Biden picks Barr as Fed bank czar

From: POLITICO's Morning Money - Friday Apr 15,2022 12:02 pm

Apr 15, 2022

By Victoria Guida and Aubree Eliza Weaver

Presented by Sallie Mae®

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QUICK FIX

It’s Barr — As MM foreshadowed earlier this week , former Treasury official Michael Barr is the pick for Federal Reserve vice chair for supervision, a surprisingly fast turnaround after Sarah Bloom Raskin withdrew her nomination for the same position just last month. President Joe Biden announced Barr’s selection in a statement this morning.

Barr is backed by Senate Banking Chair Sherrod Brown, and he has a good relationship with Sen. Elizabeth Warren . The question is whether any Democratic senators, bearing scars from Barr’s days as Treasury’s chief negotiator on the landmark Dodd-Frank Law, will do anything to block him (many of them are now gone). It’s possible he could pick up some Republicans, but MM has a hard time seeing any GOP senator actively putting him over the threshold for confirmation.

“Now more than ever, we need a full Fed Board — including a Vice Chair of Supervision,” Brown said in a statement. “The Vice Chair of Supervision plays a critical role in protecting our financial system and must prioritize strong financial regulation, and identify and stay ahead of risks to our economy. … Michael Barr understands the importance of this role at this critical time in our economic recovery.” The position, created by Dodd-Frank, also has pivotal say in regulatory issues involving climate, cryptocurrency and diversity.

Brown urged Republicans to “abandon their old playbook of personal attacks and demagoguery and put Americans and their pocketbooks first.”

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One of Barr’s defining characteristics is his focus on consumer protection, which will mean he will have strong interest in topics like overdraft fees and the Community Reinvestment Act, the anti-redlining law. MM spoke to Barr last month after Raskin withdrew under pressure, and in retrospect we wish we would’ve asked him more pointed questions about capital and liquidity. But suffice to say, he is intimately familiar with all these topics.

Something you might not have noticed is that if Barr is confirmed, both of the vice chair positions at the Fed — the other soon to be held by Lael Brainard — will have been filled by top aides to former Treasury Secretary Tim Geithner, who isn’t exactly the most popular figure with the left these days. (It’s also a little funny, since Treasury is now run by a lot of departed Fed staffers, and this will continue the recent trend of the central bank being run by former Treasury officials).

In Biden’s own words: “Michael brings the expertise and experience necessary for this important position at a critical time for our economy and families across the country. … While I’m doing everything in my power to lower prices for families, the Federal Reserve plays a critical role in fighting inflation and Barr will make a strong Vice Chair [for] Supervision, joining my other nominees for the Federal Reserve that the Senate is considering.” He urged a swift confirmation for those other nominees: Fed Chair Jerome Powell, Brainard, Lisa Cook and Philip Jefferson.

“He understands that this job is not a partisan one, but one that plays a critical role in regulating our nation’s financial institutions to ensure Americans are treated fairly and to protect the stability of our economy,” the president said. “I will work with Senate Banking Committee Chair Sherrod Brown to move Barr’s nomination forward quickly.”

An aside: The Council of Economic Advisers’ economic report was released Thursday. Read through for White House views on supply chains, inflation, climate change and more.

TGIF! — Happy Friday! You all made this long week much better, dear MM readers — thanks for hanging with me! Kate Davidson is back next week. Send tips to her kdavidson@politico.com or @KateDavidson, and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver. I’ll always be around at vguida@politico.com and @vtg2.

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Driving The Day

EUROPE STARTS DRAFTING BAN ON RUSSIAN OIL — NYT’s Matina Stevis-Gridneff: “European Union officials are drafting the most contested measure yet to punish Russia for its invasion of Ukraine, an embargo on Russian oil products. The bloc has long resisted a ban on Russian oil because of its enormous costs for Germany and its potential to disrupt politics around the region and increase energy prices.

“But E.U. officials and diplomats say the union is now moving toward adopting a phased-in ban designed to give Germany and other countries time to arrange alternative suppliers. The union took a similar approach earlier this month when it banned Russian coal, providing for a four-month transition period.”

EX-IM OKs NEW RESHORING PROGRAM — Our Doug Palmer: “The U.S. Export-Import Bank board of directors Thursday voted unanimously to create a new program to support the construction of manufacturing facilities within the United States, a significant departure from its traditional focus on financing exports for overseas customers and projects.

“‘The Make More in America Initiative will create new financing opportunities that spur manufacturing in the United States, support American jobs and boost America’s ability to compete with countries like China,’ EXIM President and Chair Reta Jo Lewis said in a statement after the bipartisan 3-0 vote. The new project stems from an executive order signed by President Joe Biden to bolster U.S. supply chain resilience that recommended the bank consider a domestic financing program.”

CFPB: 15M STUDENT LOAN BORROWERS AT RISK — About 15 million student loan borrowers are at risk of delinquency when the federal government’s student loan freeze ends at the end of August, according to a new analysis released on Thursday.

“The report by the Consumer Financial Protection Bureau also found that about 5 million of the most at-risk borrowers were more likely to live in lower-income and high-minority communities.”

LAWMAKERS TO SEC: GIVE PEOPLE MORE TIME TO COMMENT — Forty-seven lawmakers from both parties on Wednesday called on the Securities and Exchange Commission to provide longer comment periods for its rulemakings, joining their voices with industry groups who have complained about the same thing. The House members, in a letter led by Reps. Bill Foster and Andy Barr, said the comment periods on two key rulemakings — proposals for private fund advisers and so-called Form PF — “may hamper the ability for the public to provide effective and meaningful input.” The regulator should accept input until at least 90 days after they were published in the Federal Register, the letter says.

CONSERVATIVES EMBRACE TWITTER SAVIOR MUSK — Our Rebecca Kern and Meridith McGraw: “Conservatives are heralding Elon Musk’s bid to buy Twitter as a salve for years of feeling slighted and sidelined by the platform for their political views.

“The Tesla CEO and self-proclaimed ‘free-speech absolutist’ has offered to buy Twitter for $43 billion — a potential takeover that could lead to more controversial content allowed on the site, and be a boon for Republicans who allege Twitter censors their views.”

Also, listen to Musk’s plans for Twitter in his own words.

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Fly Around

MOODY’S WARNS RUSSIAN PAYMENTS IN RUBLES COULD LEAD TO DEFAULT — NYT’s Alan Rappeport: “Russia’s repayment of foreign currency bonds in rubles could be considered a default if it does not reverse course and pay in dollars, Moody’s, the ratings agency, said on Thursday.

“The warning from Moody’s comes as Russia is inching closer to its first failure to pay foreign debt since the 1917 Bolshevik Revolution, as President Vladimir V. Putin faces sanctions imposed by the United States and its allies in Europe and Asia in response to Russia’s invasion of Ukraine.”

STOCKS FALL AMID BANK EARNINGS REPORTS — AP’s Damian J. Troise and Alex Veiga: “Stocks are closing lower on Wall Street Thursday as investors gave mixed reviews to earnings from four of the nation’s largest banks. The S&P 500 fell 1.2 percent and ended a shortened trading week with a decline of more than 2 percent. The yield on the 10-year Treasury rose to 2.83 percent as inflation worries continue to overhang the markets. Investors again turned their attention to the drama surrounding Tesla CEO Elon Musk and Twitter. Musk offered to buy the social media company for $54.20 a share, two weeks after revealing he’d accumulated a 9 percent stake. The Commerce Department said retail sales rose 0.5 percent in March.”

STOCK-AND-BOND BOTTOM FEEDERS HOLD TIGHT AMID FED BULLYING — Bloomberg’s Isabelle Lee and Vildana Hajric: “War, soaring energy prices and central-bank badgering may be testing the resolve of dip-buying bulls. But none of that has yet to completely break it. While this week saw the hottest readings on inflation in four decades, it also featured conspicuous signs of resilience, including a bounce on Wednesday that pushed the S&P 500 up the most since last month. Two-year Treasury yields eased in three of four sessions, while industrial stocks held firm and volatility benchmarks were unmoved.”

INVESTORS PLAY DEFENSE ON OPTIONS MARKET — Reuters’ Saqib Iqbal Ahmed: “U.S. stock investors are increasingly turning to the options market for protection against more downside on Wall Street as they worry the Federal Reserve will be less sensitive to equity market volatility as it hikes interest rates to fight inflation. Demand for puts, typically bought for downside protection, is in line with a trend that has seen investors ramp up hedging in recent months, as the Fed’s hawkish tilt roils markets after years of double digit gains.”

BIG BANK PROFITS DECLINE— AP’s Ken Sweet: “Four big banks reported noticeable declines in their first-quarter profits Thursday, as the volatile markets and war in Ukraine caused deal-making to dry up while a slowdown in the housing market meant fewer people sought to get a new mortgage or refinance.

“The results from Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo were similar to the results out of JPMorgan Chase, which on Wednesday reported a double-digit decline in profits. At Goldman Sachs, profits fell 43 percent to $3.63 billion. Citigroup posted a 47 percent decline in profits to $4 billion, Wells Fargo’s profits fell 21 percent and Morgan Stanley’s earnings dropped 11 percent.”

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UNEMPLOYMENT CLAIMS ROSE SLIGHTLY LAST WEEK — WSJ’s Bryan Mena: “New applications for U.S. unemployment benefits rose last week, but remained near historically low levels as employers held on to workers in a tight labor market. Initial jobless claims, a proxy for layoffs, rose to 185,000 during the week that ended on April 9, compared with a revised 167,000 the week prior, the Labor Department said Thursday. New claims had fallen to the lowest point since 1968 in early April. The four-week moving average, which smooths out volatility, rose to 172,250.”

MORTGAGE RATES CLIMB TO 5 PERCENT FOR FIRST TIME SINCE 2011 — NYT’s Conor Dougherty: “U.S. mortgage rates rose to 5 percent for the first time in over a decade, raising the pressure on the housing market and adding another burden to home buyers who were already struggling with rising prices. Since the beginning of the year, interest rates on a 30-year fixed-rate mortgage have climbed from about 3 percent to 5 percent, the fastest jump since the 1980s, according to Freddie Mac. The rise has added hundreds of dollars a month to the typical house payment and comes on top of two years of blistering price increases in excess of 30 percent.”

IMF CHIEF: UKRAINE WAR, INFLATION THREATEN GLOBAL ECONOMY — AP’s Paul Wiseman: “The head of the International Monetary Fund warned Thursday that Russia’s war against Ukraine was weakening the economic prospects for most of the world’s countries and called high inflation ‘a clear and present danger’ to the global economy. IMF Managing Director Kristalina Georgieva said the consequences of Russia’s invasion were contributing to economic downgrades for 143 countries, although most of them should continue to grow. The war has disrupted global trade in energy and grain and is threatening to cause food shortages in Africa and the Middle East.”

ECB OFFICIALS CONVERGING ON QUARTER-POINT HIKE IN THIRD QUARTER — Bloomberg’s Jana Randow and Carolynn Look: “European Central Bank policy makers are forming a consensus around increasing interest rates in the third quarter of 2022 to tackle record inflation, according to people familiar with the matter. The first hike in borrowing costs in more than a decade is expected to be by 25 basis points, the people said, asking not to be identified because the deliberations are private. An ECB spokesperson declined to comment.”

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