It’s 2024, and as Samuel L. Jackson said in “Jurassic Park”: Hold onto your butts. The coming year is poised to shake up Washington’s relationship with Wall Street in a number of big ways, and there will no doubt be major surprises. So let’s compare notes — or just use this as a cheat sheet if you’re still figuring out what day it is, we won’t judge — on some of the key political and policy storylines MM will be watching in the months to come. The big picture: Elections in the U.S. and abroad will matter As our colleague Eric Bazail-Eimil writes in a handy guide on elections looming around the world, “2024 is set to put democracy through its most sweeping test yet.” Four billion people will hold regional, legislative and presidential elections, including in the U.S., Europe, the U.K., Mexico and Taiwan. It’s worth paying attention to this space as geopolitics continues to be one of the biggest and growing threats to a surprisingly resilient economy. Zooming in, the outcome of what’s likely to be a rematch between President Joe Biden and former President Donald Trump could lead to significant swings in economic and financial policy. One question MM wants to suss out: Would Trump once again turn to establishment types — Wall Street’s so-called adults in the room — when it comes to key economic personnel? Or is it more likely that he’d go with advisers more driven by economic populism or far-right social agendas? Just as important are critical congressional races. Two key characters in MM’s favorite policy sagas — Senate Banking Chair Sherrod Brown and Sen. Jon Tester — are up in elections that could determine whether Democrats lose control of the chamber. Are you ready to start speculating on whether Sen. Elizabeth Warren — who’s also up for reelection this year, by the way — could be in line to be the next top Democrat on Senate Banking? What does the Fed do? Fed Chair Jerome Powell’s perceived pivot to rate cuts last month was all the markets needed to come to a roaring close for the year, with growing signs that the central bank had prevailed in its fight to bring down inflation. But if the cuts come to pass, it could be a symptom of problems with the economy, and could also make the Fed a political target. With a “soft landing” seemingly in the offing, economic growth is expected to slow this year. As the WSJ reported in stories the last few weeks, U.S. manufacturing has weakened for 13 months, office landlords are bracing for a brutal 2024 and banks continue to reel from bond losses following Fed rate hikes. A scary question you also have to consider: What does the Fed do if a missile blows up an oil tanker in the Middle East? How Powell and Co. proceed with cuts could have significant implications for the Fed as an institution. A perception, no matter how off-base, that Powell is juicing the economy for Biden will fuel criticism and conspiracy theories from the right. If Republicans win back control of Washington in 2024, the bipartisan coalition that once insulated Powell and the Fed's independence from Trump’s wrath may not be there to hold the line. Biden’s regulatory agenda, the courts and a do-or-die deadline Washington’s banking and markets watchdogs are entering a critical phase that could cement Biden’s fin reg legacy. The SEC is soon expected to finalize the most controversial rule of Chair Gary Gensler’s already sweeping agenda — climate disclosures for public companies. The policy has implications for corporations across America. Once it drops, how quickly will business groups take the SEC to court? And how will it land with Gensler’s long-time progressive allies, who may be disappointed with any compromises made to shore up its legality? Gensler is facing an onslaught of other legal challenges from money managers and crypto firms that could also determine his lasting impact on financial markets. (Side note: Look for the SEC to potentially approve the launch of bitcoin ETFs in the near future.) An even messier policy fight — and one that's potentially more consequential — looms as the Fed, FDIC and OCC figure out how to finalize big bank capital requirements in the face of the industry’s most intense lobbying barrage in years. All eyes will be on Powell as the agencies hash out the extent to which they’ll revamp and possibly scale back their original proposal. Powell has voiced his own reservations about the rule and has said he plans to finalize a version that has “broad support” on the Fed board. Bank executives are gearing up for a court battle if the agencies don’t relent. One X factor is whether FDIC Chair Martin Gruenberg steps down amid fallout from scandals at the agency. A pressure point that will be front of mind for regulators across the board is the Congressional Review Act. Any regulations finalized after this summer, possibly around June, would be exposed to expedited disapproval by the next Congress — a power that would let Republicans nullify Biden-era rules if they win control of Washington this fall. Also remember that the Supreme Court will rule this year on the constitutionality of CFPB funding, though it sounds like the status quo may prevail. Don't forget Congress Partial government shutdowns loom on Jan. 19 and Feb. 2. It could trigger a predictable and temporary bout of economic uncertainty. It’s also an opportunity for lawmakers to hitch a ride for unrelated policy measures. In the financial policy space, MM will be watching how House Republicans in the next few weeks work out a potential compromise on policing U.S. investment in China. On the crypto front, it’s not looking likely, but lawmakers may reach a deal on setting up a new regulatory regime for stablecoins or agree to ratchet up crypto anti-money laundering safeguards. If nothing gets done, it’s still worth watching because it sets the table for what crypto policy might look like in 2025 and beyond. The most important inside baseball to watch will be the Republican race to succeed Rep. Patrick McHenry as the GOP leader on House Financial Services. It’s expected to come down to Reps. Blaine Luetkemeyer and French Hill, who have been broadly aligned on policy but would likely take notably different approaches to running Wall Street’s go-to committee. Happy New Year – Got predictions for 2024? Send ‘em to zwarmbrodt@politico.com.
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