Washington Policy Pulse: Government Shutdowns, Crypto Bills, and Regulatory Agendas

Government Shutdown Outlook

• ⚠️ A government shutdown is a possibility with only 11 legislative days until September 30th, with a 40% chance estimated, higher than usual due to political rhetoric.
• 🚫 Despite the increased risk, a shutdown is unlikely because neither Republicans (concerned about election years) nor Democrats (wary of political blame and potential negative endgame) see a strategic advantage.
• 🗓️ A continuing resolution is the most probable outcome, likely extending into December, allowing for further negotiation.

Legislative and Regulatory Updates

• 📜 The Credit Card Competition Act may be attached to a continuing resolution as a "Christmas tree bill" to bypass regular order, a tactic previously used to repeal parts of Dodd-Frank.
• 🏛️ The Senate plans to change rules on nominee confirmations to expedite President Trump's appointments.
• ₿ The Responsible Financial Innovation Act (Senate version of the Clarity Act) has an updated version, with a 70% chance of passing early next year, focusing on joint rules for crypto management by the SEC and CFTC.

SEC and Banking Regulations

• 📈 The SEC may enhance private markets regulation, potentially affecting accredited investor definitions and crowdfunding rules within the next 6-12 months.
• 📊 The Fed's proposal for an enhanced supplemental leverage ratio (ESLR) is being reviewed, with market participants comfortable with the proposed reduction but seeking reaffirmation of the ability to exclude Treasuries from the denominator during times of stress.
• 🏦 Proposals for changes to long-term debt and TAC rules for regional banks are being considered, with potential Fed proposals on bank capital expected soon.

Geopolitical and Trade Developments

• 🇷🇺 President Trump's impatience with Russia-Ukraine negotiations may lead to Senator Lindsey Graham advancing a Russian sanctions bill, potentially imposing high tariffs on countries purchasing Russian oil.
• 🇪🇺 In response to EU fines, President Trump has threatened a Section 301 investigation on Europe, with potential headwinds expected later in the week.