The Archive

GOP INVESTIGATIONS

Republicans accuse Khan of misleading Congress over possible ethics violation

House Republicans are accusing Federal Trade Commission Chair Lina Khan of “misleading” Congress over statements saying she fully followed federal ethics guidelines from her agency.

House Judiciary Committee Chair Jim Jordan (R-Ohio) and Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.) raised concerns related to Khan’s participation in a case involving Facebook’s parent company, Meta.

“A recent report suggests that you declined to fully follow ethics advice that you recuse yourself from a pending FTC matter in 2022, despite testifying under oath in 2023 that you have always followed nonpartisan ethics guidance,” Jordan and McMorris Rodgers told Khan on Wednesday.

The two GOP committee chairs referenced a Bloomberg article that cited internal FTC documents on the issue. Khan refused to recuse herself from an FTC case against Meta despite being told to do so by the agency’s top ethics official, known as the Designated Agency Ethics Official, Bloomberg reported.

The letter cites an exchange between McMorris Rodgers and Khan during her April testimony in which Khan responded “no” when asked if there had ever been instances where she had not followed the DAEO’s advice.

Jordan and McMorris Rodgers are requesting records for any exchanges between Khan and FTC ethics officials, as well as any references Khan made to her April testimony before the Energy and Commerce Committee. The lawmakers provided a July 12 deadline for the documents.

In a separate letter to Khan, Jordan requested transcribed interviews from 23 FTC employees, citing the Judiciary panel’s “oversight of the programs and operations” as it relates to the agency.

The expanded probe comes ahead of Khan’s testimony before the Judiciary Committee on July 13.

As we reported in our AM edition on Wednesday, Jordan — a “Big Tech” critic — has targeted Khan over the FTC’s investigation into Twitter since it was bought by Tesla CEO Elon Musk.

The FTC confirmed to us they had received the letter from Jordan and McMorris Rodgers, but declined to comment any further.

— Mica Soellner

Fed says largest US banks are in good shape to weather severe downturn

The country’s largest banks are still well-positioned to survive a severe recession, according to the results of the Federal Reserve’s latest annual stress testing.

The Fed announced late Wednesday afternoon that all 23 banks tested this year passed. The U.S. central bank subjected large banks’ capital buffers to a simulation that imagined the unemployment rate at 10%, a 45% loss in the U.S. stock market and a 40% drop in the value of commercial real estate.

The banks tested include JPMorgan Chase, Bank of America, BMO Financial, Citigroup, Citizens Financial, Goldman Sachs, Morgan Stanley, PNC Financial Services Group, U.S. Bancorp and Wells Fargo. See the full results here.

These 23 banks would have suffered more than $500 billion in losses under this year’s scenario, but they still managed to stay above critical capital thresholds. That’s good if you’re the type of policymaker who prefers to avoid financial crises.

This result isn’t shocking. It’s become rare for U.S. banks to fail their stress tests in recent years, and most banks passed this year with flying colors.

But even though Federal Reserve Vice Chair for Supervision Michael Barr said that Wednesday’s results “confirm that the banking system remains strong and resilient,” he warned that policymakers should also “remain humble about how risks can arise.”

Case in point: The Fed’s stress tests don’t really grill banks on their exposure to interest rate risk. That is a notable gap, given that Silicon Valley Bank failed dramatically in large part last spring after failing to hedge against rising interest rates. (The Fed designed and announced the approach its stress tests would take in February, a month before the crisis began.)

We expect that to change in the coming years. The Fed’s 2023 stress test conducted an “exploratory market shock on the trading books of the largest banks, testing them against greater inflationary pressures and rising interest rates.”

— Brendan Pedersen

THE HOUSE’S RIGHT FLANK

Inside a documentary on the right-wing revolt during January speaker’s vote

We got a sneak peek of an upcoming documentary that takes viewers behind the scenes of hardline conservatives’ effort to deny Kevin McCarthy the speaker’s gavel back in January.

The film, titled “The People’s House,” is a production of FreedomWorks — a Freedom Caucus-aligned outside group.

Many of the key players from the speaker’s fight sat down with FreedomWorks for interviews on their experiences during the marathon, 15-floor vote fight. There’s a lot of fascinating insight into the thinking of the House’s top conservative rabble-rousers in the documentary.

Check out the trailer here.

Here are a few quotes from the film, which debuts late next month:

Rep. Thomas Massie (R-Ky.) on his support for McCarthy: “I was a staunch, unflinching, barely-Kevin all 15 rounds… What I wanted to see come out of that conflict was a better institution, not a different speaker.”

Rep. Andy Biggs (R-Ariz.) on a surprise during the days leading up to the speaker vote: “So on Jan. 3, I anticipated 12 or 13 people would vote either for me or Jordan or somebody other than Kevin. Then we actually picked up an individual from Texas who was a freshman. Just, we never even talked to him. We had no idea where he was. It made it real.”

Rep. Ralph Norman (R-S.C.), a McCarthy critic who ended up on the influential House Rules Committee: “We had members threatening us that if we didn’t vote for McCarthy, we’re going to lose our committee. Do it! I’ve cut grass before. I can vacuum carpet. I don’t care what committee I’m on.”

— Max Cohen

CHECKING THE RECORD

Duarte walks back comments saying he is aligned with HFC

Rep. John Duarte (R-Calif.) walked back his comment that he’s “not that far” from the ultraconservative House Freedom Caucus on policy goals — a remark he made in a Punchbowl News interview that ran earlier this week.

In our profile of Duarte, the vulnerable California Republican spoke about being aligned with the right flank when it comes to some fiscal issues.

“I’m not that far from a lot of these Freedom Caucus guys” on fiscal policy, Duarte told us, while adding he’s a moderate on social issues.

Duarte talked about a bloated federal government and said it was “silly” to care too much about the recent blow-ups HFC has had, which included a standoff with leadership that completely halted House action.

Yet one day after our story ran, Duarte called up his local paper, the Sacramento Bee.

Duarte told the Bee he didn’t support certain fiscal stances HFC takes, such as defunding federal law enforcement, welfare programs and climate initiatives. Duarte also said the group’s “no debt whatsoever” goal would be bad for the U.S. economy.

“I’m a Republican. I’m going to be a Republican. But other than that, I don’t really have a huge affiliation with any one, one faction or another. Other than how can we help each other get policy across the line,” Duarte told the paper.

Duarte represents California’s 13th district, which is home to the San Joaquin Valley area. His district voted for President Joe Biden by 11 points in 2020, making him a top target for Democrats this cycle.

No surprise, the House Democrats’ campaign arm has already jumped on Duarte’s comments.

“John Duarte made clear he endorses the cult of far-right extremists that has taken over the GOP conference,” DCCC spokesperson Viet Shelton told us. “The Duarte-backed House Freedom Caucus agenda will hurt everyday Californians struggling to make ends meet.”

— Mica Soellner

MOMENTS

10 a.m.: President Joe Biden will get his daily intelligence briefing.

12:45 p.m.: Biden will leave the White House for Joint Base Andrews, where he will fly to New York. Karine Jean-Pierre will brief on Air Force One.

4 p.m.: Biden will sit for an interview with Nicolle Wallace on MSNBC at 30 Rock.

5:30 p.m.: Biden will attend a fundraiser.

7:40 p.m.: Biden will attend a second fundraiser.

9:05 p.m.: Biden will leave New York for D.C. He’s expected back at the White House at 10:50 p.m.

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