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Why wouldn’t Biden pick a Democrat for Fed chief?


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Why wouldn’t Biden pick a Democrat for Fed chief? That’s a question progressives eager to dump Fed Chair Jerome Powell have been asking, underscoring that if Biden keeps Republican Powell, it will mean only one Democrat in more than three decades — Janet Yellen in 2014 — will have been elevated to the top Fed post. There’s the big reason: Biden might want to go the continuity route. But there’s also the consideration that the Democrat who the left has been pushing for — Lael Brainard — would likely face a tougher road in Congress.

Your MM guest host and Ben White report: “People close to the president say his instinct would be to stick with Powell, even though he barely knows him. Biden likes to be bipartisan when he can and doesn’t want to do anything to jeopardize the long-running rally on Wall Street. But at least some in the small circle of advisers who will help make the call will argue that the left will revolt at a Powell renomination and that Wall Street would be fine with Brainard.”

“Brainard is just a better bet to naturally, independently arrive at a similar place to the Biden administration than Powell,” said Jeff Hauser, director of the progressive Revolving Door Project, which opposes Powell.

Brainard’s bid for Fed chair looks quite different from her campaign to become Treasury secretary. She irritated some people on the Biden transition last fall when stories began appearing in national media outlets that positioned her as a frontrunner for the top Treasury job. While she was not quoted in those stories, some on the Biden transition felt that she and her team were orchestrating them and didn’t appreciate the public campaigning for the job.

This time around, she has told her allies that an open contest between her and Powell wouldn’t be good for the Fed and that the two have worked together well, according to a former Obama official with close ties to Brainard and progressives.

Republicans are also looking to make trouble if Brainard gets the nod, for either chair or one of the two No. 2 spots that are also opening up at the Fed. “Key Republicans are planning to revive paperwork issues Brainard had when she was nominated to the Treasury Department in 2009,” we report.

IT’S TUESDAY — Ben White will be back soon! Send tips to him at [email protected] or @morningmoneyben and to Aubree Eliza Weaver at [email protected] or @AubreeEWeaver. And you can always reach me for any economic policy tips at [email protected].

8:30 a.m. Bureau of Labor Statistics releases Consumer Price Index data for August … 10 a.m. SEC Chair Gary Gensler testifies before the Senate Banking Committee

FINALLY, SOME FINREG NOMINEES — Our Kellie Mejdrich: “President Joe Biden on Monday said he will nominate CFTC Acting Chair Rostin Behnam to lead the agency and will tap a top federal watchdog and a law professor as commissioners.

“Biden will nominate Christy Goldsmith Romero, the special inspector general for the Troubled Asset Relief Program, and Kristin Johnson, a law professor at Emory University, to serve as Democratic commissioners on the CFTC’s five-person panel. Behnam, a former Senate aide, has served as the CFTC’s acting chair since January and as a commissioner since 2017.”

Our Katy O’Donnell also reports that Biden plans to nominate Alanna McCargo to be the next president of Ginnie Mae, tapping a housing veteran to oversee the agency’s $2 trillion portfolio of mortgage-backed securities.

FED HIRES CLIMATE EXPERT TO RUN INTERNAL COMMITTEE — Adele Morris, a senior fellow at the Brookings Institution, announced Monday that she’s leaving the think tank to chair the Fed’s Financial Stability Climate Committee. Brainard announced the creation of that committee in March, saying it would operate across the Federal Reserve system to develop and implement “a program to assess and address climate-related risks to financial stability.”

Morris worked as the lead natural resource economist for the Treasury Department for nine years, according to her Brookings bio, as well as the senior economist for environmental affairs at the Council of Economic Advisers while the Kyoto Protocol was being developed. She also worked on the Hill as an adviser to the Joint Economic Committee.

GENSLER: CHINESE FIRMS NEED TO OPEN THEIR BOOKS — WSJ op-ed from SEC Chair Gary Gensler before his testimony this morning: “The Securities and Exchange Commission may need to prohibit trading in about 270 China-related companies by early 2024. The reason can be traced to the Enron and WorldCom accounting scandals.

“Congress passed the Sarbanes-Oxley Act in 2002, mandating inspections of public companies’ auditors by the Public Company Accounting Oversight Board. More than 50 foreign jurisdictions allow the board to ‘audit the auditors.’ Two do not: China and Hong Kong.”

A PEEK INTO BROWN’S TESTIMONY AT TUESDAY’S SEC HEARING — Per an excerpt from Banking Chair Sherrod Brown’s opening statement: “Chair Gensler, it’s your job to make sure that efficient markets are balanced with strong enforcement that protects Americans from the worst Wall Street greed and careless risk – even if that means challenging practices or shady investment products that previous chairs ignored. It also means working to increase transparency that the last Administration didn’t take seriously.”

FAKE WALMART RELEASE CAUSES CRYPTO DRAMA — From yours truly: “A false press release announcing Walmart would accept the cryptocurrency Litecoin caused the digital asset’s price to surge and then drop Monday morning as several media outlets published the news. The episode will likely trigger scrutiny by regulators because of concerns it may have been a pump-and-dump scheme. It affected the prices of multiple crypto assets.

“Litecoin rose more than 25 percent after a news release issued from Globe Newswire Monday morning said Walmart intended to collaborate with the nonprofit Litecoin Foundation ‘to give its millions of shoppers across the world an opportunity to seamlessly make payments with cryptocurrencies.’ Walmart spokesperson Randy Hargrove said later that the release was inaccurate and that it wasn’t clear where it had come from.”

The SEC later said in a statement that it “does not comment on the existence or nonexistence of a possible investigation.”

REALTORS FIGHT BACK ON ANTITRUST PROBE — Our Leah Nylen: “The National Association of Realtors has asked a federal court to block the Justice Department from backing out of an antitrust settlement the Trump administration reached with the trade group. The organization — which represents 1.4 million real estate professionals — said the DOJ’s decision to withdraw the settlement ‘will set a potentially catastrophic precedent’ and wants a court order prohibiting prosecutors from continuing to investigate the group’s rules about real estate listings.

Trump’s Assistant Attorney General for Antitrust Makan Delrahim reached a settlement with NAR in October. The group agreed to drop rules that prohibited real estate listings from disclosing a buyer-agent’s commission and changed its policy that limited the ability of agents who aren’t affiliated with it to access lockboxes and show homes for sale. In exchange, the Justice Department agreed to close other aspects of the probe, such as NAR’s rules on how and when listings must be displayed. Some of NAR’s rules on listings have led to other antitrust suits, including one by real estate startup Rex against the group and Zillow.

“The settlement wasn’t yet final when the DOJ filed to withdraw it on July 1, citing concerns that it would impede the prosecutors from future investigation. Days afterward, prosecutors sent NAR a new civil subpoena seeking documents and information on its policies. The trade group argues the new document requests violate the October agreement that DOJ would close that portion of the probe. ‘The Antitrust Division has no right, under the law or the parties’ agreements, to unilaterally modify or rescind the commitments it made,’ NAR said. The Justice Department ‘is bound by the terms of the deal, just like any other litigant.’”

JUST IN: PAYMENTS INDUSTRY PUTS OUT CRYPTO ‘PRINCIPLES’ — Our Kellie Mejdrich: “The Electronic Transactions Association, the trade association that represents the payments industry, is rolling out a set of principles this week to guide regulators as they prepare to update their rules to apply to cryptocurrencies.

“Among them: properly defining crypto assets, tailoring regulations to fit the risk profiles of individual participants and activities, ensuring consumer protection and harmonizing new laws or rules with existing regulations, such as those around anti-money laundering. ETA CEO Jodie Kelley in an interview said it was important to establish goals because ‘there is so much happening, and it’s happening so quickly.’”

DODD, FRANK BACK POWELL’S REAPPOINTMENT — An op-ed from Chris Dodd and Barney Frank, the cosponsors of the 2010 Dodd-Frank Act: “We believe the national interest will be best served by President Biden reappointing Jerome Powell to chair the Federal Reserve System. The most important issue facing us today is the enactment of President Biden’s comprehensive program responding not just to the ravages of COVID-19 but to the underlying social and economic problems that have exacerbated its effects. Reappointing Mr. Powell will provide strong support for this essential step.”

STOCKS EDGE HIGHER AFTER A DOWN WEEK — AP’s Damian J. Troise and Alex Veiga: “Stocks managed to end a wobbly day mostly higher on Wall Street Monday as the market regroups after its biggest weekly drop since June. The S&P 500 shook off an afternoon slump and edged up 0.2 percent, the Dow Jones Industrial Average added 0.8 percent and the Nasdaq slipped 0.1 percent. Financial and energy stocks climbed, helping to make up for losses in health care. Energy companies benefited from higher prices for oil and natural gas. Benchmark crude oil rose 1 percent to close above $70 a barrel for the first time since early August. The yield on the 10-year Treasury fell to 1.32 percent.”

AMC, GAMESTOP PUSH SMALL-CAP BENCHMARK HIGHER — WSJ’s Gunjan Banerji: “Meme stocks are distorting the way some investors see parts of the market. The Russell 2000 value index, designed to follow shares of small companies that are viewed as bargains relative to the rest of the market, is up 22 percent this year. Meanwhile, the Russell 2000 growth index, populated with companies whose earnings are expected to flourish faster than the rest of the market, has increased only 5.2 percent.”

NEW YORK FED: CONSUMERS’ INFLATION EXPECTATIONS HIGHEST SINCE 2013 — Reuters’ Jonnelle Marte: “U.S. consumers’ expectations for how much inflation will change over the next year and the coming three years rose last month to the highest levels since 2013, according to a survey released on Monday by the New York Federal Reserve. Year-ahead inflation expectations increased for the 10th straight month to a median of 5.2 percent in August, according to the monthly survey of consumer expectations. Inflation expectations over the next three years increased to a median of 4.0 percent. Both metrics are at the highest they’ve ever been for the survey, which was launched in 2013.”





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