Good morning, Early Birds. They said it couldn’t be done — but this seagull (sorry, “gull”) did it. Tips: earlytips@washpost.com. Thanks for waking up with us.
On the Hill
Democrats try to figure out what legislation to rally around after SVB
Treasury Secretary Janet L. Yellen will return to Capitol Hill this morning to field questions from senators about the failure of Silicon Valley Bank and Signature Bank, as Democrats rush to figure out why the banks failed and what legislation they should try to pass in response.
Yellen’s testimony before the Senate Appropriations Committee’s financial services subcommittee comes a day after she told bankers the administration was considering “whether some adjustments are necessary in supervision and regulation” following the banks’ demise.
Sen. Chris Van Hollen (D-Md.), the subcommittee’s chairman, told The Early he wants to pass a bill allowing the government to claw back compensation from executives of failed midsize institutions such as SVB, as President Biden proposed on Friday. Greg Becker, SVB’s chief executive, sold $3.6 million of SVB stock right before it failed.
“It’s outrageous that the CEO of a bank that was mismanaged would reap such a windfall just days or weeks before it collapsed,” Van Hollen said.
Politics and policy
Such a bill could also help Democrats politically in 2024 — and avoid what some liberals view as the Obama administration’s mistakes in the aftermath of the 2008 financial crisis. While Democrats imposed tougher rules on Wall Street when they passed the Dodd-Frank law in 2010, critics argued that President Barack Obama failed to harness popular anger by going after bank executives themselves.
- “We need to be very clear that executives who mismanaged their banks should not at the same time be profiting from them,” Van Hollen said.
Lawmakers have summoned regulators to the Hill next week to testify about the banks’ failures, with Federal Deposit Insurance Corporation Chairman Martin Gruenberg, Federal Reserve Vice Chair Michael Barr and Nellie Liang, the Treasury Department’s undersecretary for domestic finance, scheduled to testify before the Senate Banking Committee and the House Financial Services Committee.
But it’s unclear whether there are enough Republican votes to pass even narrowly tailored legislation.
“The House won’t move on anything that the banks don’t approve, and most Senate Republicans won’t either,” said Sen. Sherrod Brown (D-Ohio), the Senate Banking Committee’s chairman. “So I count on Barr to do the things we need to do to make the system stronger.”
While Republicans haven’t ruled out supporting legislation, they’re directing their ire at regulators and the banks themselves.
Rep. Patrick T. McHenry (R-N.C.), the House Financial Services Committee’s chairman, and Sen. Tim Scott (S.C.), the top Republican on the Senate Banking Committee, asked the Fed, the FDIC and the two failed banks to preserve their records for the two years before the collapse.
It’s the effort that counts
Some liberals say Republican opposition shouldn’t stop Democrats from trying to pass something meaningful.
Elizabeth Warren (D-Mass.) and 17 other Democratic senators — along with Bernie Sanders (I-Vt.) — introduced a bill last week to repeal part of a 2018 law that rolled back some provisions of the Dodd-Frank law.
- “If I were Biden, I would be going on the offensive about it and push for it and not play the game of, ‘Do I have the votes or not?’” said Jeff Hauser, executive director of the Revolving Door Project, which has been critical of Barr’s record.
Other Democrats haven’t ruled out making changes to the 2018 bill.
- “We need to figure out what happened,” Sen. Mark R. Warner (D-Va.), who voted for that legislation, told reporters Monday at a Christian Science Monitor breakfast. “And if there were things that happened in 2018 that helped create this crisis, I’m wide open to making changes.”
But the White House hasn’t said anything encouraging about Warren’s bill, nor has it endorsed another widely discussed idea: raising the $250,000 limit on accounts insured by the FDIC. The administration doesn’t view such a move as necessary, according to a person familiar with the matter, who spoke on the condition of anonymity to describe private discussions.
It’s not surprising that Democrats are taking some time to work out what they want to do, said Todd Phillips, a former FDIC attorney and congressional staffer who’s now a fellow at the Roosevelt Institute, a liberal think tank.
“Deposit insurance has not been a topic of conversation in Washington since the 2008 crisis,” Phillips said. “This is an area where policymakers are really trying to figure out what is necessary, and just thinking through those options takes time.”
The lessons of 2008
Democrats seeking to avoid the pitfalls of the financial crisis are particularly sensitive to comparisons to the unpopular Wall Street bailouts passed in the waning days of President George W. Bush’s administration.
“The biggest lesson [of 2008] was: Don’t bail out any banks,” Van Hollen said. “And in this case, the lesson was learned. SVB was not bailed out. The shareholders, the stockholders, the bondholders are all going to get hit, as they should.”
- While the administration has insisted that its decision to guarantee all of SVB’s deposits — even though accounts over $250,000 aren’t protected by federal law — isn’t a bailout, that hasn’t stopped Republicans from attacking it as one.
Is the public paying attention?
But it’s unclear whether voters will come to dislike the SVB rescue as much as they loathed the 2008 bailouts — or whether they’ll even remember it in 2024.
A YouGov poll last week found that 34 percent of Americans strongly supported the decision “to bail out customers who had deposited money with Silicon Valley Bank after the bank collapsed,” with another 30 percent somewhat supporting the move.
Just 9 percent of Americans strongly opposed it; 10 percent somewhat opposed it.
Louisiana senators on board with Biden’s judicial pick
Sens. Bill Cassidy (R-La.) and John Neely Kennedy (R-La.) have indicated they support Biden’s pick for a federal judgeship in Louisiana, giving Democrats a relatively rare chance to fill a judicial vacancy in a state with two Republican senators.
Senators can block a president’s judicial nominees in their home states by refusing to return their “blue slips” signing off on them — a traditional senatorial courtesy that several liberal judicial groups have urged Senate Judiciary Committee Chairman Richard J. Durbin (D-Ill.) to abandon for fear it would slow the confirmation of Biden’s nominees.
Sen. Lindsey O. Graham (R-S.C.), the top Republican on the committee, has urged Republicans to work with the White House so Democrats don’t scrap blue slips — and it appears to have worked in the case of Darrel James Papillion, whom Biden nominated on Monday to fill a district court vacancy in Louisiana.
- “We went through several iterations, I’ll put it that way,” Kennedy said of his discussions with the White House to find a nominee.
“Darrel Papillion has the experience and temperament to be a good federal judge,” Cassidy said in a statement. “He is knowledgeable and thoughtful. I expect him to be approved by both Democrats and Republicans.”
If there are no last-minute hiccups, Papillion will be the second recent blue slip victory for the White House. Sens. Todd C. Young (R-Ind.) and Mike Braun (R-Ind.) backed Magistrate Judge Matthew Brookman in January for a district court judgeship in their state.
What we're watching
In New York: Former president Donald Trump could be indicted by a Manhattan grand jury today for his alleged role in hush-money payments to adult-film actress Stormy Daniels. The Manhattan grand jury investigating the matter is expected to reconvene today and could vote on whether to charge Trump with a crime when it wraps up the day’s work.
- What to expect: If Trump is indicted, his attorneys will probably negotiate his surrender to police custody to avoid a public arrest — although Trump has mused privately about participating in a perp walk and smiling for news cameras. If Trump ends up in police custody, he will be arraigned in a Manhattan courtroom where he will probably be released without bail (or additional conditions).
- While we wait: In the meantime, Trump and his campaign have capitalized on the favorable coverage of his pending indictment in conservative media outlets, raising more than $1.5 million since Saturday while pressuring primary rivals to throw their support behind him.
At the Fed: It’s unclear whether the Federal Reserve will opt to raise interest rates by a quarter of a percentage point once policymakers conclude their two-day meeting today. Experts are urging the Fed to temporarily pause interest rate hikes until the banking fiasco is over. If the Fed decides to raise rates, it would be the ninth hike in a row.
Federal Reserve Chair Jerome H. Powell will hold a news conference this afternoon where he will probably be asked the following questions, per our colleague Rachel Siegel:
- What did the Fed know about SVB and when?
- Is Powell concerned about future banking shocks?
- Does Powell see threats from Europe in the wake of Credit Suisse’s forced takeover?
- Is the Fed’s own interest rate fight destabilizing parts of the economy, rather than just slowing it down?
Corporate oversight in the Senate: The Senate Commerce Committee will hold its first hearing today on the train derailment in East Palestine, Ohio. It is a jam-packed session: The committee will hear from Sens. J.D. Vance (R-Ohio) and Sherrod Brown (D-Ohio); an East Palestine resident, Misti Allison; Ohio Gov. Mike DeWine (R); Alan Shaw, chief executive of Norfolk Southern, the company that owns the train that derailed; and National Transportation Safety Board Chairwoman Jennifer Homendy, among others.
- Stéphane Bancel, the chief executive of Moderna, meanwhile, will testify before the Senate Health, Education, Labor and Pensions Committee about the company’s plans to raise the cost of its coronavirus vaccine.
In Russia: Chinese President Xi Jinping concluded his three-day trip to Russia. It’s not clear if he’ll speak with Ukrainian President Volodymyr Zelensky in the coming days.
On the Hill
Washington’s new boogeyman
TikTok’s charm offensive: Our colleagues Cat Zakrzewski and Cristiano Lima take us inside TikTok’s fierce campaign to court lawmakers ahead of tomorrow’s blockbuster hearing. When TikTok CEO Shou Zi Chew appears before the House Energy and Commerce Committee for the first time, he’ll probably face intense grilling over concerns about privacy, misinformation and the effects of social media on children.
Here’s what the company’s doing to get in Congress’s good graces:
- Hiring lobbyists and consultants: “Joseph Crowley, the former chair of the House Democratic Caucus, has sat in on several private meetings with lawmakers,” Cat and Cristiano write. “The company also hired former Reps. Bart Gordon (D-Tenn.), now at the law firm K&L Gates, and Jeff Denham (R-Calif.), now at the law firm Dentons, to lobby on its behalf.”
- Meeting with lawmakers: “In meetings with lawmakers, Chew has framed the app as primarily an entertainment tool used by over 150 million American users, the aides said, suggesting a ban would deprive users globally of U.S. content. … Chew has also criticized efforts by competitors to paint TikTok as a danger to children.”
- Launching an ad campaign: “TikTok has been buying up ads in Washington highlighting its commitment to data privacy, including sponsored newsletters from Axios and a full-page ad in The Washington Post. Another campaign posted on TikTok, Twitter and Facebook touts its contributions to small businesses.”
In the agencies
DHS launches operation targeting fentanyl
“Operation Blue Lotus”: The Department of Homeland Security has launched the Biden administration’s latest campaign to stop fentanyl trafficking along the U.S.’s southern border, our colleague Nick Miroff reports.
- “The campaign will use new scanning technology, more drug-sniffing dogs and other detection tools to ramp up interdiction efforts and build criminal cases, officials said. Much of the effort will focus on ports of entry, the land border crossings where more than 90 percent of U.S. fentanyl seizures along the southern border have occurred since the start of the 2023 fiscal year on Oct. 1.”
The Media
Must reads
From The Post:
- DeSantis sharpens criticism of Trump, dismisses mocking nicknames. By Kelly Kasulis Cho.
- Fox staffer’s claims of sexism, coached testimony jolt defamation case. By Jeremy Barr and Sarah Ellison.
- House GOP tries to avoid Trump talk at retreat while targeting Bragg. By Marianna Sotomayor, Leigh Ann Caldwell and Jacqueline Alemany.
- McConnell phones Senate Republicans, who say he’s ‘eager’ to be back. By Liz Goodwin and Paul Kane.
- U.S. will speed transfer of Abrams tanks to Ukraine, Pentagon says. By Dan Lamothe.
From across the web:
- Special counsel claims Trump deliberately misled his attorneys about classified documents, judge wrote. By ABC News’s Katherine Faulders, Alexander Mallin and Lucien Bruggeman.
A Tribute
We’re thinking about Vaughn Ververs’s family. Vaughn, a longtime political editor in Washington who spent the last 13 years of his career at NBC News, died way too soon on Sunday. Thanks for being a friend and teaching me (Leigh Ann) how to write, Vaughn. You almost succeeded. You’ll be missed.
Thanks for reading. You can also follow us on Twitter: @theodoricmeyer and @LACaldwellDC.