Tag Archives: Regulation/Government Policy

Business

Biden to Order Study of Cryptocurrency Risk, Creation of U.S. Digital Currency

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WASHINGTON—President Biden will sign an executive order on Wednesday instructing agencies across the federal government to study the possible risks presented by the explosion in popularity of cryptocurrencies and consider the creation of a U.S. digital currency.

The executive order will urge federal regulators to review the risks a roughly $1.75 trillion crypto market presents to consumers, investors and the broader economy. Federal agencies will have several months to prepare a report with their findings, which will then inform any new regulatory actions the White House takes, a senior administration official said.

About 16% of adult Americans, or roughly 40 million people, have invested in, traded or used cryptocurrencies, according to a White House fact sheet. That growing prevalence of digital assets, which include volatile cryptocurrencies like bitcoin and so-called stablecoins pegged to assets like the U.S. dollar, has pushed the Biden administration to centralize its work on the topic. White House officials have been working with the crypto industry and experts for several months to prepare the executive order.

“This is not a niche issue anymore, and it’s profoundly important that we have the right tools to mitigate the risks to consumers and to investors and frankly to the entire financial system,” a senior administration official said.

Bitcoin’s dollar value jumped more than 9% from its 5 p.m. ET level Tuesday to $42,118.73 on Wednesday, according to CoinDesk. Most of the climb came before the formal announcement of the White House’s plans, after the Treasury Department accidentally published a statement on the executive order from Treasury Secretary

Janet Yellen.

Ms. Yellen said the president’s order will support responsible innovation in digital assets while also addressing risks related to illicit finance. The statement was taken down after being published in error, a Treasury spokeswoman said, and was later reposted Wednesday morning.

Concerns over stricter regulation may have weighed on bitcoin’s value, said Chris Bendiksen, head of research at London-based asset-management firm

CoinShares.

“It could be that there’s been this overhanging fear of some negative action by the U.S. government,” he said.

Under the executive order, the Biden administration will scrutinize how cryptocurrencies may undercut U.S. sanctions and efforts to fight money laundering, a senior administration official said. Those concerns have been heightened as the U.S. has leveled sanctions on Russia in response to its invasion of Ukraine. The administration will also study the impact that energy-intensive crypto mining has on the climate.

The Biden administration will also formally consider the creation of a possible U.S. digital currency, a cryptocurrency backed by the Federal Reserve, according to a White House fact sheet. The Federal Reserve is already evaluating the possibility of a digital currency, which some other countries, including China, have already adopted. A person familiar with the matter said the executive order will ask the Justice Department to study whether Congress would need to authorize the creation of a digital currency.

While in many ways a broad, initial review, the White House executive order opens the door to more substantial federal regulation in a sector that agencies have previously largely sidestepped or addressed piecemeal.

—Caitlin Ostroff contributed to this article.

Write to Andrew Duehren at andrew.duehren@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

As Fed signals a 25-basis point hike later this month, here’s what that means for your credit-card bill, savings and mortgage repayments

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Federal Reserve Chair Jerome Powell is telegraphing his first punch in the fight against inflation — his intention to support a 25 basis-point increase on a benchmark interest rate, the first in a number of potential rate hikes this year.

Now it’s time for consumers to make their own maneuvers, particularly those who are planning to pay down credit-card debt or build up their savings in 2022.

By itself, a quarter-percentage-point increase will not make a big difference to a credit card’s annual percentage rate (APR) or their savings account’s annual percentage yield (APY), experts say. But stack several rate increases together and consumers will start to feel the pinch, they note.

In Congressional testimony Wednesday and Thursday, Powell previewed what’s he’s considering at a crucial policy meeting scheduled for mid-March. That way, markets do not have to wait in the lurch when there’s already so much uncertainty — due to Russia’s invasion of Ukraine — and they aren’t blindsided when the increase happens to the federal funds rate now near zero.

“I do think it will be appropriate to raise our target range for the federal funds rate at the March meeting in a couple of weeks. And I’m inclined to propose and support a 25-basis-point rate hike,” he told lawmakers Wednesday.

On Thursday, he reiterated plans for a 25-basis-point increase and said he supports a “series” of 2022 hikes. If price inflation rates stay high, the Fed would be ready with rate hikes exceeding a quarter percentage point, Powell said.

Markets liked the certainty, and it’s a helpful heads up for consumers because the federal funds rate strongly influences a credit card’s APR and a savings account’s APY. Here’s more on that relationship:

Added credit-card costs

If a rate hike does comes this month, it could be April or May when credit-card holders see the higher APR reflected on their bill, said Matt Schulz, chief credit analyst at LendingTree. For anyone with credit-card debt, “any rise in rates is unwelcome, but the truth is that the Fed’s move in March isn’t likely to rock most people’s financial world, if it is only a quarter-point increase. The danger comes if the rate increases keep coming — and in bigger chunks.”

Consider this scenario:

A person carries a balance of $5,000 and makes $250 monthly payments, with a 16.44% APR (the average credit card interest rate in 2021’s fourth quarter, according to the Fed). To pay off the balance, the person will pay $884 in interest, Schulz said.

In comes a 25-point basis point increase:

That would bring the APR to a potential 16.69% because the prime rate — which issuers use to make their credit-card rates — historically absorbs the full amount of the federal funds rate increase, Schulz said. Now the same person is paying $900 in interest to pay down the balance, a $16 increase over the life of the loan, he said.

And another 25-basis-point increase:

With an APR of 16.94%, that turns into $917 in interest, an additional $32 during the loan’s duration.

If there are six, quarter-percent rate increases — which isn’t out of the ballpark when some observers say there could be seven hikes — that turns into a 1.5% rise for APR, Schulz said. Now the borrower has to pay $985 in interest, he said. That’s $101 extra during the life of the loan.

In a time of high inflation, an extra $101 being paid to interest instead of groceries or gas will be a tough reality for families living paycheck to paycheck. Average hourly earnings were flat from January to February, but up 5.1% year-over-year according to Friday’s jobs report.

Americans had approximately $860 billion in credit-card debt during 2021’s fourth quarter, according to the Federal Reserve Bank of New York. Borrowers had an average $4,857 in credit-card debt during the third quarter, according to TransUnion
TRU,
+2.13%,
one of the big three credit bureaus.

It’s worth noting that some rates will be higher depending on a cardholder’s credit history. In February, the average rate for all new card offers was 19.53%, according to LendingTree.

Higher savings-account yields

“The good news about interest-rate hikes is that consumers who put their money in high-yield savings accounts will grow their money faster so continuing to shore up savings this year will yield more returns than last year,” said Gannesh Bharadhwaj, general manager of credit cards at Credit Karma
INTU,
-1.64%.

Savings accounts are a place to safely store easy-to-access cash, rather than to reap large returns. Extra interest yields after a rate hike will be modest at first but can pile up depending on how many rate increases occur, said Ken Tumin, founder and editor of DepositAccounts.com.

Right now, an online savings account has an average 0.49% APY, he said. Historically, rate increases haven’t all been passed along to the APY, at least at first, Tumin said.

A 25 basis point hike could mean a potential average APY around 0.55% – 0.6%, he estimated. If a savings account has $10,000, that little step up bears an extra $10, Tumin said.

But the talk is of multiple rate increases. If there are six, quarter-percentage-point increases, that same $10,000 account could produce an extra $100 in a year, he estimated.

Online savings accounts are the places to find the elevated APYs, not the “brick and mortar” banks, Tumin said.

During the previous rate-hike cycle from 2015 to 2018, there were three, quarter-point increases “before the average high-yield savings account APY had any significant gain,” he noted. “The rise may be faster this time due to high-yield savings account rates that have fallen to levels much lower than the bottom levels before 2015.”

‘A marginal impact’ for mortgage rates

“For housing, the Fed’s short-term rate has a marginal impact on mortgage rates,” said George Ratiu, senior economist and manager, economic research at Realtor.com.

There’s a different Fed action connected to those rates, he said. Along with dropping the federal funds rate during the pandemic’s early days, the central bank also bought up Treasury debt and agency mortgage-backed securities. The central bank has decided it’s a good time to end that.

From 2020 to 2021, those Fed purchases injected liquidity and sent mortgage rates to the basement, Ratiu said. “As the Fed announced it planned to finalize its tapering of [mortgage-backed securities] purchases later this month, we have seen rates surge to highs not seen since mid-2019.”

So prospective homeowners are already paying for Fed actions. The average 30-year fixed mortgage rate hit 3.76% this week, Freddie Mac
FMCC,
-1.41%
said. To put that in context, the 30-year fixed mortgage rate was closer to 2.7% a year ago.

One basis point is equal to one-hundredth of a percentage point. It’s major shift from just a few weeks earlier when the average rate for the 30-year loan jumped to the highest level since May 2019, close to 4%.

February’s median listing came to $392,000, according to Realtor.com. Compared to a year ago, a buyer would pay $278 more on their monthly mortgage, Ratiu noted. That’s more than $3,300 added to the buyer’s yearly financial burden.

“Additional increases in mortgage rates will further squeeze buyers’ budgets and may limit first-time buyers’ ability to qualify for a mortgage, especially with prices continuing to advance,” he said.

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Business

FDA Raises Concerns About China-Developed Drugs

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U.S. regulators are poised to tap the brakes on approving dozens of cancer drugs and other new medicines developed in China.

The regulators have expressed concerns about the quality of studies largely conducted in China and whether the results can apply to patients in the U.S.

The shift threatens to halt the plans of Western drugmakers, including

Eli Lilly

LLY 1.40%

& Co. and

Novartis AG

NVS 0.06%

, who were eyeing billions of dollars in sales from bringing the Chinese medicines to the U.S. It could also raise a new source of tension between the two countries.

Lilly this year was aiming to roll out a lung-cancer immunotherapy developed in China and sell it at a lower price than similar drugs already on the market.

The Food and Drug Administration’s reservations threaten to upend the plans. The impact of its concerns could become clearer Thursday, when agency advisers consider the evidence for the drug from Lilly and its Chinese partner

Innovent Biologics Inc.

1801 2.48%

Eli Lilly is one of the Western drugmakers that have eyed sales from bringing Chinese drugs to the U.S.



Photo:

Mike Segar/REUTERS

The advisory committee is expected to vote on whether to recommend FDA approval of the drug and to discuss whether the Chinese clinical-trial results for it are applicable to American patients.

FDA officials say they are concerned about the quality of the studies evaluating China-developed drugs. The officials are also concerned the drugs haven’t been tested in U.S. patients.

“We have nothing against drugs being developed in China,” said Richard Pazdur, director of the FDA’s cancer-drugs division. “Our issue is, are those results generalizable to the U.S. population?”

Two Chinese drug-industry trade groups didn’t respond to requests for comment.

Drug-industry executives and analysts say the apparent shift in tone could lead to delays or outright FDA rejections of efforts to bring a growing pipeline of the treatments to American patients.

Chinese biotech companies and their Western partners may have to conduct additional tests of their proposed new drugs in U.S. patients, some analysts say.

“There does seem to be a change in tone as to the approvability of these data sets in the U.S.,” said

Jacob Van Naarden,

president of Lilly’s oncology unit. Innovent didn’t respond to requests for comment. The company said in a document submitted to the FDA that its study conducted in China supports approval.

China, long a source of drug ingredients, has placed a priority on developing a homegrown biotechnology industry in recent years.

In 2019, the FDA approved the drug, Brukinsa, a lymphoma treatment from

BeiGene Ltd.

, that had been primarily tested in China. Most subjects in the clinical studies that led to the approval were in China, but some were in the U.S.

That same year, Dr. Pazdur said at a medical conference the FDA would accept Chinese-only drug-study results if they were “quality” data.

Researchers work inside a Beijing laboratory at BeiGene, a Chinese biotechnology firm.



Photo:

Gilles Sabrie/Bloomberg News

Clinical trials, especially the large, late-stage studies that regulators review to decide whether to approve a new drug, are among the biggest research and development expenses.

Industry executives and analysts viewed Dr. Pazdur’s comments as offering a kind of shortcut for China-tested drugs to get cleared in the U.S. without having to do extensive U.S. trials.

“Now that path appears to be closing,” Bernstein analyst Ronny Gal said in an interview. He said Dr. Pazdur’s more recent comments amounted to “a clear change in tone at the FDA, from encouraging this to discouraging this.”

Dr. Pazdur said his 2019 comments have been misinterpreted as encouraging companies to take certain steps.

When drugs are tested only or primarily in one country such as China, Dr. Pazdur said, it is difficult to assess whether the drug would have the same benefits and safety profile in the U.S. population.

Richard Pazdur, director of the FDA’s cancer-drugs division, says he has concerns that the Chinese drug studies used outdated study designs.



Photo:

JOSHUA ROBERTS/BLOOMBERG NEWS

There may be differences between countries in medical care and population that affect how a drug performs, he said.

The FDA has more flexibility to accept China-only clinical data for diseases that are less common in the U.S. than in Asia., such as nasopharyngeal carcinoma, Dr. Pazdur said.

Dr. Pazdur said he was concerned the Chinese studies used outdated study designs, which don’t directly establish whether the China-developed drug works as well as similar drugs approved in the U.S. in recent years.

He also expressed concern about the integrity of data generated by drug studies in China.

An analysis by Chinese regulators in 2016 found that about 80% of domestic drug applications reviewed at that time contained fabricated, flawed or insufficient data from studies, the British Medical Journal has reported.

In some cases, there were discrepancies between original study data and what was submitted to regulators.

“The elephant in the room is obviously, what is the quality of the data that is coming from these foreign countries?” Dr. Pazdur said.

There are about 25 potential new cancer treatments that were tested only or predominantly in China and which companies have told the FDA they would like to sell in the U.S., Dr. Pazdur said.

FDA officials including Dr. Pazdur raised some of the concerns in an article published by the New England Journal of Medicine in December, titled “The Wild West of Checkpoint Inhibitor Development.”

Checkpoint inhibitors are cancer immunotherapies like the one that Lilly and partner Innovent want to bring to the U.S., named Tyvyt.

Lilly executives have said they would sell Tyvyt in the U.S. at a substantially lower price than older, similar drugs such as

Merck

& Co.’s Keytruda and

Bristol-Myers Squibb Co.

’s Opdivo. Lilly said Wednesday it would sell the drug at a 40% discount to comparable brands, pending regulatory approval.

Keytruda and Opdivo can cost more than $150,000 per patient annually.

Innovent conducted a trial of Tyvyt in nearly 50 hospitals in China that enrolled nearly 400 patients with advanced non-small-cell lung cancer.

Researchers found that giving patients both Tyvyt and chemotherapy prolonged the median time to disease progression or death to about 8.9 months, versus five months for those on chemotherapy alone.

Mr. Van Naarden said he thought the Tyvyt study was well-conducted and the results are applicable to the U.S. population.

FDA staff said, in a document posted online Tuesday, the data from the clinical trial “are not applicable to the U.S. population and U.S. medical practice.”

A final agency decision on whether to clear the Lilly-Innovent drug is expected by the end of March.

Write to Peter Loftus at peter.loftus@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

SEC Proposes Broad Disclosure Rules for Private Investment Funds

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WASHINGTON—Regulators proposed expansive new requirements for private investment funds Wednesday as part of a widening effort to police a rapidly growing but relatively opaque corner of the capital markets.

In a Wednesday morning meeting, the Securities and Exchange Commission passed a proposal that would force hedge funds and private-equity funds to provide basic disclosures to their investors and guard against conflicts. The Democratic-controlled commission approved the proposal by a 3-to-1 vote, signaling a strong chance that a final version will be adopted. The agency will now seek public comments for at least two months before issuing a final rule.

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Health

South Africa study shows boosters failed to block omicron, bolstering case for face masks, distancing and hand washing

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A study of some of the first breakthrough cases of COVID-19 caused by the highly infectious omicron variant found that booster shots of the mRNA vaccines failed to block that strain, although the infections involved only mild or moderate symptoms, confirming they are effective in preventing serious illness and death.

The study involved a group of seven Germans visiting Cape Town in South Africa who had the first documented breakthrough cases of COVID between late November and early December after receiving three vaccine doses, including at least two of the mRNA shots developed by Pfizer
PFE,
+0.95%
with German partner BioNTech SE
BNTX,
-3.17%

22UA,
-5.22%
or Moderna
MRNA,
-3.76%.
Findings were published in the medical journal the Lancet.

The group comprised five white women and two white men between 25 and 39 years of age, four of whom were participating in clinical training at hospitals, while the others were on vacation. All seven developed respiratory symptoms between Nov. 30 and Dec. 2 and tested positive for the omicron variant of the SARS-CoV-2 coronavirus. The study was approved by Stellenbosh University and the University of Cape Town.

“These findings support the need for updated vaccines to provide better protection against symptomatic infection with omicron and emphasize that non-pharmaceutical measures should be maintained,” the authors wrote.

Earlier this week, a preliminary study by a hospital in Israel found that a second booster dose failed to block omicron, even though it lifted antibodies to a higher level than they had been after a first booster shot.

See also: Omicron cases seem to have peaked in northeastern states, but national case tally remains at record levels and hospitals are slammed

In the U.S., omicron has pushed new cases and hospitalizations to record levels, according to a New York Times tracker. Cases are averaging close to 800,000 a day, while hospitalizations are above 158,000. That number includes patients in the hospital with other symptoms who have tested positive for the virus.

See: A record 8.75 million people missed work because COVID is in their house

And while case levels seem to have peaked in some of the states that were first hit hard by omicron — New York among them — the national rate remains at a record level and deaths, which lag cases and hospitalizations, are above 1,900. That’s an increase of 50% over the last two weeks and means the U.S. is suffering 9/11-scale casualties every two days.

Amid a surge in cases, some countries are handing out second booster shots. In Israel, early data suggest a fourth vaccine dose can increase antibodies against Covid-19, but not enough to prevent infections from Omicron. WSJ explains. Photo composite: Eve Hartley/WSJ

See: Opinion: We need a decisive pivot on COVID-19: Double down on treatments for those at high risk instead of boosters and tests for everyone

Other COVID-19 news you should know:

• The National Institutes of Health on Wednesday updated its COVID-19 treatment guidelines for patients with mild to moderate forms of COVID-19 who are at high risk for disease progression. The new guidelines now include the recently authorized antivirals developed by Pfizer and Merck
MRK,
-0.66%
with Ridgeback Biotherapeutics and not that GlaxoSmithKline
GSK,
-1.77%

GSK,
-0.09%
and Vir Biotechnology’s
VIR,
-2.53%
sotrovimab is the only monoclonal antibody that is thought to be effective against omicron, and have added a three-day course of Gilead Sciences Inc.’s
GILD,
-1.82%
 Veklury as a treatment option. The panel suggests that clinicians first use Pfizer’s Paxlovid, then sotrovimab, then Veklury, and the final option should be molnupiravir, which is the Merck/Ridgeback drug.

• The French government will unveil a timetable for easing COVID restrictions later Thursday, Reuters reported, citing spokesman Gabriel Attal, who cautioned that the omicron wave has not yet passed. Attal said France’s new vaccine-pass rules would help allow a softening of rules even as the incidence of infections continues to increase. France reported nearly half a million coronavirus infections on Wednesday to leave the seven-day average at 320,000 cases.

• Austria’s conservative-led government is introducing a national lottery to encourage holdouts to get vaccinated, Reuters reported separately. The news came hours before parliament passed a bill introducing a national vaccine mandate applicable to everyone 18 and older with exemptions for pregnant women, people who for medical reasons can’t be vaccinated and those who have recovered from infection by the coronavirus within a six-month span. Roughly 72% of Austria’s population is fully vaccinated against COVID-19, one of the lowest rates in Western Europe. Every 10th lottery ticket will offer a gift voucher valued at 500 euros ($568).

• Texas Attorney General Ken Paxton, an opponent of vaccine mandates, has tested positive for COVID, the Washington Post reported. It’s unclear whether Paxton was vaccinated or when he was infected, and his office reportedly did not reply to a request for comment. Paxton has opposed making vaccines compulsory for healthcare workers in facilities that receive Medicare and Medicaid funds, troops in the Texas National Guard and staff at Head Start programs.

Scientists are using automation, real-time analysis and pooling data from around the world to rapidly identify and understand new coronavirus variants before the next one spreads widely. Photo Illustration: Sharon Shi

Here’s what the numbers say

The global tally of confirmed cases of COVID-19 rose above 338.9 million, and the death toll is now more than 5.56 million, according to data aggregated by Johns Hopkins University.

The U.S. leads the world with 68.7 million cases and 858,481 fatalities.

The world set a record of more than 3 million COVID cases a day between Jan. 13 and Jan. 19, AFP reported, in the latest sign of how fast omicron has spread.

The Centers for Disease Control and Prevention’s vaccine tracker is showing that some 209.5 million people living in the U.S. are fully vaccinated, equal to 63.1% of the total population.

Some 81.7 million have received a booster, equal to 39% of the fully vaccinated.

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Business

The Warren-Biden Bank Heist – WSJ

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Elizabeth Warren

finally got her woman—that is, the Senator and her many acolytes in the Biden Administration have succeeded in ousting

Jelena McWilliams

as chair of the Federal Deposit Insurance Corp. The coup deserves attention because of its norm-breaking precedent and what it signals for bank mergers and supposedly independent regulatory agencies.

Ms. McWilliams resigned on Dec. 31, effective Feb. 4, to avoid more turmoil at the bank regulator. But as she wrote in these pages on Dec. 16, her resignation comes amid a concerted and unprecedented political effort to strip her of authority before her term as chair expires in June 2023.

***

The coup has been led by

Rohit Chopra,

the Warren protege who now runs the Consumer Financial Protection Bureau and is one of four current members of the FDIC board (one post is vacant). The FDIC’s longstanding practice and bylaws, based on its interpretation of the law, is that the chair sets the board’s agenda.

Every administration for 88 years has honored that understanding, including the supposedly norm-breaking Trump Administration. Democrat

Martin Gruenberg

was allowed to continue as chair until June 2018 after President Trump took office, and no one attempted to oust him.

Enter the Warren-Biden progressives in a hurry. The Senate confirmed Mr. Chopra on Sept. 30 on a 50-48 vote, and as soon as Oct. 31 he presented Ms. McWilliams with a request for information (RFI) on bank mergers. When she said the draft RFI would have to be vetted by FDIC staff, Mr. Chopra publicly released his own RFI without authority from his post at the CFPB, which the FDIC was obliged to contradict.

Mr. Chopra then moved to neuter Ms. McWilliams by other means. He has asked the Office of Legal Counsel at the Justice Department for an opinion on whether Ms. McWilliams can set the agency’s agenda. In a Dec. 14 statement, Mr. Chopra also threatened to “take further steps to exercise independence from management” of the FDIC.

This distorts the meaning of agency “independence,” which is supposed to be from the executive branch. Mr. Chopra cites President Biden’s July 9 executive order referring to bank mergers, but the FDIC has long held that it is not subject to executive orders on policy. Mr. Chopra wants to make the FDIC a de facto part of the Biden Administration. Who knew the left endorsed the originalist constitutional theory of the “unitary executive”?

Our sources say the plan was for Mr. Chopra and his allies on the board—Mr. Gruenberg and acting Comptroller of the Currency

Michael Hsu

—to change the FDIC bylaws and strip Ms. McWilliams of her power. Ms. McWilliams made the honorable decision to spare the agency more internal fighting, but her resignation means Mr. Chopra will now essentially run the show. Mr. Gruenberg will become acting chair. He will follow where Mr. Chopra wants to go, as he showed by signing a joint statement with Mr. Chopra on his draft RFI on Dec. 9.

The real power behind all this is Sen. Warren, who has planted her aides and camp followers throughout the Biden Administration. She may have lost the 2020 Democratic primaries to Mr. Biden, but she has colonized the government’s financial regulatory offices.

Her former staffer,

Bharat Ramamurti,

is deputy director of the White House National Economic Council. His fingerprints were all over the failed nomination of Saule Omarova to be Comptroller of the Currency.

Wally Adeyemo,

who helped Ms. Warren establish the CFPB, is now deputy Treasury secretary. Lina Khan runs the Federal Trade Commission.

Graham Steele,

a former aide to Warren Senate ally

Sherrod Brown,

is assistant Treasury secretary for financial institutions. There are many others.

One result is that Treasury Secretary

Janet Yellen

seems to have little influence over financial regulation. Ms. Omarova wasn’t her choice for Comptroller. Ms. McWilliams sought her support for the FDIC’s traditional independence, but Ms. Yellen refused. Her main job these days seems to be telling the public not to worry about inflation.

***

What do these Warren cadres hope to accomplish? One clear goal is greater influence over the allocation of credit. Using regulation to squeeze financing for fossil fuels will be a priority. Bank mergers are a political target because regulatory approval can be exploited as a tolling station to coerce money for “local communities,” to use Mr. Chopra’s euphemism for progressive political groups.

Mr. Chopra also wants to reinterpret the law to make it easier to block bank mergers, notably those that have more than $100 billion in assets. This is a coordinated effort. His Dec. 9 RFI mentioned that figure. On Dec. 10

Maxine Waters

sent a letter to federal officials urging a moratorium on bank mergers above $100 billion. On Dec. 17 the Justice Department’s Antitrust Division issued a press release praising Mr. Chopra and promising heightened antitrust review of bank mergers.

The irony is that regional banks are merging to gain economies of scale to compete with giant banks. The 2010 Dodd-Frank Act increased compliance costs, which the biggest banks find easier to afford. Blocking mergers of regional banks will enhance the market power of JP Morgan and Bank of America.

By undermining the independence of federal agencies, Democrats are also creating a precedent that the GOP will follow. The next Republican President will promptly fire the next FDIC chair, among other officials.

The FDIC coup should also focus the Senate’s attention on Mr. Biden’s pending nominees for the Federal Reserve, another supposedly independent bank regulator. Anyone who endorses the FDIC coup shouldn’t be confirmed.

Democrats claim that Trump Republicans broke political norms, and sometimes they did. But one reason is that they see how progressives trample norms when they have power. Watch the Warren left in action.

Journal Editorial Report: What’s Plan B for a faltering legislative program? Images: Bloomberg/Getty Images Composite: Mark Kelly

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Reddit Files Confidentially for IPO

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Reddit Inc. said it has confidentially filed paperwork with the U.S. Securities and Exchange Commission for an initial public offering, an announcement that comes at the tail end of a banner year for stock-market debuts.

The company said in a blog post that it had started the paperwork with the SEC but didn’t share any further details.

“The number of shares to be offered and the price range for the proposed offering have not yet been determined,” it said in the post. “The initial public offering is expected to occur after the SEC completes its review process, subject to market and other conditions.”

As of August, Reddit said it had a valuation of about $10 billion after raising more than $400 million from Fidelity Investments Inc. In February, the social-media company said it had raised about $500 million at a $6.5 billion valuation.

Reddit has been looking to build on the attention it gained when at the start of the year its WallStreetBets forum became a hot spot for the individual investors who rallied around

GameStop Corp.

and other stocks.

The episode brought in millions of new users, Reddit CEO

Steve Huffman

said in its wake, as well as new advertisers, the source of the bulk of the company’s revenue. He has also said that with an IPO, he would want to make Reddit’s share offering more accessible to individual investors.

San Francisco-based Reddit, founded in 2005, is known for its message boards on an array of topics, plus its “ask me anything” digital town halls with celebrities, politicians and subject-matter experts. The company was sold to Condé Nast in 2006, and the magazine publisher’s parent, Advance Publications Inc., spun Reddit off in 2011 and remains a shareholder.

Over time Reddit has grown to outpace rivals such as Digg to become a haven for niche communities to gather and a go-to source of news. Reddit had more than 50 million daily users as of January, according to its website. In August the company said it reached $100 million in advertising revenue in a quarter for the first time, almost triple the prior-year figure, but that it remained unprofitable.

Reddit’s market debut will come after a year for IPOs like no other. More than 900 companies have gone public in 2021, raising nearly $300 billion in 2021, including electric vehicle maker Rivian Automotive Inc., dating app

Bumble Inc.

and mobile-videogame maker

Playtika Holding Corp.

Along with Fidelity, Reddit’s investors include venture-capital firms Andreessen Horowitz and Sequoia Capital, and Chinese technology conglomerate

Tencent Holdings Ltd.

In recent years, Reddit has been taking steps to grow by investing in areas such as video and consumer products, as well as by moving into international markets. But like many other social-media companies, it’s also been plagued with content-moderation challenges, including how to stop the spread of misinformation and calls for violence.

In 2020, Reddit banned “The_Donald,” a community devoted to former President

Donald Trump,

saying moderators frequently ignored content that violated its platform’s rules.

Thanks to the GameStop trading frenzy, Reddit has become a hot spot this year for everyday Wall Street investors seeking advice. At The Wall Street Journal’s Tech Live conference in October, Mr. Huffman said he was hoping a lot of individual investors would participate in Reddit’s initial offering.

“Retail investors are usually the last and probably at the worst price” for initial offerings, Mr. Huffman said at the event. “But the way the market is evolving to be more fair I think is really exciting.”

Write to Sarah E. Needleman at sarah.needleman@wsj.com

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Business

SEC Floats Rules to Shore Up Money Markets, Curb Insider Trading

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WASHINGTON—The Securities and Exchange Commission issued a raft of proposals Wednesday including measures aimed at shoring up money-market funds and curbing executives’ ability to trade their own companies’ stock.

The proposals, some of which surprised Wall Street executives with their scope, indicate that Chairman

Gary Gensler

is moving quickly to enact a policy agenda that observers have called the SEC’s most ambitious in decades. That stands in contrast to other financial regulators, for which President Biden has yet to fill key positions, and saw a nominee withdraw amid Senate skepticism during confirmation.

With a thin majority in Congress, Democrats are leaning on Mr. Gensler to advance progressive priorities such as fighting climate change and curbing the power of big business. The SEC’s authority to write rules for asset managers, publicly traded companies and the stock market provides powerful, if sometimes roundabout, tools for achieving such goals.

The proposals “will go a long way toward increasing corporate transparency and accountability,” Sen.

Sherrod Brown

(D., Ohio), chairman of the Senate Banking Committee, said, praising enhanced disclosures around stock buybacks. “The first step to workers getting their fair share is learning just how much corporate executives are spending on themselves.”

Mr. Gensler’s agenda reflects political divisions. Three of the four proposals garnered party-line votes from the SEC’s five commissioners. Republicans

Hester Peirce

and

Elad Roisman

supported only a plan to tighten rules on how and when corporate insiders can sell their companies’ stocks. The agency is independent of the Biden administration.

The other proposals “are a partisan overreach that will likely diminish investment opportunities, economic growth and capital formation,” Sen.

Pat Toomey

(R., Penn.), the top Republican on the Senate Banking Committee, said.

Two of the proposals put forward Wednesday seek to make the financial system more stable by reducing panicked investors’ tendency to flee money-market funds and by regulating opaque derivatives known as “swaps.” The other two rules would seek to enhance fairness and transparency in the stock market. They would introduce new restrictions on corporate executives’ trading and heighten disclosure requirements around share buybacks by publicly traded companies.

The new rules for money-market mutual funds aim to prevent episodes that occurred during the past two recessions, in 2008 and 2020, when the Federal Reserve was forced to backstop the funds after they were hit with a wave of redemption requests that caused credit markets to seize up.

Money markets are typically used by corporate treasurers, pension funds and millions of individual investors as a safe place to park cash and earn a higher return than they could obtain in a bank account. They provide companies with liquidity for short-term loans, called “commercial paper,” to cover immediate expenses like payroll.

But money-market funds aren’t regulated like banks, which must meet minimum capital requirements and offer deposit insurance. Regulators say this makes them more susceptible to runs when markets are under severe stress, creating broader risks to the financial system.

“This is about resiliency,” Mr. Gensler said in an interview, noting that Americans have roughly $5 trillion invested in money markets. “Though there have been reforms in 2010 and 2014, we found again in 2020 some instability…with the dash for cash.”

The SEC’s proposed changes include a measure called “swing pricing” that firms including

BlackRock Inc.

and

Federated Hermes Inc.

have warned could destroy a subset of the industry that holds short-term corporate debt and caters to institutional investors. The measure would require these funds to adopt policies for adjusting their share prices by a “swing factor” on days when they have net redemptions. The factor would be determined by transaction costs and the market impact of selling a slice of the fund’s portfolio.

The goal is to protect investors who remain in the fund from dilution by investors who redeem their shares, Mr. Gensler said.

The SEC’s timing caught money-market fund managers off guard, said

John Tobin,

investment chief at Dreyfus Cash Investment Strategies, which oversees $350 billion in money funds. Many didn’t expect to see the new proposed rules until next spring, he said.

The swing-pricing proposal is likely to draw universal industry opposition, said Mr. Tobin, whose business is a unit of

Bank of New York Mellon Corp.

He said the rule would create operational challenges and could encourage institutional investors to head for the exits before a fund executes any swing-price decision.

“It’s definitely a shot across the bow,” he said. “This is a watershed moment.”

The SEC also proposed significant restrictions on arrangements, known as 10b5-1 plans, by which corporate officers and directors schedule stock trades ahead of time to avoid running afoul of insider-trading rules. Among other changes, the agency would require executives to wait 120 days before buying or selling their employer’s stock after setting up or modifying the plans.

That proposal follows academic research suggesting the arrangements are being abused as company leaders cash in at historic levels on their companies’ shares.

“The core issue is that these insiders regularly have material information that the public doesn’t have,” Mr. Gensler said in a statement. Wednesday’s proposed changes seek to ensure their stock trading is done “in a way that’s fair to the marketplace,” he added.

Commissioners also voted 3-2 along party lines to propose increased disclosures around public companies’ stock buybacks, which are also hitting records this year.

Repurchases support stock prices by reducing the number of shares outstanding in a company, lifting the firm’s earnings per share. Like dividends, they enable companies to return cash to investors. But critics, including many Democrats, say buybacks give executives who are partly paid in equity or options a roundabout way of boosting their own compensation, at the expense of workers’ wages or productive investments.

The SEC’s proposal would require stock-buyback disclosures to be more detailed and more frequent. Rather than disclosing monthly aggregate share repurchases once a quarter, companies would have to report buybacks on the next business day. They would also have to indicate whether any executives bought or sold shares within 10 business days of a buyback program’s announcement.

“Companies may determine to allocate capital towards share repurchases for a number of different reasons,” Democratic SEC Commissioner

Allison Lee

said. “But one of those reasons should not be for the opportunistic, short-term benefit of executives.”

The SEC’s chief economist,

Jessica Wachter,

said during the meeting that the costs of complying with the increased disclosure requirements might discourage some companies from buying back stock. Ms. Peirce and Mr. Roisman issued strong dissents against the rule.

“Say ‘dividend,’ and nobody gets angry, but say ‘share buyback,’ and the rage boils over,” Ms. Peirce said. “Today’s proposal channels some of that rage against repurchases in a way that only a regulator can: through painfully granular, unnecessarily frequent disclosure obligations.”

—Justin Baer contributed to this article.

Write to Paul Kiernan at paul.kiernan@wsj.com

Corrections & Amplifications
The SEC proposed significant restrictions on 10b5-1 plans. An earlier version of this article incorrectly referred to them as 10b5-5 plans. (Corrected on Dec. 15.)

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