graham steele

@grahamsteele

Assistant Professor, UNC School of Law. Teaching and writing about financial and corporate law. Former Assistant Secretary, US Treasury Department & Democratic chief counsel, Senate Banking Committee.

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graham steele@grahamsteele· 8d

FIMA is a useful illustration of the issues with Warsh's view that the Fed's non-monetary policy functions aren't independent. Is FIMA monetary policy? Financial stability? International finance? "Public monies" (bc it involves the Treasury market)? These functions aren't always clearly separable.

Second, Fed independence is at its peak in the operational conduct of monetary policy. That degree of independence does not extend to the full range of its congressionally mandated functions. Fed officials are not entitled to the same special deference in their stewardship of public monies . . . or in bank regulatory and supervisory policy . . . or in areas affecting international finance, among other matters.

graham steele@grahamsteele· 11d

Some truly amazing polling results about the unpopularity of crypto. Completely out of step with how much attention crypto gets in DC.

A bar graph showing the crypto industry with a -67% favorability, behind only ICE and the NRA. Also, a word cloud associating crypto with “scams,” “fraud,” and “fake money.”

Bar graph showing crypto-backed candidates with a -68% favorability rating with Democratic voters.

graham steele@grahamsteele· 26d

This under-counts how many members of Treasury leadership have left/been forced out. The department’s top sanctions and money laundering official was also forced out over a rule requiring banks to collect immigration information. Very bad sign about the state of things at Treasury right now.

Kies will become the latest senior Senate-confirmed Treasury official to leave the department after a relatively short tenure.

Billy Long lasted less than two months as IRS commissioner, part of a carousel in the top tax-administration post.
Michael Faulkender was deputy secretary for less than five months.

Jonathan McKernan, an undersecretary, is leaving after less than a year. Brian Morrissey, the agency’s general counsel, left less than eight months after being confirmed.

graham steele@grahamsteele· 29d

This administration is trying further their deportation by using bank regulators to pressure banks to shut certain immigrants out of the financial system. It’s akin to a modern form of redlining against immigrant communities.

Banks aren’t prohibited from offering accounts or loans to undocumented immigrants, but the changes undertaken by regulators following Trump’s executive order appear intended to make it harder for them to justify to regulators why they might be doing so. Such warnings tend to put a chill on bank activity.

A prior warning by the Treasury Department directed banks to be on the lookout for employers that might be committing payroll fraud by employing undocumented immigrants. Regulators have also pushed financial institutions and payments companies to reconsider the risks of providing credit cards and mortgages to undocumented immigrants.

The crackdown on serving undocumented immigrants comes at the same time that the Trump administration and regulators are also investigating banks for allegedly “debanking” clients for political and religious reasons. Trump signed another executive order on that topic seeking to uncover discrimination against conservatives.

graham steele@grahamsteele· Jul 10

Once upon a time, the Fed’s task force on “productivity and jobs” would’ve included a labor representative. It speaks volumes about the current Fed leadership that the task force instead includes Trump-supporting, AI-boosting venture capitalist Marc Andreessen.

Productivity and Jobs: Assess the economic impact of new general-purpose technologies, including artificial intelligence, to inform the Federal Reserve's policy judgments.

Marc Andreessen, cofounder and general partner, Andreessen Horowitz

Charles I. Jones, professor of economics, Stanford University, currently on leave at Anthropic

Asha Sharma, executive vice president and XBOX CEO, Microsoft Corp.

graham steele@grahamsteele· Jul 7

Yes, I also noted this dynamic last year. Importantly, this isn’t pure speculation. We have precedents where R holdovers have made mischief and D nominees have been blockaded by the Senate. www.yalejreg.com/nc/the-real-...

Given these experiences, what recourse would a future Democratic President have when there are Republican holdovers leading various agencies and a Republican-controlled Senate that refuses to confirm the President’s nominees?

During the first year of the Biden Administration, for example, the Trump-nominated Chair of the Federal Deposit Insurance Corporation (FDIC), Jelena McWilliams, attempted to block the FDIC’s board majority from voting on policy initiatives consistent with President Joe Biden’s agenda. The Democratic appointees to the FDIC board sought to bring those measures to a vote, prompting a dispute which ultimately resulted in McWilliams’ resignation and replacement with the next board member in the line of succession, Martin Gruenberg. (The Justice Department’s Office of Legal Counsel later determined that McWilliams was wrong on the law, and the Democratic board members were correct that a majority of FDIC board members, not the chair, have the power to determine the board’s agenda.)

If those events were to repeat themselves, a President who lacks the ability to confirm a replacement will be stuck with a choice between keeping a prior President’s nominees or removing that nominee and leaving a non-functioning agency without political leadership. In such a scenario, the Vacancies Act provides limited value if all nominees requiring Senate confirmation—especially to multi-member commissions—are being blockaded.

These developments foreshadow a post-Slaughter future where Presidents—or at least Presidents of a certain party—can use the appointment power to control both single-director and multi-member agencies, thereby undermining the sort of reasoned policymaking that Congress and the courts have said is both constitutional and desirable. Due to the Senate’s undemocratic features, the most likely scenario is that Presidents of the Democratic Party will be stymied by a Republican-controlled Senate if they try to rebuild the capacity of these agencies. It is unclear whether and to what extent agencies will operate with bipartisan, multi-member leadership—or even any functional leadership at all.

Again, the Court in Seila Law v. CFPB said the removal power is essential to ensuring a President is not “saddled with a holdover [agency official] from a competing political party who is dead set against [their] agenda.” Yet, the same conservative Justices who wrote those words could make the situation worse, not better, by overruling Humphrey’s Executor.

graham steele@grahamsteele· Jul 1

This is well put. Here's how I framed it in this blog post. www.yalejreg.com/nc/inconsist...

In Cook, many of the Justices spoke deferentially about Congress’s determination that the Fed should be structurally protected from certain kinds of partisan influence due to the Fed’s important role stewarding the financial system. These concerns are equally applicable to various functions of other financial regulatory agencies. Even in the case of the Fed, some monetary policy functions could be insulated by the Court’s decision in Cook, but regulatory independence could still be functionally eroded by other means.

And yet, some Justices seem unconcerned by the likelihood that such an outcome could result from making the heads of other financial agencies removable at will in Slaughter. This is the central paradox of the Court’s sui generis treatment of the Fed. Some Justices seem to believe that decisions of economic stewardship are so important that they must, by and large, be subject to partisan control. At the same time, they also hold the position that the Fed’s functions are too important to be left to partisan control.

graham steele@grahamsteele· Jun 29

Importantly, the practical import of the Cook decision's Fed exception remains to be seen. That's because Trump's Fed Chair, Kevin Warsh, has said he believes--contra most Fed chairs before him--that the Fed is *not* entirely independent in all its functions. www.banking.senate.gov/imo/media/do...

graham steele@grahamsteele· Jun 29

I think Thomas's dissent is actually right insofar as he argues that the Court's decision in Slaughter *should* be applicable to the Fed, which exercises a significant amount of regulatory power. Instead, the majority relies on an "ahistorical analogy" to create a special Fed exception.

The Court today upholds the constitutionality of a limita-
tion on the President’s ability to remove a principal execu-
tive officer for only the third time in American history. Its
constitutional reasoning consists of two paragraphs. The

Court does not dispute that members of the Federal Re-
serve Board exercise (a great deal of ) federal executive
power. It does not dispute that any person who exercises
federal executive power must be freely removable by the
President. And it does not dispute that its holding today
contravenes those principles by preventing the President
from freely removing members of the Federal Reserve
Board. Instead, the Court endorses a contradiction: “the
Constitution vests the whole executive power in the Presi-
dent alone,” Slaughter, 609 U. S., at ___ (slip op., at 21) (in-
ternal quotation marks omitted), but the Board can exercise
executive power “independen[t] from Presidential control,”
ante, at 22.
The Court’s constitutional reasoning depends entirely on
an ahistorical analogy between the Board and the First and
Second Banks of the United States. See ante, at 22–23. The
problem for the Court is that the First and Second Banks
were banks with no executive power, whereas the Board is
unquestionably a federal agency that wields considerable
executive power. See supra, at 3–9. The Board does not
follow in “our Nation’s tradition of central banking” at all.
Ante, at 9; see supra, at 3–6. It is not a “bank,” ante, at 23,
but a novel “federal agency” with “broad powers affecting
the entire banking and currency system,” Cushman 153;
see supra, at 4–5. The “‘founders of our Government,’”
ante, at 22, thought that distinction was significant. Alt-
hough the Court attempts to imply otherwise, ibid., it does
not deny that the First and Second Banks of the United
States exercised no executive power.

graham steele@grahamsteele· Jun 29

Justice Kavanaugh gives a nod to the historical arguments, but his concurrence is (unsurprisingly) pretty clearly motivated by the economic consequences of diminishing Fed independence.

I agree with the Court, moreover, that we should not
leave open the question whether the Federal Reserve can
remain an independent agency in the wake of Slaughter.
After Slaughter, there is a clear choice: Either the Federal
Reserve may remain independent (with the Governors
removable for cause, not at will), or it may not. Leaving
that question open would create significant uncertainty
about whether the Court might soon eliminate the Federal
Reserve’s independence, and thereby expose the Federal
Reserve to political influences and jeopardize the efficacy of
U. S. monetary policy. Even temporary uncertainty about
the status of the Federal Reserve could spark political
upheaval, including confusion about whether the President
could immediately remove multiple Governors at will, as
well as turmoil in the U. S. and world economies.
I would not go down that road. I would not risk
destabilizing the U. S. economy just so that we can further
mull over an issue that, in various permutations, we have

been thinking about for many years. As the Court’s opinion
explains and the Government agrees, the Federal Reserve
occupies a unique role in the U. S. Government and
maintains critical responsibility for the stability and
success of the U. S. and world economies. See ante, at 1–6.
Most importantly for constitutional purposes, the Federal
Reserve follows in a distinct historical tradition of central
bank independence that has long coexisted with Article II.
That history of course carries great weight in Article II
cases. See Youngstown Sheet & Tube Co. v. Sawyer, 343
U. S. 579, 610–611 (1952) (Frankfurter, J., concurring); id.,
at 634–638 (Jackson, J., concurring). In my view, in light
of that historical practice and precedent, the Federal
Reserve may continue as an independent agency after
Slaughter. If the Federal Reserve’s for-cause removal
protections are to be eliminated, that change must occur
through the legislative process.1
In short, like the Court, I see no good reason here to
unsettle a critical constitutional question that has long
been settled and that should remain settled.

graham steele@grahamsteele· Jun 29

Some might say it's cynical to think SCOTUS is protecting the Fed because of its affect on financial markets and capital. But the majority says pretty clearly in Cook that it needs to get to the merits to avoid "sow[ing] doubt" about one of the world’s "most important financial institutions."

In this extraordinary case, we have had the benefit of not only amici and oral argument but months of internal consultation and deliberation. We see no reason to leave the public in limbo, or to sow doubt as to the status of one of our Nation’s (and the world’s) most important financial institutions. Although we appreciate that others may see matters differently, we would not so quickly unsettle this “special arrangement
sanctioned by history.”

graham steele@grahamsteele· Jun 25

Recalling how the Chief Justice once used the shadow docket to block an EPA rule because he was offended by EPA officials’ press statements. So according to SCOTUS, the President’s personal animus isn’t relevant to the government’s motivations but bland statements by bureaucrats are.

Then, in June 2015, the court ruled against the Obama administration in a case involving mercury emissions. The next day, an E.P.A. official, Janet McCabe, made what now looks like a tactical error. She issued a statement that, according to the papers, offended the chief justice and struck him as an attempt to sideline the court.

The chief justice cited an unusual source for that last point, one that would not ordinarily figure in a Supreme Court opinion: an interview with the BBC in which the E.P.A. administrator at the time, Gina McCarthy, had said “we are baking” the Clean Power Plan “into the system.”

graham steele@grahamsteele· Jun 19

I've said it before, but the renovation was the chosen line of attack against Powell because Republicans had run that play against the CFPB in its early years to some success. Important lesson about the need to nip bad-faith attacks in the bud because you never know where they'll lead.

The book dives into one line that Trump chose not to cross in his second term: Trying to fire then-Federal Reserve Chairman Jerome Powell. Instead, Trump launched a campaign last year to try to make Powell’s life miserable. An aide told the authors at the time that Trump was not going to fire Powell, he was just going to torture him.

Haberman and Swan recount how Office of Management and Budget Director Russ Vought brought Trump a plan to attack Powell over the renovations of the Federal Reserve building, which led to an extraordinary visit by the president to tour the site last July.

graham steele@grahamsteele· Jun 5

A remarkably candid assessment from Janet Yellen of the Fed’s regulatory and supervisory failures from a retrospective on Jay Powell’s tenure. She says “crisis management is not a substitute for prevention” which “requires strengthening both bank supervision and broader financial regulation.”

Sound supervision is mostly invisible: It is the crisis that does not happen, the institution that does not fail, the vulnerability addressed before it becomes systemic. Those successes do not hold press conferences. That makes the culture of supervision—the willingness to push back, to escalate, to act in a timely way, to accept the discomfort of being unpopular with the supervised—all the more important. The Fed’s own post-mortem on SVB identified a supervisory culture in which the burden of proof for escalating concerns had drifted too high, in which examiners were reluctant to act against rapidly growing institutions, and in which formal findings did not reflect the actual risks being observed. My predecessor and our colleagues identified this same issue in our review of the 2008 crisis and took steps to address it. During both Trump terms the focus has instead been on financial deregulation and reduced supervisory intensity. The 2019 regulatory changes diminished the liquidity stress testing and interest rate risk scrutiny facing a bank the size of SVB. I worry that the continuing deregulatory push may be further undermining a culture that has not sustainably improved. These problems predate Powell, and they remain serious.

graham steele@grahamsteele· May 29

Meme of Lucille Bluth in the series Arrested Development saying: "It's One Banana, Michael. What Could It Cost, 10 Dollars?"

graham steele@grahamsteele· May 21

Unsurprisingly, the previous administration took a different view of this issue. home.treasury.gov/news/press-r...

In the second category, the use of flawed internal models can cause significant model risk management issues. As the financial crisis of 2007-09 and other failures of financial institutions, like Long-Term Capital Management, have shown, the overreliance on faulty risk models can have financial stability implications. As a result, the post-crisis prudential regulatory framework has sought to move toward more standardized risk measurements. It is important to consider these historical lessons regarding the broader use of models by financial institutions and regulators as we evaluate specific use cases for AI models.

graham steele@grahamsteele· May 20

It’s here. The Trump Administration has issued an Executive Order that includes a requirement for banks to collect customers’ citizenship information. www.whitehouse.gov/presidential...

(ii) institutions maintain the authority, where warranted by other risk indicators or supervisory concerns, to obtain additional information necessary to resolve material compliance concerns, including information relevant to whether account holders possess lawful immigration status and employment authorization in the United States when such information is relevant to assessing risks associated with fraud, identity misrepresentation, sanctions evasion, or other illicit financial activity, as part of a risk-based customer due diligence program.

graham steele@grahamsteele· May 19

I’d like to understand the thought process behind going out of his way to praise crypto. There are no votes to be won from it, he has a background in finance so presumably knows better on the substance, and he’s self-funding so doesn’t need to worry as much about super PAC spending. Why do this?

LNG. You would alt the AI regulatory environment. What are we controlling? Other than the state of California, I guess.

No one, it'll never be one person controlling it. I think the one that we should control is—and there's such a fine line between control and alt—but I think that, in finance, we should control the way crypto is used.

Oh, interesting. Tell me more.

I just think that this is a technology, which I'm fine with, but I just think it's one of those things where we need to make sure that there are things to protect people who are investing in these tokens.

I think the industry agrees with that. They've spent a long time saying, “Stop trying to outlaw us. Give us regulations so that we can build our businesses.” Which I'm totally fine with, and that's what I would describe as control. I think control's the wrong word because you never control something. You basically have regulations that make sense and protect unsophisticated people from damage.

graham steele@grahamsteele· May 17

In 2024, the CFPB issued an “open banking” rule that would have given consumers the power to prevent this kind of third-party data harvesting. But Trump’s CFPB repealed that rule, so here we are: AI companies are scraping data from people’s bank accounts.

The final rule strengthens protections for consumers’ data by:

Banning bait-and-switch data harvesting: Third parties can only collect, use, or retain data to deliver the product the consumer requested. They cannot secretly collect, use, or retain consumers’ data for their own unrelated business reasons – for example, by offering consumers a loan using consumer data that they also use for targeted advertising. The rule does not prohibit any particular uses of data, but it requires that all use be driven by what is necessary to deliver the product sought by the consumer.
Creating revocation and deletion rights: When a person revokes access, the rule requires that data access end immediately, and deletion would be the default practice. Access can be maintained for no more than one year, absent express reauthorization. To prevent “dark patterns” from emerging, the process to revoke access must be simple and straightforward.

graham steele@grahamsteele· May 7

Remarkable detail in this story about the corrupt intent behind President Trump's pardon of former Honduran President Juan Orlando Hernandez.

According to the same leaks from Hondurasgate, Trump’s pardon of JOH, days before the elections in Honduras, was not a gesture of clemency, but rather the initial payment in a larger agreement. In one of the recordings, Hernández explains it directly, though without revealing his interlocutor: “The pardon money didn’t even come from you. It came from a group of rabbis and people who supported Israel.” In another audio recording, he says that Israeli Prime Minister Benjamin Netanyahu had “everything to do” with his release and the negotiations that made it possible.

graham steele@grahamsteele· May 6

I'm reminded of the time Phil Gramm said that there is "one form of bigotry that is still allowed in the United States of America, and that's bigotry against the successful." www.huffpost.com/entry/gop-wa...

Gramm appreciates this principle as much as his Roman predecessors. At the hearing, he railed against "the one form of bigotry that is still allowed in the United States of America, and that's bigotry against the successful." Gramm said that former AT&T CEO Ed Whitacre had been unfairly criticized for receiving a $158.5 million pay package upon his retirement.

graham steele@grahamsteele· May 6

Not for nothing, but the student loan picture does not look great either. Likely not helped by this administration's policy choices.

graham steele@grahamsteele· May 6

Credit card balances are indeed trending up, but that's a sign of increasing household indebtedness. Meanwhile, delinquencies are *also* increasing. Reminder that this is happening as the Trump administration guts the CFPB, the agency responsible for regulating the credit card market. Not good.

New York Fed chart showing household debt balances increasing across all categories.

graham steele@grahamsteele· May 4

Some absolutely grim numbers on prediction markets here. Trading on the two biggest platforms has grown 25x in the last year, with the lion’s share of the winnings going to a few sophisticated, well-connected accounts.

On Polymarket, the Journal found, 67% of profits go to just 0.1% of accounts. That means less than 2,000 accounts netted a total of nearly half a billion dollars. The Journal analyzed 1.6 million Polymarket accounts that have traded since November 2022. There are at least 2.3 million total accounts on the site.

On Kalshi, too, losers vastly outnumber winners. Spokeswoman Elisabeth Diana said there are 2.9 unprofitable users for each profitable one based on data from the past month. She said the number is subject to change as the exchange grows. The company doesn’t make public comprehensive data on users’ profits and doesn’t share its total number of users.
Total trading volume on both platforms has rocketed to $24.2 billion in April, up from $1.8 billion a year earlier, according to analytics firm The Block.

graham steele@grahamsteele· Apr 27

@bdgesq.bsky.social, does his clever arbitrage scheme of living in Mountain view half the month and Tahoe, NV, the other half mean the tax wouldn't be applicable to him? Seems like it still would?

Under the CA Revenue Code, a “Resident” includes "Every individual who is in this state for other than a temporary or transitory purpose."

For purposes of the CA Revenue Code, the term “part-year resident” is a "taxpayer who meets both of the following conditions during the same taxable year.
"(a) Is a resident of this state during a portion of the taxable year.
"(b) Is a nonresident of this state during a portion of the taxable year."

graham steele@grahamsteele· Apr 24

On Secretary Bessent's defense of providing dollar swaps: This isn't a strategy to *expand* dollarization. Any financial stress these countries experience is the result of poor US foreign policy choices. This administration has created the need for a bailout to *preserve* dollar credibility.

Discussions with countries, including our Gulf and Asian allies, about U.S. dollar swap lines are part of ongoing, routine conversations that @USTreasury has been having with our partners over a number of years. They are a testament to the U.S. dollar’s primacy and the strength of America’s economic shield.

Additional swap lines can benefit our nation by reinforcing dollar usage and liquidity internationally, maintaining smooth functioning in dollar funding markets, promoting trade and investment with the United States, and, in hypothetical stress scenarios, preventing disorderly sales of U.S. assets as well as disruptions to U.S. markets, businesses, and households.

Many of these countries have pristine sovereign balance sheets and large dollar holdings – larger than many major economies with whom we maintain permanent swap facilities. I applaud our allies’ foresight and watchful risk management by exploring additional financial buffers during periods of market quiescence.

Extending permanent swap lines can be a major first step in creating new U.S. dollar funding centers in the Gulf and Asia.

Dollar dominance and reserve currency status are strengthened by constant long-term initiatives, including countering the growth of problematic, alternative payment systems.

Under @POTUS, this is American Economic Leadership at work.

graham steele@grahamsteele· Apr 18

It continues to amuse me how conservatives set a trap for themselves with NRA v Vullo.

A plaintiff’s likelihood of success on the merits “depends on [his] prospects of successfully meeting the elements of [his] claim.” Minocqua Brewing Co. LLC v. Hess, 160 F.4th 849, 855 (7th Cir. 2025). The Supreme Court has established that “[g]overnment officials cannot attempt to coerce private parties in order to punish or suppress views that the government disfavors.” National Rifle Association of America v. Vullo, 602 U.S. 175, 180 (2024). “To state a claim that the government violated the First Amendment through coercion of a third party, a plaintiff must plausibly allege conduct that, viewed in context, could be reasonably understood to convey a threat of adverse government action in order to punish or suppress the plaintiff’s speech.” Id. at 191.

graham steele@grahamsteele· Apr 18

There's a *lot* going on here, but I'm struck by the irony of Roberts taking umbrage at EPA officials' public statements. Just 2 years later, in upholding Trump's Muslim travel ban in Trump v Hawaii, Roberts wrote that Trump's bigoted public statements weren't relevant to the rule's validity.

In his final paragraph, the chief justice again told colleagues that the E.P.A. had done an end run around the court with the mercury regulation just months before and said the agency had signaled that it was planning to do the same thing again.

The chief justice cited an unusual source for that last point, one that would not ordinarily figure in a Supreme Court opinion: an interview with the BBC in which the E.P.A. administrator at the time, Gina McCarthy, had said “we are baking” the Clean Power Plan “into the system.”

Roberts in Trump v Hawaii: "Plaintiffs argue that this President’s words strike at fundamental standards of respect and tolerance, in violation of our constitutional tradition. But the issue before us is not whether to denounce the statements. It is instead the significance of those statements in reviewing a Presidential directive, neutral on its face, addressing a matter within the core of executive responsibility. In doing so, we must consider not only the statements of a particular President, but also the authority of the Presidency itself."

graham steele@grahamsteele· Apr 16

Imagine the reaction if one of the liberal justices launched a broadside against conservatism. A remarkable tirade in this moment in particular, as this administration shreds the Constitution on a daily basis.

Thomas said Washington has been overrun by elected and appointed officials who lack commitment to “righteous cause, to traditional morality, to national defense, to free enterprise, to religious piety or to the original meaning of the Constitution.”

“They recast themselves as Institutionalists, pragmatists or thoughtful moderates, all as a way of justifying their failures to themselves, their consciences, and their country,” he said.

graham steele@grahamsteele· Apr 15

Even more irrational to make this threat when SCOTUS is about to make next-to-impossible for Trump to remove Powell from the Board. It’s both an empty threat and a counterproductive one. The graceful off-ramp here is to just drop the probe and let Powell leave when his term expires.