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Good morning: I’m delighted to be kicking things off as your new MM co-author with Sam Sutton. My goal each week will be to bring you scoops and fresh analysis to help you better understand Washington’s role in a volatile global economy. I want to hear from you too. Tell me what we’re missing, or just say hello. I would like to include your insights in the next newsletter.
Let’s start now.
One on one with McHenry: The time has come. House Republicans are expected to choose next year’s committee chairs by the middle of the week. Rep. Patrick McHenry will be their choice to lead House Financial Services, which oversees banking, financial markets, housing and monetary policy.
MM had a quick walk-and-talk with the North Carolina Republican on Friday as the Capitol cleared after final votes. Some highlights:
The five bullet points he will give to the Republican Steering Committee this week: Data privacy, capital formation and digital assets are the “big three” opportunities for two-party accounts. He will also outline plans to oversee and respond to “the Biden economy.”
The FTX olive branch to Maxine Waters: Our Playbook colleagues last month described McHenry as “the old pro,” who has changed his image from “a brash conservative whistleblower to a shrewd low-profile operator.”
Examples include what he said were “highly coordinated” tweets with Maxine Waters on Friday morning that encouraged FTX founder Sam Bankman-Fried to testify at the committee’s upcoming series of hearings about the company’s collapse. The success of McHenry’s legislative agenda next year may depend on the cooperation of Waters and other Democrats.
“We had a good working relationship on this,” he told MM. “These hearings have to be bipartisan, and to start them this Congress and carry them over to the next Congress makes a lot of sense. … All the stuff on my agenda, I’ve deliberately tried to draw bipartisan support. There’s no 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 chairman assignments for his top lieutenants: Reps. Blaine Luetkemeyer(Mo.), Bill Huizenga (Mich.), Andy Barr (Ky.), French Hill (Arch.) and Ann Wagner (Mo.). Luetkemeyer and Huizenga are effectively term-limited on their long-standing subcommittees – financial institutions and capital markets, respectively. Wagner, who was the top Republican on the Waters diversity subcommittee that McHenry is likely to scrap, is seen as a match for capital markets.
McHenry remains mum about his final plans, which may include a digital assets subcommittee. Luetkemeyer and Huizenga are up for new assignments, possibly even a subcommittee swap, according to sources plugged into the situation.
“The jurisdictional lines will shift a little bit,” McHenry says. “It’s based on our current dynamics in the market and also the emphasis we have from a legislative agenda standpoint.”
More about the economy: McHenry has concerns about liquidity in the Treasury bond market and also wants to look at how low bank capital rules interact. “We don’t want anything 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 tops your year-end Apple Music or Spotify most-listened to 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 am [email protected] and Sam is [email protected].
Drive the week – Monday … US and European officials meet for a technology and trade summit (more below) … The Treasury Advisory Committee on Racial Equality meets at 10 a.m. … Ron Klain and Tom Cotton speaking at the WSJ HUB Council that 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 pm… Wednesday … The CFTC Agriculture 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 Inequality and Equity in Growth holds a hearing on its final report to approve 1:00 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.…
SBF: I will testify one day – Bankman-Fried indicated on Sunday afternoon that he will not appear at the December 13 House Financial Services Committee hearing on FTX’s collapse.
Of a tweet addressed to Waters: “Once I had finished learning and reviewing what happened, I would feel it was my duty to appear before the committee and explain. I’m not sure it will happen by the 13th. But when that happens, I will testify.”
Waters told MM on Friday “we want him here,” whether he testifies in person or via video.
Cannabis banking is having its moment – After years of debate, Congress appears poised to pass landmark legislation that would allow banks to serve the cannabis industry. Supporters intend 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: Will you take advantage of looser marijuana restrictions in banking regulations or wait for full pot legalization? Let us know.
“With allies like these, who needs enemies?” – US and European officials will hold a technology and trade summit on Monday at a time of growing tensions between the transatlantic 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 US is frustrated that Europe won’t be more aggressive in pushing back against China. Some officials privately accuse their counterparts of broken promises, particularly on trade.
More from WSJ: “Europe is bracing for a confrontation with Washington over a new law encouraging businesses to invest more in the U.S., an initiative that European officials say threatens the region’s economy as it teeters on the brink of a recession.”
Oil price cap fallout – The Friday announcement of a $60-a-barrel cap on purchases of Russian oil by Europe and the G-7 reverberated through oil markets – prompting a backlash from Russia and Ukraine.
– OPEC+ agreed on Sunday to stick to its oil output targets, amid concerns over Covid-19 restrictions in China and uncertainty over Russia’s ability to export crude.
– Moscow will ban domestic companies from selling Russian oil below any price limit, and is prepared to cut production to compensate for lost exports, Russian Deputy Prime Minister Alexander Novak said on Sunday.
– Ukrainian President Volodymyr Zelenskyy said the $60 per barrel cap cannot be called “a serious decision” because that level is “quite comfortable” for Russia’s budget.
The view from Treasury – A senior Treasury official argued on Friday that the price cap would carry weight even for countries like China or India that might be less likely to cooperate with punitive measures against Moscow, our Victoria Guida reports.
“You’re going to see a number of countries … that want to negotiate lower prices, if at all possible, even if they don’t use Western services,” the official told reporters at a conference. “Because they know that Russia has two choices: they can either sell to them at their asking price, or they can choose to sell in the price limit.”
Sen. Sherrod Brown (D-Ohio) on why Congress hasn’t passed crypto regulations – From a CNN “State of the Union” interview Sunday: “Half of the Senate, the Republicans and a handful of Democrats, still think that crypto is legal and that it’s something that should be a significant part of our economy So it’s not like we’re going to snap our fingers and get a crypto bill through the Senate and through the House. …
“I would like to do something legislative. I don’t know that Congress is able to because of crypto’s hold on one political party in the Senate and the House. But we try every day.”
An administration officer tells Victoria that a stablecoin regulatory 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 sign, the official said.
Meta wants to stop NFT suppression – Meta, the tech giant formerly known as Facebook, invited MM and a few other journalists to its downtown Washington offices for a spin on its virtual reality meeting app and a briefing on its lobbying priorities.
Meta has a new policy document discouraging financial regulations for blockchain products that, in its eyes, do not pose the same risks as financial risks. It argues that a creator making, say, NFT art should be treated the same way as an artist making physical art. The SEC has made NFTs an enforcement target, with officials warning that some may qualify as securities.
Meta urges regulators not to rush to set rules for decentralized computing systems as it aims to build interoperability and portability for digital assets in “the metaverse.”
A new approach to economics – The Brookings Institution released a paper by Aaron Klein and Joel Levine arguing that the use of new statistical models in economics can improve policy making. One example they cite was predicting which Senate Republicans would be part of the bipartisan group that negotiated last year’s infrastructure bill.
China loosens Covid restrictions — WSJ: “Local authorities across China are withdrawing some of their strictest Covid-19 controls, 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 is looking beyond China – WSJ: “In recent weeks, Apple Inc. has accelerated plans to move some of its production outside China, long the dominant country in the supply chain that built the world’s most valuable company, people involved in the discussions say.”
Defaults threaten poor countries $200B in debt – NYT: “Developing countries face 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 trigger a wave of messy defaults and economic pain on the world’s most vulnerable people.”