🏦 The Vault Quarterly: A big moment for tax and crypto

THE VAULT LOOKAHEAD

Congress on the brink of… success?

Assessing Congress’ financial policy leaders

The Senate tax bill’s winners and losers

The Vault Power Matrix

How independent will Powell’s successor be?

THE TOP

Congress on the brink of… success?

Welcome back to The Vault Quarterly.

Washington is smack in the middle of a frenzied rush to score legislative wins five months into President Donald Trump’s second term.

It all means big changes are looming this summer for taxes and crypto.

In moments like this, we learn a whole lot about how congressional leaders guide the ship. That’s why we decided to take you on a run-through of how each chair and ranking member on the House and Senate Banking committees has fared in the 119th Congress.

The Senate’s successful passage of the GENIUS Act, which would regulate stablecoins, is a landmark moment for the crypto industry. In the wake of that win, more crypto bills are certainly coming. The entire episode speaks volumes to how financial policy leaders like Senate Banking Committee Chair Tim Scott (R-S.C.) and House Financial Services Committee Chair French Hill (R-Ark.) operate.

Meanwhile, Republicans are sprinting to pass Trump’s legislative agenda via the filibuster-proof reconciliation process. The GOP’s bill would extend the 2017 tax cuts, dole out new tax relief Trump campaigned on and slash more than $1.5 trillion in federal spending. That’s just skimming the surface.

Suffice to say, it’s a hugely consequential moment for the GOP. But we always want to drill down on how tax changes are going over. So we’ve got your winners and losers from the Senate Finance Committee’s latest tax text.

We’re also looking ahead to the future of the Federal Reserve. Now that Trump appears to have decided against trying to fire Chair Jay Powell, senators are mulling what the next chair will have in store for the U.S. central bank. We asked some key members whether they believe the nature of the Fed’s independence will change under the next chair and what that would mean for the economy.

Last but certainly not least: Vault! Power! Matrix! Get it while it’s hot.

Thanks, as always, for reading.

– Brendan Pedersen and Laura Weiss

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LEADER LOOK

Assessing Congress’ financial policy leaders

The past 150 days have been momentous for the financial policy world. Congress has been at the center of much of the action.

Lawmakers are working overtime to incorporate crypto into the regulated financial system. The U.S. housing affordability crisis looms. President Donald Trump’s trade wars are bending the economy in ways policymakers are just beginning to understand. And stock and bond markets have been bouncing around like an EKG.

All this financial policy action comes as key congressional panels have new leaders. So let’s take a second to check in with four lawmakers who are defining the Trump administration’s finance agenda, either through support or opposition.

Sen. Tim Scott (R-S.C.): The Senate Banking Committee chair had a good spring. It remains to be seen whether the summer will be as kind.

Scott’s panel advanced the GENIUS Act to regulate the stablecoin market in March, and the bill passed the Senate on Tuesday with 18 Democrats. This is the first time the Senate has ever advanced crypto legislation. Banking has also quickly advanced several critical financial policy nominees — though a few prominent ones have struggled to get floor time.

Everything coming next will be tougher. It’s not clear how the House will proceed on GENIUS, given its own approach. Scott has faced open skepticism from GOP members about his panel’s section of the party’s reconciliation package, which tries to eliminate funding for the Consumer Financial Protection Bureau. The committee has barely touched crypto market structure reform, giving the House’s product a legislative edge.

Sen. Elizabeth Warren (D-Mass.): The ranking member of the Senate Banking Committee has had a weird season so far.

The headlines haven’t been pretty for the Massachusetts progressive. Warren fought hard against the GENIUS Act, arguing the bill would crack open the payments system for commercial giants, imperil community banks and further enrich Trump. For her trouble, more than half the Democrats on the Banking panel voted for the stablecoin bill on the floor.

Warren has also been denied some key personnel victories. The White House isn’t planning to fill Democratic spots on bipartisan agency boards, such as at the Securities and Exchange Commission, which would have been a golden opportunity for Warren to install future financial policy leaders from her orbit.

But it hasn’t been a wash. There’s no question that pressure from Warren and other Democrats shaped key additions to the final version of GENIUS. Warren has found pockets of bipartisanship, including with Sen. Jim Banks (R-Ind.) on national security concerns around Nvidia and even with Trump on getting rid of the U.S. debt limit. And the Banking Committee is expected to host a bipartisan housing markup as soon as next month.

Rep. French Hill (R-Ark.): The House Financial Services Committee chair is in a strong position heading into the summer and fall.

Hill’s committee is a pocket of discipline in an otherwise unwieldy House. The panel has been cranking through legislation all year long, hosting six days’ worth of markups since January. That includes high-profile crypto bills, reconciliation instructions and a flurry of changes to bank supervision.

The Senate has outrun the House on stablecoin legislation. But Hill holds significant leverage on the second half of the crypto sector’s legislative agenda after lawmakers advanced a bill that would set the rules of the road for crypto markets through both the House Agriculture and Financial Services committees.

The crypto sector is more than a little worried that Congress won’t enact both halves of its agenda this session. Right now, Hill’s got two bills in hand to the Senate’s one. If we’re gonna see One Big Beautiful Crypto bill, chances are it will appear in the House.

Rep. Maxine Waters (D-Calif.): Like Warren, Waters has mostly struck out on crypto legislation this year. The California Democrat has been flatly opposed to the digital asset bills coming out of the House Financial Services Committee, but that hasn’t stopped some of her members from backing these efforts.

But we’ll say this much about the former Democratic chair of Financial Services: She has made Republicans fight for every inch of every markup held this year. Waters has forced marathon, 10-hour-plus markups several times this year, including a 13-hour markup of the STABLE Act in April. Regardless, policy-wise, the effect has been muted.

– Brendan Pedersen

RECONCILIATION

The Senate tax bill’s winners and losers

Senate Republicans have imposed their will on the tax bill — scaling back pay-fors, making more tax cuts permanent and crushing SALT.

But the tax fight isn’t over. Senate Republicans are in for tough negotiations to get a compromise on politically fraught Medicaid cuts and tax changes that have to be settled with uneasy senators and wary House members.

Republicans are rushing to get the party-line reconciliation bill carrying President Donald Trump’s domestic agenda through the Senate by July 4. Then they want to get it to Trump’s desk before August.

Plenty could change before any bill makes it through Congress. But we want to highlight the notable winners and losers from the Senate’s rewrite of the House tax bill.

Winners.

— Big businesses: Senate Republicans put their foot down and made a trio of tax breaks permanent, rather than reviving them for five years like the House bill did. That includes a provision affecting businesses’ research and development spending, which is a huge priority for large companies.

There are still tax increases that K Street isn’t thrilled about, but things have shaken out well overall for corporate America.

— Seniors: GOP senators scaled back Trump’s tax priorities in their bill by adding new limits to provisions like “no tax on tips” and “no tax on overtime.” But Senate Republicans decided to spend more on tax cuts for seniors. Their bill gives seniors who earn less than $75,000 an extra $6,000 tax deduction. The House offered $4,000.

— Sports team owners: Trump had a fun surprise for owners of major league sports teams earlier this year when he called for a crackdown on their taxes. The House delivered, limiting a key tax break for team owners that would’ve seen them pay $991 million more in taxes over a decade. The Senate dropped the tax hike in a win for the big leagues.

Losers.

— SALT: Senate Republicans despise deductions for state and local taxes and made that very clear. They responded to the House lifting the SALT cap to $40,000 in its bill by extending the current $10,000 limit in the Senate version.

GOP senators only represent purple and red states where the SALT cap doesn’t matter the way it does in blue states. But House members from states like New York, New Jersey and California view a bigger deduction as an existential issue and are promising to vote down any bill that doesn’t include one.

— Pass-through businesses: There’s a lot for partnerships, S corporations and other pass-through businesses to cheer in the tax bill. For one, they wanted their 20% deduction to be made permanent, and it will be. But the House shelled out to boost deductions for these firms to 23%. Senate Republicans reverted to 20% as they tried to make the deficit math work.

— HSAs: The House tax bill would’ve expanded tax-advantaged health savings accounts. The Senate dropped the new HSA boosts. There was a lot of ground for Senate Republicans to try to cover, juggling different priorities and costs in the tax bill. We’re sure the efforts from HSA backers won’t end here.

– Laura Weiss

WHO UP WHO DOWN

The Vault Power Matrix

— Laura Weiss and Brendan Pedersen

THE SENATE X FEDERAL RESERVE

How independent will Powell’s successor be?

We’re just about done musing about the possible firing of Federal Reserve Chair Jay Powell, whose term is set to expire in May.

Now, the hottest central banking parlor game is who President Donald Trump will choose as Powell’s replacement. The decision, per Trump, is coming “very soon.”

The leading contender appears to be Kevin Warsh, a former Fed governor. Treasury Secretary Scott Bessent has also been floated. But we’re not here to belabor names.

Instead, we’ve spent this month asking Senate Republicans whether the next chair, whomever that is, should maintain Powell’s approach that the Fed act completely independently of the president? Or, would it be OK for Trump to nominate someone who, in his words, would give him more of a “say” in monetary policy?

Senate Banking Committee Republicans took a cautious approach to our question. They did say they want someone who will act independently. But they added they’re fine with a chair talking to Trump — noting Powell recently visited the White House at Trump’s request.

“The Federal Reserve is and should continue to be independent, and there’s nothing wrong with the Federal Reserve chair talking to a president,” Sen. John Kennedy (R-La.) said. “Happened just recently.”

Sen. Mike Rounds (R-S.D.) took a similar position.

“I don’t think there’s anything wrong with the Fed chair visiting with the White House or with members of Congress,” he said. “In fact, we encourage it. But we expect them to stand the ground and to do what is statutorily accepted to them.”

Pressuring the chair: Trump’s relationship to Powell and the Fed has always been a bit rocky. Trump likes low rates. COVID-era inflation made that untenable, and trade wars haven’t helped in the meantime.

Trump has lobbed many angry posts in Powell’s general direction since January. Trump’s belligerent approach toward Powell has raised questions about whether he would nominate someone who would maintain independence as a bright red line not to be crossed.

Supporters of a completely independent Fed say it gives markets confidence that decisions are being made solely based on what the economics dictate.

“The only places where it’s not independent is in countries whose Powerball jackpot is 287 chickens and a goat,” Kennedy said.

But, look: We’re talking about the Senate. There’s never been any amount of nose-holding that will keep politics out of the nomination process. Some Senate Republicans are willing to embrace that dynamic.

Here’s Sen. Kevin Cramer (R-N.D.):

But Cramer added the Senate doesn’t have to confirm a pick it doesn’t think is up to the job.

“Donald Trump will get to pick the next Fed chairman. That’s going to determine what kind of a Fed chairman we have in a Republican Senate,” he said. “Maybe we’ll confirm that person. Maybe.”

– Brendan Pedersen