Axios Markets

The boom times are all around us (from corporate deal sprees to the breakneck rise of cryptocurrency) — and the agencies in charge are stretched thin trying to police it, Axios' Courtenay Brown writes.

Why it matters: Overwhelmed staff and a slew of vacant posts could set back President Biden's big regulatory agenda.

One example: The Federal Trade Commission said last month it doesn't have the manpower to review the "tidal wave" of deals within the standard 30-days.

• The Information reported this week the antitrust agency has had to slow another investigation to keep up.

Where it stands: The agencies charged with regulating banks, derivatives markets and housing are operating with acting heads — people who may not feel entitled to pursue aggressive agendas.

• These agencies are relying on people in advisory or counselor capacities — without Senate confirmation, who aren't accountable to lawmakers, the head of one industry trade group said.

The Treasury Department, one of the most powerful economic government agencies, has fewer confirmed officials than at the same point in the Bush, Obama and Trump presidencies, per data from the nonprofit Partnership for Public Service.

• Out of the 20 open confirmation-required posts, 10 are in limbo, as the Senate has been slow to move would-be officials through the process. But nine still need nominations, according to the data.
• One vacancy has prevented Treasury Secretary Janet Yellen's name from appearing on banknotes, as Bloomberg reports — a small example of how vacant roles are preventing business as usual.

There is some progress. Biden is reportedly set to tap Saule Omarova to head the Office of the Comptroller of the Currency, which supervises some of the nation's biggest lenders.

• And the nominee to lead the Consumer Financial Protection Bureau, Rohit Chopra, inched closer to confirmation, after six months stuck in committee.

What's next: The Fed is weeks away from losing a top bank cop, with no indication yet who will step in next and a shrinking window to confirm a replacement.

• Federal Reserve governor Randy Quarles' vice chair for supervision role expires on Oct. 13 (but he can stay on as governor for the next decade).

No official has been more publicly outspoken recently about regulator staffing shortages than SEC chair Gary Gensler, Courtenay writes.

• Complaints of this sort date back to at least 2009.

What they're saying: “We’ve got an IPO boom, we have a SPAC boom, we have cryptocurrencies to deal with ...[and] China," Gensler told CNBC last week.

• It echoes comments at a recent congressional hearing: Gensler said he needs more people to deal with the thousands of new digital assets that have cropped up.

Our thought bubble, via Axios' Felix Salmon: Between (a) Gensler's maximalist view of financial regulation and what counts as a security, (b) his desire to regulate the broad financial system, and (c) his deep understanding of inter-regulator politics from his time running the CFTC, it’s clear why he would move aggressively to claim as much land as he can before the other regulators even show up.

🚨China’s crackdown on digital currencies continued Friday when the central bank banned all crypto-related transactions and mining. (Axios)

💰Americans are sitting on a ton of cash. The amount of household cash and cash equivalents increased to $16.5 trillion in the second quarter, up from $16.3 trillion in 1Q and $12.7 trillion at the end of 2019, the Federal Reserve reported on Thursday. (WSJ)

🏃‍♂️Nike's missed 1Q sales estimates thanks to a number of factors, including COVID-related factory closures in Vietnam, and supply chain issues that caused production and shipping delays. (Bloomberg)

Evergrande, the Chinese property giant, was due to pay foreign bondholders $83.5 million Thursday as the semi-annual interest payment on its $2 billion bond due next year. It didn't, Felix writes.

Why it matters: This is the biggest missed coupon payment since the chaos of March 2020, and marks a key turning point in what could be one of the biggest and messiest corporate restructurings of all time.

The big picture: Missing a coupon payment doesn't automatically mean that Evergrande is in default — under the terms of the bond there's a 30-day grace period during which it can make the payment (as ordered by the Chinese government) and still be in good standing.

• Between the lines: Given the Chinese arm-twisting, it seems fair to assume that if Evergrande had the money to make the coupon payment, it would. While the company can come to a private "resolution" with domestic bondholders, its foreign bonds are an all-or-nothing affair: Either it makes the coupon payment in full, or it's in default.
• Flashback: The biggest missed coupon payment of last year came from Frontier Communications, which failed to make a $322 million interest payment on March 16, according to S&P. By April 15, the company had formally filed for Chapter 11 bankruptcy.

What's next: Evergrande has a hugely convoluted corporate structure, which privileges local banks over foreign bondholders. It's also acutely attuned to local political sentiment, which favors individual Chinese creditors who are owed either money or apartments or both.

• Fixed-income analysts including Travis Lundy see little chance of a debt-for-equity swap that would give foreign bondholders a substantial stake in a restructured Evergrande.
• The price of the 2022 bonds — they're now trading at just 29 cents on the dollar — implies that investors see not only a very high probability of default but also a very low recovery if and when the default occurs.

The bottom line: The Chinese government has a vested interest in preventing millions of its own citizens from losing money or property as a result of Evergrande collapsing. Foreign bondholders, however, are probably on their own.

Generic drug companies have asked Pfizer, Moderna and Johnson & Johnson to license their COVID-19 vaccine technology to help increase global production, but so far the vaccine makers have given them the cold shoulder, Axios' Bob Herman writes.

Why it matters: Other companies are saying they have extra capacity to make more vaccines. Not using that extra capacity could prolong the pandemic throughout the world.

What they're saying: "Right now our biggest problem is that we cannot produce enough vaccine to meet the high demand," Moderna CEO Stéphane Bancel told a Swiss newspaper this week.

Behind the scenes: Several generics manufacturers have reached out to Pfizer, Moderna and Johnson & Johnson, and "none of their offers have been met positively," said one industry source, who asked not to be named to talk about private discussions.

• Teva's CEO told the Financial Times the company "made it clear that we were willing to help, but it has not resulted in any agreements."
• The Biden administration also has been unsuccessful in arranging licensing deals and has only obtained extra doses from Pfizer to donate, according to the New York Times.

Between the lines: Generic drug companies already produce vaccines for other parts of the world, and they are saying they could help out now that raw material shortages are less of a concern.

• A Pfizer spokesperson said the company and its vaccine partner BioNTech "select contract manufacturers using a rigorous process based on several factors" like quality, safety, capacity and highly trained workers. They continue to "pursue opportunities to bring new partners into its supply chain network."
• Moderna and J&J did not immediately respond to questions.

Flashback: "In certain instances, such as public health emergencies, trade partners may legally issue a compulsory license," the drug industry's lobbying group PhRMA wrote in a 2017 blog.

• In other words, generic drug companies making COVID-19 vaccines during a global pandemic, without the patent owner's permission, is something the drug industry hypothetically would have supported four years ago.