House GOP vs. Wall Street

Jun 26, 2023

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The time has come: After months of threats, House Republicans are about to spend July pummeling major Wall Street firms with hearings and bills designed to discourage climate- and social-investing practices.

What should you expect from the House Financial Services Committee’s “ESG month”? Your MM host and POLITICO’s Eleanor Mueller have fresh intel after talking with committee members the last several days.

The big initial focus: Showcasing ways to stop activists from forcing companies to take positions on environmental issues via the shareholder voting process.

Republicans will pitch greater oversight of the biggest asset management firms — think BlackRock, Vanguard and State Street — as well as the two big proxy advisors, ISS and Glass Lewis, which issue recommendations on shareholder votes.

Eleanor got the scoop Friday in a POLITICO Pro Q&A with Rep. Bill Huizenga, the Michigan Republican who leads the ESG working group that’s behind the committee’s effort.

Among the group’s recommendations: Congressional scrutiny and legislation to rein in the influence of the biggest asset managers.

“Investment advisers, asset managers, pension funds — I would argue some, not all, but certainly some — have been ignoring their fiduciary duty to shareholders or maybe de-emphasizing that,” Huizenga told Eleanor. “There's currently no requirement for asset managers to justify why they are voting for some of these things and especially if they're voting against an independent board. There's very little transparency with that.”

The committee plans to vote on anti-ESG bills around the end of the month. In the lead-up, it will have a series of hearings that cover ESG investing and other areas of finance ensnared in climate and social debates. Rep. Ann Wagner (R-Mo.) told MM that her capital markets subcommittee will focus on proxy advisory firms. Rep. Warren Davidson (R-Ohio) said his housing and insurance subcommittee will look at impacts on home construction costs and property casualty insurance availability.

How do Democrats fit into this? While some moderates — especially those in red states — have joined Republicans in the anti-ESG push, look for committee Democrats to highlight the obvious: The pro-business party of free markets is telling corporate America what it can’t sell to its own clients. (To be sure, MM can confirm that some committee Republicans would also prefer to focus on telling regulators what to do, rather than companies.)

“We’ll continue to be the voice that's defending the fact that the market should have choice,” Rep. Sean Casten (D-Ill.) told MM.

Happy Monday — What do you think of the House GOP’s “ESG month”? Let us know: Zach Warmbrodt, Sam Sutton.

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Driving the Week

Treasury Federal Insurance Office Director Steven Seitz and assistant secretary for financial institutions Graham Steele talk insurance regulation and supervision of climate-related financial risk at Brookings at 10 a.m. Tuesday … President Joe Biden will deliver what the White House calls a major “Bidenomics” speech in Chicago Wednesday … Danish National Bank Governor Signe Krogstrup and Bank of England senior manager Katie Fortune talk central bank digital currencies at the Peterson Institute at 9 a.m. on Wednesday … Fed Chair Jerome Powell speaks on a panel with ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Japan Governor Kazuo Ueda at the ECB Forum on Central Banking at 9:30 a.m. Wednesday … Powell speaks at the Banco de España financial stability conference Thursday at 2:30 a.m.

Driving the day

Crypto tea leaves — Rep. Jim Himes (D-Conn.) told MM that the committee is “very close” to agreement on a stablecoin bill. “We’re down to the sort of fiddly issues,” he said.

House Financial Services Chair Patrick McHenry wants to hold votes on crypto legislation the second week of July, after Congress returns from a two-week recess. In addition to the bill on stablecoin regulation, McHenry is trying to advance a proposal that would revamp the crypto powers of the SEC and CFTC.

Rep. French Hill (R-Ark.), who chairs McHenry’s digital assets subcommittee, told MM that the plan for the next couple of weeks is to keep reviewing the bills with Republicans, Democrats and industry and to also keep Senate colleagues in the loop.

“We’ve had outstanding engagement from both Democratic and Republican members,” he said.

One MM reader also flagged: Look for House Financial Services to vote next month on a National Flood Insurance Program extension that would decouple the NFIP from its recent cycle of being attached to government funding legislation.

Economy

Welcome to Bidenomics Week — From Sam: With lawmakers back in their districts for recess, the White House distributed talking points to Democratic members late last week in a bid to sell voters on Biden’s stewardship of the economy and tax policy

Biden, Vice President Kamala Harris and other top administration officials will kick off a three-week campaign with events planned across the country — including an infrastructure funding announcement later today — to make the case that their policies powered a resilient labor market and steady economic recovery. They’re also looking to sap the momentum behind the House GOP’s tax plan, which they’ve labeled a “scam” that will benefit large corporations.

Coming soon: Biden regulators versus big banks — Victoria Guida has a new piece previewing the upcoming push that banking agencies will make to hike capital requirements for the largest U.S. lenders. It’s shaping up to be a huge battle between bank lobbyists and Biden appointees, who are also facing resistance from Republican lawmakers and even concern from some Democrats.

“There’s no good time … to raise capital,” FDIC Chair Martin Gruenberg, one of the regulators leading the charge, said last week. “In good times, people say, ‘You don’t need to do it.’ And in bad times they say, ‘Do it during good times.’”

CFTC punts on political betting — The CFTC is taking another 90 days to review a proposal from political betting startup Kalshi that would let people wager on the outcomes of House and Senate elections. The CFTC’s two Republican commissioners — Summer Mersinger and Caroline Pham — dissented from the decision announced late Friday, with Mersinger calling it “fundamentally unfair.”

European agency wants more ‘firepower’ for bank failures — The FT reports that Europe’s Single Resolution Board, which is responsible for winding down the largest eurozone banks when they collapse, wants the ECB to fund the resolution of failed lenders, possibly with a government guarantee.

“The idea is to increase our firepower because we think that under exceptional circumstances we think it would be better if we had a bit more of a solution [on liquidity],” said SRB chair Dominique Laboureix.

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