Senators Grill CFTC Boss on Sketchy Links to FTX’s Fallen Star

Senators
Elizabeth Warren and Chuck Grassley demand a full accounting of the
interactions between the Commodity Futures Trading Commission’s (CFTC) Chairman, Rostin
Behnam, and Sam Bankman-Fried (SBF), the convicted founder of the now-defunct
cryptocurrency exchange FTX.

Commentators wonder if this will allow the public to discover what might have happened between the regulator and SBF just before the exchange’s collapse.

In a letter
sent to Behnam on Monday, the senators expressed concern about the nature of
the relationship between CFTC’s Chair and Bankman-Fried in the months leading up to
FTX’s implosion in November 2022. The lawmakers are seeking records of all
meetings, phone calls, and correspondence between the two parties by 29 April.

“Safeguarding
the savings and retirements of Americans requires Congress and market
regulators like the CFTC to determine how this multi-billion-dollar crime was
allowed to happen,” Warren and Grassley wrote in
the letter
.

Behnam
previously testified before the Senate Agriculture Committee that he and his
team met with Bankman-Fried and other FTX executives roughly 10 times in the 14
months before the exchange’s bankruptcy. He also disclosed exchanging “a
number of messages” with the CEO.

The
senators’ request comes on the heels of Bankman-Fried’s sentencing last month
to 25 years in prison
for orchestrating massive fraud that led to the loss of
billions in customer funds. Last week, he appealed his conviction.

Despite the
severity of the punishment, Warren and Grassley emphasized that victims
“will never be made whole financially.”

“Mr.
Bankman-Fried was sentenced last month to 25 years in prison for stealing $8
billion dollars from users of the cryptocurrency exchange FTX. This punishment,
while appropriate, provided cold comfort for his victims,” the senators added.

Warren Is Active in the
Crypto Field

The letter
marks the latest in a series of inquiries spearheaded by Senator Warren in the
wake of FTX’s collapse. In November 2022, she and Senator Sheldon Whitehouse urged the Department of Justice to hold Bankman-Fried and complicit
executives personally accountable for wrongdoing.

Warren also
sent letters to Silvergate Bank and to Bankman-Fried himself, seeking answers
about their roles in the misappropriation of customer funds.

Senator
Warren’s position on cryptocurrencies has been well-known and consistent for
years. In 2021, she described digital assets as “highly opaque and
volatile
,” and in 2023, she made headlines with her proposal for the
Digital Asset Anti-Money Laundering Act
.

Finance
Magnates
contacted
the CFTC press office for comment on the matter, but the Commission did not respond at the time of publication.

Senators
Elizabeth Warren and Chuck Grassley demand a full accounting of the
interactions between the Commodity Futures Trading Commission’s (CFTC) Chairman, Rostin
Behnam, and Sam Bankman-Fried (SBF), the convicted founder of the now-defunct
cryptocurrency exchange FTX.

Commentators wonder if this will allow the public to discover what might have happened between the regulator and SBF just before the exchange’s collapse.

In a letter
sent to Behnam on Monday, the senators expressed concern about the nature of
the relationship between CFTC’s Chair and Bankman-Fried in the months leading up to
FTX’s implosion in November 2022. The lawmakers are seeking records of all
meetings, phone calls, and correspondence between the two parties by 29 April.

“Safeguarding
the savings and retirements of Americans requires Congress and market
regulators like the CFTC to determine how this multi-billion-dollar crime was
allowed to happen,” Warren and Grassley wrote in
the letter
.

Behnam
previously testified before the Senate Agriculture Committee that he and his
team met with Bankman-Fried and other FTX executives roughly 10 times in the 14
months before the exchange’s bankruptcy. He also disclosed exchanging “a
number of messages” with the CEO.

The
senators’ request comes on the heels of Bankman-Fried’s sentencing last month
to 25 years in prison
for orchestrating massive fraud that led to the loss of
billions in customer funds. Last week, he appealed his conviction.

Despite the
severity of the punishment, Warren and Grassley emphasized that victims
“will never be made whole financially.”

“Mr.
Bankman-Fried was sentenced last month to 25 years in prison for stealing $8
billion dollars from users of the cryptocurrency exchange FTX. This punishment,
while appropriate, provided cold comfort for his victims,” the senators added.

Warren Is Active in the
Crypto Field

The letter
marks the latest in a series of inquiries spearheaded by Senator Warren in the
wake of FTX’s collapse. In November 2022, she and Senator Sheldon Whitehouse urged the Department of Justice to hold Bankman-Fried and complicit
executives personally accountable for wrongdoing.

Warren also
sent letters to Silvergate Bank and to Bankman-Fried himself, seeking answers
about their roles in the misappropriation of customer funds.

Senator
Warren’s position on cryptocurrencies has been well-known and consistent for
years. In 2021, she described digital assets as “highly opaque and
volatile
,” and in 2023, she made headlines with her proposal for the
Digital Asset Anti-Money Laundering Act
.

Finance
Magnates
contacted
the CFTC press office for comment on the matter, but the Commission did not respond at the time of publication.



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#Senators #Grill #CFTC #Boss #Sketchy #Links #FTXs #Fallen #Star

Powell reinforces position that the Fed is not ready to start cutting interest rates

Federal Reserve Chair Jerome Powell on Wednesday reiterated that he expects interest rates to start coming down this year, but is not ready yet to say when.

In prepared remarks for congressionally mandated appearances on Capitol Hill Wednesday and Thursday, Powell said policymakers remain attentive to the risks that inflation poses and don’t want to ease up too quickly.

“In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks,” he said. “The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Those remarks were taken verbatim from the Federal Open Market Committee’s statement following its most recent meeting, which concluded Jan. 31.

During the question-and-answer session with House Financial Services Committee members, Powell said he needs “see a little bit more data” before moving on rates.

“We think because of the strength in the economy and the strength in the labor market and the progress we’ve made, we can approach that step carefully and thoughtfully and with greater confidence,” he said. “When we reach that confidence, the expectation is we will do so sometime this year. We can then begin dialing back that restriction on our policy.”

Stocks posted gains as Powell spoke, with the Dow Jones Industrial Average up more than 250 points heading into midday. Treasurys yields mostly moved lower as the benchmark 10-year note was off about 0.3 percentage point to 4.11%.

Rates likely at peak

In total, the speech broke no new ground on monetary policy or the Fed’s economic outlook. However, the comments indicated that officials remain concerned about not losing the progress made against inflation and will make decisions based on incoming data rather than a preset course.

“We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said in the comments. “But the economic outlook is uncertain, and ongoing progress toward our 2 percent inflation objective is not assured.”

He noted again that lowering rates too quickly risks losing the battle against inflation and likely having to raise rates further, while waiting too long poses danger to economic growth.

Markets had been widely expecting the Fed to ease up aggressively following 11 interest rate hikes totaling 5.25 percentage points that spanned March 2022 to July 2023.

In recent weeks, though, those expectations have changed following multiple cautionary statements from Fed officials. The January meeting helped cement the Fed’s cautious approach, with the statement explicitly saying rate cuts aren’t coming yet despite the market’s outlook.

As things stand, futures market pricing points to the first cut coming in June, part of four reductions this year totaling a full percentage point. That’s slightly more aggressive than the Fed’s outlook in December for three cuts.

Inflation easing

Despite the resistance to move forward on cuts, Powell noted the movement the Fed has made toward its goal of 2% inflation without tipping over the labor market and broader economy.

“The economy has made considerable progress toward these objectives over the past year,” Powell said. He noted that inflation has “eased substantially” as “the risks to achieving our employment and inflation goals have been moving into better balance.”

Inflation as judged by the Fed’s preferred gauge is currently running at a 2.4% annual rate — 2.8% when stripping out food and energy in the core reading that the Fed prefers to focus on. The numbers reflect “a notable slowing from 2022 that was widespread across both goods and services prices.”

“Longer-term inflation expectations appear to have remained well anchored, as reflected by a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets,” he added.

Powell is likely to face a variety of questions during his two-day visit to Capitol Hill, which started with an appearance Wednesday before the House Financial Services Committee and concludes Thursday before the Senate Banking Committee.

Questioning largely centered around Powell’s views on inflation and rates.

Republicans on the committee also grilled Powell on the so-called Basel III Endgame revisions to bank capital requirements. Powell said he is part of a group on the Board of Governors that has “real concerns, very specific concerns” about the proposals and said the withdrawal of the plan “is a live option.” Some of the earlier market gains Wednesday faded following reports that New York Community Bank is looking to raise equity capital, raising fresh concerns about the state of midsize U.S. banks.

Though the Fed tries to stay out of politics, the presidential election year poses particular challenges.

Former President Donald Trump, the likely Republican nominee, was a fierce critic of Powell and his colleagues while in office. Some congressional Democrats, led by Sen. Elizabeth Warren of Massachusetts, have called on the Fed to reduce rates as pressure builds on lower-income families to make ends meet.

Rep. Ayanna Pressley, D-Mass., joined the Democrats in calling for lower rates. During his term, Democrats frequently criticized Trump for trying to cajole the Fed into cutting.

“Housing inflation and housing affordability [is] the No. 1 issue I’m hearing about from my constituents,” Pressley said. “Families in my district and throughout this country need relief now. I truly hope the Fed will listen to them and cut interest rates.”

Correction: Ayanna Pressley is a Democratic representative from Massachusetts. An earlier version misidentified the state.

Don’t miss these stories from CNBC PRO:

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The American banking landscape is on the cusp of a seismic shift. Expect more pain to come

The whirlwind weekend in late April that saw the country’s biggest bank take over its most troubled regional lender marked the end of one wave of problems — and the start of another.

After emerging with the winning bid for First Republic, a lender to rich coastal families that had $229 billion in assets, JPMorgan Chase CEO Jamie Dimon delivered the soothing words craved by investors after weeks of stomach-churning volatility: “This part of the crisis is over.”

But even as the dust settles from a string of government seizures of failed midsized banks, the forces that sparked the regional banking crisis in March are still at play.

Rising interest rates will deepen losses on securities held by banks and motivate savers to pull cash from accounts, squeezing the main way these companies make money. Losses on commercial real estate and other loans have just begun to register for banks, further shrinking their bottom lines. Regulators will turn their sights on midsized institutions after the collapse of Silicon Valley Bank exposed supervisory lapses.  

What is coming will likely be the most significant shift in the American banking landscape since the 2008 financial crisis. Many of the country’s 4,672 lenders will be forced into the arms of stronger banks over the next few years, either by market forces or regulators, according to a dozen executives, advisors and investment bankers who spoke with CNBC.

“You’re going to have a massive wave of M&A among smaller banks because they need to get bigger,” said the co-president of a top six U.S. bank who declined to be identified speaking candidly about industry consolidation. “We’re the only country in the world that has this many banks.”

How’d we get here?

To understand the roots of the regional bank crisis, it helps to look back to the turmoil of 2008, caused by irresponsible lending that fueled a housing bubble whose collapse nearly toppled the global economy.

The aftermath of that earlier crisis brought scrutiny on the world’s biggest banks, which needed bailouts to avert disaster. As a result, it was ultimately institutions with $250 billion or more in assets that saw the most changes, including annual stress tests and stiffer rules governing how much loss-absorbing capital they had to keep on their balance sheets.

Non-giant banks, meanwhile, were viewed as safer and skirted by with less federal oversight. In the years after 2008, regional and small banks often traded for a premium to their bigger peers, and banks that showed steady growth by catering to wealthy homeowners or startup investors, like First Republic and SVB, were rewarded with rising stock prices. But while they were less complex than the giant banks, they were not necessarily less risky.

The sudden collapse of SVB in March showed how quickly a bank could unravel, dispelling one of the core assumptions of the industry: the so-called stickiness of deposits. Low interest rates and bond-purchasing programs that defined the post-2008 years flooded banks with a cheap source of funding and lulled depositors into leaving cash parked at accounts that paid negligible rates.

“For at least 15 years, banks have been awash in deposits and with low rates, it cost them nothing,” said Brian Graham, a banking veteran and co-founder of advisory firm Klaros Group. “That’s clearly changed.”

‘Under stress’

After 10 straight rate hikes and with banks making headline news again this year, depositors have moved funds in search of higher yields or greater perceived safety. Now it’s the too-big-to-fail banks, with their implicit government backstop, that are seen as the safest places to park money. Big bank stocks have outperformed regionals. JPMorgan shares are up 7.6% this year, while the KBW Regional Banking Index is down more than 20%.

That illustrates one of the lessons of March’s tumult. Online tools have made moving money easier, and social media platforms have led to coordinated fears over lenders. Deposits that in the past were considered “sticky,” or unlikely to move, have suddenly become slippery. The industry’s funding is more expensive as a result, especially for smaller banks with a higher percentage of uninsured deposits. But even the megabanks have been forced to pay higher rates to retain deposits.

Some of those pressures will be visible as regional banks disclose second-quarter results this month. Banks including Zions and KeyCorp told investors last month that interest revenue was coming in lower than expected, and Deutsche Bank analyst Matt O’Connor warned that regional banks may begin slashing dividend payouts.

JPMorgan kicks off bank earnings Friday.

“The fundamental issue with the regional banking system is the underlying business model is under stress,” said incoming Lazard CEO Peter Orszag. “Some of these banks will survive by being the buyer rather than the target. We could see over time fewer, larger regionals.”

Walking wounded

Compounding the industry’s dilemma is the expectation that regulators will tighten oversight of banks, particularly those in the $100 billion to $250 billion asset range, which is where First Republic and SVB slotted.

“There’s going to be a lot more costs coming down the pipe that’s going to depress returns and pressure earnings,” said Chris Wolfe, a Fitch banking analyst who previously worked at the Federal Reserve Bank of New York.

“Higher fixed costs require greater scale, whether you’re in steel manufacturing or banking,” he said. “The incentives for banks to get bigger have just gone up materially.”

Half of the country’s banks will likely be swallowed by competitors in the next decade, said Wolfe.

While SVB and First Republic saw the greatest exodus of deposits in March, other banks were wounded in that chaotic period, according to a top investment banker who advises financial institutions. Most banks saw a drop in first-quarter deposits below about 10%, but those that lost more than that may be troubled, the banker said.

“If you happen to be one of the banks that lost 10% to 20% of deposits, you’ve got problems,” said the banker, who declined to be identified speaking about potential clients. “You’ve got to either go raise capital and bleed your balance sheet or you’ve got to sell yourself” to alleviate the pressure.

A third option is to simply wait until the bonds that are underwater eventually mature and roll off banks’ balance sheets – or until falling interest rates ease the losses.

But that could take years to play out, and it exposes banks to the risk that something else goes wrong, such as rising defaults on office loans. That could put some banks into a precarious position of not having enough capital.

‘False calm’

In the meantime, banks are already seeking to unload assets and businesses to boost capital, according to another veteran financials banker and former Goldman Sachs partner. They are weighing sales of payments, asset management and fintech operations, this banker said.

“A fair number of them are looking at their balance sheet and trying to figure out, `What do I have that I can sell and get an attractive price for?'” the banker said.

Banks are in a bind, however, because the market isn’t open for fresh sales of lenders’ stock, despite their depressed valuations, according to Lazard’s Orszag. Institutional investors are staying away because further rate increases could cause another leg down for the sector, he said.

Orszag referred to the last few weeks as a “false calm” that could be shattered when banks post second-quarter results. The industry still faces the risk that the negative feedback loop of falling stock prices and deposit runs could return, he said.

“All you need is one or two banks to say, ‘Deposits are down another 20%’ and all of a sudden, you will be back to similar scenarios,” Orszag said. “Pounding on equity prices, which then feeds into deposit flight, which then feeds back on the equity prices.”

Deals on the horizon

It will take perhaps a year or longer for mergers to ramp up, multiple bankers said. That’s because acquirers would absorb hits to their own capital when taking over competitors with underwater bonds. Executives are also looking for the “all clear” signal from regulators on consolidation after several deals have been scuttled in recent years.

While Treasury Secretary Janet Yellen has signaled an openness to bank mergers, recent remarks from the Justice Department indicate greater deal scrutiny on antitrust concerns, and influential lawmakers including Sen. Elizabeth Warren oppose more banking consolidation.

When the logjam does break, deals will likely cluster in several brackets as banks seek to optimize their size in the new regime.

Banks that once benefited from being below $250 billion in assets may find those advantages gone, leading to more deals among midsized lenders. Other deals will create bulked-up entities below the $100 billion and $10 billion asset levels, which are likely regulatory thresholds, according to Klaros co-founder Graham.

Bigger banks have more resources to adhere to coming regulations and consumers’ technology demands, advantages that have helped financial giants including JPMorgan steadily grow earnings despite higher capital requirements. Still, the process isn’t likely to be a comfortable one for sellers.

But distress for one bank means opportunity for another. Amalgamated Bank, a New York-based institution with $7.8 billion in assets that caters to unions and nonprofits, will consider acquisitions after its stock price recovers, according to CFO Jason Darby.

“Once our currency returns to a place where we feel it’s more appropriate, we’ll take a look at our ability to roll up,” Darby said. “I do think you’ll see more and more banks raising their hands and saying, `We’re looking for strategic partners’ as the future unfolds.”

Two financial experts discuss the Fed's next steps and the future of the U.S. banking system

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#American #banking #landscape #cusp #seismic #shift #Expect #pain

Here’s Joe Biden’s Student Debt Forgiveness Backup Plan … And His Other Debt Relief Plans, Too!

Joe Biden went on TV yesterday to say that he thinks the Supreme Court got it wrong when it nuked his plan for up to $20,000 in student loan forgiveness in a very dubious 6-3 ruling. He was obviously pretty cheesed about the decision, especially the fact that so may Republicans are just fine with doling out corporate loans, tax cuts, and subsidies but suddenly care very much about the national debt if a struggling family gets a little help from the government, to give them some breathing room. But it wasn’t just condemnation of the Court and the greedheads; Biden also highlighted what he intends to do now to help families with student debt.

Previously!

Supreme Court: You Owe Your Soul To The Student Debt Store

Joe Biden’s Here With A Few Choice Words About The Supreme Court’s Student Debt Decision

Here’s the video; we have so much to get to in this post that we’re only barely going to mention the assholish question at the end from Jacqui Heinrich — of Fox News, of course — who accused Biden of giving “false hope” to millions with his debt forgiveness plan, because presumably he should have known in advance the Supremes would act lawlessly. Kudos to Joe for not letting that foolishness stand, and for pointing out that “Republicans snatched away the hope” borrowers had been given by the plan. Also, that brief flash of anger in his eyes before his fairly measured reply. I like this guy.

youtu.be


Biden said that since the Court ruled — stupidly, we’ll add — that the loan forgiveness plan wasn’t authorized by the 2003 HEROES Act, his administration would pursue a new path to loan forgiveness, using the Education Department’s authority under the 1965 Higher Education Act (HEA), which established low-interest federal student loans in the first place. It was signed into law by Lyndon Johnson and has been reauthorized nine times, with revisions to update it, like the establishment of Pell grants in 1972.

The law authorizes the secretary of Education to “compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption,” and that clause was what Democrats like Elizabeth Warren and Chuck Schumer had in mind when they called on Biden to forgive student debt. Real policy nerds can dive into this 7-page analysis that Sen. Warren requested in 2020 from Harvard Law School’s Legal Service Center, which concludes that the HEA gives the secretary the power to grant “broad or categorical debt cancellation.”

Biden said he had already directed Education Secretary Miguel Cardona to start the process of using the HEA to bring back debt forgiveness; because of the lengthy federal rulemaking process, it will likely take months to reach a final rule, which of course would then be subject to challenge in the same Court that decided the HEROES Act’s authorization for the secretary to issue “waivers and modifications” of student loans in national emergencies wasn’t good enough. To be sure, the HEA language is more expansive, but we suspect that still might not be enough for the Roberts Court because it doesn’t also say “including cancelling up to $10,000 of debt for most borrowers, or $20,000 for those who received Pell grants. P.S.: Alito’s a tool.”

In addition to the second try at loan forgiveness, Biden also said that when the pandemic loan payback and interest pause ends on October 1 and loan payments are again due, the Education Department will allow a 12-month “ramp up” period through September 30, 2024. That’s to make sure that

financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

In addition, Biden called attention to the Education Department’s proposed revisions to the Income Driven Repayment (IDR) plan for student loans, which were announced in January and are still moving through the federal rulemaking process. Once that revision goes into effect, many borrowers in the most popular income-based repayment plan will qualify for far lower monthly payments, and many financially challenged borrowers will actually see their monthly payments go to zero. At the end of 20 to 25 years, depending on the type of loan, their remaining debt will be discharged. Folks who initially borrowed $12,000 or less will have their loans forgiven after 10 years of payments. More on that program here.

More! Here!

Did Joe Biden Just Fix Student Loan Debt Going Forward? Mayyyyybe!

I Got My Student Loans Ready For Joe Biden’s Big Income-Based Forgive-A-Thon And You Should Too

Also too, while Biden didn’t mention it in his remarks yesterday, keep in mind that, in another administrative action the Education Department announced last year, millions of borrowers in IDR plans of all sorts will qualify for a special, one-time adjustment that could dramatically reduce the number of payments they need to get their loans discharged. More on that here; I still plan on doing an update to that next week, too.

Finally, Biden also touted other measures his administration has taken, like increasing the size of Pell Grants; fixing processing roadblocks that had kept participants in the Public Service Loan Forgiveness program from actually getting their loans forgiven (Biden too-graciously didn’t name Trump’s Ed Secretary, Betsy DeVos, who made the problem worse); and cancelling more than $66 billion in student debt for those eligible public service workers, as well as for students who were defrauded by the grifty for-profit colleges that were DeVos’s very special darlings.

The more I look at how the Education Department is fixing what’s been wrong with student loans, the more impressed I am.

Now, if we could just tackle the many factors that have made college so expensive in the first place — first among them states’ abandonment of adequate tax support — we’d really have something to crow about.

[CBS News / NYT / Harvard Law School / Income Driven Repayment at Studentaid.gov / One-Time IDR Adjustment at Studentaid.gov]

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Huzzay! Debt Ceiling Raised, Catastrophe Averted, Republicans And Joe Manchin :(

The Senate passed the debt limit bill last night, raising the ceiling on how much the government can borrow to pay for spending it’s already done, and thereby avoiding a default on the federal debt and the attendant economic disaster that would follow. The bill now goes to President Joe Biden, who will sign it today and is scheduled to address the nation this evening at 7 p.m. Eastern. We expect the speech will say something along the lines of, “Now look, for cryin’ out loud, we need to pay our bills, I mean it! None of this was necessary, and that’s why I’m invoking the 14th Amendment, I’m not joking, to make the Supreme Court rule on whether the debt limit law is even constitutional. What a load of malarkey, goodnight.”

Following the Senate vote last night, Biden actually said in a statement, “No one gets everything they want in a negotiation, but make no mistake: This bipartisan agreement is a big win for our economy and the American people,” which was far nicer.


The bill passed in the Senate on a 63 to 36 vote, enough to avoid a filibuster. Five members of the Democratic caucus — John Fetterman (Pennsylvania), Ed Markey (Massachusetts), Jeff Merkley (Oregon), Elizabeth Warren (Massachusetts), and Bernie Sanders (I-Vermont) voted nay. (They presumably would have voted for it if necessary.) The majority of Republicans, 31 of ’em, also voted against the bill albeit for very different reasons. Only 17 Republican senators voted for the bill. I’ll note that it was a rare thing for me to see both of Idaho’s senators, Mike Crapo and the other one, voting with Elizabeth Warren and Bernie Sanders.

Before the vote, the Senate debated and rejected 11 amendments to the bill, including Virginia Democrat Tim Kaine’s amendment to yeet Joe Manchin’s pet methane pipeline project out of the bill (which Manchin had somehow sneaked into the House version) and into the sun. That was the only amendment offered by a Democrat; the others were Republican attempts to demand deeper cuts to domestic spending programs than in the House bill, to increase military spending even more than the House bill did, to Git Tougher on the border, and the like.

During floor debate, several Republicans fretted that without unlimited Pentagon spending, the Russians, Chinese, or Martians might try something sneaky, or that the US would be unable to support Ukraine’s defense against Russian invasion (as far as we can tell, no Republicans rose to shout, “That’s the point!”). Majority Leader Chuck Schumer (D-New York) said that the defense hawks needn’t worry, and that the debt ceiling bill

does nothing to limit the Senate’s ability to appropriate emergency supplemental funds to ensure our military capabilities are sufficient to deter China, Russia and our other adversaries, and respond to ongoing and growing national security threats, including Russia’s evil ongoing war of aggression against Ukraine.

Schumer added that the bill wouldn’t limit Congress’s ability to pass emergency funding for disaster relief or other needs, either, although he failed to note that Republicans would certainly whine about such expenditures unless their own states were affected.

All told, the Congressional Budget Office estimated the spending caps in the bill would reduce federal spending by $1.5 trillion over the next decade. Reuters rather cheekily adds, “That is below the $3 trillion in deficit reduction, mainly through new taxes, that Biden proposed,” and we say good on you, Reuters.

Also, in a coda that gives us at least a satisfied smirk, Fox News reports that in an interview, Joe Manchin (D?-Methane) complained that Republicans were getting too much credit for his personal boondoggle in the bill, the fast-tracking of the Mountain Valley Pipeline. The debt limit agreement forces an end to all regulatory and court challenges to Manchin’s pet project, which he has pushed since it was proposed in 2014, and by golly, Joe Manchin isn’t about to have any Republicans take the focus away from him and the ginormous favor he’s doing for the fossil-fuel industries (of which he’s not only the president, he’s also a client).

What’s the problem here? They’re afraid of who gets credit for it?” Manchin told Fox News Digital. “You know, what we said before — success has many fathers, but failure is an orphan. Well, I guarantee you, I was an orphan there for a long time because I was the only one on the front taking all the spears and everything, taking point on this.”

“But I’m happy to — everyone is happy — to share the success. I think everybody knows how this happened,” the West Virginia senator added. “I mean, my God, for the whole year I’ve had the living crap beat out of me, back and forth and everything.”

Now there’s a man who loves sharing the spotlight, as long as nobody else is right in the center. Manchin also whined that it really pissed him off something fierce that Republicans might get any credit (which he’s happy to share, but not) since it was his hard work and stubborn assholishness that won over or exhausted the White House in negotiations, and where were Republicans the other times he tried to ram through a bunch of fossil fuel projects, huh?

“It’s bulls— because they knew there was not going to be a problem on the Democratic Senate side or the Democrat president and his staff because they were the ones who supported it and got us 40 votes in the Senate when we voted,” Manchin said.

“It was the Republicans that killed us when we voted last time — only got seven votes. And the Republicans have always supported permitting. The only reason they wouldn’t support that is because of the Republicans being upset about the [Inflation Reduction Act]. That’s it. So it got caught in the politics.”

Still, you have to be impressed by the bipartisan outreach, calling Joe Biden a “Democrat president” just like the Fox News analyst he’s destined to become following his Senate career.

[CNBC / The Hill / Reuters / Fox News]

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Elizabeth Warren Said This Bank F*ckbungle Would Happen, Maybe Let’s Listen To Her This Time?

With the weekend’s failure of two big banks — Silicon Valley Bank and Signature Bank — America is once again vaguely aware that banking regulations have an actual effect on the economy, and, to a lesser degree, that money is imaginary anyway, just a collective agreement about numbers and who has piled them up in particular ways. So here’s Sen. Elizabeth Warren (D-Massachusetts) in the New York Times yesterday, to remind us that the failure of both banks probably could have been prevented if Donald Trump and congressional Republicans — with the aid of more Democrats than there should have been, which would have been “zero” — hadn’t rolled back significant parts of the Dodd-Frank banking regulations in 2018.

Remember how we had that huge financial crisis in 2008, and then Congress actually did something to prevent another one? Elizabeth Warren does!

In the aftermath of the 2008 financial crisis, Congress passed the Dodd-Frank Act to protect consumers and ensure that big banks could never again take down the economy and destroy millions of lives. Wall Street chief executives and their armies of lawyers and lobbyists hated this law. They spent millions trying to defeat it, and, when they lost, spent millions more trying to weaken it.

As Warren points out, one of the bankers insisting that Dodd-Frank was too strict was Greg Becker, CEO of Silicon Valley Bank, who along with others in the industry argued that great big banks like SVB weren’t actually big enough to need rigorous oversight by the Federal Reserve, which they said was holding them back from doing great things for America.

And hey, for a while there, SVB was flying pretty high, becoming a top funder of tech startups and racking up a 40 percent increase in profits in the last three years. And everything would have been great if it weren’t for the tiny problem that SVB plowed most of its capital into long-term federal bonds, which are a great investment as long as you don’t need access to those funds to cover a little panic among depositors when interest rates go up. And as Warren points out, mostly having tech companies as customers also made SVB vulnerable to any wobble in the tech sector. (Same for Signature, which served a lot of crypto companies.) Oopsie!


Warren explains,

Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks. They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure — and Signature’s collapse was close behind.

On Sunday night, regulators announced they would ensure that all deposits at S.V.B. and Signature would be repaid 100 cents on the dollar. Not just small businesses and nonprofits, but also billion-dollar companies, crypto investors and the very venture capital firms that triggered the bank run on S.V.B. in the first place — all in the name of preventing further contagion.

Hooray for the small businesses and others (as well as their employees) who might have been wiped out if the FDIC hadn’t stepped in to cover losses beyond that normal $250,000 limit on FDIC-insured accounts. But was it really necessary to make whole the very largest depositors? Warren notes that, yes, the idea is to cover all the depositors from both banks using bank funds from the pool the FDIC uses to insure against bank failures. But she adds that it’s hardly surprising that Americans “are skeptical of a system that holds millions of struggling student loan borrowers in limbo but steps in overnight to ensure that billion-dollar crypto firms won’t lose a dime in deposits.”

Well yes, that is certainly a thought-provoking comparison. Say, what was Wonkette saying about all this in 2018? It was so long ago, we barely remember (Wayne and Garth make go “doodley-oo, doodly-oo” while waving their fingers) …

Oh look! We were block-quoting a warning from Cassandra Elizabeth Warren:

“On the 10th anniversary of an enormous financial crash, Congress should not be passing laws to roll back regulations on Wall Street banks,” Sen. Elizabeth Warren (D-Mass.) said in an interview. “The bill permits about 25 of the 40 largest banks in America to escape heightened scrutiny and to be regulated as if they were tiny little community banks that could have no impact on the economy.”

The new regulations passed in 2018 allowed all but the very biggest banks — those with assets of over $250 billion — to avoid the liquidity requirements and stress tests (Dodd-Frank had set the “too big to fail” bar at $50 billion). Even before the 2018 bank bill passed, we noted, several banks subjected to Federal Reserve scrutiny “have already been found to have been taking supposedly prohibited risks with investors’ money.”

Well gosh, it turns out that if you leave big banks to their own devices, they get up to mischief in pursuit of profits. Who could have predicted such a thing?

In her op-ed, Warren calls for the 2018 deregulation to be reversed by “Congress, the White House and banking regulators,” at a minimum. Rep. Katie Porter (D-California), who’s running for the Senate in 2024, is already working on a bill to do that, and President Joe Biden has also called for the regulations to be tightened.

But beyond that, Warren adds,

Bank regulators must also take a careful look under the hood at our financial institutions to see where other dangers may be lurking. Elected officials, including the Senate Republicans who, just days before S.V.B.’s collapse, pressed Mr. Powell to stave off higher capital standards, must now demand stronger — not weaker — oversight.

In addition, she says regulators should make changes to how deposit insurance works,

so that both during this crisis and in the future, businesses that are trying to make payroll and otherwise conduct ordinary financial transactions are fully covered — while ensuring the cost of protecting outsized depositors is borne by those financial institutions that pose the greatest risk.

We could certainly get behind that. And finally, says Warren, for Crom’s sake the people responsible for these failures should be kept from being rewarded, not simply by refusing to bail out the investors, but also by clawing back the big bonuses paid to the executives who drove both banks into the ditch. Beyond that, she adds,

Where needed, Congress should empower regulators to recover pay and bonuses. Prosecutors and regulators should investigate whether any executives engaged in insider trading or broke other civil or criminal laws.

But wouldn’t that be socialism? If you punish banking executives for making the occasional irresponsible bet, aren’t you really just coming after the ordinary small businessperson who won’t have the chance to be trickled down upon? Besides, as Rep. Nancy Mace (R-South Carolina) tweeted yesterday in reply to Warren, is a bank failure any time to be talking about politics? There certainly wasn’t anything political about rolling back Dodd-Frank to please Wall Street in 2018, so why get all political now?

Best to offer the banks our thoughts, prayers, and bailout money and save the blame for … oh, how about the gays?

[NYT / NBC News]

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