U.S. Treasury hobbled by Cruz's nomination holds, officials say

WASHINGTON (Reuters) -The U.S. Treasury is being held hostage by Republican Senator Ted Cruz’s efforts to halt a Russia-to-Germany gas pipeline, blocking critical appointments when the federal debt limit remains a pressing issue, White House officials and Democrats in Congress say.

FILE PHOTO: U.S. Senator Ted Cruz (R-TX) addresses a news conference on Capitol Hill in Washington, U.S., October 6, 2021. Picture taken October 6, 2021. REUTERS/Evelyn Hockstein/File Photo

Only four confirmed nominees are in place in the top ranks of the Treasury, of about 20 slots for presidential picks, officials say. More than eight months after Democratic President Joe Biden took office, his nominees across the government are being approved at a slower rate than the past three presidents, federal data shows.

In addition to the toll that Cruz’s actions are taking on the Treasury’s ability to tackle the federal debt limit, they are hurting the Biden administration’s ability to address other big problems, senior officials say, including a global minimum tax, terrorism and financial intelligence.

Cruz has wielded power by being a lone holdout on a fast-track confirmation process that requires consent by all 100 senators for non-controversial nominees – a description the White House says fits many of the Treasury picks as well as others awaiting Senate confirmation, including numerous ambassadors.

Cruz wants Biden to impose sanctions that would halt Russia’s Nord Stream 2 gas pipeline.

Biden, despite his opposition to the pipeline, has said he waived sanctions because the project was nearly complete and he wanted to rebuild strained ties with Germany, a key U.S. ally.

As far as Cruz is concerned, a spokesman for the senator said, the solution is simple: he will remove the holds if the Biden administration sanctions the company behind the pipeline project, something he insists is required under U.S. law.

Failure to do so “hands Vladimir Putin a geostrategic victory” and “entrenches corrupt Russian influence in Europe” Cruz said in a letter on Sept. 13, referring to the Russian president.

The Senate could go ahead with the confirmations by holding floor votes in a time-consuming process that requires approval from 60 senators, but that would limit the chamber’s time to address other issues, including efforts to pass infrastructure and spending bills, experts say.

The standoff has left some Treasury nominees, including Brian Nelson, who is tapped to be undersecretary for terrorism and financial intelligence, in limbo as the United States grapples with the Taliban takeover of Afghanistan.

Others, including Jonathan Davidson, nominated to be assistant secretary for legislative affairs, and Ben Harris, nominated to be assistant secretary for economic policy, are working as advisers to Treasury Secretary Janet Yellen and Deputy Treasury Secretary Wally Adeyemo in the interim, but are severely constrained in what they can do.

If confirmed, Davidson would play a key role in building support for a longer-term increase of the $28.4 trillion U.S. debt limit, and a global minimum tax. But in his current role as a counselor he cannot engage in “outward-facing” activities, according to federal guidelines, meaning he cannot go to Capitol Hill to meet with lawmakers or make calls to them, which some members of Congress say was a huge hurdle during the recent debt negotiations.

While an agreement to raise the debt ceiling temporarily was reached last week, there are no signs that Yellen will have a bigger team in place to manage the issue when it bubbles up again in coming weeks, said one official.

Personal efforts by Yellen and Adeyemo to get Cruz to loosen his grip have failed, officials say, and they see no solution in sight.

“Jonathan Davidson has widespread support as a long-time Senate staffer, and is sorely needed as Congress navigates numerous issues with the Treasury Department,” said Senate Finance Committee Chairman Ron Wyden, citing the federal debt limit specifically. “Senator Cruz is just … making it more difficult to run the federal government well.”

Cruz’s spokesman did not address Wyden’s comments, but said the Texas senator would use “whatever leverage he has as a senator to force President Biden to implement mandatory sanctions on Nord Stream 2.”

In the past, Cruz has released a small number of nominees who he said were “cleaning up” foreign policy “messes” caused by the Biden administration, and is not blocking the nomination of Graham Steele, Biden’s nominee to be assistant secretary for financial institutions at Treasury, the spokesman added.

As of Thursday, the Senate had confirmed 191 of Biden’s nominees, or about 36%, compared with 42% of Donald Trump’s over the same period, 68% of Barack Obama’s and 65% of George W. Bush’s, federal data show.

MEETINGS WITH CRUZ

Yellen and Adeyemo have spoken with Republican senators in recent weeks in efforts to get Cruz to drop his hold, a senior administration official told Reuters. Treasury officials have also asked other senators to appeal to Cruz, including Republicans Mike Crapo and Cynthia Lummis, although both declined, the official added.

Adeyemo gave Cruz an in-person classified briefing on Nord Stream 2 in recent weeks, a senior official said, and made another rare in-person visit to Cruz’s office.

Another Treasury official provided a classified briefing to Republican Senator Pat Toomey, according to Toomey’s office.

“Both the secretary and Wally spoke with Cruz multiple times. We’ve reached out to staff. We’ve tried every which way possible,” said the senior official, adding that the administration was losing hope it could change his mind.

Treasury spokesman John Rizzo said it was “essential” that the Senate confirm the nominees, calling them “critical” to the department’s work to deal with the debt limit and “achieve national security objectives of disrupting illicit finance and combating terrorism.”

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