| | | | |  | | By Zachary Warmbrodt and Declan Harty | | Presented by |  | | | Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.
| | Beverly Hills, California — Commodity Futures Trading Commission Chair Rostin Behnam is spending the closing months of President Joe Biden’s first term tackling novel financial developments that are stretching the limits of conventional Wall Street regulation. His agenda for the rest of this year includes big moves that will impact cryptocurrency trading, election betting and carbon markets. MM caught up with Behnam this week on the steps of the Beverly Hilton, where he was making the rounds at the Milken Institute Global Conference. In our stand-up interview (quiet seating is hard to come by here), he previewed the CFTC’s upcoming work and also made a bit of news about himself: He’s planning to serve out the rest of his term. “My term goes to 2026,” he said. “I fully intend on staying up until and through 2026. I’m looking forward to continuing the job, and there’s more work to be done.” Crypto Behnam has been urging Congress to give the CFTC greater authority to police digital asset trading. It seems unlikely to happen this year, with lawmakers at odds over the politics and policy of what to do with the crypto industry. Does he think Washington missed an opportunity to set rules for crypto over the last four years? “You never necessarily get to where you want to go, but you have to build a foundation, right?” he said. “Ultimately, we built a narrative, we demonstrated to the world, not just to the U.S., what the CFTC is capable of, but also where our hands are tied and what needs to change in order to fill this gap to protect investors and to move the country forward.”
| | | | A message from the Electronic Payments Coalition: WORKING-CLASS AMERICANS DEPEND ON CREDIT CARD REWARDS: A new study finds credit card rewards like cashback empower low-income families to pay for the rising price of everyday essentials—like groceries and gas. So why are DC politicians partnering with corporate mega-stores to end those hard-earned rewards programs that Americans rely on? The Durbin-Marshall Credit Card Bill takes billions from American families, lining corporate pockets instead. Tell DC politicians to OPPOSE the Durbin-Marshall Credit Card Bill. | | | Still, at Milken, Behnam said there’s been “a lot of discussion around digital assets” including recent momentum for stablecoin legislation. Even if congressional action is in doubt, the debate over crypto’s regulatory status is far from over this year. Crypto firm Consensys is suing the SEC over concerns that it will claim authority over ether, which Behnam has said should be treated as a commodity. “This, in my mind, is just further evidence of the need for clarification from Congress,” he said. Behnam wants to propose a rule by this summer on “vertical integration” by derivatives firms that want to combine broker-dealer operations with exchanges and clearinghouses. It’s a debate being driven by new crypto entrants but is also an issue for traditional financial players. What might the rule look like? Behnam said he still needs to work through the plan with his fellow commissioners, but his view is that the agency can “wall off” entities within the same holding company to reduce conflicts of interest. Election betting The CFTC is set to vote Friday on an “event contracts” proposal that’s expected to curtail election-related wagering. Officials have long warned that the practice runs afoul of derivatives market rules. Behnam declined to discuss the specifics of the plan. But he said, “I don’t think the CFTC should have listed event contracts on political elections.” “It puts the CFTC in a very difficult position of being an election cop,” he said. “That’s not one that’s good for consumers, investors and certainly the American voting public.” Behnam said he’s trying to address “ambiguities.” The agency is facing litigation from prediction market operators Kalshi and PredictIt. He said the contracts have “ended up consuming an enormous amount of time” for CFTC staff. “We just want to get to a place where we can be more clear from a rules perspective, and ultimately the registrant can better understand our rules, so that we don’t have this ambiguity and that we’re not wasting anyone’s time,” Behnam said. Climate Behnam, who was one of the first U.S. financial regulators to lay out a blueprint for climate finance regulation, said he has a summer timeline in mind for finalizing guidance for derivatives trading linked to carbon credits. “Overall, not only domestically here in the U.S. but globally, the response has been very positive,” he said. “Folks see a place for us to ensure that there’s credibility and legitimacy in this market.” MM asked Behnam what it means that banks appear to be dialing back their enthusiasm for climate finance as they face a wave of political and legal challenges. He said, “There’s never a clear path to the finish line.” “Everything that involves policy and politics and finance and financial markets is a journey and you're gonna face headwinds, you're gonna face bumps and hurdles and you’ve got to work through these,” he said. “We're working through these growing pains.” It’s Thursday — A big thanks to everyone who took the time to chat at the Milken conference. Keep sending tips to Zach at zwarmbrodt@politico.com, and keep up with Declan at dharty@politico.com and @declanharty.
| | | | THE GOLD STANDARD OF FINANCIAL SERVICES POLICY REPORTING & INTELLIGENCE: POLITICO has more than 500 journalists delivering unrivaled reporting and illuminating the policy and regulatory landscape for those who need to know what’s next. Throughout the election and the legislative and regulatory pushes that will follow, POLITICO Pro is indispensable to those who need to make informed decisions fast. The Pro platform dives deeper into critical and quickly evolving sectors and industries, like financial services, equipping policymakers and those who shape legislation and regulation with essential news and intelligence from the world’s best politics and policy journalists.
Our newsroom is deeper, more experienced, and better sourced than any other. Our financial services reporting team—including Zach Warmbrodt, Victoria Guida and Declan Harty—is embedded with the market-moving legislative committees and agencies in Washington and across states, delivering unparalleled coverage of financial policy and the financial services industry. We bring subscribers inside the conversations that determine policy outcomes and the future of industries, providing insight that cannot be found anywhere else. Get the premier news and policy intelligence service, SUBSCRIBE TO POLITICO PRO TODAY. | | | | | | | | | Senate Banking holds a hearing on fees in financial services and rental housing at 10 a.m. … CFPB and DOT hold a joint hearing on airline and credit card rewards programs … The SEC’s Division of Economic and Risk Analysis, Lehigh University’s Center for Financial Services, and the University of Maryland’s Center for Financial Policy hold the Conference on Financial Market Regulation. Trump's crypto pledge — Former President Donald Trump is officially courting the crypto vote. The presumptive GOP nominee told a crowd of supporters that crypto is moving out of the U.S. because of hostility and that “we’ll stop it.” “The Democrats are very much against it, and I say this, a lot of people are very much for it,” Trump said in a video circulating on social media in which he also called out SEC Chair Gary Gensler, who has pursued a crypto crackdown. “I’m fine with it. I want to make sure it’s good and solid and everything else with it, but I’m good with it. If you’re in favor of crypto you better vote for Trump.” Trump’s crypto-friendly stance has been long anticipated by Republicans and digital asset advocates. First in MM: Small biz bump — The SBA has rattled some banks and lawmakers over recent changes to its lending programs, but the agency says the revamp is starting to pay off. The SBA tells MM that it has seen a 35 percent increase in the total number of “small dollar” loans — those under $150,000 – so far this fiscal year. In addition, SBA says there’s been a 46 percent increase in the total value of small dollar loans. The uptick follows rules the SBA implemented in August that eased some lending requirements. Officials expect to grant the highest number of sub-$150,000 loans since 2017. Russian assets update — The EU has approved a plan to use the profits generated by investing frozen Russian assets to buy weapons for Ukraine, Gregorio Sorgi reports from Brussels. The profits are worth between €2.5 billion and €3 billion per year. Per the agreement, which allows the EU to send funds to Ukraine in July, 90 percent of the profits will be used to buy weapons and the rest will go toward non-military aid. Biden admin scrutinizes credit card rewards programs — The CFPB and Transportation Department today are holding a public hearing as part of their inquiry into unfair practices in credit card rewards and airline frequent flyer programs. CFPB Director Rohit Chopra and Transportation Secretary Pete Buttigieg are moderating a panel with union leaders, consumer advocates and some industry representatives. The discussion is expected to focus on concerns about what Chopra has called “bait-and-switch” tactics in how rewards programs operate, including concerns that benefits are difficult for consumers to access or can be revoked or devalued by card issuers. The largest credit card industry players won’t be there. The agencies invited the CEOs of the nation’s largest banks but all of them declined, according to a source familiar with the discussions. In related news, Jasper Goodman reports that the Senate rejected an attempt by Sen. Roger Marshall to throw out slated amendments for the FAA bill, as part of a bid to force a vote on his credit card swipe fee bill. What Wall Street wants from Trump — CNBC reports that corporate leaders are weighing in with Trump and his circle about who should be his VP pick. Ike Perlmutter, the former chair of Marvel Entertainment, told Trump he thinks he should choose Rep. Elise Stefanik. Rupert Murdoch has hinted that he would be happy with Virginia Gov. Glenn Youngkin. The Fed and private credit — Per Bloomberg, Fed Governor Lisa Cook said the rise in lending by nonbank investment firms is worth watching but doesn’t seem to be creating excessive risks for the financial system. She said private credit funds “appear well positioned to hold the riskiest parts of corporate lending” and are less vulnerable to funding runs.
| | | | JOIN 5/22 FOR A TALK ON THE FUTURE OF TAXATION: With Trump-era tax breaks set to expire in 2025, whoever wins control of Congress, and the White House will have the ability to revamp the tax code and with it reshape the landscape for business and social policy. Join POLITICO on May 22 for an exploration of what is at stake in the November elections with our panel dissecting the ways presidential candidates and congressional leaders are proposing to reshape our tax rates and incentives. REGISTER HERE. | | | | | | | | White House would spike SEC crypto rollback — The Biden administration is threatening to veto a resolution the House passed Wednesday that would undo a controversial SEC crypto policy. The GOP-led legislation would block SEC guidance that critics say discourages banks from taking custody of crypto assets. In a landmark move for crypto, the House passed the rollback in a 228-182 vote with 21 Democrats supporting. As for the Senate, Eleanor Mueller reports that Sen. Cynthia Lummis has collected 30 Republican signatures for a petition that will allow opponents of the SEC guidelines to sidestep committee consideration. The House is expected to take up more crypto legislation as soon as this month, Eleanor scooped this week. First in MM: Banking votes coming soon — House Financial Services plans to vote next Thursday on GOP legislation that would ease regulations on banks, two people briefed on the markup told Eleanor. Bills expected to be considered include legislation from Rep. Andy Barr that would allow more banks to escape major regulations such as the Volcker Rule and debit interchange requirements. The proposals would also ratchet up scrutiny of Fed stress testing by requiring the central bank to issue rules on the process and have the GAO review it. Other Barr legislation on the agenda would force bank regulators to act on merger applications and require the Fed to review its discount window operations. The markup is also expected to include bills that would curtail the CFPB's collection of data on small business loans and enforcement of so-called abusive acts and practices.
| | | | A message from the Electronic Payments Coalition:   | | | | | Higher corporate taxes: A bipartisan issue? — Our Benjamin Guggenheim reports that House Ways and Means Chair Jason Smith says there are “people on both sides of the aisle that believe the corporate tax rate is not enough,” though that does not include the Missouri Republican himself. Smith’s comments come as Congress begins to grapple with the looming expiration of Trump-era tax cuts next year. In other tax news, the U.S. Chamber of Commerce is set to kick off its 2025 tax-policy advocacy today with a closed-door summit featuring House Budget Chair Jodey Arrington (R-Texas), former House Ways and Means Chair Kevin Brady and former Sen. Rob Portman. The Chamber’s goal? To sell lawmakers and the business world once again on what the group sees as the benefits of the 2017 Tax Cuts and Jobs Act before cuts expire next year, said Chief Policy Officer Neil Bradley. He told Declan he expects “a massive lobbying effort.” “There are a lot of new challenges as we head into this tax extension,” Bradley said, pointing to the larger deficit today and the sheer number of new lawmakers who have been elected since the 2017 law was passed.
| | | A crypto boost for Robinhood — Trading app Robinhood beat Wall Street analysts’ estimates for its first-quarter results, while posting a 232 percent year-over-year jump in revenue from cryptocurrency trading. The earnings report came just days after the SEC fired off a warning shot to the company that staff was preparing a potential lawsuit over its crypto business. FTX creditors to be made whole — Bankrupt crypto exchange FTX has collected enough money to pay back creditors the amount they had locked up on the platform and then some, CoinDesk reports. Still, some customers are reportedly feeling short-changed as crypto has surged in the 18 months since FTX filed for bankruptcy. The payouts will be tied to the value of customers’ holdings as of the bankruptcy filing date.
| | | Oklahoma energy boycott law frozen — An Oklahoma judge temporarily blocked state officials from enforcing a law intended to curb pension funds from working with financial giants like BlackRock, Wells Fargo and JPMorgan Chase that have been accused of boycotting the fossil fuel industry, our Allison Prang reports. The judge said that the Oklahoma treasurer would risk violating the state’s constitution if he tried “to divest or move money for any reason other than to benefit pensioners,” Allison reports.
| | | | A message from the Electronic Payments Coalition: NEW STUDY DEBUNKS MYTH CREDIT CARDS REWARDS ARE ONLY FOR THE RICH: Politicians in DC are teaming up with corporate mega-stores to push a false narrative only the rich benefit from credit card rewards. New research disproves this, showing rewards have a significantly larger financial benefit for low- and middle-income Americans. These rewards, especially cashback, help working class families pay for everyday essentials--equivalent to a 17 cent per gallon gas price reduction. Yet, politicians are trying to pass a new law that would end rewards programs that Americans rely on, favoring corporations over people. The card mandates included in the Durbin-Marshall Credit Card Bill would weaken security measures, disrupt rewards, and burden households already grappling with rising costs. With food and rent prices soaring, stripping cashback rewards from hardworking American families would be devastating. Learn more here. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
