Washington Policy Pulse: Bank Capital, Fed Chair Nominees, and Tariffs

Asia Trip and US-China Relations

• 🌏 President Trump's Asia tour includes key meetings with leaders of Japan, Malaysia, and South Korea, with a significant focus on discussions with President Xi Jinping.
• 💡 Key issues at stake in the Trump-Xi meeting include rare earths, export controls, fentanyl supply, TikTok, shipping levies, soybean trade, and potential additional tariffs on China.
• 🤝 A potential framework agreement between the US and China is being discussed, with details still to be determined.

US Government Shutdown Update

• 🏛️ The government shutdown continues with House Republicans out of town and both parties maintaining their talking points.
• 📅 Potential negotiations for reopening the government may emerge closer to November 1st due to upcoming military paychecks, missed air traffic controller paychecks, and discussions around SNAP benefits.
• ⚠️ Widespread disruption, including potential TSA agent sickouts, is a concern as the shutdown extends, possibly impacting travel and services.

Federal Reserve and Financial Regulation

• 🏦 The Federal Reserve is considering increasing capital requirements by 3-7% through the Basel III endgame.
• ⚖️ A shift in the GSIB surcharge calculation from Method 2 to Method 1 could lead to a net $58 billion capital reduction for the largest US banks.
• 📊 A new proposal on stress testing aims to increase transparency in the process, though it's not expected to significantly impact capital requirements.
• 🧑‍💼 Treasury Secretary Steven Mnuchin has narrowed down the list of potential Fed chair nominees to five individuals, with a recommendation to the President expected by Thanksgiving.

Tariffs and Trade Policy

• 🇨🇦 A bipartisan Senate resolution to overturn President Trump's tariffs on Canada and Brazil is expected, though largely symbolic due to House rules and presidential veto power.
• 📈 President Trump announced a potential 10% tariff increase on Canada, but no specific timeline has been provided.
• ⚖️ The Supreme Court will hear oral arguments on November 5th regarding AIPA tariffs, with a 60% chance of being found unlawful, potentially leading to refund chaos for billions in tariffs.

Other Washington Developments

• 🚀 Mike Seelig, a crypto advisory, has been nominated as the next CFTC chairman, seen as a win for the crypto industry.
• 🛡️ Negotiations are ongoing for the National Defense Authorization Act (NDAA), with a bipartisan group of senators working on a framework by Thanksgiving.
• 💡 An upcoming AI conference in Washington D.C. is expected to generate industry-focused news and highlight the sector's importance.
• 🌾 A farmer aid program, potentially between $10-13 billion, is expected to be announced after the government shutdown concludes, addressing concerns about soybean trade and agricultural supply.