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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is your weekly

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Speaker 1: Washington policy pulse, the Balance of Power Podcast. I'm Joe Matthew.

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Speaker 1: Every Monday, Bloomberg Intelligence, senior policy analyst and friend of

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Speaker 1: the show, Nathan Dean shares his weekly call on upcoming

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Speaker 1: catalysts in the nation's capital. Listen for the most recent

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Speaker 1: and relevant policy research from our team at Bloomberg Intelligence.

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Speaker 1: Now with today's installment, here's Nathan Dean.

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Speaker 2: Good afternoon, everybody. My name is Nathan Dean. I'm a

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Speaker 2: senior policy and host with Bloomberg Intelligence here in the Washington,

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Speaker 2: d C. Bureau. I also want to say thank you

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Speaker 2: for those of you who are listening via the Balance

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Speaker 2: of Power podcast. First off, if you are in the

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Speaker 2: Washington DC area or on the East Coast, we hope

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Speaker 2: you are safe and sound this afternoon. We're here and

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Speaker 2: there's going to be a lot of strong storms and

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Speaker 2: what it's worth my children, my children's school is closing

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Speaker 2: early as a result. But we got a lot of

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Speaker 2: stuff to go through today, so I'm just going to

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Speaker 2: try and do a quick round rob and if there's

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Speaker 2: anything that you want me to talk about in greater detail,

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Speaker 2: please feel free to give me a call or an

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Speaker 2: email at my email end ten at Bloomberg dot net,

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Speaker 2: or if you have a Bloomberg terminal obviously, feel free

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Speaker 2: to ib me at any time. So let's first talk

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Speaker 2: about Iran and just sort of the key state of

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Speaker 2: player where we were this morning. Now, Bloomberg News did

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Speaker 2: a lot of reporting this morning. Obviously. President Trump just

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Speaker 2: yesterday said that he wants a coalition of the willing

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Speaker 2: my words, not his, but a coalition of the willing

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Speaker 2: to bring together ships into the straight of horror moves

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Speaker 2: to effectively be able to guide these tankers in these

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Speaker 2: ships through the straight of horror moves. Because effectively Bloomberg,

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Speaker 2: you know, the straight of hoom News is closed. There

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Speaker 2: is actually new functionality on the terminal that will show

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Speaker 2: you how many ships not in maps portion, but in

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Speaker 2: terms of grafts that our economists have put out. So

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Speaker 2: if you need a copy of that, just please let

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Speaker 2: me know. But you know this coalition President Trump's call

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Speaker 2: put it out there and said, look, he wants China,

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Speaker 2: and he wants the UK, he wants Japan, he wants

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Speaker 2: South Korea, wants Australia, and it's been sort of a

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Speaker 2: muted message. Japan has said there's no immediate plans. Australia

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Speaker 2: said that hasn't been any media plans. Germany said they

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Speaker 2: haven't had a formal request here. The United Kingdom said

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Speaker 2: they're still mulling over it. You get the idea, It

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Speaker 2: doesn't seem that there's many people chomping at the bid

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Speaker 2: at the moment to send more troops or sorry, more

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Speaker 2: ships to the area. And so President Trump essentially is

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Speaker 2: still going to try and I think put up that

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Speaker 2: political pressure. This Press Secretary of Caroline Levitt also said

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Speaker 2: this morning that it wouldn't be unfeasible or the United

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Speaker 2: word it wouldn't be unlikely if President Troports who delayed

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Speaker 2: but not canceled his planned summit with President Hiji ping

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Speaker 2: out of China that's scheduled for later this month. Caroline

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Speaker 2: Levitt said, and I'm just paraphrasing here that you know,

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Speaker 2: at times of war, the president is not going to

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Speaker 2: leave US soil. So again, keep that in mind. That's

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Speaker 2: something now currently as we are talking right now, China

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Speaker 2: and US officials are negotiating in Paris over tariffs. There

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Speaker 2: have been a couple of headlines that have come out

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Speaker 2: and in terms of this, nothing that I think is

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Speaker 2: worthwhile mentioning at this point. But keep that in mind

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Speaker 2: if you have exposure to China, they are negotiating as

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Speaker 2: we speak and meet. Considering that it's getting to be

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Speaker 2: the afternoon in Europe at the moment, I would say

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Speaker 2: that meeting's probably going to end, probably in the next

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Speaker 2: couple of hours. A couple other things on Iran, just

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Speaker 2: to keep in mind, there's been a lot of questions

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Speaker 2: about this idea of an Iranian supplemental defense bill, you know,

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Speaker 2: plant God. Bloomberg News reported the Pentagon is seeking around

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Speaker 2: fifty billion. I said just last week. Keep in mind

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Speaker 2: that farmers are thinking about attaching fifteen billion, And when

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Speaker 2: I say farmers, I mean the House and State ad

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Speaker 2: committees are looking at attached fifteen billion dollars worth of

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Speaker 2: farm aid to this bill over the weekend. Some of

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Speaker 2: the reporting suggests that this bill is not yet anywhere

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Speaker 2: close to being considered by Congress. It wouldn't be surprising

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Speaker 2: if you saw an ask come out from the White

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Speaker 2: House later this month or maybe next month. But in

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Speaker 2: terms of the Congressional appropriators, this is something that they

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Speaker 2: doesn't seem like you're going to get in the spring season.

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Speaker 2: Sounds like this is going to be something that comes

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Speaker 2: up in this summer. And just remember, like we've said many, many,

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Speaker 2: many many times before, that once you get something out

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Speaker 2: there and you say, hey, I want fifty billion dollars

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Speaker 2: for the troops, we're going to get fifteen billion dollars

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Speaker 2: for the farmers. Well, then the insurance industry for disasters

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Speaker 2: is going to get twenty billion dollars, and you get

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Speaker 2: this idea. You know, I'm guessing that this package will

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Speaker 2: probably be somewhere between one hundred and two hundred billion,

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Speaker 2: but again that's just pure a guess. At this point, Well,

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Speaker 2: we have plenty of time to think about it. I

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Speaker 2: don't think it's going to come up other than they ask,

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Speaker 2: but at least in terms of Congress approving this, we've

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Speaker 2: got plenty of time for this to figure out. So

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Speaker 2: just last week, I want to the Senate passed it's

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Speaker 2: twenty first Century for Road Housing Act. This is the

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Speaker 2: bill that we've talked about before in terms of the

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Speaker 2: impact of institutional investors. Well, it passed the Senate and

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Speaker 2: now it goes to the House. The House has said, look,

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Speaker 2: they're not happy with this bill, there's really three provisions

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Speaker 2: that you need to worry about. And I apologize if

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Speaker 2: I said this last week. I can't remember, but those

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Speaker 2: provisions are cutting regulatory red tape, which really doesn't excite

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Speaker 2: us all that much in terms of spurring new homes

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Speaker 2: or affordability. There's a provision related to a central being

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Speaker 2: digital currency. It would ban it up until twenty thirty.

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Speaker 2: House Republicans, especially the House Freedom Caucus, want to go

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Speaker 2: even further and have a permanent ban. And then there's

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Speaker 2: this provision about institutional investing by firms. Sorry, it just

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Speaker 2: institutional firms buying single family homes. Now, there is a

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Speaker 2: language in there called disposable disposal language that would require

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Speaker 2: these single family reads to essentially that builds a rental

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Speaker 2: community to dispose of it within seven years. Now, why

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Speaker 2: would you want to build something if you have to

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Speaker 2: dispose of it fairly soon. So that is still it's

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Speaker 2: gone through the Senate, that was still attached. It's now

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Speaker 2: gone to the House. And there's two things to keep

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Speaker 2: in mind. One is the House is not happy with

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Speaker 2: this bill. They are not happy being stifled by the Senate.

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Speaker 2: The Senate has jammed them multiple times they're trying to

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Speaker 2: jam them again here, So look for this bill to fester.

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Speaker 2: Look for this bill. It doesn't have to pass right now.

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Speaker 2: The House can sit on it for a while. So

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Speaker 2: I wouldn't be surprised if you saw the House sit

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Speaker 2: on it. And then secondly, when it comes to that

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Speaker 2: provision related to institutional homes, just look for more negotiations.

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Speaker 2: But the way this would work is because the Senate

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Speaker 2: has passed a bill and the House has already passed

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Speaker 2: the housing built, and it primarily is just cutting rey

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Speaker 2: go to my red tape. Both of those bills passed

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Speaker 2: with overwhelming bipartisan support. There's two options for the House now.

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Speaker 2: They can either adopt the Senate bill or they can

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Speaker 2: go to conference committee. And Senator Kennedy AV of Louisiana,

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Speaker 2: when he was quoted last week, he said, look, I

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Speaker 2: think the White House is going to have to go

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Speaker 2: over to the House and knock some heads into Pluto.

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Speaker 2: So his view is that the White House is going

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Speaker 2: to go to the House and say you must pass

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Speaker 2: the Senate bill. Where I'm going with this is we

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Speaker 2: have plenty of time to figure it out. So as

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Speaker 2: you see these headlines come out, over the next few weeks.

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Speaker 2: If you have exposure to housing, feel free to call

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Speaker 2: in and we'll walk you through that process. Also, just

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Speaker 2: because that House bill is now done in the Senate,

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Speaker 2: now they get to work on crypto. Senator John Thunis

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Speaker 2: said he said this to punch Bowl last week that

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Speaker 2: he thinks the Senate Banking Committee is going to be

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Speaker 2: really hitting part on crypto in April. So don't be

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Speaker 2: surprised for the Senate Banking Committee really now starts to

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Speaker 2: start working on this Clarity draft and these negotiations over

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Speaker 2: stable coin yield get put into overdrive and we start

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Speaker 2: to see that over the next one to two weeks.

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Speaker 2: Staying on the crypto theme, just I put this out

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Speaker 2: last Tuesday. The OCC has put out a proposal on

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Speaker 2: stable coins. This is the implementation of the Genius Act.

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Speaker 2: Member Genius Act, passed last year, requires stable coin issuers

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Speaker 2: to have one hundred percent high quality liquid assets to

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Speaker 2: back up their stable coins, has some registration, has credential standard.

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Speaker 2: It's not that big of a deal, but there's one

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Speaker 2: provision here that's really making the crypto industry upset. Because

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Speaker 2: we just talked about stable coin yield and how there's

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Speaker 2: this debate over it. Well, the OCC proposal goes further

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Speaker 2: than the Genius Act and essentially says that if there's

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Speaker 2: any type of handshake agreement, whether it's winkwink not nod

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Speaker 2: formal agreement between issuers and third party platforms that are

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Speaker 2: offering yield or sorry rewards programs for stable coins, the

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Speaker 2: OCC is going to come in there and say no,

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Speaker 2: you can't do that. And obviously the crypto industry is

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Speaker 2: not happy with that. They're like, well, look, if it's

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Speaker 2: permissible in your Genius Act, why did you go further?

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Speaker 2: And so there's going to be some interesting conversations had

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Speaker 2: between the Office of the Control or the Currency and

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Speaker 2: the crypto industry and the banking industry as they go

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Speaker 2: through this rule making. But keep in mind, if the

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Speaker 2: Senate build the Senate the Clarity Act, if it passes,

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Speaker 2: that would circumvent anything the OCC does. But again, very

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Speaker 2: interesting that the Bank's sort of got a win from

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Speaker 2: this proposal on that. For what it's worth, there's a

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Speaker 2: significant comment period on this one, so I don't think

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Speaker 2: finalization will be towards the end of this year. So

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Speaker 2: saying on the financial regulatory theme, this Thursday. It's like

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Speaker 2: the Super Bowl for bank investors. The Bozo three end

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Speaker 2: game is finally being proposed. Now, most of you who

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Speaker 2: are covering the Basle three endgame already have seen the

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Speaker 2: speech that Michelle Bowman gave last week. I know because

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Speaker 2: many of you contacted me and we talked about it.

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Speaker 2: But you know, just keep in mind that this is

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Speaker 2: going to be a ninety day comment period. Just real

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Speaker 2: quickly back in the Napkin Math by my colleague Arnold Kakuta,

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Speaker 2: you know, this is two proposals, maybe three, but I

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Speaker 2: think it's two proposals. One is the Bazzo three end game.

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Speaker 2: The one is the g sib surcharge. Now, like we've said,

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Speaker 2: multiple times, the Baso three end game increases capital requirements.

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Speaker 2: The way that the risk ratings look like it's going

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Speaker 2: to be is operational risk and market risk are going

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Speaker 2: to increase and credit risk is going to decrease, especially

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Speaker 2: in the Morgan So there's going to be more incentives

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Speaker 2: for banks to actually push mortgages and do the mortgage originations.

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Speaker 2: Now I don't know the specifics of it, we'll find

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Speaker 2: out on Thursday, but this will ultimately increase capital requirements.

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Speaker 2: But then the jesup seurcharge comes in and ultimately decreases

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Speaker 2: capital requirements to the tune of about thirty two billion

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Speaker 2: dollars for the sixth JESIPS so Bank of America JP, Morgan,

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Speaker 2: Moist Fargo Gold with sacks Morgan Stanley, and City Group.

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Speaker 2: For what it's worth, we're keeping State straight at Baker,

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Speaker 2: New York, evening the other jesips for those purposes of

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Speaker 2: this calculation, we're keeping them out of this. So you know,

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Speaker 2: take those two proposals in mind. The GESIP surcharge is

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Speaker 2: not a move to Method one. I'm not going to

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Speaker 2: get into the method one or Method two, but currently

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Speaker 2: it's Method two. If it was Method one, it would

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Speaker 2: be a much more substantial relief to these banks. But

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Speaker 2: it's not. It's a Method two tweak. So that's why

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Speaker 2: it's a little bit more subdued than what anticipations were

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Speaker 2: earlier this year. But ninety day comment period, don't be

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Speaker 2: surprised if they try and finalize this right before the

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Speaker 2: December holidays. I think they can get it done if

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Speaker 2: they move quickly. But for those two proposals, and for

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Speaker 2: what it's worth, if there is a third proposal, it's

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Speaker 2: just dealing with the standardization models. I think that can

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Speaker 2: be wrapped up into the bottle three end game. But

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Speaker 2: there was a remark that Governor Bowman said that made

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Speaker 2: me think that potentially it was three. But it's not

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Speaker 2: that big of a deal. So that will be out

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Speaker 2: on Thursday. So let's also shift to March Madness. Well, really,

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Speaker 2: my Purdue Bollywood makers won the Big ten attorney last night,

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Speaker 2: so I'm excited about that. We'll make them losing to

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Speaker 2: Gonzaga in the second round or third round a little

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Speaker 2: bit less painful. But CFTC actually put out guidance in

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Speaker 2: Advanced Notice of proposed rulemaking last week on prediction markets. Now,

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Speaker 2: if you're looking at coinbase or CME Group or robin

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Speaker 2: Ord or any of the exchanges intercontinental exchanges, you know

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Speaker 2: their their their ownership, you know their their portion ownership

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Speaker 2: of polymarket. So what the CFTC did here is they

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Speaker 2: put out guidance that effectively said that most prediction markets

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Speaker 2: out there today are considered swaps and therefore they are

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Speaker 2: under the Commodities Exchange. The AMPR has over two hundred

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Speaker 2: questions to market participants and really asks them to help

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Speaker 2: the CFDC define what is gambling versus what factors should

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Speaker 2: people think of in terms of prohibited contracts, for example,

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Speaker 2: those tied to assassination or terrorism. War So there's lots

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Speaker 2: of questions in the industry. They've put out the proposal.

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Speaker 2: Comments are due in May. But because this is an

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Speaker 2: AMPR and not an MPR, because this is just questions,

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Speaker 2: it means that a proposed rule isn't going to be

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Speaker 2: finalized until mid twenty twenty seven. Now interesting thing here

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Speaker 2: to keep in mind, though, is that the CFTC has

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Speaker 2: said that they're going to do a formal rule making

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Speaker 2: on this. Now one would argue, and I'm not taking

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Speaker 2: a stance on this, but some are arguing out there

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Speaker 2: that you don't need a formal rulemaking on this, that

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Speaker 2: you already have the authority over the Commodity Exchange Act

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Speaker 2: just to treat these as swaps and guidance is all

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Speaker 2: you need. But because the CFTC is going forward with

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Speaker 2: a rule making, a future CFTC that is led by

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Speaker 2: Democrat that may have a different view on prediction markets.

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Speaker 2: And remember the Biden there, CFTC had a previous guidance

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Speaker 2: on prediction markets that this one withdrew. A future democratic

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Speaker 2: CFTC can't just immediately come in and say, yep, right,

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Speaker 2: that guidance has gone. Now we're going to take new guidance.

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Speaker 2: They're going to have to take steps so actually undo

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Speaker 2: the rule making that this rule making is putting on.

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Speaker 2: Think of it as icing on the cake. You know,

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Speaker 2: it's going to prevent you from getting to the actual

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Speaker 2: cake unless you get sliped off the icing. It's a

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Speaker 2: bad analogy, but you get the idea. So if you

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Speaker 2: want to talk prediction markets, feel free. A couple other things.

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Speaker 2: Just back to Congress and back to White House, just

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Speaker 2: real quickly. President Trump is going to have a press

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Speaker 2: conference today around eleven forty five, right before he gets

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Speaker 2: over at the Kennedy Center. That press conference, expect lots

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Speaker 2: of Iran information. So if you are exposed obviously to

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Speaker 2: geopolitical keep in mind. We will probably be streamed on

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Speaker 2: Life Go if you have a terminal if not, it'll

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Speaker 2: be on every single major television network. The Save Act

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Speaker 2: is coming to the floor this week, so this is

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Speaker 2: probably what you've seen all the news talking about in

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Speaker 2: terms of the Save Act. We're not covering the Save

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Speaker 2: Act because it really doesn't have an investing angle. But

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Speaker 2: the reason why I want to bring it up is

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Speaker 2: we are getting questions on whether or not the filibuster

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Speaker 2: goes away. Remember the Save Act, this is the build

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Speaker 2: would essentially require US citizens to identify themselves as a

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Speaker 2: citizen in order to go vote. Because for those of

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Speaker 2: you who aren't in the states, please remember that voting

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Speaker 2: is a state issue. So the voting procedures that I

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Speaker 2: have to live under in Virginia are different than the

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Speaker 2: voting procedures that I had to live under when I

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Speaker 2: lived in Illinois. And so because each state has their

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Speaker 2: own different voting procedures and it's deemed by the Secretary

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Speaker 2: of State of each state, the Save Act will come

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Speaker 2: in and say no, you have to do this on

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Speaker 2: a federal level. And this is how President Trump is

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Speaker 2: really effectively one of the reasons why he thinks is

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Speaker 2: very essential to the Republicans keeping the House. Now, Senator Thune, sorry, yeah, so,

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Speaker 2: Senator Thune is now in a position here where he

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Speaker 2: has to do something. The DWIGHTE House is saying, you

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Speaker 2: must put this on the floor. You must put this

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Speaker 2: on the floor. Well, Senator Thune doesn't have the sixty

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Speaker 2: votes to pass it. So there's this idea of going

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Speaker 2: away with Philbuster. We talked about this last week. Now,

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Speaker 2: what Senator Thune is going to do is he is

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Speaker 2: going to put it on the floor as a measure,

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Speaker 2: which only requires fifty votes, you know, and then there's

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Speaker 2: going to be some additional amendments, Then there's going to

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Speaker 2: be some additional thoughts, and then ultimately it's going to

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Speaker 2: require sixty votes. Anyway, what you need to know is

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Speaker 2: that the filibuster is not going away, transferring to this

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Speaker 2: idea of a talking filibuster isn't going away. But Senator

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Speaker 2: Thune has to go through the motions to make the

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Speaker 2: President get on board with the idea that they've tried.

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Speaker 2: Because remember President Trump has said that he's not going

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Speaker 2: to sign any legislation until the stay back passes. We'll

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Speaker 2: see what happens. But again, Senator Thune's going to be

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Speaker 2: going through a lot of motions this week. Devin Worris's nomination,

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Speaker 2: let's talk about that for a second. So Friday afternoon,

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Speaker 2: we saw the US Attorney for the DC, Janine Piro,

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Speaker 2: Judge Piro come out here and say that well, actually

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Speaker 2: we saw it. Judge squashed the subpoenas that she had

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Speaker 2: sent to the Federal Reserve about Jerome Powell. Now, my

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Speaker 2: colleague Elliott Stein, spent about twenty five minutes on Blue

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Speaker 2: Television Friday afternoon, and we have a copy of that,

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Speaker 2: so we can send that to you he spent about

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Speaker 2: or just call Elliott, honestly, just call Elliott. That's you.

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Speaker 2: Forget the TV stuff. Just call Elliott, but you know,

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Speaker 2: and he's available on the termino, or just call me

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Speaker 2: and I can put you in touch with him. But

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Speaker 2: Elliott's spent about twenty minutes going through all the scenarios

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Speaker 2: here of what can happen now, and it sounds like

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Speaker 2: the DOJ is going to appeal that decision. And I'm

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Speaker 2: not going to get into the legality of it, but

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Speaker 2: remember Senator Tom Tillis, who sits on the Senate Banking Committee,

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Speaker 2: is currently blocking Kevin Walsh's nomination from going to the committee.

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Speaker 2: And because the Republicans have thirteen eleven, he can do that.

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Speaker 2: He can just show up and the vote No. Twelve

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Speaker 2: twelve high Kevin Walsh's nomination goes nowhere. So Senator till

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Speaker 2: has put out a statement essentially said, look, this doesn't

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Speaker 2: really change anything. Again, I'm paraphrasing here, but because this

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Speaker 2: doesn't change anything, We're currently in a situation where you

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Speaker 2: are going to see lots of steps from the White

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Speaker 2: House and the Senate Banking Committee to try and figure

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Speaker 2: out a way to move this forward because if there's appeal,

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Speaker 2: that just delays things even further. And Elliott's thesis here

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Speaker 2: is that if we get to May, when Chairman Paula

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Speaker 2: has to step down as chairman, not governor, but as chairman,

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Speaker 2: you could see a scenario where of acting chair Myron

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Speaker 2: in the interim. So again keep that in mind our

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Speaker 2: FOMC folks out there if you ever want to talk

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Speaker 2: in advance in the meeting. Ira Jersey is our FOMC expert,

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Speaker 2: so definitely he's got great opinions on this. Well, last

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Speaker 2: two things. Senator mollen Mark Wayne Mullen has this confirmation

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Speaker 2: hearing this week for DHS Secretary. I don't really have

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Speaker 2: an update for you on DHS shut down that we're

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Speaker 2: really still in the status quo. And then finally we're

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Speaker 2: in primary season. Illinois primaries are tomorrow. The reason why

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Speaker 2: I bring it up is that the Senate race to

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Speaker 2: replace Senator Dermott has a lot of Democrats in there.

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Speaker 2: We may get some indication of whether or not a

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Speaker 2: moderate or a progressive Democrat has any success. As a

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Speaker 2: former Illinois resident, I can tell you that it's a

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Speaker 2: very progressive state. But you know, again, we'll see what

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Speaker 2: happens tomorrow. I apologize that went about ten minutes long,

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Speaker 2: but we had a lot of stuff happening today. I

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Speaker 2: will say thank very much for attending. We really appreci

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Speaker 2: and if we can ever be of assistance, please don't

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Speaker 2: hesitate through each other.

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Speaker 1: Our thanks to Nathan Dean, Bloomberg Intelligence senior policy analyst,

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Speaker 1: bringing you the latest installment of his weekly Washington Policy Pulse.

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Speaker 1: For more from BI or to join this call live

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Speaker 1: each week, you can email Nathan at Ndan at Bloomberg

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Speaker 1: dot net. That's n d e a n at Bloomberg

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Speaker 1: dot net and come back to the podcast later today

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Speaker 1: for the latest edition of Balance of Power