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Presented by Sallie Mae®: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Ben White and Aubree Eliza Weaver | Presented by Sallie Mae® | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our s each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. | | | Wall Street takes a hit — Markets continued to take some blows with Wall Street indices dropping around 2 percent largely over concern about global fallout from a potential default by Chinese real estate giant Evergrande. That’s not the only thing bothering investors as concern rises over fiscal fights in the U.S. on government spending and raising the debt limit. There’s no real panic yet as most expect Democrats to figure out a path forward even if they can’t quickly slam through President Joe Biden’s $3.5 trillion spending plan in addition to the much smaller bipartisan infrastructure bill. The economy has enough strength to chug ahead without an immediate refreshment of federal stimulus. Pockets will struggle as extra benefits expire but the big issues are supply and labor shortages, not a lack of more federal money. And on the taper front, some investors worry more that the Fed is way behind than express concern that any kind of asset purchase curtailment announcement on Wednesday could prove problematic. RBAdvisors’ Richard Bernstein emails : “It’s totally bizarre Fed policy hasn’t meaningfully changed since the depths of the pandemic. Remember they are still in jawboning mode … hinting about a future announcement regarding a future tapering plan. Despite a strong economic recovery that has resulted in labor and product shortages and a myriad of financial bubbles, they continue to lack the courage to even begin reversing course..” Europe rises — Via Reuters : “European shares rose on Tuesday after their biggest fall in two months on easing worries about the spillover from the crisis at China’s Evergrande, although gains were capped by fears major central banks could announce a tapering in stimulus.
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“Universal Music Group, the business behind singers such as Lady Gaga, Taylor Swift and The Weeknd, soared 38.1% in its first day of trading. The company was valued at around 33.5 billion euros ($39.30 billion) ahead of its debut. … U.S. stock futures also bounced a day after global markets were roiled by concerns the potential default by Evergrande, the world’s biggest property developer, could hurt China’s real estate sector, as well as banks and the economy.” Brian Price, Head of Investment Management for Commonwealth Financial Network on the stock drop and the debt limit: “We’ve been down this road many times in the past but it seems like both sides are digging their heels in a little more than usual. “I would suspect that a deal gets done in the end but it seems like there might be more fireworks than usual this time around. Finally, there seems to be a change in market sentiment over the past couple of weeks that favors the bears. After a relatively quiet summer where the path of least resistance for equities was steadily higher it seems as though market participants are looking to fade this year’s rally.” GOOD TUESDAY MORNING — Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. | | A message from Sallie Mae®: College financing can be complicated. Thankfully, students don’t have to go at it alone. Sallie Mae is an education solutions provider here to make sense of it all. From finding scholarships and completing the FAFSA®, to understanding loan choices and repayment options before borrowing, Sallie Mae is here to make sense of a complicated system. Why? Because when students are informed about their choices, they’re in a better position to succeed. See how Sallie Make makes sense of college financing. | | | | | | President Biden addresses the UNGA in New York at 10:00 a.m. and meets with UK PM Boris Johnson at 4:45 p.m. at the White House … Treasury Secretary Janet Yellen and Deputy Secretary Wally Adeyemo will also meet with Johnson … GOP RECENT HISTORY ON THE DEBT LIMIT — Kyle Herrig, president of Accountable.US: “During the Trump era, Republicans in Congress never blinked when suspending the debt ceiling over and over and doling out trillions of dollars in tax breaks to millionaires and big corporations — giveaways that never trickled down to anyone else. “Now, these Republicans are promising to hold the process hostage and keep the nation from meeting its obligations even though 97% of the current debt was incurred before Joe Biden became president.” DEMS TRY TO MAKE A PLAN — Our Caitlin Emma and Sarah Ferris: “Congressional Democrats are proposing lifting the debt ceiling through the 2022 midterm elections as part of their plans to fund the government into December, leaders said … “But that measure, which is set for a House vote this week, faces an uncertain future as Senate Republicans remain unwilling to help Democrats neutralize the looming crisis over the nation’s debt limit when their party controls Congress and the White House. The release of their short-term spending bill was delayed by several hours Monday amid internal deliberations.” | | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down and who really has the president's ear in West Wing Playbook, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today. | | | | | ANOTHER BAD JOBS REPORT AHEAD? — Via Reuters: “A JPMorgan model that came closer than virtually all other forecasts in predicting last month's big U.S. employment report shortfall is pointing to another weak jobs number for September as consumers appear to have dialed back their travel and leisure spending since Labor Day. “The jobs tracker created by the bank's quantitative research team, fed by a range of alternative data including Chase credit card usage and airport security check volumes, suggests that September job growth will come in at 333,000. That would be far from the kind of rebound from August's disappointing job growth of just 235,000 — the lowest total since January - that policymakers at the Federal Reserve and elsewhere are hoping for.” TREASURY LOOKS TO REIN IN CRYPTO — Our Victoria Guida: “The Treasury Department is moving to rein in a new class of cryptocurrencies whose popularity as a payment method is skyrocketing, citing a need to head off potential risks to consumers and to the financial system. “So-called stablecoins — payment tokens that differ from other cryptocurrencies because their value is often pegged to the U.S. dollar — are drawing scrutiny because they have already been used in trillions of dollars’ worth of lightning-fast transactions and could transform the way Americans pay for things. Treasury and other regulators want to ensure that they’re reliable, even during financial panics.” MNUCHIN RAISES NEW FUND — Bloomberg’s Heather Perlberg and Sonali Basak: “Steven Mnuchin has started his next act with a multibillion-dollar fund for private equity investments. Mnuchin, a movie producer and financier before being tapped as U.S. Treasury secretary for the Trump administration, has raised about $2.5 billion at his firm Liberty Strategic Capital, according to people familiar with the matter. Most of the money is from sovereign wealth funds in the Middle East, including Saudi Arabia’s Public Investment Fund, said the people, who asked not to be named because the details are private. “Liberty was founded this year with a focus on technology, financial services and fintech, as well as new forms of content, according to a statement in July announcing a $200 million investment in a cybersecurity business.” | | | |   | | | | | | WALL STREET SUFFERS WORST DROP SINCE MAY — NYT’s Matt Phillips, Eshe Nelson and Coral Murphy Marcos: “Stocks swooned on Monday as investors fretted that the governments of the world’s two largest economies — China and the United States — could act in ways that would undercut the nascent global economic recovery. “The sell-off started in Asia and spread to Europe before landing in the United States, where the S&P 500 fell 1.7 percent, the worst one-day slide since mid-May. It would have been worse were it not for a late rally; the index was down as much a 2.8 percent in the afternoon.” And as stocks fall, options traders show no rush to guard against deeper pullback — Reuters’ Saqib Iqbal Ahmed: “U.S. stocks are experiencing the biggest wave of volatility in months but options traders are showing little appetite for more protection, a sign that at least some of them believe the current selloff will be short-lived. “The Cboe Volatility Index, known as Wall Street’s ‘fear gauge,’ stood at 27.5 on Monday, its highest level in more than four months, as concerns about heavily indebted Chinese property company Evergrande added to jitters over global growth. The S&P 500 tumbled 2.5 percent on Monday, on pace for its largest decline since Jan. 27.” BITCOIN PRICE SLIDES AS CHINA JITTERS HIT CRYPTO MARKETS — WSJ’s Alexander Osipovich: “Bitcoin fell sharply on Monday as a wave of selling triggered by tumult in China’s indebted property sector hit the crypto markets. “The world’s largest cryptocurrency was hovering at about $43,950 in early-afternoon trading, down 6.5 percent from 5 p.m. ET on Friday, according to CoinDesk. Other digital currencies tumbled too. Ether dropped 8 percent over the same period, while dogecoin slid 11 percent. The selloff extended to crypto-linked stocks such as exchange operator Coinbase Global Inc., whose shares fell 5 percent on Monday.” | | | | Be a Policy Pro. POLITICO Pro has a free policy resource center filled with our best practices on building relationships with state and federal representatives, demonstrating ROI, and influencing policy through digital storytelling. Read our free guides today . | | | | | | | | FED LIKELY TO SIGNAL A COMING PULLBACK IN ECONOMIC SUPPORT — AP’s Christopher Rugaber: “The Federal Reserve is expected this week to send its clearest signal yet that it will start reining in its ultra-low-interest rate policies later this year, a first step toward unwinding the extraordinary support it’s given the economy since the pandemic struck 18 months ago. “Many economists think the Fed will formally announce a pullback in November, in response to a steady recovery from the pandemic recession and an acceleration in inflation that has raised widespread concerns. This week’s Fed policy meeting could lay the groundwork for that announcement.” SEC WARNS INVESTORS OF RISKS FROM CERTAIN CHINESE BUSINESS ENTITIES — Reuters: “The U.S. Securities and Exchange Commission (SEC) on Monday issued its latest warning to people looking to invest in Chinese companies listed in the United States. "In an alert to investors, the SEC detailed the potential risks in putting money into U.S.-listed companies that have contracts with but no control over a Chinese entity, known as a variable interest entity (VIE). It is the most recent move by the agency to address concerns that Chinese companies are flouting rules for accessing U.S. markets.” Investor advocates also think the SEC should amp up its crypto crackdown — Bloomberg’s Joe Light: “Many cryptocurrency projects are flouting investor-protection rules and deserve more scrutiny, a group of investor advocates told Securities and Exchange Commission Chair Gary Gensler in a Monday letter. The letter, signed by the Americans for Financial Reform Education Fund, the Consumer Federation of America and others, singled out stablecoins, crypto lending and exchanges as deserving of increased SEC attention.” EXTERNAL REVIEW FINDS DEEPER ROT IN WORLD BANK ‘DOING BUSINESS’ RANKINGS — Reuters’ Andrea Shalal: “Weeks before the World Bank scrapped its flagship Doing Business rankings following a damning independent probe, a group of external advisers recommended an overhaul of the rankings to limit countries' efforts to ‘manipulate their scores.’ "An 84-page review, written by senior academics and economists, including the former Colombian finance minister, was published on the bank's website on Monday, about three weeks after it was submitted to World Bank chief economist Carmen Reinhart.”
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