The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital. Send tips and ideas to polo.rocha@spglobal.com, david.hood@spglobal.com and declan.harty@spglobal.com.
At the Fed
Former Federal Reserve Bank of New York President Bill Dudley's candid advice for the central bank on dealing with President Donald Trump caused quite a stir this week.
Sen. Thom Tillis, R-N.C., said he wants the Senate to hold a hearing about the Fed's independence after Dudley's Aug. 27 op-ed in Bloomberg argued the Fed could "state explicitly that the central bank won't bail out an administration that keeps making bad choices on trade policy."
Dudley, who left the Fed in 2018, wrote that if the Fed's goal is to deliver the best long-term economic results, Fed officials "should consider how their decisions will affect the political outcome in 2020." A Trump reelection victory "arguably presents a threat to the U.S. and global economy," Dudley wrote.
The op-ed was widely panned by economists, who said the Fed should continue making monetary policy decisions without weighing political considerations and that Dudley is making the Fed's job harder. Dudley's op-ed "might be the least responsible statement by a former financial official in decades," former Treasury Secretary Larry Summers tweeted.
The comments prompted a rare pushback from the Fed. Michelle Smith, a Fed spokeswoman, told several news outlets that "political considerations play absolutely no role" in the central bank's decision-making, which is "guided solely by its congressional mandate to maintain price stability and maximum employment."
The controversy comes as Trump continues to press for more accommodative action by the Fed, which he argues would weaken the dollar and help in his effort to win trade concessions from other countries.
"We don't have a Tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don't have a clue!" Trump tweeted Aug. 30.
The president has not specifically mentioned Dudley's op-ed, but Tillis' request for a Senate Banking Committee hearing shows the former Fed official's comments may have some lasting impact.
"I am very disappointed that former [Federal Open Market Committee] Vice Chairman Bill Dudley is lobbying the Fed to use its authority as a political weapon against President Trump," Tillis said in a news release, warning about the "danger of this institution taking unprecedented and inappropriate steps to meddle in the presidential election."
On Capitol Hill
House Democrats are calling on Wall Street's biggest banks to raise their minimum hourly wages to at least $20 by the end of the year.
After grilling big bank CEOs about their hefty pay packages earlier in 2019, House Financial Services Committee Democrats issued a report Aug. 27 saying that those executives are still being paid with "outsized compensation packages, as many American workers have seen their wages remain stagnant." The report analyzed the gap between the pay of a median employee at eight of the largest U.S. banks and those companies' CEOs. Included in the report were JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc., Bank of New York Mellon Corp., Morgan Stanley, State Street Corp. and Wells Fargo & Co.
The focus on CEO pay ratios is nothing new for Wall Street's biggest banks. Shareholder advocates, lawmakers and others have long called for those companies' boards to reform their executive pay packages.
An S&P Global Market Intelligence analysis of publicly traded U.S. banks with at least $20 billion in total assets found that those institutions had a median CEO pay ratio in 2018 of 87-to-1.
The Democratic-controlled House panel, led by Rep. Maxine Waters, D-Calif., says big banks' boards need to consider ways to narrow those gaps. The report also said big banks should offer their employees at least a living wage in the next two years.
At the SEC
SEC Commissioner Robert Jackson Jr. does not have any immediate plans to leave his post at the top U.S. securities regulator.
In an Aug. 26 statement, Jackson, one of the commission's two Democratic representatives, said he will not teach at New York University during the fall 2019 semester, which had been the prior expectation. Jackson, whose term at the SEC ended June 5, declined to comment on when he will step down from his seat. SEC commissioners can remain in their positions for up to 18 months after their terms have ended.
The development comes amid continued considerations on Capitol Hill about who could succeed Jackson. Among the names thus far floated are Caroline Crenshaw, an attorney on Jackson's staff at the SEC, and Urska Velikonja, a law professor at Georgetown University, according to Reuters.

