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Bloomberg Audio Studios Podcasts Radio News.
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This.
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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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My name is Nathan Dean. I'm a Senior Policy analyst with Bloomberg Intelligence here in the Washington, D.C. office. We just want to say thank you for joining the Washington Policy Pulse. Also thank you to those of you who are listening to us via the Balance of Power podcast. We really appreciate that. So today is October 20th. We're doing this at 10:02am the reason why I timestamped this is because there's a lot of things that are going on this week, but the one thing I want want to lead off with that's not going on is that is negotiations over the government shutdown. Unfortunately for a lot of the furloughed workers and contractors here in the Washington, D.C. area that are hoping that they can get back to work or at least start collecting their paychecks. Neither Democrats or Republicans are really in a mood at the moment where they think that they need to negotiate. Polling data continues to suggest that if you're looking at it from the Democratic perspective, that Republicans are getting a slight edge in terms of being blamed for the shutdown. Republicans are looking at the polling data and they're saying that we're pretty much in a good situation right now. We're sticking to our guns and we have the moral high ground. So I think what's going to happen right now is that there's two things that are going on from the pressure point. From the Democratic perspective, it's really when do these moderate Democrats begin to feel the pain to actually go forth and want to negotiate? And I'm not talking about Senator Chuck Schumer here. I'm talking about those bipartisan Ish. You know, Democrats like Senator Shaheen, you know, Senator Ossoff, maybe Senator Warner, who have constituents that are either impacted by this, maybe they start talking about their own solution. It's not going to happen this week despite the fact what Kevin Hassett said earlier this morning. He said that he could potentially see the government shutdown ending this week. I don't see that happening. But again, I think that if there is an off rat from the Democratic perspective, it comes with the idea of November 1st. November 1st has actually essentially two things and maybe even include October 29th, because that's the next military paycheck. You know, October 29th you have a government funding, government employee paycheck. You also have the military paych. November 1st is when Obamacare subsidies go up. It's open enrollment for the next ACA period. You also have SNAP benefits. And in fact, the SNAP benefits, the SNAP administrator just even this morning said, look, the money's not going to be there for the 42 million Americans that take advantage of the program formerly known as food stamps. So I think if the Democrats were to say, at this point, okay, now we're in a situation where the Obamacare subsidies are gone, or at least they'll be gone for the next year. Now this is a problem for the Republicans to own. Maybe that's an off ramp for a handful of Democrats to come on board. Because remember, at this point, you just need five. From the Republican perspective, I think the House Republicans and the Senate Republicans are essentially just waiting back to see what the White House wants to do. And I don't think the White House is in any mood at the moment that they think they need to negotiate. So again, here we are October 20th, and I don't think the government's going to the shutdown is going to end it anytime soon. For what it's worth, on the poly market, on the betting markets, there's a significant about 36% of the folks taking the bet think that the shutdown will end somewhere between October 23rd and October 26th. But the majority of the folks, over 50% think this will go into November. So again, we'll see what happens. I want to do a little bit of a reset or state of play on the crypto industry because it's been reported that Senator Gillibrand out of New York, a Democrat, is going to have a meeting on Wednesday with a host of crypto CEOs. And this comes over a lot of reporting over the last couple of weeks suggests that the Clarity act or the Responsible Financial Innovation Act These are the two. This is the House act and then the Senate bill, you know, the Senate House bill, the Senate bill, this comes as there's been reporting as some, you know, distrust and maybe some misalignment in terms of the goals over the Senate side between Democrats and Republicans right now. I would just say, look, negotiations are going to be hard because of the shutdown anyway. There's a lot of anxiety out there amongst the senators, but nothing that I don't think can get over over dealt with. I still think that there's a 70% chance that somet the first half of next year you're going to see a broad crypto structure bill pass, but we'll see what happens. In terms of this meeting with the Democrats on Wednesday, I think crypto, it's now become not so much more of an issue of will Congress actually go forth and create a bill, but it's more so of what are the protections in place for Congress to go forth in the bill and how does it impact the banking industry? Because I think talking to some bank lobbyists this week, there's a lot of thought out here that if this bill is too pro crypto and doesn't have similar protections and doesn't have similar BSA and AML protections and provisions in place, the banking sector may see that they're at a disadvantage. And we're getting a lot of this, especially in a stablecoin argument we've talked about in the past where the banks are trying to close this or at least expand the loophole of paying yield on stablecoins. There are certain crypto platforms out there, not issuers, but platforms that are offering rewards. And under the GENIUS act, well, you know, it's prohibited to pay interest or yield on issuers. But there's nothing out there that says these platforms can't pay rewards. And so now this argument has really been a bank industry versus a crypto industry fight. And generally speaking, when it happens, it's like two of your children fighting. You love them anyway, you just want them to go away so you can watch football. But ultimately I think it favors more of a status quo. So I think they have to come together and they have to figure out how to make this bill actually work for both industries. And so I think that's going to take time. We still have not heard anything in terms of the Senate AG portion of the Senate bill. This is the commodities portion. Remember, we're just working off of the Senate banking discussion draft. So I think that has to wait for the government shutdown. All that being said is that there's negotiations that are going on. There's not a ton of momentum, but I do think that first half of next year is still likely. Another thing I want to talk about is I just put in a note this morning on Senator, sorry, Chairman Paul Atkins over at the SEC in his efforts to make IPOs great again. You know, if you think about about the different agenda items over at the sec, crypto is really taking up most of the oxygen, market structure and regulation. NMS is doing some of this as well. But then you also have this idea of capital formation. Chair Atkins gave a speech a couple weeks ago, essentially said that he wants to make IPOs great again. So what does that actually look like? Well, for one, we've talked about expanding quarterly earnings or at least the idea of de emphasizing earnings from the first quarter and the third quarter. I think that plays a part of it. Going to see additional listing standards potentially to make it easier. You're going to see streamlined disclosures. You're going to see all these activities, I think over the next six to nine months from the SEC to try and make it easier for companies to go public. I've looked at all the scenarios that we've played out and what my note essentially says is that I don't think you're going to see a massive increase in volume in terms of going IPOs, but I think you're going to see little bit less regulatory burdens for smaller companies to go to IPOs. And I also say this in that see any of the actions that are out there in terms of the SEC really harming or influencing. Influencing is a better way of phrasing it, influencing the private credit market. Because the SEC right now is sort of saying, look, if private credit wants to go forth, go forth. But we also want to make sure that IPOs are being made great again. And I don't think the SEC is in a position where they're going to pick a winner or a loser here. They're just doing things to actually essentially make sure that both paths are a little bit forward. So if you want a copy of that note, please feel free. I'll send that on. Talk about tariffs for a minute. You know, we had several meetings last week here in Washington due to IMF week, and I will say that the number one question we got was tariffs. In fact, we got zero questions on the government shutdown, which I don't think was very surprising just because there was a lot of non US individuals that we met with. But you know, couple Things to keep in mind when it comes to tariffs. One President Trump right now, his feuding with Colombia. He made some statements over the week linking Colombia to drug trafficking. We're anticipating a new Colombia tariff to come out tomorrow. That's what President Trump said just this morning, is that that new tariff on Colombia is going to come tomorrow. You are going to see some movement in the Senate about this idea of a resolution overturning President Trump's tariffs related to Canada and to Brazil. Senator Tim Kaine of Virginia has a resolution out there. Sounds like there may be a vote in the works when it comes to a resolution. Just keep in mind it's a majority vote. There's no filibuster here. So you need a majority vote in the Senate, majority vote in the House. Question is, even if you get it past the Senate, will you get it past the House and would the president even sign it? Of course President Trump wouldn't sign it. So you would need a veto proof majority. I don't think it goes there. And so ultimately I think this is just headlines. But I think the big question when it comes to the tariff piece, and this is where we don't have anything for you this week, but as we get into the next couple of weeks, it really is what happens with China towards the end of the month, President Trump is meeting with Chinese President Xi Jinping potentially in South Korea when they go to a summit in South Korea. My colleague Adam Farrer from Bloomberg Economics is actually just flown out to the region to start covering that. If you want, you can always find him on the terminal at his bio. But you know, this is one of those things where if you're exposed to the ag sector, you know, will China make a commitment to soybeans? If you're exposed to essentially the retail sector, are you going to see 100% tariff on 100% additional tariff on goods related to rare earth minerals? You know, President Trump even made a statement on Friday saying, Look, long term, 100% tariffs isn't viable. But you could see a shock and awe strategy. You know, we're not really trying to model this out at the moment just because November 1st, even though it's only 10 days away, is still 10 days away and so 11 days away. So stay tuned. But if you need any assistance on that next week, we're going to be looking at that in particular. And the last thing I want to highlight is, you know, while the government is still shut down, it doesn't mean that we don't have hearings and we don't have votes and we actually have two hearings at the Senate Banking Committee that I think are worthwhile. I went through all the other Senate hearings and these are the only two that I think are really worthwhile. The first is on is tomorrow on Tuesday. This is an industry hearing. What I mean is the panelists are coming from industry and academia and think tanks and trade associations talking about housing. You know, obviously there's been a lot of social media posts from President Trump on trying to make housing more affordable and to actually push forth new home building across the United States. So essentially tomorrow's hearing at the Senate Banking Committee is going to be more idea generation rather than anything else. The more important hearing comes on Thursday. This is at the Senate Banking Committee where we're going to hear from the prudential banking regulators. So it's the Federal Reserve, the fdic, the Office of Comptroller, the Currency and the National Credit Union Administration. Apologies to the ncua but they don't get many questions here. We're going to concentrate on the banking prudential regulators and the question here is what are we going to see in terms of the future of bank regulation? When is the Basel III endgame going to come out? Is there going to be another stress test proposal that they had promised by September 30 which has not come out? Are you going to see a move to method one amongst the G Sib surcharge like the general feeling is around town is so we hopefully will get some questions or some answers on that. I think most of the answers are going to be very high level. They're not going to give any specifics but in terms of general timing I'm looking to see if they still think that they can get stuff out by the end of this year because to me that suggests that these rules and these proposals are actually very close to being done. If they start using language like well start beginning of next year then I think you're going to see the regulators potentially they may not be as far as long as they've once said. So with that I'm going to stop there. I'm going to say thank you very much for attending. We really appreciate it. If you do have any questions, feel free to send me a message on the Bloomberg terminal. Reach me offline. I'd love to talk with you more about this stuff but again we really much thank you for listening and wish you a great week.
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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@ndeanblumberg.net that's n d e a n@bloomberg.net and come back to the podcast later today for the latest edition of Balance of Power.
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