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Balance of Power
Weekly Washington Policy Pulse: Partial Government Shutdown, Trump Fed Pick (Feb. 2, 2026)
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Bloomberg Audio Studios Podcasts Radio News this is.
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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 afternoon everybody. My name is Nathan Dean. I'm a Senior Policy Analyst with Bloomberg Intelligence. We want to say thank you for joining the Washington the BI Washington Policy Pulse and always just want to say thank you to those of you who are listening via the Balance of Power podcast. We always welcome your inclusion here. This is going to be a short call this week. One because you know we are in a partial government shutdown and two, because I was on vacation for the bulk of last week. But first let's take talk about the shutdown. So obviously we are in a partial shutdown at the moment. A lot of DC Workers aren't coming into the office today. Traffic was actually fairly light. But where do we go from here? Well, the Senate, as you may know, has passed a bill that would fund five out of the six remaining appropriation bills, the last one being the dhs, which would then get a two week continuing resolution. Now this bill has been passed by the Senate, was passed via bipartisan they received over 70 votes. It's now gone to the House. There's going to be a little bit of political hiccups here, but I think ultimately the shutdown is going to end this week, most likely tomorrow, if not Wednesday this afternoon. This is recording this Monday at 10:03am Monday, February 2nd. But around 4:00pm Eastern you're anticipated to we're anticipated that the House Rules Committee is going to look at this that is going to be challenging for the Republicans because as you remember, this is a Senate deal that was passed with negotiations with the White House. House wasn't really involved here and the House doesn't like getting jammed up. And so there are going to be House Republicans here saying, look, if Democrats are going to be insisting on changes to this deal, then I want to have changes to this deal. For example, there is a bill out there that would require essentially everybody to show identification of their citizenship before voting. That's going to have to go through the House Rules Committee. That's going to have to go through just the Republican caucus. And Speaker Johnson essentially is going to have to try and keep his party in order. Any deviation from that extends the shutdown and actually extends this. The discord with this special election that occurred in Texas over the weekend. That. Or. Sorry, over the week. Yeah, over the weekend that essentially saw a Democrat. Sorry, I'm getting things mixed up here. There was a Senate state. Reese, let me. Okay, I'm just going to completely reset this with a special election that occurred that is going to be seen sworn in later today. The Republicans are going to have a one person operating majority. If everybody shows up to the House to vote. When you have one person, that is essentially going to be extremely difficult for Speaker Johnson to keep his party in line. And so going forward, you're going to see a lot of bills, a lot of pieces of legislation like this require Democratic votes. So that is where the challenge of this is coming, is that Speaker Johnson has to keep his party aligned and if not, he's going to have to get Democrats on board to come with. Now, the Democratic perspective essentially is this, is that they are not going to give the Republicans any inch or any ability to essentially saying here, we're going to help you on this. They're going to try and make the process as extremely painful as possible. So I think the House Rules Committee will actually work on it later today. It eventually will pass and potentially there will be a vote tomorrow. And I think that there will have to be. It's going to be a bipartisan vote where significant number of parties, members of both parties are voting against this bill. But just remember, a lot of this is over ICE funding. ICE funding was actually appropriated during the one big beautiful bill. $75 billion through fiscal year 2029 and DHS funding, not only does it include ICE, but also things like FEMA, Coast Guard and the TSA. And so when we're trying to predict how the future will be in terms of cr, you know, this is an election year. So Congress is changing from a governing Congress to a campaigning Congress. And when that happens is you're going to have to take things into account of like, okay, what is the TSA response going to be? Well, Americans have shown they didn't like it when their air travel was disrupted during the first shutdown. So just again, keep that in mind. But I think the government shutdown is going to get resolved. Now I saw a question in the chat and this is where I was actually going to talk about. The question was what is your view on the warship confirmation process after Tillis's refusal? Is the base case here that Trump pulls the Powell case. Now, when it comes to Kevin, obviously President Trump decided to nominate him as the Fed Chair. I don't have any opinions whatsoever on his monetary policy. I highly recommend that you attend or contact Ira Jersey, our BI rates. Sorry, our BI chief rate strategist. His dashboard is BI rates. He has a call that he does with our Bloomberg Economics colleagues Every Monday at 8:30am one of the reason why this call is a little bit later they talked about Kevin Warsh's nomination. I'm going to put into our chat at the moment a link for those of you who need it. Highly recommend you go back and highly recommend you go back and. Oh, I already even put it into the chat. Perfect. So. So that's what you should do when it comes to listening about what Kevin Warshire's views on monetary policy. Now, when it comes to his confirmat policy, it's this. Senator Thom Tillis from North Carolina who is a Republican, sits on the Senate Banking Committee. Now, the Senate Banking committee has run 13 to 11, 13 Republicans to 1 to 11 Democrats. Senator Tillis has said that he's going to effectively block Tillis or Worsh's nomination until the issue with Jerome Powell and this DOJ investigation is quote, unquote resolved. And he even, you know, said on Twitter last week that he's doubling down on that so he can effectively block the nomination. There is a way to discharge the nomination. And to this is just real quickly for the chat, this is for the webinar chat. So if you're listening on Zoom, just go to the webinar chat and it should be in there. Otherwise, just contact him. Contact me or ira afterwards@ndean10bloomberg.net and we'll get a copy of that to you. So Senator Tillis can effectively block this nomination from going forward. Now, the way you get around this is you discharge the nomination, you bypass the committee that currently under the Senate rules takes 60 votes. You're not going to get 60 votes. You would need Democrats to go on board with that. Now to change the rules of the Senate, you would need 50 votes. So, you know, theoretically you would have to change you have to try the discharge process, have it fail, then you have to change the actual Senate rules process. Get that 50 votes. And when Senator Tillis has already said he's a no, Senator Murkowski has said she's a no, you can see where I'm going with this. Most likely things, you know, Kevin Morris's nomination is going to be blocked. Now, a couple of things here. One is what's the definition of quote, unquote, resolved? You know, that's something to keep in mind. Also keep in mind is that, you know, while I, I could see President Trump, I don't want to get into whether or not President Trump will say pull the Powell case because then you're talking about the independence of the doj. And that's not something really what I focus on. I tell you to contact my colleague Elliot Stein on that. But what I'll say is, is that I wouldn't be surprised if you saw something over the next few months or maybe even few weeks that essentially says that Powell's case is sort of just disappearing. But again, I'm just talking high level here because, you know, this is an effective block. And Trump made a statement on Air Force One over the weekend. He said, well, maybe we'll just, you know, we'll wait around until Senator, Senator Tillis is no longer here. That's January of 2027, you know, because even though he's not running for reelection, he's still a member of Congress until January 2027. That's a long time from now. So I, I do anticipate something to be resolved and I don't anticipate Senator Tillis changing his mind. So great follow up question here. Once Tillis becomes comfortable with the Powell Cook process, how long would you estimate it takes to get through the confirmation process quickly? The Senate Banking Committee was led by Republican Senator Tim Scott of South Carolina. He can put something together fairly quickly. So if the Senate Banking Committee decides that they want to have a confirmation hearing, and look, they may have a confirmation hearing before Senator Tillis removes his block. Because I, the, I think, you know, I'd have to, I may be wrong here, Senate watchers may get me on this. But essentially I think what happens here is, is that I'm going to go with the fact that I think Tillis is blocking the vote from the floor. I don't think he can block the Senate Banking Committee confirmation hearing. But, you know, Senator Scott can have a confirmation hearing. They can go through the ram. It, you know, Tillis said, look, Kevin Warsh is A good pick. You know, I'm paraphrasing. He said it's a good pick. So you know, you are going to see questions in this hearing from the Democrats about independence of the Federal Reserve. But you're not going to see Republicans really bash Kevin Warsh on this. If it were to ever come up for a vote, you know, he most likely would get the votes. The issue is not there. So I think the confirmation hearing happens fairly quick. The vote can happen fairly quick after that. So all being said is that Kevin Warsh can happen really quick. But just remember it can't happen until after Jerome Powell's term ends. So you can get everything set up ready to go. But you know, obviously it has to happen when Powell not sent and if Warsh isn't confirmed, you know, Chairman Powell sticks around. Just remember is that, you know, and you should really talk to Ira about this because he's really our FOMC watcher here. But the FOMC is separate than the Federal Reserve Board. The FOMC has its own process of actually developing who is the chairman of the FOMC versus the chairman of the Federal Reserve. So again, you know, it's a different process here. And so even though Kevin Wash is being nominated for the Federal Reserve governors as the chair, it's a different process than the fomc. Now I'm not saying Kevin Wash isn't going to be the chair of the fomc. I'm just saying it's a different process. So. But there's a lot of questions here. And so what I would suggest is, is that if you want a deeper dive, contact me, contact Ira. Let's put together a call. We do this all the time for our clients. So just reach out. We can put together a call and we can actually explain this to you in great detail. So a couple other things happening today at 1 o' clock ish there is going to be a meeting at the White House, not with President Trump, with White House staff on this idea of cryptocurrency and stablecoin yield debate. There's going to be representatives from the banks here. There's going to be representatives from the cryptocurrency industry here as well. Last week we saw the Senate AG pass its markup of the their version of this Clarity act fairly. I would argue that it's not that controversial. The Democrats obviously were not happy because this was a Republican bill. This wasn't a bipartisan bill. There's still negotiations that are going to be taking place. But again, I've said this from the beginning that the Senate Ag Committee is not really where the hiccups for this bill is. It's on the Senate banking side. And that is what this crypto meeting is going to take place later today. So if we see statements coming out tonight, this afternoon saying that from the White House saying, look, there is some solution here or they're building a solution or so forth, in my mind, that actually bodes well for this bill's passage. Now, the solution going into this is that is, remember, the Genius act prevents yield from being paid by both bank issuers and non bank issuers. But non bank issuers can work with third party platforms like Coinbase to offer rewards. That's different. And so the idea going into this meeting was is that rather than paying rewards off of balances, you pay rewards off of activity like a airline credit card reward program. Again, we'll see what happens. But I'm still sticking with my 60% chance that a bill passes in the first half of this year because ultimately, yes, there are some folks in the crypto world that say no bill is better than a bad bill. But no bill A can be over any type of regulatory framework that the FCC and CFTC comes with can be overturned if a Democratic SEC or CFTC comes in charge in 2028. And B, this is your best shot of getting a bill because with polymarket and kalsheet giving an 80 to 85% chance of the House of Representatives turning into the Democrats next year, you're not going to have as much ability to get a bill through the House Financial Services Committee if Maxine Waters is your chairwoman. So again, that's why I'm at 60% right now. But again, I said that I'd give it to around Valentine's Day and see what the momentum is coming out and before we change those odds. And then finally, I want to just give you a heads up on two hearings later this week. On February 4, Treasury Treasury Secretary Scott Besant is going to be testifying to the House Financial Services Committee and then he'll be testifying to the Senate banking committee on February 5. The February 4 hearing is the one that you want to watch because when all 55 members want to get their, you know, five minutes with the Treasury Secretary, there's only so many questions you can ask. So they ask a much more broad set of questions than they do over the Senate Banking Committee. So the House one is the one you want to watch. So fortunate for us, it's the first one. Now the Treasury Secretary this is a hearing about the Financial Stability Oversight Council and the safety and soundness of the US Banking system. Normally the Treasury Secretaries don't get all into the weeds because look, we're talking about Fed rules or SEC rules or CFTC rules, but this is a little bit different because Treasury Secretary Scott Bessen has shown that he wants to have a little bit more hands on approach here when it comes to bank deregulation. So I'm going to be looking to see if he can give us any types of timing in terms of when the Fed and the OCC is going to be working on things like, you know, the Basel III endgame, the GSIS surcharge, lots of questions about regional bank relief. Is that going to come after the large bank relief? You know, right now our our view is, is that regional bank relief is going to be in the second half of this year as a proposal, not finalization. So I'm hoping the Treasury Secretary can actually give us some more insight on that. You may also hear some more stuff related to debanking. Just because you know, the House Republicans and the House Financial Services Committee love to talk about operation choke point 2.0, et cetera, you're going to hear some talk, you know, we'll see what happens. I'm going to be watching the hearing and then if you have any questions post hearing or if you just need a synopsis, just please reach out and let me know. With that I'm going to say thank you very much. I'm just going to do one more quick check to make sure that I answered everybody's questions. It looks like I have. Have a wonderful week. I hope you all are, you know, staying warm, thawing out, trying to get this snow creek that's here in D.C. off the roads. And if we can ever be of a service, please don't hesitate to reach out. Thanks.
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Our thanks to Nathan Dean, Bloomberg Intelligence Senior Policy Analyst, bringing you the installment of his weekly Washington Policy Pulse. For more from BI or to join this call live each week you can email nathan@ndeanloomberg.net that's n-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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Foreign.
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