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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 afternoon everybody. My name is Nathan Dean. I'm a Senior Policy Analyst with Bloomberg Intelligence here in Washington, DC. I want to say thank you very much for joining the Washington Policy Pulse this week. I also want to say thank you for those of you who are attending this via the Balance of Power podcast. We always appreciate your listening. Today is March 30th. We are recording this at 10:02am I've started timestamping this because we've discovered that a lot of things happen in the Washington space, so let's go ahead and jump right into it. Last Friday, I'm going to talk about the DHS shutdown first. So last Friday? Actually, I think it was Thursday. No, it was Friday. Around 2am The Senate came up with a bipartisan plan to essentially fund the Department of Homeland Security minus ICE and minus some custom Border Patrol portions. Now, as a reminder, I think many of you have heard me say this before. ICE was funded via the one big beautiful bill, $75 billion through fiscal year 2029. So this essentially just said we're going to fund everything but that. So the Senate passed it and most of them had a nap and then they got up Friday morning and they flew home and they went to the airport. The House, on the other hand, came in and said, look, we have this rule. It's this really interesting rule within the 119th Congress that under the rules you couldn't pass something under the suspension of the rules, meaning you couldn't really go quickly on this on a Thursday, Friday, Saturday or Sunday. This was something that was inserted into the rules language by The House Freedom Caucus. This was entirely just to prevent situations like this where the Senate jams the House up. And the House has said, look, you have to accept something or then go home. They couldn't get it past the Rules Committee. Speaker Johnson had many conversations with members of the House Freedom Caucus. They weren't not happy with this deal because as a reminder, this deal did not include President Trump's Save America act, the Voter ID citizenship rule. And so they essentially just couldn't get unanimous consent and they weren't going to be able to get it through within that time frame. It was essentially was going to have to wait till today. So what the House did instead is they passed a 60 day stopgap resolution funding everything in DHS and they sent it back to the Senate and then both sides went home. So now we're in a situation where the Senate is home, the House is home, and they both said, we've done our part, it's now up to the other side to agree. So we have a two week recess. Now, this can work one of two ways. One, the Senate has said that they have no plans to come back. The Republicans, the House Republicans are trying to blame the Democrats on this. Democrats are saying, look, it's not our issue anymore. This is Republican infighting. We've done our part. Here's this bipartisan plan we've agreed upon with the Senate. It's your problem now. So I don't see, look, it's, it's a holiday week in the States, obviously the markets are closed on Friday with Good Friday. We have Easter on Sunday. So you're not going to see either side come back this week. Now, there is some talk in town about bringing them next week, bringing them back next week, but if they come back next week, you're going to have a lot of members just sitting around essentially blaming other sides at the moment, without actually much work to do. I'm not exactly sure how this gets resolved because President Trump in the interim has said via executive order that he's going to direct the Department of Homeland Security to use unallocated funds from the one big beautiful bill to pay the TSA workers. And those paychecks will come out, quote, as soon, as early as today. So maybe you'll start to see the lines of the TSA begin to get a little bit better just because the TSA workers are getting paid. But if you're a member of FEMA or Coast Guard or another Department of Homeland Security group, you're still not getting paid. And unfortunately, you know, this is one of the situations where I think you're going to see this continue and continue, because President Trump essentially used the unilateral authority and said, look, Congress, you're not doing your job, therefore I'm going to pay. And the answer is, sue me. You don't like it, sue me. And the Democrats looked at this and they said, look, politically, we're not going to sue you on this. So the Democrats are saying, you know, we've already done our job, we've signed a bill with the Republicans in the Senate. We're not doing anything more. So this is one of those situations where I think it sort of resets the clock, if you will, and you have to start looking at pressure points here. And I'm not exactly sure how this gets resolved. So, you know, again, you may see the TSA lines get a little bit better at the airports, but again, if you're one of those other department heads or you're working from One of those 275,000 other employees, I don't know. I mean, it's going to be really interesting to see how it works out. But when Congress does get back, so whether it's next week or two weeks, and they do figure this out, there's a couple of things I want to talk about. One, the Senate Banking Committee is talking about having a markup for Kevin Morsh to be the next chairman of the Federal Reserve. That's going to be the week of April 13th. Now, sorry, not a markup, a confirmation hearing. Now, Senator Thom Tillis has said you can have a hearing. That's fine, more than happy to have a hearing, but I'm not going to advance his nomination. So even though they're going to have a hearing, this DOJ investigation into the Federal Reserve still continues. So I don't see Senator Attilus just changing his mind saying, you know what, you decided to have a hearing, so I'm going to go ahead and vote for him now. So you'll have the hearing. And then I think it just continues to fester and nothing really changes from that. You know, they're going to work on this cryptocurrency bill, they're going to work on this housing bill. You're going to see lots of discussion on an AI framework. For what it's worth, my colleague Matt Shettenholm doesn't have much odds of an AI framework bill passing this year. As a reminder, just last week the White House put out its framework on AI was actually only three pages and was mostly bullets. How that translates into Legislation is going to be very difficult to come by in an election year. So again, just keep that in mind. But you're going to see a lot of work, quote unquote, if you can't watch me and if you're not seeing me right now, I'm doing air quotes, you're going to see a lot of work. Meaning there are a lot of good discussions on this, but I don't think it translates into actual tangible policy anytime soon. And then you got the reconciliation bill. So where were we with the reconciliation bill? Remember, think of one big Beautiful Bill, Part 2. This is where Republicans are going to pass something and bypass the Democrats because they can avoid the filibuster. So it has to have a budgetary impact. Can't do anything like raise the national wage like the Democrats have tried, or you're not going to be able to do things like the Save America act, even though, you know they said that some people were saying that they were going to do this via reconciliation, Senate parliamentarian most likely will come in here and say you can't do it. In fact, Utah Senator Mike Lee has already gone on the record said you can't do this via reconciliation. But you are going to see the Republicans try to come together and cobble up this reconciliation bill. The most important thing for the people on this call is the Iranian supplemental defense funding package that's coming from the Pentagon to the White House and then to the Congress. And so Wayne Sanders and I took a look at it last week. We can send you this research if you want. If you look at $200 billion, think anti missile technology and counter drone technology. Wayne told me multiple times it's not anti drone, it's counter drone. And that favors three defense contractors. It's Lockheed Martin, RTX and Northrop Grumman. And so if this package comes out from $200 billion goes to the White House, they don't attach anything to it. You could probably attach $15 billion worth of farmers aid. But as long as this bill doesn't balloon up into a trillion dollar bill, then this one is fairly decent. I think this one could pass if it's solely about the troops and solely about defense. But as soon as you start attaching things like ICE funding or border security or Obamacare or tax changes, I mean, you are going to have to find budgetary offsets for this. But once this thing start ballooning up, then the odds of that bill going down actually dramatically decreases. So just put this in your hip pocket right now. They're just talking ideas Nobody has really specifics. You're going to see that come back when Congress comes back in one or two weeks, you're going to see more specifics being added to it. And so look for this to get really hardcore debate. Some of the Republicans around town are saying we should get this for President Trump so he can sign this on the 4th of July. Thank you. So think about that as in terms of your timeframe for this reconciliation bill. We'll be covering this quite a bit on that. So, but let's move a little bit away from Congress. Some other things you can see is just the SEC has two rulemakings that we think are coming out next month. This is a cryptocurrency. This is more of a codification of their guidance that they issued a little bit earlier this month on crypto. So you're going to see the SEC and I call this a nice to have rulemaking, not a required rulemaking. And what I mean by that is the SEC or the cftc, and this is the same thing you could see with the CFTC on prediction market markets. They could say, look, the law is already clear. We can just do this via guidance. That's great. But a future chairman could come in on the Democrats and say, well, you did this via guidance stroke of the pem. I've wiped it out with new guidance. But if you do a rulemaking, you're essentially putting another layer of security on that rule so that a future SEC chair or a future CFTC chair is, has to come in and do a formal rulemaking to undo that work. And that's where I think the SEC crypto work is going to be on. So look for that in April. The other thing is, and our colleague Bloomberg News, Lydia Boyd, sorry, Lydia Bayard, said this morning that the Office of Management and Budget has just gotten the proposal on SEC quarterly earnings. We talked about this a couple of weeks ago. This is where, you know, if you're not going to have quarterly earnings anymore, you're gonna, you're gonna go to semiannual. At least give the companies to go the option to go to semiannual. There's debates about whether investors will let big companies do it. Small companies may come out that are new, publicly traded may say, look, I'm just going semiannual. You know, we can have an entire call on that. The Office of Management of Budget got the proposal this weekend, which means it could be out as soon as probably call it mid April. So keep your eye on that. The Labor Department just a few moments ago released its proposal on implementing President Trump's executive order on 401 in alternative assets. Now this rule had been at OMB for since January. Now what President Trump did here is he said, look, I want the Labor Department and then as an sec, as a follow up to release a proposal making it easier for 401k and employer retirement sponsored programs to be able to invest in private equity funds, private credit and cryptocurrencies. Now I have not read the proposal because it just came out 15 minutes ago. It's 164 pages, it's a 60 day comment period. But a couple of things to keep in mind. A, are 401k plans can immediately start investing in Bitcoin? I don't know. I mean we, we have serious considerations about that. And if is a 401k plan going to invest in a private equity fund when there's questions about illiquid liquidity, et cetera. So Paul Goldberg and I have a note on what it was like predicting the proposal. So I can give you a copy of that. But give me a couple days to read the proposal and I'll probably have my thoughts out on that next week. There is a very interesting legal argument to this as well in terms of a liability shield that my colleague Elliot Stein is going to be looking at. But you know, let's stay connected on this. You know, I'm going to be reading the proposal probably tomorrow, so if you have questions on that, please let me know. We'll do that. A couple other things to keep in mind. Next month you'll probably see the Federal Reserve finalize its proposal on the stress testing. They may push this into May, but in the heels of the Basel III endgame adjacency surcharge proposal that came out last week. And I just my note, for what it's worth, the note just came out this morning. No real big surprise. You know, you're looking at around 4.8% reduction, about $18 billion in reduction in terms of CET1 for those big banks. These are the G sibs. So real, no surprise there. You know, we could talk about this, but I talked about the Basel III endgame quite a bit on my previous call. But you're most likely going to see the Fed, I think, really finalize those stress testing proposals. And then last Friday the EPA released its new renewable fuel standards for biofuels. I'm just going to come out and say I don't understand this one bit, but my colleague Brett Gibbs does and he and his clients have been, and I'M going to use this term with all love. They've been geeking out this about this all weekend. Brett just put out an amazing analysis. I say it's amazing because the one client that I actually talked to understood renewable fuel standards for biofuel, said it was amazing. So if you have any questions on the biofuel standards on that, let me put you into contact with Brett and he can do that. But the last thing I want to leave you with, I know it's going to be somewhat of a shorter call today, but the last thing, and I think I said last thing four times, but this is the actual last thing, is that on Friday, the President Trump is going to release his budget. So April 3rd, you're going to release the budget on Good Friday when Congress is in here. Thing to note about a budget is that budgets never get implemented because what happens is every White House sends over their budget. Congress says, thank you very much, we really appreciate it. They throw it over their backs, they completely ignore it and they do whatever they want to do anyway. But the one thing from this budget that you're going to want to look at is the defense funding or the national security spending, because it's been reported that the Department of Defense right now budget is $883 billion. It's been reported that President Trump wants to go up to 1.5 trillion, which is about a 70% increase with next year's budget. And so if you're trying to game out what's going on with Iran again, you know, call me if you have questions on Iran, because we have plenty of working groups I didn't talk about on this call, but we have lots of working groups and a lot of our analysts are spending the time over the weekend working on this stuff. But it'll be really interesting to see how President Trump goes forth in terms of this defense budget, because if you don't get it via appropriations, those Republicans would say President Trump wants a 70% increase in terms of the Department of Defense. If we know we're not going to be able to get this done by September 30th, let's actually see if we can insert some of this into the reconciliation bill as well. That's the one thing I'm going to be looking for. Everything else, even if there's things in here like financial user fees to fund the CFTC or whatever, they never get implemented. So I'll look at the budget over the weekend. I'll talk about it next week on Monday's Washington Policy Pulse. But that's it. I'm going to say thank you very much. We really appreciate it if you are traveling this week. Safe travels and we will talk soon and have a great week. Thank you.