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House Republicans just made history.
Late Wednesday, the House Financial Services Committee approved — for the first time ever — landmark legislation that would start to construct a federal regulatory regime for cryptocurrency.
Financial Services Chair Patrick McHenry and a top deputy, Rep. French Hill, even brought along six Democrats, despite opposition from their committee leader, Rep. Maxine Waters.
The bill the committee approved in a 35-15 vote would give explicit digital asset powers to the SEC but also impose new limits on the agency, which is fighting several crypto legal battles using laws enacted long before the Bitcoin boom. A parallel bill, which the House Agriculture Committee is set to approve later today, would give the CFTC sweeping new authority over crypto trading.
The vote marks a watershed moment for the crypto lobby, which backed the plan and showed that it still has some influence despite the view of many lawmakers that its products have little societal worth.
As my colleague Eleanor Mueller covers here, the markup followed weeks of work by McHenry and Hill, who agreed to incorporate several changes from interested Democrats in a bid to make the plan a little less of a longshot.
On Wednesday, they framed the legislation as an effort to fill in regulatory gaps.
“I remind my colleagues that joint stock companies were once an innovation that some claimed were only used to facilitate fraud,” McHenry said, later describing the bill as “better at worst case than what we have currently.”
Rep. Jim Himes, a Connecticut Democrat, had in recent weeks left open the possibility of backing the bill but on Wednesday made an unexpectedly impassioned case for it, after Waters blasted it as “a wish list of Big Crypto.” Himes described the status quo of crypto regulation in the U.S. as having an “utter lack of transparency” and being “total chaos,” with crypto firms, regulators and the courts at odds over how the market should operate.
“Are we comfortable walking away having done nothing?” he said. “The status quo is this: $2 trillion in value lost in the crypto asset markets. $2 trillion evaporated in what is a Wild West. An FTX collapse, which might have been prevented by this legislation, that devastated smart and dumb money alike. We don’t want to see another FTX collapse.”
McHenry’s next big test is whether he can convince Waters and other Democrats to back a narrower bill to regulate stablecoins, a digital token backed by assets like the U.S. dollar. Supporters say the technology can help improve payments but regulators see big risks and a need for more oversight.
McHenry on Wednesday night left open the possibility of punting Thursday’s planned stablecoin vote to September, as talks continued with Waters, the Biden administration and other committee members. As Eleanor reports, the Federal Reserve and the New York Department of Financial Services are also weighing in on what kind of federal-state balance of power will be in the bill.
It’s Thursday — MM wants your reaction to the bank capital rules coming out today. Please direct them to [email protected].
The Commerce Department releases second-quarter GDP numbers at 8:30 a.m … House Financial Services marks up crypto and anti-ESG bills at 9 a.m. … House Agriculture votes on its crypto bill at 10 a.m. … The FDIC meets at 10 a.m. and the Fed meets at 1 p.m. to propose higher capital requirements for large banks
Fed takes a recession off the table — The Fed raised rates Wednesday and may have more to come, but Victoria Guida reports that Chair Jerome Powell had a bit of cheery news: the Fed staff believes the U.S. will avoid a recession in 2023.
“I wouldn’t use the term ‘optimism’ about this year,” Powell said. “I would say there’s a pathway to a soft landing.”
The White House is trying to keep the good vibes flowing today — and keep you thinking about “Bidenomics.”
In a Roosevelt Institute speech today, National Economic Council deputy director Bharat Ramamurti will tick through milestones that the economy’s hit during its sustained period of low unemployment. Among them: the lowest unemployment rates for Black and Hispanic workers on record, as well as those for veterans and workers with disabilities.
“The experience of the past two-and-a-half years shows that we have the tools to avoid painful spells of unemployment and to keep workers empowered with a strong job market,” he will say.
Biden’s Council of Economic Advisersalso has a new blog post today that argues the labor market is historically strong even after taking into account population aging. The White House economists say the employment-to-population ratio and the labor force participation rate, two labor maker metrics, are at their highest levels in decades.
It’s not all so rosy — Michael Stratford and Sam Sutton (remember that guy?) report that the upcoming resumption of student loan payments after a pandemic pause could hit consumer spending, according to economists and Wall Street analysts.
“This will be a significant additional obligation that could lead to broader credit distress among the household sector, and potentially change some spending patterns in certain segments of the population,” CFPB Director Rohit Chopra said in an interview.
A big day for bank capital, and Congress will have questions — The Fed and the FDIC today are set to propose new rules that would require banks to tap more capital to protect themselves from losses. Look for House Republicans to press the agencies on the proposal in the weeks and months to come.
Our Jasper Goodman reports that McHenry expects Financial Services will likely hold oversight hearings.
“There’ll be significant oversight to come,” McHenry told reporters. “I want to see the economic analysis underlying this and I want to see the data they use to justify the decision-making.”
McHenry did not rule out the possibility of legislation rolling back the new capital rules, saying that “all options are on the table.”
SEC will require companies to report cyber breaches — The SEC voted 3-2 Wednesday to finalize a plan requiring companies to alert the public about certain cyber incidents within four business days. As our Declan Harty reports, the new mandate is threatening to deepen a rift between the SEC and leading business groups that are already feuding with the agency over issues including climate risk disclosures and how mutual funds are priced.
Vance backs a bank regulator — Sen. J.D. Vance, in contention to be this year’s most active legislator on the Banking Committee, has a new bill that would convert all state-chartered banks with $100 billion or more in assets into nationally chartered banks supervised by the Office of the Comptroller of the Currency.
Vance frames the proposal as a response to March’s bank failures. Silicon Valley Bank was supervised by the Fed and Signature Bank was supervised by the FDIC.
The measure, similar to an amendment he offered to the Senate’s bank CEO accountability bill, would impact lenders including Truist.
Lawmakers navigate Fed, state worries in stablecoin talks — Eleanor reports that competing concerns from state and federal regulators have complicated efforts to reach a bipartisan consensus on the House Financial Services stablecoin bill, according to lawmakers.
“The chair is sensitive to the concerns about state regulators like [the New York Department of Financial Services], and the ranking member is sensitive to concerns from the Federal Reserve,” Rep. Ritchie Torres said. “The key to a compromise is to reconcile those two, which is a challenge.”
Prosecutors want SBF in jail, now — The WSJ reports that prosecutors asked a judge to revoke FTX founder Sam Bankman-Fried’s bail and send him to jail, after he gave the private writings of a potential trial witness, Caroline Ellison, to the New York Times.
Prosecutors argue he’s trying to intimidate witnesses. SBF’s lawyer says his client is exercising his First Amendment right to combat negative portrayals of himself.