the same as it is in the industry, they need to be mindful of how politics work,” he said. “And when people suffer losses, Congress responds.” What to listen for? Any hints of bipartisan agreement on the introduction of a new crypto regulatory regime and any lawmaker discussion about Circle’s plans to obtain a banking charter, says BTIG analyst Isaac Boltansky. Still, Boltansky says, the odds are heavily against this Congress advancing digital asset legislation. It’s not clear this hearing will change that momentum. | | | | A message from ExxonMobil: We’re committed to reducing emissions to help society achieve net zero. Steps we take today help drive tomorrow’s climate innovations. We recently announced new GHG emission reduction plans for 2030 consistent with Paris Agreement pathways – expected to reduce absolute corporate-wide emissions by ~20%, compared to 2016. We also plan to maintain our annual capital spending of $20-$25 billion - with potential to double earnings and cash flow by 2027 versus 2019. Learn more at exxonmobil.com. | | | BIDEN’S OCC NOMINEE WITHDRAWS — Cornell Law Professor Saule Omarova has withdrawn her name as President Joe Biden’s nominee to be a top banking regulator, following weeks of intense pushback from Republicans and banks and mounting pressure from moderate Democrats, who signaled they could not support her confirmation. The failure of the nomination seemed a fait accompli after the uproar over her advocacy of a dominant role for the government in banking, and it has forced the White House to start all over again for the second time this year to come up with a new OCC nominee. For now, the banking industry and the administration are just fine leaving Acting Comptroller Mike Hsu, a former Federal Reserve official, in charge. — One source familiar with the process tells MM: “Why did the administration waste everyone’s time and put Omarova through that?? To just make a point to the far left? For cover to nominate Powell? Probably a little of both.” — A view from the left: “Let’s not kid ourselves about what happened here. Wall Street feared it would get a regulator who understands its derivatives shenanigans, commodity trickery, and other practices,” said Carter Dougherty, a spokesman for Americans for Financial Reform, adding that “not quite enough Democrats” were willing to stand up to the industry and its Republican allies. IT’S WEDNESDAY — What do you think Omarova’s withdrawal means for the forthcoming White House Fed nominations? How soon could we see another OCC nominee? Send us your thoughts and tips — especially if you’re NEC Deputy Director Bharat Ramamurti — at kdavidson@politico.com, aweaver@politico.com, or hit us up on Twitter @katedavidson or @aubreeeweaver. | | | | 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. | | | | | | | | House Financial Services digital asset hearing at 10 a.m. … Ways and Means hearing on “The Pandora Papers and Hidden Wealth” at 10 a.m. … FDIC’s Tech Lab virtual discussion on banking and fintech Wednesday HOUSE PASSES WORKAROUND TO PAVE WAY FOR DEBT CEILING HIKE — From our Sarah Ferris, Jennifer Scholtes and Caitlin Emma: “The House passed a bill Tuesday night to expedite a debt ceiling fix in the Senate, allowing Democrats to essentially raise the nation’s credit limit on their own and thwart a Christmastime default. “The measure — which is the result of an 11th-hour accord between party leaders — tees up a new path for Congress to hike the nation’s borrowing ability, preventing the Treasury Department from running out of cash as soon as this month.” — More on the reasons behind this strategy, from last Friday’s MM. —The consequences of default: Third Way is out with a new report this morning on six potential knock-on effects of a U.S. debt default, including millions of job losses and sharply higher borrowing costs. HOUSE BLAMES SENATE FOR REMOVING CANNABIS BANKING FROM NDAA — Our Natalie Fertig: “Cannabis banking language will not be included in the National Defense Authorization Act, after bill sponsor Rep. Ed Perlmutter (D-Colo.) decided not to introduce the legislation as an amendment during the House Rules Committee markup Tuesday afternoon. “Members of the House Rules and Armed Services committees lauded the cannabis banking legislation, and blasted the Senate — particularly Majority Leader Chuck Schumer — for the outcome. Rules Committee Chair Jim McGovern (D-Mass.) : "The Senate Majority Leader — I don't really quite know what the hell his problem is. He's making it very difficult for a lot of small businesses and minority-owned businesses.” MM sidebar: Despite the last-minute snafu, analysts see momentum for cannabis legislation to advance next year, especially given the increasingly broad and strong support for the measure. MANCHIN ISSUES INFLATION WARNING AS CLOCK TICKS ON SPENDING BILL — Our Marianne LeVine: “Sen. Joe Manchin (D-W.Va.) expressed concern Tuesday about rising inflation and warned his party about the need to carefully craft its social spending bill. “During a Wall Street Journal CEO Council Summit, Manchin indicated that he is still waiting on final text before making a decision on whether to support the Democrats’ $1.7 trillion proposal. But he reiterated his unease about rising inflation.” Into the unknown — “The unknown we’re facing today is much greater than the need that people believe in this aspirational bill that we’re looking at, and we’ve got to make sure we get this right,” Manchin said. Manchin on Powell — Asked if Fed Chair Jerome Powell is the right man to fix inflation, Manchin said, "I don't know." "On that, now, I had a conversation with him. I have more of a comfort level with him now than I did but I still have some unanswered questions I'm concerned about," said Manchin, who has called on the Fed to pare back its stimulus programs to avoid stoking inflation. | | | | A message from ExxonMobil:   | | | NEW POLL: INFLATION EMERGES AS KEY CONCERN FOR VOTERS — WSJ’s Aaron Zitner: “Inflation has emerged as a pressing concern for American voters , with majorities saying it is causing them at least some financial strain and is bound to get worse, a new Wall Street Journal poll finds. Some 56 percent in the new survey said inflation was causing them major or minor financial strain, including 28 percent who said they felt major pressures. More than half said gas and groceries were among their greatest concerns when it came to rising prices, with about a quarter citing housing and utility bills.” TREASURY RULE WOULD UNMASK ANONYMOUS SHELL COMPANIES — Our Katy O’Donnell: “The Treasury Department on Tuesday proposed long-awaited rules that would require businesses to disclose ownership information to the government, in a bid to crack down on anonymous shell companies used to launder money.” SEC’S INTERNAL WATCHDOG KEPT JOB DESPITE ‘SERIOUS MISCONDUCT’ FINDING — Scoop from Reuters’ Sarah N. Lynch and Chris Prentice: “As the inspector general at the U.S. Securities and Exchange Commission, Carl Hoecker leads investigations into wrongdoing by agency staff. In one case, however, it was Hoecker himself who was under an investigation - one that concluded in 2019 with a recommendation that the agency consider firing him for ‘serious misconduct,’ government records reviewed by Reuters show. “The agency instead decided in May 2020 to suspend Hoecker without pay temporarily, for an undisclosed period. He’s back on the job as the Wall Street regulator’s internal watchdog.” GENSLER WARNS EXECS AGAINST USING SPACS TO SHIRK RULES — Bloomberg’s Benjamin Bain: “Securities and Exchange Commission Chair Gary Gensler is warning companies against seeking a tie-up with a blank-check company as a less arduous path to going public. Gensler signaled at an event Tuesday for business executives that Wall Street’s main regulator is on the lookout for firms that want to use special purpose acquisition company mergers to sidestep red tape associated with traditional initial public offerings.” | | | | 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. | | | | | | | | NFTs AND CRYPTOCURRENCIES REPLACE CASH AS NEW HOLIDAY GIFT — WSJ’s Julia Carpenter: “Cash in little wrapped boxes or tucked inside Hallmark cards is one of the most reliable and beloved gifts. But this holiday season, cash gifts are taking a new form as cryptocurrencies and nonfungible tokens, or NFTs.” OMICRON SENDS BANK STOCKS SEESAWING — WSJ’s Ben Eisen: “Fears about the economic impact of the new Covid-19 variant have hit bank stocks hard, but they are still on track for their best year in more than two decades. “The KBW Nasdaq Bank Index, which measures the performance of big lenders including JPMorgan Chase & Co. and Bank of America Corp., was up nearly 44 percent in 2021 before Thanksgiving. At that rate, the KBW far outpaced the gains in the broader S&P 500 index, which was up about 25 percent. But since Thanksgiving, when the Omicron variant emerged, the KBW is down 5.5 percent, more than twice the drop of the S&P 500.” THE STOCK MARKET’S COVID PATTERN: FASTER RECOVERY FROM EACH PANIC — NYT’s Karl Russell and Mohammed Hadi: “Much is still unknown about the Omicron variant, including how much protection vaccines provide. But financial markets have taken the news in stride relative to earlier outbreaks. That follows a pattern. Each bout of pandemic-driven volatility in the stock market since February 2020 has been shorter than the one before, and followed by a recovery to a new high. The S&P 500 through Monday had recovered nearly all its losses from its previous peak after Omicron’s existence was announced by officials on Nov. 26.”
| | | | A message from ExxonMobil: At ExxonMobil, we’re committed to playing a leading role in the global energy transition and helping society achieve its net zero ambitions. We’ve been reducing GHG emissions in our own operations for years and recently announced $15 billion in lower-emission investments through 2027. During that time, we also plan to maintain annual capital investments at $20-$25 billion, with the potential to double earnings and cash flow - while also reducing emissions. Our newly established Low Carbon Solutions business is advancing climate solutions like carbon capture and storage, hydrogen and biofuels. We are focused on reducing emissions at-scale across essential, high-emitting sectors like heavy industry, manufacturing and power generation. And by 2030, we expect to reduce our absolute corporate-wide GHG Scope 1 and 2 emissions by ~20%, compared to 2016 levels. Learn more at ExxonMobil.com. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
