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So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM
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this is your weekly Washington Policy Pulse on the Balance of Power podcast. I'm Joe Matthew. Every Monday, Bloomberg Intelligence, senior policy analyst and friend of the show, Nathan Dean shares his weekly call on upcoming catalysts in the nation's capital. Listen for the most recent and relevant policy research from our team at Bloomberg Intelligence. Now with today's installment, here's Nathan Dean.
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Good morning and good afternoon, everybody. My name is Nathan Dean. I'm senior policy analyst with Bloomberg Intelligence here in Washington, D.C. want to say thank you very much for joining the Washington Policy Polls. Also want to say thank you. Thanks to you who are joining us via the Balance of Power podcast. We always appreciate you listening. Today is July 13th. I had to look at it because I've been out on holiday last week and I didn't know which date it was. It is 10:02am Eastern Standard Time. I think it's standard time. I can never tell if it's standard time or daylight time, but it's east coast time. So let's talk about what the fallout of Senator Lindsey Graham's death, the unexpected passing over the weekend. Obviously, you know, this changes a lot of things when it comes to the Senate. Senator Graham was an influential leader, especially the, you know, the Senate Budget Committee, for example. And really he was the one that had to deal with reconciliation. And that's where I want to start with is, you know, reconciliation is something that you, President Trump has been pushing for. Obviously, he's been pushing for an inclusion of the Save America Act. From the investment point of view, it really is the $350 billion worth of additional supplemental funding for the Department of Defense. There's also some farm aid in there, et cetera. But really what I have to say on reconciliation is that I don't think it's going to happen. We're giving it a pretty low chance, like 20 to 30% chance right now that reconciliation 3.0 can happen. And with Senator Graham's death, you obviously need a replacement at the Senate Budget Committee. But also you need a replacement for him in the Senate. You know, the Republicans have the Senate 53 to 47. Senator Graham is now longer, no longer with us. So that gives you down to 52. Senator McConnell is still being dealing with some health issues and unlikely to return to Washington, D.C. right now. So now that you've got 51 votes and when you have Susan Collins in Maine running fairly tightly against the whoever is going to be the Democratic challenger in the state of Maine, now you're down to 50 votes and we haven't even talked about other individuals that may have issues with appropriations or additional budget spend, etc. You can get where I'm going here is that things are going to be very difficult for to get those 50 votes for a reconciliation bill. So now don't be surprised if they try. Right now, House Republicans this week are going to be meeting, even though they're largely out of town, they're going to be meeting this week to actually try and come up with a plan of what the next spur of reconciliation would look like. So again, don't be surprised if you see the news headlines come out. But I just think it's going to happen. And for what it's worth, when it comes to Senator Graham's replacement, the Governor McMaster of South Carolina said he's going to name somebody fairly soon. And I just based off of the news reports that I was just reading this morning, it sounds like he's going to name a caretaker senator. And then you would have a primary, a special primary election on August 11 that would dictate who would be the next person to run for his seat because Senator Graham was up for reelection this cycle. Now you are going to see some folks from the House potentially say, look, I want, you know, obviously Representative Wilson, the infamous, you lie, you know, State of the Union against President Obama many, many years ago. You know, he's put his name out there forth but we are hearing that, you know, House leadership is telling essentially Governor McMaster to think twice before naming somebody from the House because that margin, that thin margin in the House of Representatives goes even tighter. And so, you know, that would be one of the reasons why maybe you don't somebody from the House being named as a senator right now. But if somebody wants to run for the Senate election from the House, then feel free go through the special primary. But I'm just telling you what I read in the news this morning. So no defense spending. And you know, as I get back to Washington, I was trying to look at the Senate calendar and I was trying to think, okay, what are things that could pass between now and the end of the year? And I'm not exactly sure I can come up with anything. And I'll talk about clarity in a second because I know some of you want to talk about clarity. But, you know, things like the federal gas tax, things like, you know, even the NDAA is running into trouble right now. Appropriations isn't anywhere close to where it should be to get done before September 30th. So you are going to need a government funding bill in September. You are going to have a kick in the can. And look, I've heard discussions about, you know, Republicans blaming Democrats and Democrats blaming Republicans over a potential government shutdown in September. I just don't see a shutdown happening. But, you know, you're going to get a continuing resolution in September. But I think that may be it. I'm trying to rack my brains and, you know, I'm not really seeing much else out there in terms of legislation that's actually going to go forth. Now, this past week, we saw the housing legislation become law. I'm just mentioning that in case you missed it, President Trump decided not to sign the bill. But as we've spoken on previous calls, if president decides not to veto or not to sign the bill, the bill becomes law automatically after 10 days. So the housing bill has become law. But let's talk about the Clarity act for a second. So here's where we are with the Clarity act. And this is the crypto market structure bill for those of you who are following. So I have been at a 60% chance of success. I went to a 70% chance of success. And I've always said that the 4th of July weekend was the weekend when we needed to see momentum. And look, I know the Senate's not here, but you needed to see momentum on legislative text. You know, Senator Lummis from Wyoming has said, you know, right before the Fourth of July holiday that the text should come out. And the latest is the text has not come out. They're still negotiating. And it's really two issues. One is forget the stablecoin issue. We've talked about that before. That, that, that seems to be resolved. It's the bank secrecy AML issues and its ethic ethics language. And there was an article that came out that said that the Trump family had made a lot of money based off of Trump coin and other type of crypto holdings, etc. And that really made it hard for Democrats to come back and say, I want to support this in fact, it gave a lot of the Democrats that they want to say, you know, that I want to see more changes to this bill. And for what it's worth, I think Senator Gallego out of Arizona is, you know, he even insinuated, it's like, look, you know, I don't think we're going to be able to do anything to prevent the Trump children from making money off of crypto. But again, if you're a Democrat and you're wishy washy about this, Sorry, wishy washy is not the appropriate term if you're on the fence about this. You know, that article really doesn't say, hey, let's jump forth. Now, the reason why I've always thought a crypto bill would pass is because from the crypto platform perspective, if you don't get a bill now, you're not going to get a bill under when the Democrats most likely will control the House of Representatives. And as a result, yes, you have clarity for the next two years. But if a Democrat wins in 2028, that clarity can actually dry out fairly quickly. And from the crypto platform perspective, they can. Look, we won against Gary Gensler. We won in the fifth Circuit, we'll win again. Yeah, but it's going to cost a lot of money. From the bank's perspective, they can say they don't want a bill, but if they don't get a bill, then for the next two years, firms like Coinbase and Robinhood and these crypto platforms, they're going to be operating under a very friendly SEC and a very friendly cftc. And the banks may not want to be in an environment when competitors in decentralized finance are really, really moving forward with a lot of innovation and stuff, with very little regulatory, I don't want to say little regulatory oversight because that's unfair to the regulators, but just in a more industry friendly regulatory environment. That's a better way of putting it. So that's why I thought the banks would always want to deal. And from the politician side, I think the politicians would want a deal because there most likely will be a vote. I think Senator Thune is going to have a vote no matter what, the week of July, maybe next week or the week after, because they're going to put everybody in the record. They're going to say, do you support this? Yes or no. And if you don't support it, then the crypto PAC money, which has not been shy about throwing money around, is going to go either after or to support individuals. And so I could see A lot of moderate Democrats wanting to actually want to support them crypto from the money perspective. Because look, money talks. So that's my way of saying why I always thought the bill would actually pass. Now do I think the bill is still going to pass? I'm going to update my note later this week. I'm going to get, I'm going to sleep on it one more night. So right now I'm at the 60% and I have to make the decision will I'm going to go down to 40% or not? I'm going to sleep on it one more night. But I wanted to lay out my case before you do that. And so please send me an IB later this week if you're interested and I'll be able to tell you but again, it looks like one of those situations where if I was wrong about this and the bill does not pass, please come into the Bureau. I will buy you as many Bloomberg coffees. Because that's my joke is that if this bill doesn't pass, I'll give you a Bloomberg coffee. But I wanted to lay out the scene of where we are in terms of clarity. Because look, if we get that vote in the end of July, right before August recess, and for what it's worth, I think this will be the last thing the Senate does before they go on August recess. If we get that vote and that vote does not pass, I don't see the way clarity can become law. And if the Democrats win in November, I think clarity is done as a bill probably until 2028, which is, you know, from the crypto platform, you can certainly say, look, then we've got clarity for at least two years and the SEC and the CFTC are doing a project crypto. You're just not going to have clarity after that. So that's what's going on with crypto. Real. Finally, last two things we want to talk about. Kevin Warsh is testifying up on Capitol Hill this week. He's going to be going to the Senate Banking Committee and the House Financial Services Committee. Same thing with Acting director cfpb. Acting CFPB Director Russ Vogt. On the Kevin Moore side, I actually think this is going to be more of a monetary policy hearing than a regulation hearing. Also probably will be a lot of times talking about President Trump's influence on the Fed. But on the regulatory side, you know, obviously, obviously we're going to have the Basel III endgame update, the G suit surcharge. You know, I'm guessing that he will just say deferring to Vice Chair Bowman on a lot of this stuff, I actually don't think a lot is going to come out from it. But real quickly in the Basel III endgame, we did have the comment period end. I went through the comments. The large speaking is that most of the banks were generally supportive. There are tweaks to the mortgage risk weights in particular that the banks are seeking. I think the Fed is actually going to be open to that. So if the Fed anything, and I don't think they're going to change much, but if the Fed changes anything, it's going to be the mortgage risk weighting sites. The other question that we're waiting to hear from Kevin Warsh, and I don't think we're going to get it, but I wanted to call that out here is there's been talk of a liquidity coverage ratio proposal coming out from the Fed and the OCC and the FDIC fairly soon. In fact, I've heard it could be as soon as July. I don't believe that. For what it's worth, I think this is going to be beginning of next year. But I wanted to put it on people's radars that there is talk around town of an LCR proposal coming out. So are we going to get a question on that in the hearing? Probably not. But again, something to just call out. And then on the CFPB side, honestly, the CFPB is really an interesting story from the standpoint that, like, I don't think you're going to see an update on rules. Obviously, you know, the President Trump has nominated Brian, I can't remember Brian's last name, the Capital One executive to be the next director of the cfpb. You know, we are waiting for the CFPB to conduct its open banking rule change. But, you know, largely from the CFPB standpoint, there's not really, really much out there that I think it's worthwhile. I'm going to watch the hearing, but again, if you have any questions on it, please just feel free to reach out and I'll tell you about it. But anyway, that's my update for today. There wasn't much to talk about. Oh, thank you. To the person IB meet Brian Johnson at Capital One. He's the next nominee for the CFPB director. But I want to say thank you very much for joining. We really appreciate it. Obviously, these calls are going to be fairly on the lighter side through the August recess. Don't be surprised that you may get a notification saying, hey, there's nothing going on. I don't want to waste 10 minutes of your time, but if not we'll definitely be back. I plan to still continue to do these calls but just wanted to give you a heads up. So anyway, thank you very much. Appreciate it and we will talk soon. Take care.
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Our thanks to Nathan Dean, Bloomberg Intelligence Senior Policy Analyst, bringing you the latest installment of his weekly Washington Policy Pulse. For more from BI or to join this call live each week, you can email nathan@ndeanloomburg.net that's n d e a n@bloomberg.net come back to the podcast later today for the latest edition of Balance of Power.
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