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Presented by the American Bankers Association: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Kate Davidson and Aubree Eliza Weaver | | | 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 5:15 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. | | | Fed cracks down: Progressives have seized on recent news around Federal Reserve officials’ questionable trading activity last year to amplify the case for replacing Chair Jerome Powell with a new central bank leader. The Fed, in full-on damage control mode, answered back on Thursday when it announced a major overhaul of conflict-of-interest rules at the central bank. The move followed revelations last month that Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren actively traded in stocks and real estate assets while the central bank was engaged in an extensive rescue of financial markets, prompting both men to resign. Our Victoria Guida writes: “Under the new rules , Fed policymakers and senior staff will be prohibited from active trading and will be able to purchase only diversified investment vehicles like mutual funds.” The Fed said the rules would also apply to the 12 regional reserve bank presidents. “These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,” Powell said in a prepared release. | | | | 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 our West Wing Playbook newsletter, 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. | | | | | Is he in the clear yet? The Fed announcement, which comes just weeks after the trading news surfaced, could take some of the heat off Powell as the White House continues to weigh whether to nominate him for another term. Sen. Elizabeth Warren (D-Mass.) said Wednesday she would “use the tools I’ve got” to oppose Powell’s nomination, if President Joe Biden taps him for another term. She also asked the Fed for a March 2020 letter from agency ethics officials, first reported by The New York Times Thursday morning, that warned Fed leaders to avoid unnecessary trading as they intervened to stabilize financial markets early in the pandemic. But Warren’s objections to Powell don’t seem to be gaining traction across the Democratic caucus. And, apart from Fed Governor Lael Brainard, the White House hasn’t floated any trial balloons to gauge market reaction to other potential candidates, which is typical for the top central bank job. Asked about the Fed's stock-trading ban Thursday, White House spokeswoman Karine Jean-Pierre said the president respects the independence of the Fed , Reuters’ Heather Timmons reported. "President Biden believes that all government agencies, and officials, including independent agencies, should be held to the highest ethical standards, including the avoidance… of any suggestions of conflicts of interest.” Time is on his side: While the White House isn’t exactly behind on making a decision — former President Donald Trump announced Powell as his pick on Nov. 2, 2017 — Fed watchers and analysts have wondered what’s taking so long. A new Fed leader will have to manage a much more hawkish set of participants rotating into positions next year on the Federal Open Market Committee, the central bank panel that sets interest-rate policy, at a time when the conversation about rate increases will be heating up. Giving that person enough time to transition into the role is essential. The longer it takes to announce a decision, the more likely a choice Powell becomes, policy analysts and Fed watchers say. “My sense has been that perhaps they were giving Powell a little bit of a leash here, in order to forcefully address the ethics scandal,” Sarah Binder, a political science professor at George Washington University and senior Brookings Institution fellow, tells MM. “Maybe that’s just a coincidence, but certainly it seems that Powell has taken advantage of the lull here to tackle the issue in a way that we might think is long overdue, but might not have expected it quite so quickly.” IT’S FRIDAY! — We’re looking at a sunny, crisp, perfect fall weekend in D.C. Dear Red Sox, Please don’t break my heart tonight. Thanks, Kate. And to the rest of you, thanks so much for the warm welcome this week! Keep those notes, tips and feedback coming: kdavidson@politico.com. | | A message from the American Bankers Association: Every day, thousands of people fall victim to calls, emails and texts from scammers pretending to be from their bank. America’s banks want to change that. Our #BanksNeverAskThat campaign empowers consumers to spot bogus bank communications—one scam at a time. To join the fight and test your own scam IQ, visit BanksNeverAskThat.com. | | | | | | San Francisco Fed President Mary Daly speaks on climate change at 11 a.m. … Fed’s Powell speaks at the Bank for International Settlements at 11 a.m. TREASURY LEADS FIRST GOVERNMENT-WIDE BID TO REIN IN CLIMATE FINANCIAL RISKS — Our Victoria Guida: “Treasury Secretary Janet Yellen led top U.S. officials on Thursday in declaring climate change an emerging danger to the financial system, a move that will marshal resources across the government to determine how to respond to the threat. “In a long-awaited report , the Financial Stability Oversight Council stopped short of pushing regulators like the Federal Reserve to try to slow the flow of money to fossil fuel projects, despite calls to do so by environmental activists. But the panel’s commitment to focus significant attention on the financial implications of the warming of the planet is nevertheless groundbreaking.” LONG A RALLYING POINT, CHILD TAX CREDIT NOW SPLITS DEMOCRATS — Our Brian Faler writes: “Democrats’ signature achievement — their expansion of the Child Tax Credit — is suddenly a major headache. Lawmakers had already been contending with quixotic demands by Sen. Joe Manchin (D-W.Va.) to undo changes to the break Democrats pushed into law only months ago. “But word that the White House is now proposing a one-year extension of the initiative — far shorter than what most lawmakers had contemplated — threatens to become a bigger problem, even as Democrats scramble to work out their differences on the overall reconciliation package.” TRUMP SPAC SHARES RISE BY MORE THAN 350 PERCENT — Our Kellie Mejdrich writes: “Former President Donald Trump's planned social media startup received a surge in investor interest Thursday, with the SPAC that will take it public seeing a 356 percent increase in its share value. “The stock price of Digital World Acquisition Corp., which began trading on Nasdaq earlier this summer, closed at $45.50 per share. Digital World is a special purpose acquisition company — a so-called blank check vehicle established to acquire private businesses and list them on public exchanges.” APPLE, FACEBOOK TARGETED BY CONSUMER BUREAU IN TECH INDUSTRY INVESTIGATION — From our Katy O’Donnell and Leah Nylen: “The Consumer Financial Protection Bureau on Thursday ordered Apple, Facebook and other tech giants to turn over details on how they handle customer payments data, opening a new front in Washington's crackdown on Silicon Valley. The CFPB also demanded information from Amazon, Google, PayPal and Square as part of the investigation, in the first big move by agency director Rohit Chopra since he took the helm of the bureau earlier this month.” TRANSITIONS: Former Federal Reserve governor and deputy Treasury secretary Sarah Bloom Raskin will be taking over as faculty director of Duke School of Law’s Global Financial Markets Center effective January 1, 2022, the school announced this week. | | | | A message from the American Bankers Association:   | | | | | | BIGGER THAN CRYPTO: Predictive data analytics used across the financial industry including through trading as well as asset and risk management are “changing decision-making and the models behind that decision-making more dramatically than crypto,” SEC Chair Gary Gensler said according to prepared remarks for a virtual appearance before DC Fintech Week on Thursday morning. Gensler’s remarks came after he said earlier this month the SEC’s rules might need to be changed to protect investors from the new technology. KENNEDY ZEROES IN ON CHINA INVESTMENTS: Sen. John Neely Kennedy (R-La.) on Thursday introduced a bill to more tightly scrutinize investments from China in U.S. real estate or businesses. Kennedy said in a statement that the bill would subject so-called greenfield investments by foreign governments to review by the Committee on Foreign Investment in the United States (CFIUS): “The Chinese communist regime uses greenfield investments to gain leverage over the U.S. economy and our job market,” Kennedy said. “We can’t be blind to the ways Beijing is gaming our system to take American assets, real estate and innovation away from U.S. businesses.” FIRST LOOK: A report due out later today from the American Council for Capital Formation finds the Biden administration’s proposal to trigger taxes on unrealized capital gains when a taxpayer dies — ending the so-called “step up in basis” exemption — could lower private investment by $600 billion over 10 years, reducing economic output by $1 trillion, per modeling firm REMI. JOBLESS CLAIMS FALL TO PANDEMIC LOW — WSJ’s Sarah Chaney Cambon: “Jobless claims fell slightly and notched a new pandemic low last week, a sign layoffs remain low as companies struggle to hire workers. Worker filings for initial unemployment benefits decreased to 290,000 last week from a revised 296,000 a week earlier, the Labor Department said Thursday. Last week’s decline brings claims to the lowest level since the pandemic struck in March 2020. Claims, a proxy for layoffs, are holding well below a recent peak of 424,000 in mid-July but remain above 2019’s weekly average of 218,000.” WORLD BANK SEES ‘SIGNIFICANT’ INFLATION RISK FROM HIGH ENERGY PRICES — Reuters’ Andrea Shalal: “Energy prices are expected to inch up in 2022 after surging more than 80 percent in 2021, fueling significant near-term risks to global inflation in many developing countries, the World Bank said in its latest Commodity Markets Outlook on Thursday. The multilateral development bank said energy prices should start to decline in the second half of 2022 as supply constraints ease, with non-energy prices such as agriculture and metals also expected to ease after strong gains in 2021.” | | | | BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we’ve got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don’t miss out on this influential global community. Subscribe now. | | | | | | | | BOND MARKET’S INFLATION BETS REACH HIGHEST IN MORE THAN A DECADE — Bloomberg’s Elizabeth Stanton: “Bond traders are boosting expectations for U.S. inflation to levels not seen in over a decade amid concern supply-chain bottlenecks and resurgent consumer demand will keep lifting the cost of goods and services. The breakeven rate for five-year Treasury inflation-protected securities surged Thursday to the highest since the maturity was reintroduced in 2004. The move was particularly striking as it coincided with the biggest-ever auction of the tenor. The $19 billion offering drew a record-low yield of minus 1.685 percent, below where it was trading before the auction, a sign that demand exceeded dealers’ expectations.” STOCKS WOBBLE — AP’s Damian J. Troise: “Stocks wobbled in afternoon trading on Wall Street Thursday, keeping the S&P 500 near the record high it reached in early September. The S&P 500 index was up less than 0.1 percent as of 2:50 p.m. Eastern. The benchmark index is sitting just below the all-time high it reached on Sept. 2. The Dow Jones Industrial Average fell 93 points, or 0.3 percent, to 35,515 and is just below its all-time high set on Aug. 16.” | | A message from the American Bankers Association: “Do UFOs exist?” “Do you believe in ghosts?” File these under: questions a bank would never ask a customer. They’d also never ask for an account PIN or password, because banks never make an unsolicited ask for personal information.
Scammers, however, do ask for that kind of sensitive personal info. Thousands of Americans fall victim each day to fraudulent emails, texts and calls from sophisticated bank impostors. These phishing scams and other fraud cost consumers a staggering $3.3 billion in 2020 alone, according to the FTC. And the threat is only growing in 2021.
America’s banks are empowering consumers to take action—one scam at a time. Our #BanksNeverAskThat campaign is a nationwide effort to turn the table on fraudsters by stopping them in their tracks. Banks are committed to helping every bank customer spot these bogus asks—now during National Cybersecurity Awareness Month-and all year long.
To learn more visit BanksNeverAskThat.com. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
