Patrick McHenry’s big week

From: POLITICO's Morning Money - Monday Dec 05,2022 01:01 pm

Dec 05, 2022

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Good morning: I’m thrilled to kick things off as your new MM co-author with Sam Sutton. My goal every week will be to bring you scoops and fresh analysis to help you better understand Washington’s role in a volatile global economy. I also want to hear from you. Tell me what we’re missing, or just say hi. I’d love to include your insights in the next newsletter.

Now let’s get started.

One on one with McHenry: The time has come. House Republicans are expected to select next year’s committee chairs by mid-week. Rep. Patrick McHenry will be their pick to lead House Financial Services, which oversees banking, financial markets, housing and monetary policy.

MM had a brisk walk-and-talk with the North Carolina Republican Friday as the Capitol cleared out after final votes. Some highlights:

The five bullet points he’ll pitch to the Republican Steering Committee this week: Data privacy, capital formation and digital assets are the “big three” opportunities for bipartisan bills. He’ll also lay out plans for conducting oversight and responding to “the Biden economy.”

The FTX olive branch to Maxine Waters: Our Playbook colleagues last month described McHenry as “the old pro,” who has transformed his image from “a brash conservative gadfly to a savvy low-profile operator.”

Case in point is what he said were “highly coordinated” tweets with Maxine Waters Friday morning urging FTX founder Sam Bankman-Fried to testify at the committee’s upcoming series of hearings on the company’s collapse. The success of McHenry’s legislative agenda next year could hinge on the cooperation of Waters and other Democrats.

“We’ve had a good working relationship on this,” he told MM. “These hearings should be bipartisan, and starting it this Congress and being able to carry it over to the next Congress makes a lot of sense. … All of the stuff on my agenda, I’ve been intentional about trying to draw bipartisan support. There’s no guarantee. None. But all I can do is lay out the agenda and take the right steps to try to bring it.”

What lobbyists care about: One of McHenry’s toughest decisions in the coming days will be subcommittee chair assignments for his top lieutenants: Reps. Blaine Luetkemeyer(Mo.), Bill Huizenga (Mich.), Andy Barr (Ky.), French Hill (Ark.) and Ann Wagner (Mo.). Luetkemeyer and Huizenga are effectively term-limited at their long-time subcommittees — financial institutions and capital markets, respectively. Wagner, who has been the top Republican on the Waters diversity subcommittee that McHenry is likely to scrap, is seen as vying for cap markets.

McHenry is staying mum about his final plans, which may include a digital assets subcommittee. Luetkemeyer and Huizenga are poised for new assignments, possibly even a subcommittee swap, according to sources plugged into the situation.

“The jurisdictional lines will shift a bit,” McHenry says. “That’s based off of our current dynamics in the marketplace and also the emphasis we have from a legislative agenda standpoint.”

More on the economy: McHenry has concerns about liquidity in the market for Treasury securities and also wants to look at how layers of bank capital rules are interacting. “We don’t want something bad to happen in the markets because of regulation," he says.

Let’s reflect — It’s that time of year when the music streaming algorithms start serving up nostalgia. What’s at the top of your year-end Apple Music or Spotify most-listened list? My top album of 2022, with 111 plays, is Def Leppard’s Hysteria. Feel free to share yours. News tips are also welcome. I’m zwarmbrodt@politico.com and Sam is ssutton@politico.com .

Driving the week — Monday … U.S. and European officials meet for a tech and trade summit (more below) … The Treasury Advisory Committee on Racial Equity meets at 10 a.m. … Ron Klain and Tom Cotton speak at the WSJ CEO Council in the evening … Tuesday … The House Financial Services diversity and inclusion subcommittee holds a hearing at 10 a.m. … House Veterans' Affairs holds a hearing on transitional housing reform at 10 a.m. … House Financial Services capital markets subcommittee holds a hearing on corporate disclosure of workforce management and diversity at 2 p.m. … Wednesday … The CFTC agricultural advisory committee meets at 9 a.m. … House Financial Services holds a hearing on financial institutions’ role in slavery at 10 a.m. … The House Select Committee on Economic Disparity and Fairness in Growth holds a markup to approve its final report at 1 p.m. … Thursday … The SEC investor advisory committee meets at 10 a.m. … Treasury’s insurance advisory committee discusses climate-related financial risk and auto insurance affordability at 1 p.m. …

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Driving the Day

SBF: I’ll testify, some day — Bankman-Fried on Sunday afternoon indicated he won’t appear at the Dec. 13 House Financial Services Committee hearing on FTX’s collapse.

From a tweet addressed to Waters : “Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain. I'm not sure that will happen by the 13th. But when it does, I will testify.”

Waters told MM Friday that “we want him here,” whether he testifies in person or via video.

Cannabis banking has its moment — After years of debate, Congress appears poised to pass landmark legislation that would let banks serve the cannabis industry. Supporters are aiming to attach the proposal to the annual defense policy legislation that the House is expected to take up this week, our Natalie Fertig reports .

— Bankers: Would you take advantage of looser cannabis restrictions in banking regulations or are you waiting for full pot legalization? Let us know.

JOIN WEDNESDAY FOR A POLITICO DISCUSSION ON THE NEW TRAVEL EXPERIENCE : Americans are now traveling in record numbers — but the travel experience has changed drastically in recent years, not always for the better. What lessons can we learn from the pandemic and different responses around the globe? And in the face of a possible recession, what will help the travel industry remain vibrant and deliver jobs? Join POLITICO on Dec. 7 for “The Travel Experience Redefined” to discuss these questions and more. Breakfast and coffee will be provided. REGISTER HERE .

‘With these kinds of allies, who needs enemies?’ — U.S. and European officials will hold a tech and trade summit Monday at a time of growing tension between the trans-Atlantic allies. POLITICO’s Mark Scott, Barbara Moens and Doug Palmer report that the EU is up in arms over Biden’s plans for electric car subsidies, while the U.S. is frustrated that Europe won’t be more aggressive in pushing back against China. Some officials are privately accusing their counterparts of broken promises, particularly on trade.

More from WSJ : “Europe is bracing for a confrontation with Washington over a new law that encourages businesses to invest more in the U.S., an initiative European officials say threatens the region’s economy as it teeters on the verge of a recession.”

Oil price cap fallout — The Friday announcement of a $60 per barrel cap on the purchase of Russian oil by Europe and the G-7 is reverberating through oil markets — and triggering a backlash from Russia and Ukraine alike.

— OPEC+ on Sunday agreed to stick to its oil-output targets , amid concerns over Covid lockdowns in China and uncertainty over Russia’s ability to export crude.

— Moscow will forbid domestic companies from selling Russian oil under any price cap, and is willing to dial down production to compensate for the lost exports, Russian Deputy Prime Minister Alexander Novak said Sunday .

— Ukrainian President Volodymyr Zelenskyy said the $60 per barrel cap can’t be called “a serious decision” because that level is “quite comfortable” for Russia's budget.

The view from Treasury — A senior Treasury official on Friday argued that the price cap would have weight even for countries like China or India that might be less inclined to cooperate with punitive measures against Moscow, our Victoria Guida reports.

“You’re going to see a number of countries … wanting to negotiate lower prices, if at all possible, even if they’re not using Western services,” the official told reporters on a conference call. “Because they know that Russia has two choices: they can either sell to them at their price that they’re demanding, or they can choose to sell into the price cap.”

A message from the Information Technology Industry Council (ITI):

Regulatory Corner

Sen. Sherrod Brown (D-Ohio) on why Congress hasn’t passed crypto regulations — From a CNN “State of the Union” interview on Sunday : “Half the Senate, the Republicans, and a handful of Democrats, still think crypto’s legitimate and that it is something that should be a significant part of our economy. So it’s not like we snap our fingers and get a crypto bill through the Senate and through the House. …

“I would love to do something legislatively. I don’t know that Congress is capable of that because of crypto’s hold on one political party in the Senate and the House. But we’re trying every day.”

An administration official tells Victoria that a stablecoin regulation bill is still needed, as lawmakers and regulators scrutinize other players in the crypto ecosystem. Legislation is the only way to have proper guardrails for that type of token, the official said.

Meta wants to head off NFT crackdown — Meta, the tech giant formerly known as Facebook, invited MM and a few other journalists to its downtown Washington offices for a spin in its virtual reality meeting application and a briefing on its lobbying priorities.

Meta has a new policy paper that discourages financial regulations for blockchain products that, in its eyes, don’t pose the same risks as financial ones. It argues that a creator who makes NFT art, for example, should be treated the same way as an artist who makes physical art. The SEC has made NFTs an enforcement target, with officials warning that some may qualify as securities.

Meta more broadly is urging regulators to not be hasty about setting rules for decentralized computing systems, as it aims to build out interoperability and portability for digital assets in “the metaverse.”

A new approach to economics — The Brookings Institution has released a paper from Aaron Klein and Joel Levine who argue that the use of new statistical models in economics could improve policymaking. One example they cite predicted which Senate Republicans would be part of the bipartisan group that negotiated last year’s infrastructure bill.

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Fly Around

China loosens Covid restrictions — WSJ: “Local authorities across China are paring back some of their strictest Covid-19 control measures, just days after public anger spilled over into rare protests against a zero-tolerance approach that has kept the country largely isolated for three years.”

Apple looks beyond China — WSJ: “In recent weeks, Apple Inc. has accelerated plans to shift some of its production outside China, long the dominant country in the supply chain that built the world’s most valuable company, say people involved in the discussions.”

Defaults loom for poor countries $200B in debt — NYT: “Developing nations are facing a catastrophic debt crisis in the coming months as rapid inflation, slowing growth, rising interest rates and a strengthening dollar coalesce into a perfect storm that could set off a wave of messy defaults and inflict economic pain on the world’s most vulnerable people.”

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