No pressure, McHenry

From: POLITICO's Morning Money - Wednesday May 24,2023 12:02 pm
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POLITICO Morning Money

By Zachary Warmbrodt

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Wall Street executives see a bit of good news in the otherwise frustrating debt limit talks: Rep. Patrick McHenry’s on the case.

He didn’t want to go down this road. The North Carolina Republican, who chairs the House Financial Services Committee, told us in November that he opposed the idea of Republicans trying to extract spending cuts in exchange for raising the government’s borrowing authority. He cited the risks that would come if Washington failed to pay its bills.

One of the House GOP’s most experienced vote counters, he also turned down a viable shot at Republican leadership this year. He opted instead to seek bipartisan deals on crypto and investment rules with Rep. Maxine Waters at the Financial Services panel.

Now, he’s a prominent player in debt-limit negotiations between Speaker Kevin McCarthy and President Joe Biden. He’s been one of McCarthy’s two key emissaries negotiating with White House aides in recent days, and he accompanied the speaker to a meeting with Biden this week.

Executives, lobbyists — and even some Democratic lawmakers — are watching him closely and want to believe he’ll help deliver a deal before financial catastrophe ensues. It’s a notable transformation for someone who entered Congress as a conservative bomb-thrower. Shai Akabas, director of economic policy at the Bipartisan Policy Center, described the McHenry of 2023 as “one of the adults in the room” — and one who brings a financial markets perspective to the talks.

“McHenry is the ideal person to play a more active role in getting a deal done because he is both a trusted ally of the speaker and respected by the rank and file in the caucus,” one executive at a large bank told MM. “His voice on the need to get a deal done and avoid default has been critical to the cause.”

Rep. Jim Himes (D-Conn.), a Goldman Sachs alum who has served for years with McHenry on House Financial Services, told our Eleanor Mueller he too is hopeful that McHenry is “a moderating influence in the conference.”

“I trust he’s that voice of reason,” Himes said. “But the question is, will it be enough?”

McHenry’s position is reminiscent of previous party lieutenants who chaired important committees but held far greater influence, according to Joshua Huder, senior fellow at Georgetown University’s Government Affairs Institute.

“McHenry is fulfilling a similar function for McCarthy,” Huder said. “He’s easing Wall Street concerns, negotiating policy well beyond his control, and helping his conference navigate the biggest hurdle it has faced.”

McHenry spokesperson Laura Peavey said he has remained consistent in his view that default is not an option and that the debt ceiling should be raised with as little drama as possible. She said McHenry for years has also been “sounding the alarm” on spending and the need to address U.S. debt.

“The reality is that there are not enough votes in the House or Senate for a clean debt limit increase,” she said. “He is now working toward a negotiated solution that meets the Speaker’s policy parameters, can pass both the House and Senate, and addresses federal spending.”

It’s Wednesday — Are you freaking out yet? Let us know: Zach Warmbrodt, Sam Sutton.

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Driving the day

House Financial Services marks up bills on mortgages, capital formation and bank regulator oversight at 10 a.m. … House Oversight holds a hearing on San Francisco Fed supervision failures at 2 p.m.

No progress — Debt-limit talks showed no hint of a breakthrough Tuesday, with both sides appearing to be dug in on spending cuts. Rep Garret Graves, one of McCarthy’s negotiators with the White House, told reporters that “there is a significant gap between where we are and where they are on finances.” The S&P 500 stock index ended the day down more than 1 percent.

 

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‘Our hostage’ — How is the House GOP’s far-right flank feeling right now? Rep. Matt Gaetz summed it up this way to Semafor’s Joseph Zeballos-Roig: “My conservative colleagues for the most part support [the House Republican bill] Limit, Save, Grow, and they don’t feel like we should negotiate with our hostage.”

X-date doubts — Another complication: Rep. Mike Flood (R-Neb.) told Eleanor that several House Republicans are questioning whether Treasury’s “X-date” — the day the government runs short of cash — is the real deadline.

Union pressure — The American Federation of Government Employees urged Biden to invoke the 14th Amendment and consider minting platinum coins as a way to avoid default and Republican austerity measures.

14th Amendment court battle takes shape — A federal judge scheduled a May 31 hearing in a lawsuit filed by a different government employee union that asserts Biden can use the 14th amendment to sidestep Congress.

According to our Josh Gerstein, the judge “sounded skeptical of arguments from the union’s lawyers that disaster for the nation is impending if he did not put the case on an even faster track.”

As for the Biden administration’s position? A Justice Department lawyer said he was not authorized to take a position on whether DOJ disagrees with the central argument in the suit. He suggested the department would argue that the challenge is not a proper vehicle to force the legal conclusion.

 

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Economy

Powell defends rate hikes to Dems — Federal Reserve Chair Jerome Powell told moderate Democrats at a closed-door meeting Tuesday that “he doesn’t see any evidence out there“ to suggest the Fed raised interest rates too aggressively, Rep. Jim Himes told Eleanor.

“He acknowledged that history has not yet been written, but he defended the Fed’s actions so far,” Himes said.

What wasn’t up for discussion: The debt ceiling.

“I’ve never seen an official to be so aggressively clear on what he’s not going to talk about,” Himes said. (Powell typically draws a line on not talking about fiscal policy, saying it’s not the Fed’s place.)

 

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On the Hill

Votes today on bank regulators, capital markets House Financial Services is expected to approve along party lines today legislation from Rep. Andy Barr (R-Ky.) that would subject the operations of the FDIC, Federal Reserve and the Financial Stability Oversight Council to greater congressional scrutiny, Eleanor reports. Members will also consider five other mortgage- and capital markets-related bills.

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Leadership Summit highlights:
· Panels and speeches featuring the top minds in the industry, including Vanguard Chairman and CEO Tim Buckley, Edward Jones Managing Partner Penny Pennington, Citi CEO Jane Fraser, Nuveen CEO Jose Minaya, and more.
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· A fireside chat with Treasury Deputy Secretary Wally Adeyemo

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