Three names Biden is circling for Fed Vice Chair

From: POLITICO's Morning Money - Wednesday Feb 22,2023 01:01 pm

Feb 22, 2023

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Tuesday was Lael Brainard’s first day at her new White House gig, but we have the beginnings of a shortlist on who might take her (now) old job as No. 2 at the Federal Reserve. Tobin Marcus, a former adviser to President Joe Biden, highlighted three names that have risen to the top, and MM has confirmed this a serious crop of contenders:

— Karen Dynan, a Harvard professor who spent nearly two decades on staff at the Fed and served as chief economist at Treasury during the Obama administration.

— Dynan’s predecessor at Treasury, Janice Eberly, who’s now an associate dean at Northwestern University’s Kellogg School of Management.

— Seth Carpenter, Morgan Stanley’s global chief economist, a former top monetary policy staffer at the Fed board and one-time acting assistant Treasury secretary for financial markets.

“We believe Dynan and Eberly are the most likely,” Marcus, now a senior U.S. policy and politics strategist at Evercore ISI, wrote in a research note on Tuesday. Both economists are well-known around Democratic policy circles and would represent a “continuity pick” to succeed Brainard, bringing the kind of intellectual heft the White House is looking for.

While Carpenter’s clearly in the running, Marcus writes that his market experience at Morgan Stanley “may not be seen as an unalloyed positive” in a selection and confirmation process that the White House hopes to navigate without a major headache. Still, Carpenter’s allies suggest he might be more desirable to progressives than meets the eye, pointing to his work focusing on the effects of monetary policy on different racial groups as far back as 20 years ago.

Of course, anything can happen. And now that she’s director of the National Economic Council, Brainard will have plenty of opportunity to weigh in on her possible successor.

As our Ben White and Adam Cancryn report, Brainard’s about to become the public face of the White House’s bid to change the narrative on Biden’s handling of the economy: “People who know her say Brainard views the NEC job as a powerful post that could assist in her ultimate goal of serving as either Fed chair or Treasury secretary should Biden or another Democrat win in 2024.”

“While the Fed vice chair post carries influence, it lacks the same scope of authority and — because the central bank is an independent agency — is largely removed from interaction with the White House. The NEC director, by contrast, spends lots of time in the Oval Office conferring directly with the president …”

“That role will include significant air time, with Brainard widely viewed as a commanding voice on both U.S. and international economics.”

“‘Lael will absolutely be on television way more than Brian was for a whole host of reasons, partly because she comes from the Fed,’ the White House adviser said.”

IT’S WEDNESDAY — Do those names sound right to you? Let Sam know at ssutton@politico.com and Zachary at zwarmbrodt@politico.com.

A message from Mortgage Bankers Association:

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Driving The Day

The FOMC minutes will be released at 2 p.m. … New York Fed's John Williams speaks at 5:30 p.m. … Treasury Secretary Janet Yellen will hold a press conference in India at 7 p.m.

ESG ON THE FIRING LINE — Vanguard CEO Tim Buckley is playing defense after the company dropped out of the Net Zero Asset Managers initiative, telling the FT that the $7.2 trillion asset management firm’s voice was being “drowned out or confused.”

“It would be hubris to presume that we know the right strategy for the thousands of companies that Vanguard invests with. We just want to make sure that risks are being appropriately disclosed and that every company is playing by the rules,” he said.

— Bloomberg’s Mark Niquette writes that Ohio biotech entrepreneur Vivek Ramaswamy, “who’s railed against ‘woke’ investing based on environmental, social and governance principles,” has officially launched his bid for the Republican presidential nomination in 2024.

— If you haven’t read Daniel Lippman’s profile of Ramaswamy, now would be a good time.

FHA premium cut — The Biden administration is moving to lower the cost of mortgages for low-income and minority borrowers, in a win for housing advocates and mortgage lenders at a time of instability in the housing market. The Federal Housing Administration will cut 30 basis points off its annual mortgage insurance premium, slashing the fee from 0.85 percent to 0.55 percent for most new borrowers. Vice President Kamala Harris and Housing and Urban Development Secretary Marcia Fudge will tout the fee reduction in remarks in Bowie, Md., this afternoon.

THAT’S A LOT OF BAKE SALES — Our Declan Harty: “The Mormon Church, along with its nonprofit investment manager, will pay a combined $5 million to settle new SEC charges alleging that they deliberately misled regulators and the public about the church’s investments for more than two decades.”

First in MM: Goldfeder to lead fintech group — Zach reports that Phil Goldfeder — senior vice president of global public affairs at Cross River Bank and a veteran of New York politics — will be the next CEO of the American Fintech Council starting in March. The group’s members include LendingClub, SoFi and Affirm.

Before joining Cross River — a stint that included helping steer the bank through the Paycheck Protection Program — Goldfeder served in the New York State Assembly and as a senior adviser to Sen. Chuck Schumer and former Mayor Michael Bloomberg.

“My entire career has been dedicated to public service and this new role will allow me to work alongside diverse and innovative companies that are empowering consumers by creating critical access to financial services,” he said in a statement.

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.

Markets

ARE THEY HEARING POWELL, NOW? — Reuters’s David French: “Wall Street posted its worst performance of the year on Tuesday, with the main benchmarks ending down as investors interpreted a rebound in U.S. business activity in February to mean interest rates will need to stay higher for longer to control inflation.”

— Earnings reports from Walmart and Home Depot reflected a growing sense that “consumers are spending more on food and less on electronics, apparel and home improvements as inflation and changing habits zap demand for many goods,” writes The WSJ’s Sarah Nassauer.

HOME SALES CONTINUE TO FALL — Existing home sales continued their year-long slide in January even as prices climbed 1.3 percent, according Tuesday’s report from the National Association of Realtors. “Home sales are bottoming out,” NAR Chief Economist Lawrence Yun said in a statement. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”

— As home prices in expensive markets flatline, entrenched work-from-home and hybrid work schedules are starting to have major consequences in key commercial real estate markets, writes WSJ’s Peter Grant: “The number of big office landlords defaulting on their loans is on the rise … ‘Commercial real-estate markets are currently in a recession,’ said Owen Thomas, chief executive of Boston Properties.”

MCKINSEY STUMBLES — Bloomberg’s Sridhar Natarajan: “McKinsey & Co. plans to eliminate about 2,000 jobs, one of the consulting giant’s biggest rounds of cuts ever.”

WALMART’S FINTECH EMERGES — Bloomberg’s Brendan Case and Jennifer Surane: “For now, the venture looks less like a threat to the masters of the financial universe and more like a tool for Walmart’s push to keep pace with Amazon.com … But traditional financial institutions still could face trouble if the giant brick-and-mortar retailer aggressively adds banking to its line of consumer businesses.”

JOIN POLITICO ON 3/1 TO DISCUSS AMERICAN PRIVACY LAWS: Americans have fewer privacy rights than Europeans, and companies continue to face a minefield of competing state and foreign legislation. There is strong bipartisan support for a federal privacy bill, but it has yet to materialize. Join POLITICO on 3/1 to discuss what it will take to get a federal privacy law on the books, potential designs for how this type of legislation could protect consumers and innovators, and more. REGISTER HERE.

Regulatory Corner

BIG — Our Nick Niedzwiadek: “The National Labor Relations Board on Tuesday wiped away a Trump-era ruling that gave employers wide latitude to require workers to sign confidentiality agreements or waive their right to sue as a condition of severance agreements.”

GENSLER — Rep. Ann Wagner of Missouri, who leads the House Financial Services Committee’s capital markets subcommittee, wrote to SEC Chair Gary Gensler on Friday that the agency’s proposed overhaul of the U.S. stock market — the largest in two decades — would “unnecessarily break well-functioning markets and make it more difficult for [small companies] to go and stay public,” our Declan Harty reports.

ON BLAST — Former FTC Chair Timothy Muris and Bruce Kobayashi, who served as director of the commission’s bureau of economics during the Trump administration, are preemptively blasting FTC Chair Lina Khan’s planned merger guidelines in a new white paper published by the Competitive Enterprise Institute. “In a September 2022 speech, FTC Chair Khan … argues that over the last 40 years the agencies ‘sidestepped controlling precedent and the statutory text’ by ‘administrative fiat.’ Chair Khan’s arguments are without merit.”

A message from Mortgage Bankers Association:

Jobs Report

Goldman Sachs Global Head of Sustainability Dina Powell McCormick is now the board chair of Robin Hood, a New York-based anti-poverty organization. Policylink Founder-in-Residence Angela Glover, Blackstone CFO and Senior Director Michael Chae and Reddit co-founder and former Executive Chairman Alexis Ohanian have also joined the board.

Alexandra Francis is now policy adviser for terrorist financing and financial crimes at the Treasury Department. She most recently was Robina Foundation fellow at the International Committee of the Red Cross. — Daniel Lippman

A message from Mortgage Bankers Association:

Mortgage servicers stand ready to help.

Mortgage servicers have helped more than 7.5 million families stay in their homes during a national economic crisis fueled by a global pandemic. Servicers are the most important conduit for relief for distressed borrowers and the primary means by which they can recover financially and remain in their home. Mortgage servicers are working to help preserve affordable homeownership for struggling borrowers and protect their communities. Learn more: mba.org/lossmitigation.