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Presented by Ripple: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Kate Davidson and Aubree Eliza Weaver | Presented by Ripple | 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. | | | The Senate confirmation process has become increasingly contentious in recent years, but Federal Reserve nominees can generally count on a cordial reception from at least one side of the aisle. With prices on fire, however, President Joe Biden’s pick for Fed chair is going to take some serious heat. New data Wednesday showing that inflation accelerated in October is set to complicate the confirmation process as lawmakers on both sides seek assurances that the nominee won’t let higher prices spiral out of control. “Whoever is sitting in the chair during those confirmation hearings is going to get an earful,” said Stephen Myrow, a managing partner at Beacon Policy Advisors and a former George W. Bush administration Treasury official. “On the Republican side, they’re going to be hammering home one of their big talking points, and on the Democratic side, they’re now all trying to figure out how they show that they feel the pain of the voter and the consumer.” Lawmakers will likely grill Biden’s nominee on how committed he or she is to the Fed’s new framework, which calls for keeping interest rates low until the labor market reaches maximum employment; how and when officials will know whether inflation is more than transitory; and how the Fed defines factors such as “broad-based” or “inclusive” as it evaluates its maximum employment goal. Biden’s pick will also have to walk a fine line on when the Fed will next raise interest rates. In September, Fed officials were split over whether the central bank would hike rates at all next year, with half seeing rates still near zero at the end of 2022, according to their quarterly projections. After Wednesday’s CPI data, expectations in fed-funds futures markets shot up, suggesting at least three rate increases next year, according to CME Group. “The market obviously moved ahead and is assuming that the Fed is going to have to change its expectations,” Myrow said. “They can’t commit to that yet, but they can’t act like they’re clueless either.” —Another high-profile nod for Lael Brainard: This time from former FDIC Chair Sheila Bair, a George W. Bush appointee who has pushed for tougher rules for the financial sector. “Acknowledging [Fed Chair Jerome] Powell’s strengths, I still think the big threat to his re-appointment is a smart, savvy woman, known to markets, expert at monetary policy AND regulation, climate risk, and financial tech,” Bair said on Twitter Thursday. “If this Administration prioritizes diversity, seems Brainard is a no-brainer.” “But then, this wouldn’t be the first time a better qualified woman lost out to a guy,” she quipped. (Sheila, tell us what you really think!) While Brainard got some love from the right, it’s worth noting that Powell has gotten his share of support on the left, including from former Clinton Labor Secretary Robert Reich, who defended him on Twitter in September. “Powell has pursued full employment aggressively. While he should be tougher on financial regulation, this is no time to change Fed leadership. Too much market uncertainty.” | | A message from Ripple: Ambiguity surrounding cryptocurrency has some wondering “is crypto even real?” Yes, very real. Real for the businesses unlocking powerful efficiencies with it. Real for the banks leveraging its transparency. Real for the globe with its sustainability advances. Real for consumers with its innovations. Ripple, a US-headquartered company, enables financial institutions in 55+ countries to send money faster, with lower fees, and greater transparency. It uses the cryptocurrency XRP because it’s fast, efficient and carbon-neutral. | | | —A note on timing: The White House is expected to announce the Fed nominees by Thanksgiving at the latest, and Biden has said Congress will have plenty of time to confirm them before Powell’s term expires in early February. But a source points out one potential complication: Under Senate rules, any nominee who isn’t confirmed by the end of the year can only be carried over to the new session of Congress in January if senators unanimously agree. Otherwise, the White House would have to formally nominate that person again, and the Senate Banking Committee — if it has already approved the nominee — would have to take another vote. It’s likely not a huge deal but could be used as a delay tactic by any senator who isn’t happy with the nominee and wants to make mischief. IT’S FRIDAY — Rest up, everybody! Next week is (maybe? hopefully?) going to be a big one, with a possible Fed chair nominee and an OCC confirmation hearing that is expected to be, shall we say, quite spirited. Meantime, do you have tips, feedback, pitches or stuffing recipes? Please email us at kdavidson@politico.com, aweaver@politico.com, or reach out on Twitter @katedavidson. | | | | DON’T MISS CONGRESS MINUTES: Need to follow the action on Capitol Hill blow-by-blow? Check out Minutes, POLITICO’s new platform that delivers the latest exclusives, twists and much more in real time. Get it on your desktop or download the POLITICO mobile app for iOS or Android. CHECK OUT CONGRESS MINUTES HERE. | | | | | | | | American Enterprise Institute holds a “monetary policy and the ‘everything’ asset price bubble” at 9:30 a.m. … Labor Department releases job openings and labor turnover survey at 10 a.m. ...UMich consumer sentiment index at 10 a.m. ANALYSIS: MOST MILLIONAIRES WOULD GET TAX CUT UNDER HOUSE PLAN — From our colleague Brian Faler: Under House Democrats’ reconciliation plan, “about two-thirds of people making more than $1 million would see a tax cut next year averaging $16,800, the Tax Policy Center said Thursday. That’s primarily because Democrats are proposing to lift to $80,000, from $10,000, an annual cap on state and local tax deductions. “The report is certain to inflame an already difficult fight among Democrats over what to do about the limitation, imposed by Republicans as part of their 2017 tax cuts.” WALL STREET BRUSHES OFF TAX ON STOCK BUYBACKS — Also from Brian: “Market veterans say the 1 percent levy lawmakers aim to include in their reconciliation package isn’t big enough to make a difference to most companies. ‘It’s such a piddling increase,’ said Ed Yardeni, president of Yardeni Research, a stock market research firm. ‘One percent is not going to do much of anything.’ The proposal is coming amid a frenzy of stock buybacks, with a long list of corporations announcing plans to repurchase shares.” TRUMP-APPOINTED IRS HEAD LAUDS BIDEN TAX ENFORCEMENT PLAN — IRS Commissioner Charles Rettig, in a Washington Post op-ed Thursday, says Biden’s $80 billion proposal to boost IRS funding “ offers a historic opportunity” to modernize the tax agency. “The administration estimates $400 billion in additional revenue can be generated over the next decade from enforcement efforts focused on higher-end incomes, shrinking the tax gap. This figure is no surprise: If given the resources we need, we will be able to make a sizable dent in noncompliance over several years.” — The IRS enforcement provision has become a focal point in discussions over whether Biden’s social spending bill would add to deficits. Republicans have dismissed the White House’s $400 billion estimate, saying it vastly overstates how much money the Treasury would likely collect from tougher enforcement, leaving a shortfall that would add to deficits. Rettig, whom President Donald Trump appointed in 2018, suggests the estimate isn’t off the mark. FED WATCH — THE CASE FOR BRAINARD — WaPo’s Rachel Siegel: “Brainard’s supporters say her career as an economist and policymaker over three decades is a good match for Biden’s economic agenda. Since joining the Fed in 2014, she has been the leading voice for tighter oversight of Wall Street, opposing policies that loosen regulations put in place after the Great Recession. She has warned about how climate change can hinder economic activity and how big banks’ exposure to climate-related risks could threaten the broader financial system. She is also the only Democrat on the Fed board. Powell is a Republican.” WHITE HOUSE TEAM WEIGHING FED SEES NO ISSUE WITH POWELL TRADES — Bloomberg’s Jennifer Jacobs, Saleha Mohsin and Steven T. Dennis: “Top White House officials don’t believe that Federal Reserve Chair Jerome Powell’s sale of shares in a stock index fund last year disqualify him from being appointed to a second term, according to people familiar with the matter. Several key officials working on the nomination saw no reason for concern over Powell’s trading, according to people familiar with the deliberations.” UNDER (PRICE) PRESSURE — — WHY ECONOMISTS GOT IT WRONG ON INFLATION: Bloomberg’s Vince Golle, Olivia Rockeman and Reade Pickert: “Economists are getting a dose of humility on forecasting inflation after a resurgent coronavirus, a tenuous global supply network and stimulus-fueled consumers combined to send U.S. prices well beyond the expectations of Wall Street and policy makers.” —INFLATION: THE BIG BAD WOLF? The president says he takes inflation seriously, but he’s not acting like it, National Review editor Rich Lowry writes in Politico Magazine. “Conservatives cried wolf about inflation when the Federal Reserve adopted its program of quantitative easing during the financial crisis, so it’s understandable progressives would be dismissive of new cries this time around. But sometimes the wolf is at the door, or at least in the neighborhood.” SIMILE OF THE DAY — From MSNBC’s Chris Hayes: “The entire economy feels a bit like the moment a big concert or playoff game ends and everyone's trying to get out of the parking lot. ‘Transitory’ can last a maddeningly long time, but the conditions that produce it are, indeed, temporary not structural.” | | | |   | | | | | | Taylor Roberson has joined the Center for Responsible Lending as federal policy counsel. Immediately prior to joining CRL, Roberson worked as an attorney at KPMG, and before that served at the New York State Department of Financial Services, where she focused on fintech, licensing, payday loans and fair lending. Pierre Whatley, a former Rep. Maxine Waters (D-Calif.) aide and subcommittee staff director on Senate Finance, has joined FS Vector as a principal in the government relations practice. Whatley previously advised financial institutions and financial technology companies at Deloitte and Buckley Sandler, and before that worked at the Cleveland Fed, SEC, CFPB and Financial Industry Regulatory Authority. (h/t Daniel Lippman) | | | | 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. | | | | | | | | FED’S ‘TRANSITORY’ INFLATION PLOT THICKENS WITH RATE AT 30-YEAR HIGH — Reuters’ Howard Schneider: “Yields on two-year Treasury notes, a proxy for the outlook for the overnight interest rate set by the Fed, jumped 6 basis points , the most in three weeks and among the largest daily increases in the last year and a half, to 0.485 percent on Wednesday after the release of data showing consumer prices rose by 6.2 percent in October versus the year before.” SEC EXPECTED TO BOOST INDUSTRY SCRUTINY, FOCUS ON INVESTORS — WSJ’s Mark Maurer: “The U.S. audit watchdog under its new leadership is expected to provide greater transparency around inspections and increase its scrutiny of audit firms while potentially shifting how it addresses investor concerns, accountants, investors and former regulators said.” HOW BINANCE BECAME THE WORLD’S BIGGEST CRYPTO EXCHANGE — WSJ’s Patricia Kowsmann and Caitlin Ostroff: “The world’s fastest-growing major financial exchange has no head office or formal address, lacks licenses in countries where it operates and has a chief executive who until recently wouldn’t answer questions about his location. Started just four years ago, Binance is the exchange giant that towers over the digital currency world, a crypto equivalent of the London, New York and Hong Kong stock exchanges combined.” | | A message from Ripple: Massive amounts of money move around the world every second.
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From making financial services more efficient for consumers, to powering a new wave of business opportunities, we are just starting to tap crypto’s potential. In the US and beyond, the real innovations are just beginning. Learn more. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
