By Victoria Guida

An employee of Lehman Brothers Holdings Inc. carries a box out of the company's headquarters Sept. 15, 2008 in New York City. | Chris Hondros/Getty Images

CRISIS MANAGEMENT — It’s been 15 years since the 2008 financial crisis, and Washington is still fighting about the best way to prevent another banking meltdown.

Lawmakers fretted on Capitol Hill today about a new proposal from bank regulators that’s designed to wrap up unfinished business from the crisis — most notably by requiring big financial institutions to hold more loss-absorbing capital in case of another blow up.

To be clear, regulators have already done a lot to beef up bank defenses in the last decade and a half. Whether they’ve done enough is a different question.

Democrats like Rep. Maxine Waters (D-Calif.) have said the mini banking crisis earlier this year, when Silicon Valley Bank fell apart and brought two other regional banks down with it, shows they haven’t gone far enough. “We need to strengthen capital requirements for our largest banks, given the risk that they pose,” she said at the hearing.

But these types of regulations are also really complex, so it’s not just about how much capital banks are required to have. It’s also: are there useful bank activities that will be curtailed as a result of this rule? This has been the steady drumbeat of Republican allies of the banking industry, but they’re also winning over some Democrats.

Congress pushed for stronger capital requirements “to strengthen the banking industry’s ability to withstand stresses and shocks,” Rep. David Scott (D-Ga.) said today. “Since then, our banking system has successfully navigated very difficult periods, including the recent 2020 Covid economic shock. But now I’m very concerned with the unintended economic consequences of this proposed rule and its potential impact on our banking institutions as they engage in critical market activities.”

Their complaints get at the complexity of the role that banks play in our society. Banks are where we put our money, and they can use that money, in an ideal scenario, by investing in useful things — helping people buy houses, helping companies grow, facilitating trading in markets where firms and governments borrow money, and so on. (Of course, we know from prior experience that banks also do lots of irresponsible stuff as well.)

They’re at the heart of capitalism, but also they’re deeply interconnected with the government. For the biggest, most interconnected megabanks, there is a dedicated team of examiners that advise on the strategic direction of the bank to ensure both that it is “safe and sound” — that is, commercially viable — and that it isn’t endangering the financial safety of the U.S.

But how much of that should be enforced through hard and fast rules versus individualized supervision? And how much, as is often professed by people on both sides of the aisle, can the gaps simply be solved by more capital?

Banks can fund a lot of their operations through borrowed money, including but not limited to deposits. Capital, in contrast, is money that comes from shareholder money and profits, effectively a skin-in-the-game requirement that means some of the funding banks use has to actually be their own. Higher capital requirements ideally should ensure that banks can absorb unexpected losses on their own without causing a broader headache for the financial system, but it also can make taking risks, even productive ones, more expensive.

Bank supervision is considerably more strenuous than it was before the 2008 crisis. The 2010 Dodd-Frank Act, often maligned for doing either too much or the wrong things, really did radically alter the direction of bank regulation and make banks way less reliant on debt. They have way more cash to handle crises.

Meanwhile, supervisors seem to have missed the forest for the trees on the problems that ultimately plagued these failed banks. And regulators seem to have largely thrown out the post-Dodd-Frank rulebook that was supposed to dictate how to deal with a big failed bank.

So, as the country faces an ignominious anniversary on Friday — the 15-year anniversary of the epic collapse of investment bank Lehman Brothers — it’s fair to say the system is more resilient than it was. It’s not as clear whether it’s resilient enough.

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— Judge delays trial for Trump, others in Georgia 2020 election prosecution: The Georgia judge overseeing the massive, 2020 election-related racketeering case against former President Donald Trump and 18 co-defendants has ruled that the former president will not go on trial next month alongside attorneys Sidney Powell and Kenneth Chesebro, both of whom demanded an expedited schedule. In an order today, Fulton County Superior Court Judge Scott McAfee called the decision to split the sprawling case into multiple trials an “absolute necessity,” given the complexity of the case and the burden it would create for the state’s court system. McAfee said he doubted the Fulton County courthouse could handle a trial for all the defendants at once. He also worried that such a sprawling case would create an unmanageable process for selecting a jury and exacerbate the risk of delays if any defendant or attorney is unexpectedly absent. Prosecutors had claimed they were prepared to put all 19 defendants on trial together on Oct. 23, but McAfee scoffed at that possibility.

— Hunter Biden indicted on gun charges: President Joe Biden’s son is under indictment. A Delaware grand jury indicted Hunter Biden on three gun-related charges today, including illegally owning a firearm as a drug user and lying on a form when he allegedly bought the gun. Today’s move is a major escalation in the Justice Department’s probe of Hunter Biden, heightening both his legal jeopardy and his father’s political peril. The courtroom fight will play out in tandem with a Republican impeachment inquiry into the president that is scrutinizing his son’s business dealings.

— UAW strike ‘very likely’: Detroit’s Big Three carmakers and the union representing their employees are careening toward a work stoppage beginning as soon as midnight tonight. The contract negotiations will directly affect the roughly 150,000 members of the United Auto Workers employed at General Motors, Ford and Stellantis. And it carries profound implications for the industry, the economy and President Joe Biden’s political standing — as well as his pledges to build a U.S. manufacturing renaissance based on countering climate change. “At this hour, it’s very likely that there will be a strike,” Rep. Debbie Dingell (D-Mich.) told POLITICO earlier today.

GO INSIDE THE WORLD’S BIGGEST DIPLOMATIC PLATFORM WITH UNGA PLAYBOOK: The 78th Session of the United Nations General Assembly will jam some of the world's most influential leaders into four city blocks in Manhattan. POLITICO's special edition UNGA Playbook will take you inside this important gathering starting Sept. 17 — revealing newsy nuggets throughout the week and insights into the most pressing issues facing global decision-makers today. Sign up for UNGA Playbook.

Rep. Chip Roy (R-Texas) looks on as Florida Governor and 2024 Republican Presidential hopeful Ron DeSantis speaks during a news conference near the Rio Grande River in Eagle Pass, Texas, on June 26. | Suzanne Cordeiro/AFP via Getty Images

EMBRACE THE SHUTDOWN — In the high-stakes fight that is threatening to shut down the federal government next month — and tear House Republicans apart — Ron DeSantis is taking sides, POLITICO reports. The Florida governor spent about 30 minutes on the phone Wednesday with conservative Reps. Chip Roy of Texas, Thomas Massie of Kentucky and Bob Good of Virginia — leaders of the cadre that is pushing House Speaker Kevin McCarthy to embrace a shutdown if Democrats won’t agree to hard-right policy demands. DeSantis’ message, according to a person familiar with the call: “I got your back. Keep fighting.”

The call is the latest signal that DeSantis is working to insert himself into the spending fight on the Hill in a bid to elevate his standing among Republican primary voters.

CHRISTIE’S LAST STAND — In his against-all-odds pursuit of the Republican presidential nomination, former Gov. Chris Christie of New Jersey has campaigned almost exclusively in New Hampshire: More than 90 percent of his events since February have been in the Granite State, according to a New York Times analysis.

To hear Mr. Christie tell it, New Hampshire is his do-or-die state. If he doesn’t perform well here, that will probably be it. “I can’t see myself leaving the race under any circumstances before New Hampshire,” he said in an interview. “If I don’t do well in New Hampshire, then I’ll leave.” Much as he did during his White House bid in 2016, Mr. Christie is betting on the independent streak of New Hampshire voters to validate his candidacy and catapult him into contention.

SHRINKING STAGE — The Republican presidential debate stage is shrinking. Eight candidates participated in the first debate last month. With only a week and a half left to qualify, two are still hunting for an invitation to the second on Sept. 27, POLITICO writes.

And there are signs that the debates after that could see the number of participants contract considerably. The candidates whose participation in future debates is most in doubt are scrambling to influence the qualifications ahead of any announcement. The campaign manager for Sen. Tim Scott (R-S.C.) sent a letter to the Republican National Committee this week asking for an overhaul of the criteria — without which the South Carolina senator could find himself booted from the stage for the third debate. The same fate could also befall former New Jersey Gov. Chris Christie.

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DIPLOMATIC TROLLING — Hungarian Foreign Minister Péter Szijjártó accused Stockholm of making “unfair and unjust” remarks on the state of democracy in Hungary today, which he said were in “contradiction” to Sweden’s bid to join the NATO military alliance, which Budapest hasn’t yet ratified, writes Nicolas Camut.

“You urge our parliamentarians to ratify your accession to NATO, while you continue to accuse them as if they had destructed [sic] democracy in Hungary,” Szijjártó wrote in a letter to his Swedish counterpart Tobias Billström posted on X (formerly Twitter).

Hungary, which was one of the last countries to sign off on Finland’s accession to NATO, has dragged its feet on approving Sweden’s candidacy to join the military bloc for months because it says Stockholm has criticized the country’s democratic credentials. After Turkey agreed to back Sweden’s bid at a summit in Vilnius in July, NATO Secretary-General Jens Stoltenberg said he’d received assurances from Hungarian Prime Minister Viktor Orbán his country would not keep opposing Stockholm’s membership.

SPY GAMES — Chinese spies are actively trying to recruit Brits “with sensitive knowledge and experience,” the U.K. government claimed today, as it defended its efforts to clamp down on interference by Beijing.

In a long-awaited response to a piercing report about the U.K.’s efforts to take on Chinese spying, Rishi Sunak’s government said some of Beijing’s work “crosses the line from influence into interference” — and accepted it needs to up its game. The report came as Westminster continues to digest news that a British parliamentary researcher with links to senior Conservatives had been arrested in March on suspicion of spying for China.

JOIN 9/19 FOR A TALK ON BUILDING THE NEW AMERICAN ECONOMY: The United States is undergoing a generational economic transformation, with a renewed bipartisan emphasis on manufacturing. Join POLITICO on Sept. 19th for high-level conversations that examine the progress and chart the next steps in preserving America’s economic preeminence, driving innovation and protecting jobs. REGISTER HERE.

AT THE BEGINNING — One of the biggest existential questions on the planet — one that’s driven significant scientific research — is how did the universe begin? Now, we know that what we might imagine as “space” and in particular “stars” is not the same as how stars actually behaved near the start of the universe. Rather than relatively cool, long-lived stars that exist in solar systems around the universe, research now shows that the beginning was full of hot stars that consistently flamed out. With a heavier composition of elements, they were constantly bursting into supernovae. But how did we get from there to here? And what do those early bursts tell us about how our universe functions today? Jay Bennett explores these essential questions for National Geographic.

On this date in 1962: Picketers walk in front of a downtown New Orleans drug store that's desegregated its lunch counter. Lunch counters across stores on Canal Street in New Orleans were desegregated by Black Americans in groups of two across September 1962. | Jim Bourdier/AP Photo

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A message from Citi:

Innovations in technology can potentially change the way we shop, access the internet, organize data, gain education, and more.

The recent Citi GPS Report, Disruptive Innovations IX, takes a closer look into 10 leading-edge concepts that could disrupt their marketplace – from retail to healthcare to 5G.

For instance, vertical farming – where plants or crops are grown indoors in vertically stacked layers – uses 95% less water and 99% less land than conventional farming. While vertical farming automation is still in its infancy, its advancements aim to usher in the agricultural system of the future – one that contributes less food waste, reduces deforestation and soil usage, and helps to accelerate the food production needed to feed the world.

Learn more here.

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