Washington: What to Watch Now is a regular column that analyzes only those political and regulatory issues that could potentially affect investors. For more, listen to the WashingtonWise podcast on Apple Podcasts.

Congress is scrambling with a potential government shutdown looming next week. Funding for government operations expires on Friday, March 14^th. Over the weekend, House Speaker Mike Johnson (R-LA) said that he would push for a clean "continuing resolution" that simply extends government funding for the remainder of the fiscal year, through September 30, 2025. But with a narrow 218-215 margin (there are two vacancies) in the House, passing such an extension is likely to be tricky. House Democrats seem unlikely to provide many votes and several House Republican deficit hawks may push back as well. Even if such a measure clears the House, it would need at least seven Senate Democrats to join with all 53 Republicans to achieve the necessary 60-vote supermajority. Democrats aren't necessarily itching for a shutdown either, so it's a tough spot for them, as well. We think odds of a shutdown are rising—but a last-minute deal could still come together. Stay tuned next week.

Meanwhile, House Republicans squeaked through their budget framework last week, a key first step in the process toward a massive tax-and-spending bill later this year. The "budget resolution" is the starting point, an outline that provides the overall tax and spending targets for the budget. A plan that includes $4.5 trillion in tax cuts, at least $1.5 trillion in spending cuts and a $4 trillion debt ceiling increase was approved by the slimmest of margins, 217-215. But the Senate's version is much smaller—a $340 billion framework covering only border policy, energy and defense. The two chambers must pass the same budget resolution in order to move on to crafting the details of the massive bill. And that's when the real challenges will begin, as committees in both chambers will have to outline their planned spending cuts and tax code changes. 

• The Federal Reserve's Vice Chair for Supervision position is now vacant. Michael Barr announced in January that he would step down as vice chair for supervision, the Fed seat that oversees big bank regulation, on February 28. Barr, however, did not resign from the Fed Board of Governors, electing instead to continue serving out his term, which runs until 2032. That means there is no vacancy at the seven-member board, so no outside candidate can be named to the vice chair opening. Earlier this week, Senate Banking Committee Chairman Tim Scott (R-SC), House Financial Services Committee Chairman French Hill (R-AR) and 29 of their Republican colleagues wrote a letter to Treasury Secretary Scott Bessent urging him to "fill the role…with a strong leader as soon as possible," noting that important bank regulatory initiatives would be halted until the role is filled. It's not clear what will happen next, as current Fed Governors Michelle Bowman and Christopher Waller appear to be the only choices for the role, but neither seems likely to be tapped for it. Instead, Fed Chair Jerome Powell may make some staff and policy changes and handle the supervision responsibilities internally for an indefinite period.
• A hearing was held for the head of a consumer protection bureau that is all but being eliminated. It was a bit of a strange scene last week as the Senate Banking Committee held a confirmation hearing for four nominees to financial regulatory positions. One of them was Jonathan McKernan, who has been nominated as head of the Consumer Financial Protection Bureau (CFPB), an agency that has been all but shut down in the early days of the Trump administration. The CFPB has been a target of the Department of Government Efficiency (DOGE), which temporarily shuttered its headquarters, began layoffs and told employees not to do any work. McKernan took questions from Democratic senators about what exactly it was that he was being nominated to do. In an ongoing court case brought by a CFPB employee union, an employee alleged that the administration plans to reduce the CFPB to "a room at the Treasury, White House or Federal Reserve with five men and a phone in it." McKernan said repeatedly that his role if confirmed to head the agency was to "refocus" the CFPB on its core mission and statutorily required responsibilities.