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Weekly Washington Policy Pulse: Graham Death, Crypto Bill Pass Odds? · Balance of Power

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
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  Speaker 2: This is your weekly Washington policy Pulse, the Balance of
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  Speaker 2: Power podcast. I'm Joe Matthew. Every Monday, Bloomberg Intelligence, senior
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  Speaker 2: policy analyst and friend of the show, Nathan Dean shares
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  Speaker 2: his weekly call on upcoming catalysts in the nation's capital.
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  Speaker 2: Listen for the most recent and relevant policy research from
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  Speaker 2: our team at Bloomberg Intelligence. Now with today's installment, here's
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  Speaker 2: Nathan Dean.
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  Speaker 1: Good morning and good afternoon everybody. My name is Nathan Dean.
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  Speaker 1: I'm senior policy and host with Bloomberg Intelligence here in Washington, DC.
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  Speaker 1: You want to say thank you very much for joining
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  Speaker 1: the Washington Policy Pols. I also want to say thank you,
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  Speaker 1: thank thanks to you who are joining us via the
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  Speaker 1: Balance of Power podcast. We always appreciate you listening. Today
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  Speaker 1: is July thirteenth. I had to look at it because
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  Speaker 1: I've been out on holiday last week and I didn't
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  Speaker 1: know which date it was. It is tenh two a m.
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  Speaker 1: Eastern Standard time. I think it's standard time. I can
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  Speaker 1: never tell if it's standard time or day light. It's time,
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  Speaker 1: but it's East Coast time. So let's talk about the
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  Speaker 1: fallout of Senator Lindsay Graham's death, the unexpected passing over
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  Speaker 1: the weekend, obviously, you know, this changes a lot of
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  Speaker 1: things when it comes to the Senate. Senator Graham was
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  Speaker 1: an influential leader, especially the you know, the Senate Budget
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  Speaker 1: Committee for example, and really he was the one that
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  Speaker 1: had to deal with reconciliation. And that's where I want
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  Speaker 1: to start with, is, you know, reconciliation is something that
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  Speaker 1: you know, President Trump has been pushing for. Obviously, he's
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  Speaker 1: been pushing for an inclusion of the Save America Act.
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  Speaker 1: From the investment point of view, it really is the
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  Speaker 1: three hundred and fifty billion dollars worth of additional supplemental
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  Speaker 1: funding for the Department of Defense. There's also some farm
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  Speaker 1: mate in there, et cetera. But really, what I have
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  Speaker 1: to say on reconciliation is is that I don't think
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  Speaker 1: it's going to happen. We're giving it a pretty low chance,
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  Speaker 1: like twenty to thirty percent chance right now, that reconciliation
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  Speaker 1: three point zero can happen. And with Senator Graham's death,
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  Speaker 1: you obviously need a replacement at the Senate Budget Committee,
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  Speaker 1: but also you need a replacement for him in the Senate.
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  Speaker 1: You know, the Republicans have the Senate fifty three to
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  Speaker 1: forty seven. Senator Graham is now no longer with us,
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  Speaker 1: so that gives you down to fifty two. Senator McConnell
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  Speaker 1: is still being dealing with some health issues and unlikely
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  Speaker 1: to return to Washington, d C. Right now. So, now
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  Speaker 1: that you've got fifty one votes, and when you have
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  Speaker 1: Susan Collins in Maine running fairly tightly against the whoever
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  Speaker 1: is going to be the Democratic challenger in the state
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  Speaker 1: of Maine, now you're down to fifty votes and we
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  Speaker 1: haven't even talked about other individuals that may have issues
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  Speaker 1: with appropriations or additional budget spend, et cetera. You can
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  Speaker 1: get where I'm going here is that things are going
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  Speaker 1: to be very difficult for to get you know, those
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  Speaker 1: fifty votes for a reconciliation bills. So now don't be
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  Speaker 1: surprised if they try. Right now, House Republicans this week,
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  Speaker 1: are you going to be meeting even though they're largely
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  Speaker 1: out of town, They're going to be meeting this week
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  Speaker 1: to actually try and come up with a plan of
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  Speaker 1: what the next spur of reconciliation would look like. So again,
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  Speaker 1: you know, don't be surprised if you see the news
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  Speaker 1: headlines out, but I just don't think it's going to happen.
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  Speaker 1: And from what it's worth, when it comes to Senator
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  Speaker 1: Graham's replacement, the Governor McMaster of South Carolina said he's
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  Speaker 1: going to name somebody fairly soon. And I just based
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  Speaker 1: off of the news reports that I was just reading
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  Speaker 1: this morning, it sounds like he's going to name a
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  Speaker 1: caretaker senator and then you would have a primary, a
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  Speaker 1: special primary election on August eleventh that would dictate who
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  Speaker 1: would be the next person to run for his seat
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  Speaker 1: because Senator Graham was up for reelection this cycle. You
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  Speaker 1: now you are going to see some folks from the
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  Speaker 1: House potentially say, look, I want you know, obviously Representative Wilson,
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  Speaker 1: the infamous Uli you know, State of the Union against
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  Speaker 1: President Obama many many years ago. You know, he's put
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  Speaker 1: his name out there for but we are hearing that,
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  Speaker 1: you know, House leadership is telling essentially Governor McMaster to
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  Speaker 1: think twice before naming somebody from the House because that margin,
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  Speaker 1: that then margin and the House Representatives goes even tighter.
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  Speaker 1: And so you know that'd be one of the reasons
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  Speaker 1: why maybe you don't see somebody from the House being
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  Speaker 1: named as a Senator right now. But if somebody wants
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  Speaker 1: to run for the Senate election from the House, then
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  Speaker 1: feel free go through the special primary. But I'm just
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  Speaker 1: telling you what I read in the news this morning,
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  Speaker 1: So no defense spending. And you know, as I get
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  Speaker 1: back to Washington, I was trying to look at the
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  Speaker 1: Senate calendar and I was trying to think of, Okay,
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  Speaker 1: what are things that could pass between now and the
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  Speaker 1: end of the year. And I'm not exactly sure I
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  Speaker 1: can come up with anything. And I'll talk about clarity
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  Speaker 1: in a second, because I know some of you want
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  Speaker 1: to talk about clarity, but you know, things like the
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  Speaker 1: feral gas tax, things like you know, even the NBAA
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  Speaker 1: is running into trouble right now. Appropriations is in anywhere
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  Speaker 1: close to where it should be to get done before
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  Speaker 1: September thirtieth, So you are going to need a government
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  Speaker 1: funding bill in September. You are going to have a
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  Speaker 1: kick to the cannon. Look, I've heard discussions about, you know,
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  Speaker 1: Republicans blaming Democrats and Democrats blaming Republicans over a potential
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  Speaker 1: government shut down in September. I just don't see a
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  Speaker 1: shutdown happening, but you know you're going to get a
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  Speaker 1: continuing resolution September. But I think that may be it.
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  Speaker 1: I'm trying to rack my brains. Then, you know, I'm
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  Speaker 1: not really seeing much else out there in terms of
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  Speaker 1: legislation that's actually going to go forth. Now, this past
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  Speaker 1: week we saw the housing legislation become law. I'm just
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  Speaker 1: mentioning that in case you missed it, President Trump decided
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  Speaker 1: not to sign the bill. But as we've spoken on
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  Speaker 1: previous calls, if President decides not to veto or not
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  Speaker 1: to sign the bill, the bill becomes law automatically after
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  Speaker 1: ten days. So the Housing Bill has become law. But
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  Speaker 1: let's talk about the Clarity Act for a second. So
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  Speaker 1: here's where we are with the Clarity Act, and this
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  Speaker 1: is the Crypto Market Structure Bill for those of you
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  Speaker 1: who are following. So I have been at a sixty
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  Speaker 1: percent chance of success. I went to a seventy percent
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  Speaker 1: chance of success. And I've always said that the fourth
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  Speaker 1: of July weekend was the weekend when we needed to
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  Speaker 1: see momentum. And look, I know the Senate it's not here,
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  Speaker 1: but you needed to steam momentum on legislative text. You know,
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  Speaker 1: Senator Lamas from Wyoming has said, you know, right before
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  Speaker 1: the fourth of July holiday that the text should come out,
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  Speaker 1: and the latest days of the text has not come out.
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  Speaker 1: They're still negotiating, and it's really two issues. One is
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  Speaker 1: forget the stable coin issue. We've talked about that before,
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  Speaker 1: that that seems to be resolved. It's the bank secrecy
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  Speaker 1: AML issues and it's ethic ethics language. And there was
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  Speaker 1: an article that came out that said that the Trump
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  Speaker 1: family had made a lot of money based off of
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  Speaker 1: trump Coin and a other type of crypto holdings, et cetera.
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  Speaker 1: And that really made it hard for Democrats to come
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  Speaker 1: back and say I want to support this. In fact,
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  Speaker 1: it gave a lot of the Democrats that they want
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  Speaker 1: to say, you know that I want to see more
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  Speaker 1: changes to this bill and form what it's worth. I
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  Speaker 1: think Senator Galigo out of Arizona is you know, he
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  Speaker 1: even insinuated it's like, look, you know, I don't think
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  Speaker 1: we're going to be able to do anything to prevent
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  Speaker 1: the Trump children from making money off of crypto. But again,
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  Speaker 1: if you're a Democrat and you're wishy washy about this,
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  Speaker 1: sorry wishy washy is not the appropriate term. If you're
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  Speaker 1: on the fence about this, you know that article really
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  Speaker 1: doesn't say, hey, let's jump forth. Now. The reason why
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  Speaker 1: I've always thought a crypto bill would pass is because,
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  Speaker 1: from the crypto platform perspective, if you don't get a
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  Speaker 1: bill now, you're not going to get a bill under
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  Speaker 1: when the Democrats most likely will control the House of Representatives.
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  Speaker 1: And as a result, yes, you have clarity for the
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  Speaker 1: next two years, but if a Democrat wins in twenty
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  Speaker 1: twenty eight, that clarity can actually dry out fairly quickly.
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  Speaker 1: And from the crypto platform perspective, they can say, look,
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  Speaker 1: you know, we won against Gary Gensler, we won in
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  Speaker 1: the fifth circuit, will win again. Yeah, but it's going
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  Speaker 1: to cost you a lot of money. From the bank's perspective,
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  Speaker 1: they can say they don't want a bill. But if
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  Speaker 1: they don't get a bill, then for the next two years,
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  Speaker 1: firms like coinbase and robin Hood and these crypto platforms,
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  Speaker 1: they're going to be operating under a very friendly SEC
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  Speaker 1: and a very friendly c FDC. And the banks may
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  Speaker 1: not want to be in an environment when competitors in
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  Speaker 1: decentralized finance are really really moving forward with a lot
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  Speaker 1: of innovation and stuff with very little regulatory I don't
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  Speaker 1: want to say little regulatory oversight, because that's unfair to
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  Speaker 1: the regulators, but just in a more industry friendly regulatory environment,
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  Speaker 1: that's a better way of putting it. So that's why
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  Speaker 1: I thought the banks would always want to deal. And
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  Speaker 1: from the politician side, I think the politicians would want
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  Speaker 1: to deal because there most likely will be a vote. Said,
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  Speaker 1: I think Senator thun is going to have a vote
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  Speaker 1: no matter what, the week of July, maybe next week
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  Speaker 1: or the week after, because they're going to put everybody
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  Speaker 1: in the record. They're going to say do you support this,
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  Speaker 1: yes or no? And if you don't support it, then
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  Speaker 1: the crypto pack money, which has not been shy about
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  Speaker 1: throwing money around, is going to go either after or
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  Speaker 1: to support individuals. And so I could see a lot
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  Speaker 1: of moderate Democrats wanting to actually want to support them
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  Speaker 1: crypto from the money perspective, because look, money talks. So
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  Speaker 1: that's my way of saying why I always thought the
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  Speaker 1: bill would actually pass. Now do I think the bill
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  Speaker 1: is still going to pass? I'm going to update my
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  Speaker 1: note later this week. I'm gonna get I'm gonna sleep
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  Speaker 1: on it one more night. So right now I'm at
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  Speaker 1: the sixty percent and I have to make the decision,
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  Speaker 1: well I'm going to go down to forty percent or not.
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  Speaker 1: I'm going to sleep on it one more night. But
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  Speaker 1: I wanted to lay out my case before you do that,
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  Speaker 1: and so please send me an ib later this week
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  Speaker 1: if you're interested, and I'll be able to tell you.
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  Speaker 1: But again, it looks like one of those situations where
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  Speaker 1: if I was wrong about this and the bill does
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  Speaker 1: not pass, please come into the bureau. I will buy
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  Speaker 1: you as many Bloomberg coffees, because that's my joke, is
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  Speaker 1: that if this bill doesn't pass, I'll give you a
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  Speaker 1: Bloomberg coffee. But I wanted to lay out the scene
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  Speaker 1: and where we are in terms of Clarity, because look,
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  Speaker 1: if we get that vote in the end of July,
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  Speaker 1: right before August recess, and for what it's worth, I
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  Speaker 1: think this will be the last thing the Senate does
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  Speaker 1: before they go on August recess. If we get that
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  Speaker 1: vote and that vote does not pass, I don't see
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  Speaker 1: way Clarity can become law. And if the Democrats win
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  Speaker 1: in twenty in November, I think Clarity is done as
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  Speaker 1: a bill. Probably until twenty twenty eight, which you know
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  Speaker 1: from the crypto platform you can certainly say, look, then
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  Speaker 1: we've got clarity for at least two years in the
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  Speaker 1: SEC and the CFTC here doing a project crypto. You're
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  Speaker 1: just not gonna have clarity after that. So that's what's
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  Speaker 1: going on with crypto real. Finally, last two things we
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  Speaker 1: want to talk about. Kevin Walsh is testifying up on
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  Speaker 1: Capitol Hill this week. He's going to be going to
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  Speaker 1: the Centate Banking Committee and the House Financial Services Committee,
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  Speaker 1: same thing with Acting Director CFPB Acting CFPB Director Russ Vote.
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  Speaker 1: On the Kevin Wrsh side, I actually think this is
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  Speaker 1: going to be more of a monetary policy hearing than
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  Speaker 1: a regulation hearing. Also probably will be a lot of
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  Speaker 1: times of talking about President Trump's influence on the FED.
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  Speaker 1: But on the regulatory side, you know, obviously we're gonna
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  Speaker 1: have the Basle three and gave him update to the
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  Speaker 1: Jesus surcharge. You know, I'm guessing that he will just
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  Speaker 1: say deferring to Vice Chair Bowman on a lot of
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  Speaker 1: this stuff, and I actually don't think a lot is
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  Speaker 1: going to come out from it, but real quickly in
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  Speaker 1: the Basle three end game. We did have the comment
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  Speaker 1: period end I went through the comments. The large speaking
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  Speaker 1: is that most of the banks are generally supportive. There
• 11:03
  Speaker 1: are tweaks to the mortgage risk weights in particular that
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  Speaker 1: the banks are seeking. I think the FED is actually
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  Speaker 1: going to be open to that. So if the FED
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  Speaker 1: changes anything, and I don't think they're going to change much,
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  Speaker 1: but if the FED changes anything, it's going to be
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  Speaker 1: the mortgage risk waiting sites. The other question that we're
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  Speaker 1: waiting to hear from Kevin worsh and I don't think
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  Speaker 1: we're going to get it, but I want to call
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  Speaker 1: that out here is there's been talk of a liquidity
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  Speaker 1: coverage ratio proposal coming out from the FED and the
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  Speaker 1: SECC and the FDIC fairly soon. In facts, i've heard
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  Speaker 1: it could be as soon as July. I don't believe
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  Speaker 1: that for what it's worth, I think this is going
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  Speaker 1: to be beginning of next year. But I wanted to
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  Speaker 1: put it on people's radars that there is talk around
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  Speaker 1: town of an LCR proposal coming out. So are we
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  Speaker 1: going to get a question on that and hearing Probably not,
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  Speaker 1: but again something to just call out. And then on
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  Speaker 1: the CFPB side, honestly the CFPB is really an interesting
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  Speaker 1: story from the standpoint that, like, I don't think you're
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  Speaker 1: going to see an update on rules. Obviously, you know,
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  Speaker 1: the President Trump is nominated Brian I can't remember Brian's
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  Speaker 1: last name, the Capital One executive to be the next
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  Speaker 1: director of the CFPB. You know, we are waiting for
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  Speaker 1: the CPB to conduct its open banking rule change. But
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  Speaker 1: you know, largely from the CFPB standpoint, there's not really
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  Speaker 1: much out there that I think it's worthwhile. I'm going
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  Speaker 1: to watch the hearing. But again, if you have any
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  Speaker 1: questions on it, please just feel free to reach out
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  Speaker 1: and I'll tell you about it. But anyway, that's my
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  Speaker 1: update for today. There wasn't much to talk about. Oh
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  Speaker 1: thank you to the person I be meet, Brian Johnson
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  Speaker 1: at Capital One. He's the next nominee for the CFPB director.
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  Speaker 1: But I want to say thank you very much for
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  Speaker 1: a joining. We really appreciate it. Obviously, these calls are
• 12:41
  Speaker 1: going to be fairly on the lighter side through the
• 12:43
  Speaker 1: August recess. Don't be surprised that you may get a
• 12:47
  Speaker 1: notification saying, hey, there's nothing going on. I don't want
• 12:49
  Speaker 1: to waste ten minutes of your time, but if not,
• 12:51
  Speaker 1: we'll definitely be back. I plan to still continue due
• 12:55
  Speaker 1: to these calls, but just want to give you a
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  Speaker 1: heads up. So anyway, thank you very much, appreciate it,
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  Speaker 1: and we will talk. Take care.
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  Speaker 2: Our thanks to Nathan Deed, Bloomberg Intelligence Senior policy analyst,
• 13:07
  Speaker 2: bringing you the latest installment of his weekly Washington Policy Pulse.
• 13:11
  Speaker 2: For more from BI or to join this call live
• 13:14
  Speaker 2: each week, you can email Nathan at ndan at Bloomberg
• 13:17
  Speaker 2: dot net. That's n d e a n at Bloomberg
• 13:21
  Speaker 2: dot net and come back to the podcast later today
• 13:24
  Speaker 2: for the latest edition of Balance of Power.