The Archive

THE VAULT LOOKAHEAD

The Vault Quarterly: Elections and consequences

Gensler talks crypto, banks and what’s next

The Vault Power Matrix

Crypto keeps much of its powder dry

The child tax credit is everyone’s darling

THE TOP

The Vault Quarterly: Elections and consequences

Personnel is policy.

Perhaps no one in finance has better defined that notion in recent years than SEC Chair Gary Gensler.

Gensler led the Commodity Futures Trading Commission in the years following the 2008 financial crisis when the agency went from sleepy regulator to Wall Street scourge as Gensler cracked down on derivatives markets.

He spent the Trump years in relative exile, but Gensler has come roaring back as President Joe Biden’s Securities and Exchange Commission chair.

Who better to sit down with to talk markets ahead of an election with two candidates who have very different ideas about how Wall Street should be policed? So, we did. (You can listen to an audio version of our conversation with Gensler here.)

Among the issues we chatted about in his office at the SEC was crypto. The sector is still the new kid on the block when it comes to finance, but it is flexing a lot of political muscle this election cycle with its checkbook and its growing support from, in particular, younger voters.

The near-term results have been too significant to ignore — an embrace from the Senate’s top Democrat and a legion of rank-and-file House Democrats, to say nothing about the Republican Party’s wholesale endorsement of crypto.

The presidential election is a statistical tie that could come down to one or two swing states. Contrary to the industry’s claims, we don’t expect the election to “hinge” on crypto. But the outcome will certainly mean a world of difference for the digital assets ecosystem.

To get you ready for election season, we’ve also got more of a dive into the crypto world’s political influence and the posturing over the child tax credit. Both could have huge policy consequences in 2025.

And we’d never dare to leave you without the latest Vault Power Matrix!

Thanks as always for reading. Send tips, tricks and scoops to brendan@punchbowl.news and laura@punchbowl.news.

– Brendan Pedersen and Laura Weiss

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– Brendan Pedersen and Laura Weiss

THE INTERVIEW

Gensler talks crypto, banks and what’s next

You’ll hear Gary Gensler’s name come up often in Washington financial circles. The chair of the Securities and Exchange Commission is in the midst of a high-profile turn leading the agency.

He’s angered Wall Street with his tough approach and feuded with Republicans who say he’s overreached. He’s even irked his Democratic allies at times.

So be it. Gensler hopes he won’t be going anywhere for a long time.

“If I’m so honored, I’d continue in this role,” Gensler told us in an interview, when we asked if he’d want to stay in a new Democratic administration. “I love the agency. The issue set is fascinating, and I think it’s continuing to drive efficiency and resilience in these capital markets.”

But his sticking around is no sure thing, no matter who wins the presidential election.

Gensler’s term runs through 2026. Former President Donald Trump has threatened to fire Gensler, and there’s reportedly pressure from some of Vice President Kamala Harris’ donors to do the same.

For now, at least, he remains one of the most significant regulators in Washington. We sat down with Gensler to talk about the agency’s latest projects, his relationship with Congress and what’s next ahead of the 2024 election.

Crypto: Securities law isn’t for everyone — but Gensler says it’s good enough for the crypto sector. Gensler and the SEC’s enforcement arm are the digital asset industry’s single greatest friction point with the federal government.

Gensler recently got a fresh supply of ammo courtesy of the FBI. The bureau published a report earlier this month counting $5.6 billion in fraud “with a nexus to cryptocurrency” in 2023, a 45% increase from 2022.

“It gives you a sense this is a field that’s got a lot of fraudsters, hucksters, grifters, that are trying to prey upon the public’s interest for a better life,” Gensler said, citing the report.

We pushed back on that a bit, pointing out that scammers relying on crypto for payments don’t necessarily implicate the entire industry.

But Gensler noted that, nonetheless, there are plenty of bad actors.

“There’s also straight up preying upon the public, and all too often it’s actually those less able to bear the losses,” Gensler said. “And if you look at the folks that got hurt over the years, there’s significantly — they touch upon communities of color, less wealthy individuals.”

The agenda: Gensler said his focus on the near future is about solidifying work from the recent past. He noted the agency has put in place several major rules, including those focused on corporate governance, money markets, cyber resiliency and changes that allow investors to get money from stock sales faster.

In the coming months, his agency is going to work hard on the “implementation phase” of those policies. It will also try to get some lower-profile proposals over the finish line.

Gensler and Congress: Gensler and the work he’s championed have become political targets of late, particularly for House Republicans. GOP lawmakers love to press the chair on the agency’s agenda and activities, particularly on crypto enforcement actions and climate risk disclosures.

But Gensler brushed off the idea there’s heightened pressure. He said he’s got “warm relationships with people on both sides of the aisle.”

Here’s more from Gensler:

Too big to fail: The effort to end the “too big to fail” era ushered in by the 2008 financial crisis is an ongoing project in Washington. And Gensler told us he was saving a point he wanted to make for when we “weren’t in the midst of a tornado.”

That time came earlier this month when he gave a speech about financial firms in distress and a need for more robust disclosures. His point was that regulators and markets need to have a clear picture of what’s going wrong with a firm.

“Big financial institutions need to use disclosure before they get into a mess,” Gensler said. He argued regulators need to “get disclosures that really speak to the core question: How deep was the hole, and did the hole get filled?”

The Chevron ruling: The Supreme Court’s decision to overturn the Chevron doctrine is undoubtedly a monumental ruling for federal policymaking. It means the courts — not regulators — will get more power in deciding how to interpret any gray area in the law. So we asked Gensler what it could mean for the SEC.

Like with any court ruling, Gensler said his agency will “review it and, if appropriate, we adjust.”

Gensler added he believes Congress “has spoken very clearly over the decades” about the SEC’s role, including a mandate to act as a “competition authority” amid rapidly changing technologies and business models.

“Congress often is pretty specific, and there’s clear direction,” Gensler said.

– Laura Weiss and Brendan Pedersen

WHO’S UP, WHO’S DOWN

The Vault Power Matrix

– Laura Weiss and Brendan Pedersen

THE STAT

Crypto keeps much of its powder dry

One of the biggest stories of the 2024 election is the crypto sector’s historic foray into campaign finance. The Fairshake super PAC network has raised at least $169 million over the course of this cycle.

That’s an eye-watering and historic sum by any measure. The portion of money spent by just two companies — Coinbase and Ripple Labs — accounts for nearly half of all the corporate spending in the 2024 election.

But raising the money and spending it are different propositions. A look at Fairshake’s actual spending to date, plus a general election that’s just weeks away, suggests that crypto advocates are sitting on a stockpile that won’t be spent by November.

Of that $169 million total, Fairshake reported in its most recent filings that it still had $102 million in cash on hand. Since then, Fairshake has announced approximately $18 million in new spending commitments in Ohio, Michigan and Arizona.

That means Fairshake has only spent about 40% of its campaign coffers to date. That remaining 60% will matter even if the funds remain on the sideline. That much campaign cash will make vulnerable lawmakers anywhere think twice about criticizing the digital asset sector.

Is that a problem for, say, democracy? Not so, says Rep. Ro Khanna (D-Calif.), an industry ally who told us the sector’s maturation, technological promise and embrace by younger voters has propelled crypto’s political fortunes.

“The shift has been generational. A lot of voters have bitcoin as a store of value, a modern gold. They’re in many swing states; they’re highly organized,” Khanna said. “My sense is it’s more to do with the adoption of it by a lot of the next generation.”

But Khanna couldn’t discount the campaign finance angle entirely. “Obviously, their political advocacy has also been a factor,” the California Democrat said. “But I think the bigger factor is the large numbers who use it and are outspoken about it.”

Fairshake’s recent expenditures may be the most significant of the general election. The lion’s share of that $18 million spend is headed to Ohio to support Republican senate candidate Bernie Moreno, who is lagging behind Sen. Sherrod Brown (D-Ohio).

Fairshake announced last month they’d reserved $12 million in TV ad time for Moreno in an effort to unseat Brown, who chairs the Senate Banking Committee and has been plenty skeptical of the industry. Here’s the latest example of the ads Fairshake’s affiliate, Defend American Jobs, is running for Moreno:

In Arizona and Michigan, Fairshake is backing Democratic candidates for Senate — albeit with much smaller tranches of spending. Reps. Ruben Gallego (Ariz.) and Elissa Slotkin (Mich.) wil be boosted by $3 million in TV ads each. Those ads are being paid for by Fairshake affiliate Protect Progress. Watch a Gallego spot here and a Slotkin spot here.

– Brendan Pedersen and Laura Weiss

EYE ON 2025

The child tax credit is everyone’s darling

When politicians talk about the 2025 tax fight on the campaign trail, they paint with broad strokes. But the child tax credit has a way of finding the spotlight.

It’s no shock that the benefit for families with kids is drawing attention from both parties with the election on the line and a huge tax debate brewing. But there’s no shortage of tension over a policy that could wind up creating a major impasse next year if there’s a divided government.

Democrats make no secret of their interest in selling voters on an expanded CTC. For years, Democrats have been trying to revive a bigger 2021 version they consider a signature policy. Key Democrats want to emphasize in this election that they’re the party that delivers on the CTC.

There are GOP fans of the CTC too, in particular some House members from swing districts and more populist types. Sen. JD Vance (Ohio), the Republican vice presidential nominee, said on “Face the Nation” in August that he’d “love to see a child tax credit that’s $5,000 per child” and for it to “apply to all American families.”

The Senate Finance Committee’s top Republican, Mike Crapo of Idaho, told us that he’s open to expanding the CTC next year beyond the levels set in 2017.

Here’s Crapo on the CTC, the Trump-Vance ticket and 2025:

Of course, Democrats aren’t thrilled with Crapo over this very issue. Senate Republicans refused to back the Wyden-Smith tax deal. That bill would have expanded the CTC for some of the lowest-income families while also reviving business tax breaks.

“The reality is we see this continually,” Senate Finance Committee Chair Ron Wyden (D-Ore.) said. “Donald Trump talks a big game about going to bat for working families but when the dust settles, that’s not where he puts any real attention.”

Sen. Bob Casey, a Democrat up for reelection in the battleground state of Pennsylvania, pointed to most Republican senators voting down the Wyden-Smith deal. “That was a missed opportunity,” he said.

Speaker Mike Johnson, meanwhile, touted the CTC when laying out his economic vision this week at the America First Policy Institute. Johnson said he wants a “strong child tax credit” in a tax bill next year. He added:

This, of course, is the central problem. Republicans emphasize work requirements. Democrats’ top priority is delivering more CTC benefits for the poorest families, even if they don’t have jobs.

Everyone might be rushing in to claim the CTC, but the difference over the details has the makings of a major policy hang-up for 2025.

– Laura Weiss