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THE TOP
Danny Werfelâs bid for trust in Washington and beyond
IRS Commissioner Danny Werfel leads an agency disliked by taxpayers and under constant attack from Republicans.
But Werfel is trying to change all that. He has been courting the public with a series of recent TV appearances, while also trying to win the trust of lawmakers in both chambers.
The main reason for the charm offensive is simple. Werfel wants to protect the $60 billion in extra funding from Democratsâ Inflation Reduction Act for the IRS to crack down on tax cheats and transform its operations. Republicans want to claw back the funds, calling them a waste.
âItâs about having a high-performing tax agency for this country versus an underperforming one,â Werfel told us, addressing the stakes of his efforts. âAnd I think prior to the Inflation Reduction Act, all the indicators pointed to an underperforming tax agency.â
The IRS already lost round one of the funding battle. House Republicans forced the repeal of about $20 billion of the agencyâs extra money during last yearâs debt limit brawl. But thereâs plenty of fight left.
Werfelâs efforts could help make the difference in how successfully heâs able to defend the IRS budget.
Letâs get into it.
First, the Hill: Talking to Werfel, itâs easy to see how he could win over lawmakers. He spoke glowingly about members during our interview, describing them as a âpowerful conduitâ to understand taxpayer concerns.
Werfel said his goal is to be âaccessible and responsiveâ to lawmakers. Itâs working. Nearly every member we spoke to pointed to his responsiveness.
âUnlike some agencies where people on my side will say they donât return my call, you donât hear that about Werfel,â Sen. Bill Cassidy (R-La.) said.
The other common point of praise from lawmakers in both parties is for Werfelâs candor in admitting when the IRS has faltered. Thatâs a notably similar playbook to how Werfel steered the IRS through scandal a decade ago as acting commissioner.
Sen. Elizabeth Warren (D-Mass.) told us that trying to get past IRS commissioners to identify what was going wrong and how to fix it âwas like trying to pin Jell-O to the wall.â But not Werfel.
âCommissioner Werfel is willing to give a clear answer â even if itâs not the one that puts the IRS in the best light immediately. And that way, those of us in the Senate have more confidence in the answers he gives.â
That approach is charming some lawmakers in both parties.
Hereâs what the Senate Finance Committeeâs top Republican, Sen. Mike Crapo of Idaho, told us:
âMany on my side have the issues we have with the IRS and because of that, we are going to be heavily and aggressively engaged with him. But weâre not â at least I am not â putting the blame for those on him. Maybe there needs to be some outcomes here, but right now heâs taken on a really tough job, and I think heâs really working hard at it.â
Senate Finance Committee Chair Ron Wyden (D-Ore.) pointed to Werfelâs openness to closed-door meetings with senators. Those included a casual gathering last June in Wydenâs office and a briefing this January.
âHe is regarded by almost everybody as thoughtful in spite of the fact heâs in one of the real tinderbox kind of positions in government,â Wyden told us.
The critics: Of course, the positive vibes arenât universal. House Republicans are aggressively taking aim at the agency and have pressed the IRS in their impeachment investigation.
â[Werfel] communicates with us, but I have a lot of concerns about operations within the IRS â especially how the IRS whistleblowers have been treated,â House Ways and Means Committee Chair Jason Smith (R-Mo.) said.
Now, letâs talk TV: Beyond Washington, Werfel is making moves to raise his public profile.
Werfel said that itâs important for taxpayers to hear the IRSâ plans for the $60 billion and then experience its benefits.
âItâs a very positive part of our journey⌠to speak with the American people about what weâre trying to do because it gives them awareness, it shows them that we have an ambition that is nonpartisan and that is really in serving their best interest.â
Nothing underscores Werfelâs bid to capture public sentiment quite like his TV appearances. In just the last few weeks, Werfel was on Good Morning America, MSNBC Reports, Fox Newsâ Your World with Neil Cavuto, CNBCâs Squawk Box, an NBC investigation and local newscasts.
You can even catch Werfel on the IRSâ Instagram reels (alongside dog videos).
Will it make a difference? Regardless of Werfelâs outreach, the GOP despises the $60 billion in extra funding as much as ever. That doesnât appear to be changing any time soon. But building up a little goodwill canât hurt Werfel on the margins in the budget battles ahead.
â Laura Weiss
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CRYPTO CORNER
The next big hurdle for stablecoin reform
Itâs been a big couple of weeks for crypto legislation, with a new stablecoin bill for Washington to digest and an emerging consensus that FAA reauthorization could become a legislative vehicle.
But there are still major obstacles for lawmakers to navigate. We want to spend some time unpacking one weâve heard a lot about this week: strengthening anti-money laundering laws.
The stablecoin bill dropped by Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) this week has a lot going on, but one area the bill has a relatively light touch on is money laundering. (The pair has worked elsewhere on AML reforms for crypto, just not in this bill.)
This has been a red line for Sen. Elizabeth Warren (D-Mass.). She told us last week that when it comes to stablecoins, âwe cannot move forward on a bill that does not include AML. We canât expand access to crypto knowing full well that it will help terrorists and rogue nations.â
Warren isnât alone here. Several senators told us this week they were skeptical that a stablecoin bill â or, in some cases, any major piece of crypto legislation â could become law without some kind of reform targeting illicit finance.
âWeâve got to be very serious about this,â Sen. Jack Reed (D-R.I.) said. âAnd so something that has no real, serious anti-money laundering [reform] â I donât think it should pass.â
Sen. Chris Van Hollen (D-Md.), who stressed he was still reviewing stablecoin policy and legislation, said that âif stablecoins are going to become an even greater part of our transactions, itâs important they not be used as a backdoor to escape AML requirements.â
Itâs not just Democrats: Sen. Thom Tillis (R-N.C.) was also bearish, pointing to some of the structural differences between crypto and traditional finance.
âItâs not as easy as applying the same constructs in this space that we have to traditional banking,â Tillis said. âYouâve got to make sure you get it right, or it becomes an unworkable matrix.â
But not everyone wants a significant crackdown or standalone reform effort targeting crypto and AML. Stacey Daniels, communications director for Lummis, said in a statement that the senatorâs stablecoin bill would âprotect consumers without sacrificing financial innovation.â She added:
âMerely bringing payment stablecoin issuers within the regulatory perimeter will solve the vast majority of illicit finance issues in this space.â
Of course, the opinion of one Senate Banking Committee Chair Sherrod Brown (D-Ohio) is going to carry a lot of weight here. Brown was not interested in discussing the matter last week.
âIâm not going to negotiate with you so you can write about it,â Brown told us when we asked about the role of AML reform in a potential stablecoin bill. Later, Brown did say heâd like to get buy-in from Sen. Tim Scott (R-S.C.), the top Republican on the banking panel.
âI want to work with Senator Scott on everything â on housing, on stablecoins,â Brown said.
â Brendan Pedersen
JURISDICTION PREDILECTION
Data broker bill passes House over finserv objections
The quartet of House foreign aid bills passed on Saturday included a data broker bill that faced late-stage opposition from the bipartisan leaders of the House Financial Services Committee.
Itâs not the end of the world â and the House Energy and Commerce Committee certainly isnât complaining â but, itâs a blow to Reps. Patrick McHenry (R-N.C.) and Maxine Waters (D-Calif.). The bills now head to the Senate as one package, which is expected to clear the chamber.
The 21st Century Peace through Strength Act contained a bill championed by Rep. Frank Pallone (D-N.J.) and House E&C Committee Chair Cathy McMorris Rodgers (R-Wash.) that would prohibit U.S. data brokers from selling sensitive customer data to âforeign adversariesâ and corporate entities they control.
As we scooped Friday morning, McHenry and Waters pushed hard behind the scenes last week to change that language concerning data brokers because of how it approached financial data. The two financial services leaders fought for the Consumer Financial Protection Bureau to be substituted for the Federal Trade Commission in the bill â which would have been a significant eleventh-hour change, to be clear.
That McHenry-Waters effort faltered late Thursday night when the House Rules Committee declined to allow the amendment they proposed to get a vote on the floor this weekend. The sidecar bill passed the House 360-58 on Saturday, and both McHenry and Waters voted against it.
Whatâs next: We donât want to make too big a deal out of this one fight. But itâs still a significant development in a jurisdictional struggle that goes back years between the E&C and Financial Services committees on data privacy.
Banks, other financial institutions and their regulators have had their own data regulatory regime dating back to 1999, and policymakers in this space would like to keep that control. McHenry has a data reform package that would modernize and expand privacy obligations for the financial sector.
But broader efforts at data privacy reform from commerce panels â including the bicameral agreement between Senate Commerce Committee Chair Maria Cantwell (D-Wash.) and McMorris Rodgers â would also cover some forms of financial data. So odds are this isnât the last youâll be hearing about this turf war in this Congress.
Not all bad news: The sidecar bill included some policy wins for other top members of the House Financial Services Committee.
Rep. French Hill (R-Ark.), a subcommittee chair and contender to be the next top Republican on the panel, hailed the billâs passage for including the REPO Act â which would allow the U.S. to seize sovereign Russian assets to aid Ukraine â as well as a package of sanctions targeting Iranian leaders.
â Brendan Pedersen
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GAVEL WATCH
Some đ fundraising in the finserv gavel race
Something to mark your calendar for this week: Rep. Bill Huizenga (R-Mich.) will be in Dallas on Tuesday for a fundraiser.
The eventâs special guest should sound familiar to anyone whoâs followed congressional banking politics for a minute: former Rep. Jeb Hensarling (R-Texas), the last Republican to serve as chair of the House Financial Services Committee before Rep. Patrick McHenry (R-N.C.).
This is a nice pickup for Huizenga as the crowded race to be the next top Republican on the committee kicks off in earnest this quarter.
â Brendan Pedersen
AND THEREâS MORE
Downtown download
The Semiconductor Technology Leadership Council, a coalition of chip makers, brought on Mehlman Consulting to lobby on âissues affecting semiconductor equipment manufacturers; U.S. export control policy; workforce development; and tax issues affecting semiconductor equipment manufacturers.â The hire includes Bruce Mehlman, a former House leadership aide and tech policy official at Commerce under the Bush administration, and Alex Perkins, a former House Ways and Means Committee trade counsel.
The Consumer Data Industry Association hired Porterfield, Fettig & Sears and a team of former banking committee aides to lobby on financial services issues ârelated to privacy, cybersecurity, data security, and credit reporting.â
Banco San Juan, the Puerto Rico-based financial institution, hired an ACG Advocacy team, including former Bush administration and Senate Banking Committee aides to lobby on âinternational banking issues.â
â Laura Weiss
MOMENTS
THE WEEK AHEAD
Monday
The Brookings Institution hosts an event on the lessons of Covid-19 and inflation in emerging markets starting at 9:30 a.m.
Tuesday
The U.S. Chamber of Commerce is hosting its annual Transatlantic Business Works Summit for U.S. and European business leaders and policymakers beginning at 8:30 a.m. Speakers include Commerce Secretary Gina Raimondo and Principal Deputy National Security Advisor Jonathan Finer. The Bipartisan Policy Center holds a 10 a.m. fireside chat with Housing and Urban Development Acting Secretary Adrianne Todman. The Census Bureau will release the latest data on new home sales at 10 a.m. The Urban Institute hosts an event about maximizing the âlocal equityâ of federal funds at 11:30 a.m.
Wednesday
The Mortgage Bankers Association releases survey data on mortgage costs at 7 a.m.
Thursday
The Commerce Department releases Q1 GDP figures at 8:30 a.m. The Securities and Exchange Commission has a closed meeting to discuss injunctive actions and other administrative proceedings at 2 p.m.
Friday
The Commerce Department releases the latest personal consumption expenditures price index at 8:30 a.m. â a crucial data point for the Federal Reserve as it mulls its next inflation moves. The University of Michigan releases consumer sentiment data for April at 10 a.m.
The Vault Recap
CLIPS
Bloomberg
âWhat Fedâs Rate-Cut Delay Means for US and the Worldâ
â Molly Smith and Malcolm Scott
WSJ
âBillions in Dirty Money Flies Under the Radar at Worldâs Busiest Airportsâ
â Margot Patrick
NYT
âHow Mike Johnson Got to âYesâ on Aid to Ukraineâ
â Catie Edmondson
FT
âBlackRock steps up security for Larry Fink after âanti-wokeâ backlashâ
â Louis Ashworth in London and Brooke Masters in New York
Bloomberg
âRents Are the Fedâs âBiggest Stumbling Blockâ in Taming US Inflationâ
â Matthew Boesler and Jennifer Epstein
Editorial photos provided by Getty Images. Political ads courtesy of AdImpact.
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