The Archive

IN THIS EDITION

Adams indicted, Cardin targeted

The federal government is funded — for now

The Vault: ‘Crypto is inevitable,’ Waters says

A new child care bill and an IRS funding push

THE TOP

Adams indicted, Cardin targeted

Happy Thursday morning.

On any other day, Wednesday’s government funding vote would be our biggest story. But this morning we’ll focus on two major stories from late Wednesday night: A spy scandal we broke and the indictment of New York City Mayor Eric Adams.

On Adams. The New York Times scooped Wednesday night that the 64-year-old Adams will be charged as part of a federal corruption probe that’s engulfed his administration. Adams would be the first sitting NYC mayor to face criminal charges.

What Adams is alleged to have done is still unclear. The City reported that Adams “is being charged with acting as an unregistered foreign agent for taking actions in his official capacity after receiving donations from foreign sources.”

Other members of Adams’ inner circle could also be charged, according to multiple reports from the Big Apple.

Damian Williams, the U.S. Attorney for the Southern District of New York — who also just indicted rapper Sean “Diddy” Combs — will hold a press conference on the Adams case today.

Adams quickly released a video claiming the allegations “will be entirely false, based on lies. But they would not be surprising.”

Here’s Adams with a very Trumpian line:

Adams also said he wouldn’t resign. However, New York Governor Kathy Hochul could remove him from office. But it wouldn’t be easy.

The reverberations from this blockbuster story will play out on Capitol Hill and across official Washington. House Minority Leader Hakeem Jeffries and Senate Majority Leader Chuck Schumer — two New Yorkers as well as being the top Democrats in Congress — didn’t have any comment last night.

And just before news of the indictment broke, Hizzoner was with President Joe Biden at a Metropolitan Museum of Art reception. Perfect.

However, we’ll note that Rep. Alexandria Ocasio-Cortez (D-N.Y.) called on the scandal-plagued Adams to resign hours before the indictment story broke.

Influence Ops: We scooped the news that Senate Foreign Relations Committee Chair Ben Cardin (D-Md.) was the target of a highly sophisticated deepfake operation that impersonated a top Ukrainian official.

Cardin released a vague statement saying that “a malign actor engaged in a deceptive attempt to have a conversation with me by posing as a known individual.”

But our reporting reveals alarming details of what happened during the conversation.

An individual pretending to be recently-resigned Foreign Minister Dmytro Kuleba sought and ultimately secured Zoom call with Cardin, likely by recreating Ukrainian domain names.

The FBI is investigating the incident, which occurred last week. Senior Senate leadership aides were alerted via email about the incident Monday morning. The email, which we reviewed, states that the impersonation effort had “technical sophistication and believability.”

Stepping back: It should be no surprise that members of Congress are targeted with these kinds of influence operations. They regularly take meetings with foreign diplomats and world leaders eager for face time with power players on Capitol Hill. This includes Cardin, who as SFRC chair has veto power over important administration decisions like weapons sales.

Foreign officials are always looking for inside information about what could happen on a variety of issues, including what lawmakers hear from the White House, Pentagon or intelligence agencies.

Sen. Jeanne Shaheen’s (D-N.H.) office was contacted in 2018 by an individual posing as a Latvian diplomat. That person was seeking privileged information about U.S. sanctions against Russia that Congress had recently approved.

That same year, Russian hackers targeted then-Sen. Claire McCaskill’s (D-Mo.) office with a phishing operation intended to infiltrate the senator’s email networks.

But what happened to Cardin was different — and light-years more advanced. The “malign actor” was able to generate a fake but believable Zoom invitation. They also used AI to recreate Kuleba’s voice and a video feed that looked exactly like him.

Even if the on-screen elements weren’t perfect, what likely made Cardin and his staff suspicious at first was the nature of the questions being asked.

As we reported, the Monday memo to senior leadership aides stated that the person impersonating Kuleba was asking “politically charged questions in relation to the upcoming election… likely trying to bait the senator into commenting on a political candidate.”

This appears to be the goal of these influence operations. Foreign adversaries want to goad U.S. officials into saying things that can be used for propaganda purposes.

While the Cardin incident hasn’t officially been attributed to Russia, aides briefed on the ongoing FBI investigation believe Moscow is the most likely culprit — especially because of this question that “Kuleba” asked Cardin, per the memo:

If Cardin said yes, it would be very valuable propaganda for Moscow. They could accuse the United States of seeking to escalate the war with Russia even further.

— Andrew Desiderio and John Bresnahan

NEW! Join Punchbowl News founder Jake Sherman for a conversation with Sen. Mark Warner (D-Va.) on Thursday, Oct. 31 at 9:30 a.m. ET. They’ll discuss news of the day and how 5G supports America’s global competitiveness. Afterward, Meredith Attwell Baker, president and CEO of CTIA, will join Jake for a fireside chat. This is the second event in a two-part series, “5G and America’s Competitiveness,” presented by CTIA. RSVP now!

GOVERNMENT FUNDING

The federal government is funded — for now

Let’s start the clock anew: The federal government runs out of money in 85 days.

The House and Senate easily cleared a short-term spending bill Wednesday, kicking the contentious debate over federal spending to the lame-duck session of Congress.

Most importantly, that’s well beyond the November elections, which will have a huge impact on what happens next. Lawmakers aren’t scheduled to be back in Washington until Nov. 12.

The House passed the CR package 341-82, followed by the Senate approving it 78-18.

This comes after a particularly abysmal appropriations season, in which the House passed five of 12 spending bills but on party-line votes. The Senate Appropriations Committee reached bipartisan agreements on 11 of the 12 bills, yet none of them made it to the floor.

Lofty promises to return to regular order on the appropriations process were made all year — and abandoned. For example, Speaker Mike Johnson, who famously declared that he was “done with short-term CRs” shortly after taking the job, passed a short-term CR on Wednesday.

Johnson made a new promise Wednesday after passing the bill — he won’t allow an omnibus spending bill to pass in the lame-duck session of Congress:

But Johnson is going to be under a tremendous amount of pressure in the lame-duck session — not least from appropriators, defense hawks, Democrats and the White House, all of whom will want a global spending deal to complete work on the FY2025 bill. He’ll have to extend the farm bill and push through the must-pass defense authorization bill.

All this will take place against a possible change in control of the House, Senate and White House.

Republican leadership elections for the House and Senate will be held during the lame-duck session. Johnson is already starting to lay the groundwork for another term as speaker if Republicans keep the House. If they don’t, a full-on struggle for control of the House GOP Conference is likely.

The Louisiana Republicans say “continuity” will be “very important” to ensure Trump has a successful year. Johnson refuses to entertain the idea that Republicans may lose the House.

– Jake Sherman

The Vault: ‘Crypto is inevitable,’ Waters says

The top Democrat on the House Financial Services Committee has spent the last two years acting as a prominent bulwark against the influence of the crypto sector in Congress.

But in an interview Wednesday, Rep. Maxine Waters (D-Calif.) acknowledged how the political environment has changed in recent months.

“Crypto is inevitable,” Waters said. “There are countries that are way ahead of us.”

That’s not something we’ve heard Waters say before. But the broader landscape around Waters has also changed.

On the trail, Vice President Kamala Harris has pitched herself as a more business-friendly Democrat than President Joe Biden. That includes a tentative embrace of crypto at a fundraiser earlier this month, where Harris said her administration would “encourage innovative technologies like Al and digital assets while protecting our consumers and investors.”

We asked Waters how she was feeling about crypto these days, given the Harris campaign’s recent positioning. The California Democrat responded by saying crypto was “inevitable.” And while Waters’ full response makes clear she’s still prioritizing consumer protection in these discussions, the change of tone was persistent:

If Democrats retake the House in November, Waters is expected to resume the mantle of Financial Services Committee chair. As ranking member, Waters has spent much of the 118th Congress opposing — or at least tempering — the crypto sector’s top priorities. That includes the FIT for 21st Century Act, which passed the House with 71 votes in May.

When FIT came up for a floor vote, Waters pilloried the effort led by Reps. Patrick McHenry (R-N.C.) and G.T. Thompson (R-Pa.). Waters said the bill “would deregulate a substantial portion of the crypto industry,” and she implored Democrats to hold the line: “Don’t be afraid of Big Crypto and stand for everyday investors and consumers,” she said.

Given that resistance last spring, we asked Waters how she was feeling about the sector writ large. Waters said she is “not opposed to crypto,” and she again pointed to international crypto developments. “I think we may even be behind, as I look worldwide, on digital,” Waters said.

Waters suggested change was in the air earlier this week, when senior officials at the Securities and Exchange Commission testified before the banking panel. Waters said she wanted to strike a “grand bargain” on stablecoins. It sounds like that may not be the last deal she tries to cut.

— Brendan Pedersen

TAX WORLD

A new child care bill and an IRS funding push

Sens. Michael Bennet (D-Colo.) and Marsha Blackburn (R-Tenn.) are unveiling a new child care bill today.

It’s the latest sign of bipartisan momentum to try to make child care more affordable and accessible. Lawmakers are honing in on tax credits as a good strategy to get something done. With many of the 2017 Trump tax cuts expiring next year, there’s a window to get in on what could be a massive tax bill in 2025.

The Bennet-Blackburn bill would significantly expand the employer-provided child care credit. It would offer the biggest boost to businesses in rural and low-income areas, granting benefits of up to $1.2 million per year for providing workplace child care facilities. Small businesses could get up to $1 million, and the maximum for other employers would be $800,000.

Read the bill here.

Sens. Tim Kaine (D-Va.) and Katie Britt (R-Ala.) also teamed up on a new child care proposal this summer. It’s a more expansive package than the latest Bennet-led legislation. But Bennet and Blackburn’s interest is notable because they both sit on the tax-writing Senate Finance Committee.

The House has its own bipartisan bill to expand tax credits for child care-related expenses. Rep. Salud Carbajal (D-Calif.), who leads that legislation, told us even before the Bennet-Blackburn entry into the mix that he believed momentum was building to get something done in 2025.

Of course, there’ll be a lot of tax cut priorities to contend with next year. Even without new tax credits in the mix, extending the Trump tax cuts would cost trillions. But if there’s divided government next year, bipartisan buy-in will help make child care measures a stronger contender.

Exclusive: Rep. Linda Sánchez (D-Calif.) is pressing Speaker Mike Johnson on IRS funding in her first move as the top Democrat on the House Ways and Means Committee’s Oversight panel.

In a new letter, Sánchez says she’s concerned the CR that passed on Wednesday could pave the way for more pressure on the IRS budget. That’s because it continues funding at levels from FY2024 appropriations bills, which clawed back IRS funds. The agency lost about $20 billion of an extra $80 billion that Democrats passed in the Inflation Reduction Act in negotiations with the House GOP.

Sánchez argues there’s a possibility that “future appropriation bills using similar language could lead to an anomaly where $20 billion is continually cut from the IRS.”

Read the letter here.

Here’s more from Sánchez’s letter to Johnson:

IRS funding has become an especially thorny spending issue since Democrats gave the agency extra money focused on enforcing the tax code and cracking down on tax cheats. There’ll be plenty more opportunities — like the lame duck — for Congress to spar over the IRS budget.

— Laura Weiss

… AND THERE’S MORE

House Republicans pressure Johnson on farm bill

News: More than half of the House Republican Conference has penned a letter to their own leadership, urging them to put the GOP’s farm bill on the floor during the upcoming lame-duck session.

The Farm, Food, and National Security Act of 2024 passed out of the House Agriculture Committee in May with all Republicans and four Democrats voting yes. But House GOP leadership has slow-walked the legislation to the floor due to concerns about flagging support from Democrats and Republicans.

The letter has high-profile House GOP supporters, including Agriculture Committee Chairman G.T. Thompson (Pa.), Budget Committee Chair Jodey Arrington (Texas), Oversight Committee Chair James Comer (Ky.), Natural Resources Chair Bruce Westerman (Ark.), Foreign Affairs Chair Michael McCaul (Texas) and Appropriations Committee Chair Tom Cole (Okla.).

The letter was led by Republican Reps. Mark Alford (Mo.), Ashley Hinson (Iowa), Mary Miller (Ill.) and Jen Kiggans (Va.).

The GOP lawmakers urge Speaker Mike Johnson to consider the farm bill a “must-pass” bill in the lame duck.

House Republican leadership has told us they are likely to pass a short-term extension of the current farm bill in the lame duck.

Also news: The DCCC is adding Whitney Fox, April McClain Delaney and John Avlon to its Red-to-Blue program for top House Democratic challengers.

Fox is running against Rep. Anna Paulina Luna (R-Fla.) in Florida’s 13th District. Luna has staked out some position to the far right of the House GOP this Congress. Delaney is running to succeed Rep. David Trone (D-Md.) in the 6th District race that could get competitive thanks to former Gov. Larry Hogan’s Senate campaign. Avlon is challenging Rep. Nick LaLota (R-N.Y.) in the 1st District, which got redder in redistricting.

— Jake Sherman and Max Cohen

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