GOP preps anti-China economic salvo

From: POLITICO's Morning Money - Tuesday Feb 07,2023 01:02 pm

Feb 07, 2023

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It took one missile to pop China’s balloon. Now House Republicans are setting up a 17-bill barrage to isolate its economy and financial system.

The suite of anti-China legislation will be the focus Tuesday at the House Financial Services Committee’s first hearing of the year — underlining the issue’s importance for the GOP conference. It’s also the panel’s first hearing under new Chair Patrick McHenry.

Among the proposals: Imposing sanctions on companies tied to China’s military, admitting Taiwan to the IMF, banning use of the digital yuan by U.S. money services businesses and requiring Treasury to report on risks from the Chinese financial sector.

The experts McHenry lined up for the hearing include former White House, Treasury and Commerce officials. They will outline ways to counter China and make the case for balancing policies so they don’t backfire on the U.S. economy.

Clete Willems, former President Donald Trump’s sherpa to the G-7 and G-20, will tell the committee that it’s critical for the U.S. to play both defense to protect national security, with measures like outbound investment restrictions, while also going on offense to reduce reliance on Chinese supply chains and to open new markets for U.S. firms.

“At the same time as the United States is cutting off capital and technology, we must also be creating new opportunities for U.S. companies affected by these measures,” Willems said in prepared testimony.

You can expect Republicans to take swings at President Joe Biden for not intercepting the spy balloon sooner. But the saga hasn’t derailed the fact that China policy is one of the ripest areas for bipartisan cooperation in this Congress. If anything, the balloon has increased the urgency on both sides of the aisle.

McHenry’s counterpart across the Capitol – Senate Banking Chair Sherrod Brown — is also gearing up to take on the issue. Brown’s committee will focus on China and Russia at a Feb. 28 hearing on sanctions, export controls and other economic tools in foreign policy.

Happy SOTU Tuesday – Let us know what you think of the president’s speech. I’m zwarmbrodt@politico.com and my co-host Sam is ssutton@politico.com.

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Driving the Day

House Financial Services holds a hearing on “Combatting the Economic Threat from China” at 10 a.m. … Fed Chair Jerome Powell speaks at the Economic Club of Washington DC at 12:30 p.m. … Fed Vice Chair for Supervision Michael Barr gives a speech on financial inclusion at 2 p.m. … Biden gives his State of the Union speech at 9 p.m. …

A busy day in econ policy news — Fed Chair Jerome Powell has a Q&A in the afternoon, followed by Biden’s State of the Union in the evening. Here’s what to watch.

— Powell’s appearance at the Economic Club of DC is a big deal for markets in light of Friday’s blowout jobs number, which challenged investors’ expectations that the Fed would move more quickly to scale back rate hikes.

— Biden will likely take a victory lap on the economy during his address to Congress, but we expect him to make a little forward-looking policy news as well. The White House says he’ll call for quadrupling the tax on corporate stock buybacks. And look for him to double down on the idea that raising the debt limit is not negotiable.

— Powell and Biden will weigh in on the economy as Wall Street heavy hitters like Goldman Sachs scale back predictions for a U.S. recession.

Moderate Republican dismisses sidestepping McCarthy on debt limit — Rep. Don Bacon, a centrist GOP lawmaker, ruled out using a procedural measure known as a discharge petition to force a vote on a clean debt limit increase, NBC reports. Some in the finance industry have been counting on such a maneuver as a way for moderate Republicans and Democrats to override Speaker Kevin McCarthy.

McCarthy gave a debt limit speech Monday afternoon and reiterated that cuts to Social Security and Medicare would be off the table in any negotiations, according to MarketWatch.

Anti-ESG bill out today — Rep. Andy Barr will introduce a Congressional Review Act resolution that would nullify the Biden administration rule allowing retirement plan managers to consider ESG factors. Sen. Mike Braun introduced the Senate version last week with Sen. Joe Manchin as a co-sponsor.

Russian oil price caps appear to have bite— POLITICO’s Charlie Cooper reports from Brussels that the G-7’s restrictions on Russia’s oil trade appear to be hitting the country’s economy. Kremlin oil and gas tax income in January was among its lowest monthly totals since the depths of Covid in 2020.

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Regulatory Corner

ICE’s Black Knight acquisition faces pushback— Federal Financial Analytics managing partner Karen Petrou has a new paper urging the FTC to block Intercontinental Exchange’s acquisition of mortgage data firm Black Knight, citing potential systemic risks. FedFin disclosed that the paper was funded by an unnamed entity “for which this transaction has raised competition concerns” but said it retained full editorial control over the work. ICE has said the deal would lower costs for lenders and improve the homebuyer’s experience. A company spokesperson said the new paper was inaccurate, adding that it was funded by competitors.

NYSE plans to repay some investors hit by trading glitch— In other ICE news, Bloomberg reports that NYSE told clients that between 50 percent to 60 percent of the claims they filed for investors after last month’s trading disruption will qualify for full reimbursement. The company will cover losses for orders accepted on its exchange but not those triggered on other venues.

A message from the American Bankers Association:

Crypto

Britcoin gets a boost — The Bank of England and UK Treasury are taking a step toward launching a digital pound with a new consultation paper this week, according to Bloomberg. Officials from the institutions said a central bank digital currency could present opportunities for UK consumers and businesses.

Binance to suspend U.S. dollar transactions — Crypto exchange Binance will suspend U.S. dollar deposits and withdrawals on Wednesday, according to CNBC, forcing its customers to use other fiat currencies or payment methods to make purchases. Binance.US — the exchange operator’s U.S. affiliate — said it’s not affected by the decision.

A big year for North Korea crypto theft—Reuters reports that North Korea stole more cryptocurrency assets in 2022 than in any other year, according to a confidential UN report. Different estimates put the theft at $630 million and more than $1 billion.

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Fly Around

Carlyle’s new CEO is ex-Goldman exec Harvey Schwartz— FT: “Carlyle Group’s new chief executive … stands to make more than $180mn over the next five years, a package that would make him one of Wall Street’s highest-paid executives.”

Immigration eases worker shortage, though bottlenecks persist— NYT: “The flow of immigrants and refugees into the United States has ramped up over the past year, helping to replenish the American labor force after a decline that began with restrictions imposed under the Trump administration and that was compounded by the pandemic.”

People moves — Matthew Kellogg is joining Rich Feuer Anderson as a principal after running government affairs and communications for MoneyLion. He earlier served at Treasury and as a senior policy adviser to then-House Majority Leader Kevin McCarthy.

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