‘Nothing is sticking’: White House fights for Fed noms

By Kate Davidson and Aubree Eliza Weaver

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The White House and Senate Democrats have mounted an aggressive defense of President Joe Biden’s Federal Reserve nominees over the past few weeks, determined to avoid a repeat derailment of a key financial nomination.

It’s a noticeable difference from the nomination process for Saule Omarova, the president’s pick to be Comptroller of the Currency, who withdrew amid fierce opposition from Republicans, the banking industry and several moderate Democrats.

While all the Fed nominees seem to have more support than Omarova, the administration isn’t taking anything for granted, sources close to the process tell MM. They lined up statements of support from the left and right ahead of the announcements, and have pushed back particularly hard against criticism of Sarah Bloom Raskin, Biden’s choice to be vice chair for supervision.

The White House got some help Tuesday, when the Federal Reserve Bank of Kansas City issued an unusual statement countering Republicans’ suggestion that Raskin improperly used her influence to help a state-chartered trust company gain access to the central bank’s payment system.

From our Victoria Guida: “In a statement dated Feb. 7 , the regional Fed branch said it ‘did not deviate from its review process in evaluating this request’ from Reserve Trust, a payments technology company where Raskin was a board member.”

Reserve Trust’s application was eventually approved in 2018 after changing its business model to meet the definition of a depository institution — not after a 2017 phone call from Raskin, the bank said. “It is routine for the Federal Reserve Bank of Kansas City to communicate on an ongoing basis with a requesting organization, its management (including directors), public officials and any relevant federal or state regulatory counterparts,” they said.

Sen. Cynthia Lummis (R-Wyo.), who suggested at last week’s confirmation hearing that the Kansas City Fed approved the application after the call from Raskin, insisted Tuesday that she wasn’t accusing the regional bank of wrongdoing.

Sen. Pat Toomey (R-Pa.), the top Republican on the Banking Committee, has asked Raskin for more details about her role in the application’s approval, and a spokeswoman said Tuesday that the Kansas City Fed should have no problem turning over requested information.

“Once again, @SenLummis + @SenToomey throwing everything @ the wall to see what sticks. And nothing is sticking,” White House spokesperson Chris Meagher fired back in a tweet. “So when one false argument backed by no evidence is exposed, they just make up a new one.”

The back-and-forth underscores how polarized Federal Reserve nominations have become over the past decade or so. The Senate used to routinely confirm Fed nominees — put forward by presidents of both parties — with large bipartisan support. Raskin is likely to need every last Democratic vote to win confirmation.

This is also the first time Democrats have nominated anyone to be the Fed’s vice chair for supervision, a role created by the 2010 Dodd-Frank law and one of the government’s most powerful Wall Street watchdogs.

“Even though it’s the Fed … it just feels to me like it’s been turned into a CFPB-like vote in that it’s going to be more partisan in the future because of its bank supervisory role, and the fact that it’s an uber regulator,” said one financial services lobbyist and former Senate aide.

A note about process: The Senate Banking Committee is on track to vote next Tuesday on all five of the Fed picks, but it’s looking increasingly likely that Fed Chair Jerome Powell and Governor Lael Brainard may move ahead on their own after that, sources tell MM.

Democrats wanted to move all five nominees through the process together, a strategy used often in the nomination process when one nominee (in this case, Powell) is likely to attract more support than the others (namely, Raskin and Lisa Cook).

But Raskin and Cook’s confirmation votes will probably need to wait until Sen. Ben Ray Luján (D-N.M.), who is recovering from a stroke, is able to participate. With Powell and Brainard having enough support to win confirmation, Fed watchers have questioned why — and for how long — Democrats would hold back votes on their nominations.

IT’S WEDNESDAY — We’re still thinking about this story from WSJ’s Cara Lombardo on Wall Street billionaire Carl Icahn’s secret cause. (Hint: It involves McRib sandwiches and the Humane Society of the United States.)

Have a story idea or tip about an eccentric Wall Street or Washington personality? Send it our way: kdavidson@politico.com, aweaver@politico.com, or on Twitter @katedavidson or @aubreeeweaver.

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Securities and Exchange Commission virtual meeting at 10 a.m. … Federal Reserve Governor Michelle Bowman speaks at 10:30 a.m. … House Economic Disparity committee hearing on infrastructure and inclusive economic growth at 10:30 a.m. … Cleveland Fed President Loretta Mester speaks at noon …

Joint Economic Committee hearing on empowering older workers at 2:30 p.m. … Senate Banking Committee hearing on minority depository institutions at 2:30 p.m. … National Economic Council Director Brian Deese discussion with the Council on Foreign Relations on the administration’s industrial strategy at 4 p.m.

TREASURY OFFICIAL SAYS THE NEED FOR STABLECOIN LEGISLATION IS ‘URGENT’ — Bloomberg’s Allyson Versprille and Jesse Hamilton: “Technology companies that aren’t licensed as banks shouldn’t offer crypto stablecoins, according to U.S. Treasury Undersecretary for Domestic Finance Nellie Liang. Liang told lawmakers on the House Financial Services Committee that firms issuing the tokens to let people pay for goods and services should face the heightened scrutiny that lenders receive under U.S. rules. Her comments come after Meta Platforms Inc.’s Facebook last month abandoned plans for a stablecoin project that drew fierce opposition from Washington.”

— Our Sam Sutton emails MM: “ While there was a lot of talk — Liang withstood more than four hours of testimony and questions — there wasn’t consensus on the federal regulators’ proposal to force issuers to register as banks. The lines of questioning didn’t necessarily fall along partisan lines, either. There were Republicans who asked very pointed questions about reserve requirements, echoing concerns that have been raised by crypto-skeptic Democrats. Meanwhile, New York Democrats like Reps. Ritchie Torres and Gregory Meeks asked pointed questions about making sure these products aren’t overregulated, noting that crypto’s become an important tool for underbanked Black and Hispanic communities.

“Rep. Brad Sherman (D-Calif.), who’s been very skeptical of crypto markets, told Treasury’s Nellie Liang that he’d like to see ‘specific statutes that you think that we should adopt, rather than just a few set answers of explanation.’ Absent that, ‘anything that does pass will be considerably weaker than what you're recommending.’”

COINBASE FORMS A PAC (AGAIN) — From our friends at Politico Influence: As major cryptocurrency players continue to ramp up their presence in Washington, crypto exchange Coinbase is the latest on the scene to form a vehicle with which to steer money toward crypto-friendly candidates ahead of the midterms.

The Coinbase Innovation PAC is the trading platform’s second go at direct spending on candidates. A PAC the company registered in 2018 shut down less than a year later without reporting any funds raised or spent, FEC filings show. But now its efforts have coincided with a major boom for cryptocurrencies — and in heightened interest in Washington in regulating the industry.

TIRED OF ‘WINNING’: CHINA EDITION — A new report from the Peterson Institute’s Chad Bown concludes that President Donald’s Trump’s “historical trade deal” with China, which committed China to purchase $200 billion of additional U.S. exports before Dec. 31, 2021, was a historic failure.

Brown writes: “In the end, China bought only 57 percent of the US exports it had committed to purchase under the agreement, not even enough to reach its import levels from before the trade war. Put differently, China bought none of the additional $200 billion of exports Trump's deal had promised.”

Also: “One lesson is not to make deals that cannot be fulfilled when unforeseen events inevitably occur—in this case, a pandemic and a recession. Another is not to forget the complementary policies needed to give an agreement a chance to succeed.”

COUPLE CHARGED WITH MONEY LAUNDERING TIED TO 2015 $4.5B CRYPTO HACK — Our Joseph Gedeon: “The Justice Department on Tuesday announced the arrest of a couple in New York charged with conspiring to launder stolen Bitcoin linked to the 2016 hack of a cryptocurrency exchange from which $4.5 billion went missing. About $3.6 billion in cryptocurrency from the 2016 hack of the cryptocurrency exchange Bitfinex has so far been recovered in what Justice Department officials said Tuesday is the department’s largest such seizure to date.

HOUSEHOLDS TOOK ON $1T IN NEW DEBT IN 2021 — WSJ’s Orla McCaffrey: “ Americans took on more new debt in 2021 than in any year since before the 2008-09 financial crisis.

Total household debt rose by $1.02 trillion last year, boosted by higher balances on home and auto loans, the Federal Reserve Bank of New York said Tuesday. It was the largest increase since a $1.06 trillion jump in 2007. Total consumer debt now sits at around $15.6 trillion, compared with $14.6 trillion a year earlier.”

TREASURY DEFEATS STATES’ SUIT CHALLENGING A RULE ON SOLD LOANS — Bloomberg’s Joel Rosenblatt: “The U.S. Treasury Department defeated a blue-state challenge to a rule that exempts buyers of high-interest loans from state interest-rate caps. U.S. District Judge Jeffrey White in Oakland, California, agreed with the Office of the Comptroller of the Currency and threw out the suit brought by New York, California and Illinois. The states argued that the rule by the OCC, an independent bureau of Treasury, will encourage predatory lending.”

TRAVEL NURSES MAKE TWICE AS MUCH AS THEY DID PRE-COVD — WSJ’s Stephanie Armour and Robbie Whelan: “Hospitals and lawmakers are pressing the Biden administration to review federal pandemic-relief programs that they say have distorted pay rates for travel nurses. Many nurses are making twice what they did before the pandemic or more on assignments at hospitals paying top dollar to fill big holes in their workforces. Some hospitals are using federal Covid-19 relief funds to cover part of the difference between rates for travel nurses and staff salaries.”

Michael Mosier, the former FinCEN acting director, has joined global management consultancy Oliver Wyman as a senior adviser to its anti-financial crime and digital assets practice. Mosier previously served as FinCEN deputy director and its first digital innovation officer, and worked at cryptocurrency analytics firm Chainalysis.

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.

Firms or managers toying with a full-time return to the office face an uncomfortable reality, experts say: Without significant pay incentives that only the richest firms can offer, staff are increasingly likely to look elsewhere. — Bloomberg

There’s rain in the forecast — and lots of it — as flush Wall Street bros blow their record-setting bonuses on cars and caviar. — NY Post’s Zachary Kussin and Christopher Cameron

Boring companies have been hot during the stock market’s winter swoon. An early-year tumble in major U.S. stock indexes has some investors searching for safety by dumping shares of high-growth technology stocks for stodgier businesses that pay shareholders cash, including banks, oil companies and telecoms. — WSJ’s Hardika Singh and Michael Wursthorn

For developing countries, the Federal Reserve’s battle to squelch U.S. inflation with a series of rate increases this year stirs a mix of hope and anxiety. — WSJ’s Paul Hannon

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Mark McQuillian @mcqdc Kate Davidson @KateDAvidson Aubree Eliza Weaver @aubreeeweaver Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary

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