At the SEC
U.S. House Democrats are warning that the 21-day-long government shutdown is interfering with financial markets, given the limited resources that regulators have been forced to operate with.
"The president has all but closed the doors of the SEC," Rep. Maxine Waters, D-Calif., who chairs the House Financial Services Committee, said Jan. 9 on the House floor. "The Trump administration is jeopardizing the integrity of our financial markets and the hard-earned savings of millions of Americans."
As Wall Street's top securities regulator, the SEC typically operates with a staff of about 4,400 employees. But the shutdown has slashed that by nearly 95% to about 110 staffers monitoring markets for potential manipulation and another 175 employees dedicated to security. The SEC's limited staff has raised questions about how effectively the regulator can monitor markets for bad actors.
If the shutdown continues, it could also threaten a rich pipeline of initial public offerings slated for 2019. Companies such as Uber Technologies Inc., Airbnb Inc. and Lyft Inc. are all expected to conduct potentially record-setting IPOs in 2019, but those offerings' timelines could be in peril as companies wait for guidance from the SEC on their proposed entries to the public markets. It is also unclear how the SEC will tackle a mounting backlog of filings when it does reopen.
A bill introduced by Rep. Mike Quigley, D-Ill., that would reopen a handful of federal agencies passed the House on Jan. 9 by a vote of 240 to 188. The legislation would specifically appropriate money to restart business at the Department of Treasury, the Internal Revenue Service and the SEC, among others.
Whether the bill will be taken up in the Senate remains unknown. Democrats do not control the majority of seats in the upper chamber, and some Republicans have expressed a hard-line stance on backing President Donald Trump's push for funding of a wall along the U.S.-Mexico border.
Rep. Patrick McHenry, R-N.C., called the bill a "political stunt" Jan. 9, saying that any similar pieces of legislation will be "dead on arrival" in the Senate.
"They're not going to accomplish our No. 1 goal, which is reopening the government and addressing the critical border security needs of our country," McHenry said.
On Capitol Hill
McHenry this week also pushed for inspectors general at several regulatory agencies to provide updates on how the agencies are implementing recommendations to reduce fraud and waste.
The IGs, he wrote, flagged a potential $45.1 billion in savings in the most recent fiscal year if the agencies follow through with those efforts. McHenry has sent letters to the IGs of the Federal Reserve, the Federal Deposit Insurance Corp., Treasury, the SEC and the National Credit Union Administration, among others.
Rep. Alexandria Ocasio-Cortez, D-N.Y., is likely to join the House Financial Services Committee this year, bringing a prominent critic of the financial industry onto the panel.
Fellow Democrats anticipate Ocasio-Cortez will get a nod from the panel of House Democrats that assigns members to the chamber's committees, according to Politico. She has backed the breakup of large banks, along with restoring the Depression-era Glass-Steagall Act, which prohibited commercial banks from engaging in investment banking.
In the Senate, some Democratic lawmakers are renewing a push to increase the diversity of the Fed's top leaders.
The central bank has faced criticism for a lack of diversity in its ranks, a debate that intensified after the selection of John Williams as the next New York Fed president.
A bill that Sen. Kamala Harris, D-Calif., reintroduced would require that the regional bank boards interview at least one woman and one minority candidate when they hire the bank's president. Rep. Joyce Beatty, D-Ohio, has introduced a companion bill in the House.
At the Fed
Nellie Liang, a Trump pick to join the Fed's Board of Governors, has withdrawn her nomination to the central bank.
The news has little implication for monetary policy, given that officials on the Fed's Board of Governors have been in lock-step on such decisions, Capital Alpha analyst Ian Katz wrote in a note to clients. But Liang's expertise in financial stability "could have been helpful if the country were to fall into another financial crisis," Katz added.
Liang was one of the Fed's top regulatory staffers, joining the Fed in 1986 as an economist and in 2010 becoming the first leader of a financial stability office within the Fed under then-Chairman Ben Bernanke. But her pick had drawn concerns from some Republican senators and industry officials who were skeptical of her views on regulatory policy. Liang, who had not yet had a confirmation hearing, said she withdrew "because the likelihood of a prolonged process could have left me in professional limbo for too long."