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INTO THE UNKNOWN — Some consumer investor advocates are quietly raising questions about the prospect of a new Democratic nominee to the Securities and Exchange Commission who isn’t well known to policy experts.
Jaime Lizárraga, a long-time senior adviser to House Speaker Nancy Pelosi, is the leading contender to replace Democratic Commissioner Allison Lee, whose term will expire at the end of June. One former administration official tells MM that Lizárraga is the likely pick, and two people familiar with the process say an announcement could come in the next few weeks.
Lizárraga is of course known to many on Capitol Hill — he’s worked for Pelosi for 14 years, and spent eight years before that on the House Financial Services Committee. He did a short stint at the SEC in the 1990s, as deputy director of legislative affairs.
But his résumé doesn’t include the kind of deep policy experience on these issues as other recent commissioners, such as Lee, who spent 13 years as an SEC enforcement lawyer, or Elad Roisman, a former Republican chief counsel on the Senate Banking Committee.
Neither the White House nor Lizárraga responded to requests for comment.
In short, Lizárraga is a blank slate when it comes to his policy views. That could be an asset during the Senate confirmation process. But it has put some SEC watchers on edge as they try to suss out his positions on major issues looming over the agency’s agenda, such as climate change and cryptocurrency. A number have tried to set up meetings with him in recent days as word of his potential nomination started spreading. People who spoke with MM didn’t want to share their misgivings publicly about a potential nominee.
While Lizárraga may not be a securities expert, his selection would make sense for other reasons, said one former Senate aide and financial services lobbyist.
Hispanic members of Congress have been clamoring for the White House to name more Hispanic nominees to major administration posts, especially in financial services, the lobbyist said. (New Jersey Democrat Bob Menendez regularly gives Federal Reserve Chair Jerome Powell an earful about the lack of diversity at the Fed when Powell testifies in the Senate.)
And while Pelosi has made clear she is running for reelection, Democrats may be in the minority if Republicans take back the House in the November midterm elections, making now an opportune time for a senior staffer to make a career move, the lobbyist said.
“Jaime is a good guy,” the person said. “He’s kind of a natural fit too and would make a lot of sense.”
To be clear, investor advocates are unlikely to object to a nominee who has the endorsement of the speaker. They’d just like to get to know him better, and fast.
Speaking of the midterms — Our colleague, and your esteemed former MM host, Ben White is out with a new story on the ‘scarily painful’ scenario Democrats are facing at the ballot box this November.
The path to Election Day is littered with landmines, Ben writes: “President Joe Biden and Democratic lawmakers face the threat of spiraling inflation, driven by soaring food, energy and lodging costs. The Federal Reserve is embarking on an aggressive series of interest rate hikes — as many as seven this year alone — to curb rising prices and slow the economy. The war in Ukraine is further disturbing supply chains, roiling commodities markets and fueling uncertainty. Add in a new wave of Covid lockdowns in China that could bring more disruptions to trade and you’ve got a toxic mix.”
While the economy was once seen as an asset for Democrats heading into the midterms — a robust recovery powered by steady hiring, strong consumer demand and rapidly rising wages — it’s now seen as a potential drag, several White House allies told Ben.
“The mood is just shockingly bad inside and outside the White House,” said Steven Rattner, an investment banker and former Obama administration official who speaks to senior Biden aides.
White House officials deny any sense of panic — “So many economic indicators are not only extremely good but better than expected. And we are recovering so much faster than previous downturns,” said Heather Boushey, a member of Biden’s Council of Economic Advisers.
That’s not wrong. But surveys show voters are still frustrated, with three-quarters saying the economy is in bad shape, and 58 percent disapproving of Biden’s handling of the economy.
And it’s not clear voters will give him any credit if conditions improve. In any case, the window is quickly closing.
IT’S THURSDAY — Victoria Guida will be driving the bus tomorrow. Please be sure to send her (and Aubree) your tips, story ideas and any complaints: [email protected], [email protected], or find her on Twitter @vtg2 or @aubreeeweaver.
Senate Banking hearing on strengthening oversight of the appraisal process at 10 a.m. … Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) participate in a POLITICO panel on regulating digital assets at 5:20 p.m.
WALL STREET’S 2021 BONUSES HIT A NEW RECORD — From our Joseph Spector in Albany — “Wall Street bonuses soared to an average of $257,500 last year, a new record for New York City’s securit[ies] industry and 20 percent above last year’s high, a report Wednesday found.
“The report from state Comptroller Tom DiNapoli estimated that bonuses paid out on Wall Street were higher than the city’s projections and should help the city exceed its expected revenue from income taxes as the economy rebuilds amid the Covid-19 pandemic. Income taxes from Wall Street are critical to the coffers of the state and city. They account for 18 percent of the state’s entire tax collection.”
BIDEN ADMINISTRATION OUTLINES PLANS TO TACKLE HOME APPRAISAL BIAS — Our Katy O’Donnell: “A task force of more than a dozen government agencies on Wednesday unveiled its plan to reduce disparities in the way homes are valued, part of the Biden administration’s broader campaign to narrow the racial wealth gap. The agencies pledged in a report to update their policies and issue new guidance to enhance oversight of the appraisal industry in connection with a wide-ranging plan to tackle the way homes in majority-Black and -Latino neighborhoods are routinely assessed as being worth less than comparable homes in white communities.”
DALLAS FED: OIL PRODUCTION CLIMBING — Our Ben Lefebvre: “U.S. oil companies are expanding production at a dramatic clip as oil supply disruptions have caused global prices to surge, but they are pessimistic about the potential for long-term growth, the Federal Reserve Bank of Dallas said Wednesday.”
“The business activity index for the 141 companies in Texas, northern Louisiana and southern New Mexico responding to the survey earlier in the month jumped from 42.6 in the fourth quarter to 56.0 in the first quarter of 2022, reaching its highest reading in the survey’s six-year history, the bank said in a report.”
SENATE AG PANEL ADVANCES FOUR CFTC NOMINEES — Our Sam Sutton: “The Senate Agriculture Committee advanced a slate of four nominees to the Commodity Futures Trading Commission on Wednesday, putting the five-member regulatory agency one step closer to having a full slate of commissioners. The nominees — Kristin Johnson, Summer Mersinger, Caroline Pham and Christy Goldsmith Romero — were cleared by the committee with bipartisan support and can now be considered by the full Senate.”
U.S.-EUROPE ENERGY AGREEMENT EXPECTED FRIDAY, BIDEN AIDE SAYS — Bloomberg’s Josh Wingrove, Justin Sink, Alberto Nardelli and Jennifer Jacobs — The Biden administration and European Union are close to a deal aimed at slashing Europe’s dependence on Russian energy sources, as the U.S. and its allies seek to further isolate and punish Moscow for the Ukraine war.”
— Meanwhile, Ukrainian economic adviser Oleg Ustenko in an op-ed in the New York Times this morning reiterates his plea for the U.S. to impose secondary sanctions, which could prevent anyone from legally shipping and financing Russian oil. Ustenko says that “since the invasion, Russian oil exports have not fallen, in part because the E.U. has not cut back on imports. At the same time, oil and gas prices have increased. From Mr. Putin’s perspective, his war is paying for itself.”
Robin Brooks, chief economist of the Institute of International Finance, an association of global finance companies, tells WaPo’s Jeanne Whalen that sanctions “have not addressed the main driver of Russian growth, which is exports of energy and raw materials. If the goal is to make this war as costly as possible for Russia and Putin, you want to go after those.”
U.S. SETS RED LINES FOR CHINA HELPING RUSSIA DODGE SANCTIONS — Reuters’ Jarrett Renshaw and Trevor Hunnicutt: “The Biden administration, seeking to deter China from aiding sanctions-hit Russia, on Wednesday warned Beijing not to take advantage of business opportunities created by sanctions, help Moscow evade export controls or process its banned financial transactions.”
RUSSIAN CENTRAL BANKER WANTED OUT OVER UKRAINE. PUTIN SAID NO — Bloomberg: “Russia’s highly regarded central bank Governor Elvira Nabiullina sought to resign after Vladimir Putin ordered an invasion of Ukraine, only to be told by the president to stay, according to four people with knowledge of the discussions.
“Nominated for a new five-year term last week, Nabiullina’s current views couldn’t be learned. She is left to manage the fallout from a war that’s quickly undone much of what she’s accomplished in the nine years since she took office. The people said departure now would be seen as a betrayal by the president, with whom she has worked closely for nearly two decades.”
—ALSO: Anatoly Chubais, a key architect of Russia’s post-communist privatization, has quit as Putin’s special climate envoy, making him the highest-ranking official to leave the Kremlin since the start of Russia’s war in Ukraine, FT’s Max Seddon reported.
THE ODDS DON’T FAVOR THE FED’S SOFT LANDING — WSJ’s Greg Ip: “Unfortunately, history isn’t on [Powell’s] side. Inflation is much further from the Fed’s objective, and the labor market, by many measures, is tighter than in previous soft landings. Yet the Fed starts with real interest rates—nominal rates adjusted for inflation—much lower, in fact deeply negative. In other words, not only is the economy already traveling above the speed limit, the Fed has the gas pedal pressed to the floor. The odds are that getting inflation back to the Fed’s 2% target will require much higher interest rates and greater risk of recession than the Fed or markets now anticipate.”
POWELL FLAGS RISKS OF NEW DIGITAL FINANCIAL PRODUCTS — WSJ’s Nick Timiraos: “Federal Reserve Chairman Jerome Powell said the central bank supported innovation in digital financial products but warned that it is “easy to see the risks” of certain new technologies, including cryptocurrencies, that would demand a regulatory overhaul. Mr. Powell said Wednesday that some of these innovations would require changes to existing laws and regulations to ensure proper oversight of the broader financial sector.”
DALY, MESTER WEIGH IN ON SUPERSIZE RATE HIKE — Bloomberg’s Laura Curtis: “Federal Reserve Bank of San Francisco President Mary Daly said she has ‘everything on the table’ for the next policy meeting in May, as both a 50 basis-point interest-rate hike and a decision to shrink the balance sheet could be warranted depending on economic data in coming weeks.”
And Cleveland Fed President Loretta Mester told reporters on a call Wednesday, per Bloomberg’s Olivia Rockeman: “I think we’re going to need to do some 50 basis-point moves. I don’t want to presuppose every meeting from here to July, but I do think we need to be more aggressive earlier rather than later.”
State and local governments across the United States are funding scores of projects with federal coronavirus relief money despite them having little to do with combating the pandemic, a review by The Associated Press has found. — AP’s Brian Slodysko
The meme stocks are back. Shares of GameStop and AMC, two companies beloved by traders on Reddit and other social media platforms, are surging again. — CNN’s Paul La Monica
Russia plans to reopen its stock market for limited trading on Thursday, nearly one month after shares plunged and the exchange was shut down following the invasion of Ukraine. — AP