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Presented by EMMA Labs from the Municipal Securities Rulemaking Board: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Sam Sutton, Kate Davidson and Aubree Eliza Weaver | Presented by EMMA Labs from the Municipal Securities Rulemaking Board | Programming Note: We’ll be off this Monday for Presidents Day but will be back in your inboxes on Tuesday, Feb. 22. 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. GOTTA SPEND MONEY TO MAKE MONEY — It’s hard to frame a $100 million penalty for selling unlicensed securities and misleading investors as a victory. Then again, crypto is confusing. BlockFi got into a tremendous amount of trouble with the Securities and Exchange Commission and more than 30 state regulators for (allegedly) defrauding investors and selling billions of dollars in unlicensed investment products. But while the record-setting SEC settlement grabbed headlines, it also gave the Jersey City-based company a lifeline. BlockFi is poised to become the first SEC-regulated crypto lending platform, a policy shift that could pull other behemoths like Coinbase or FTX under the securities regulator’s umbrella. It’s also a clear indication that regulators are “getting serious about providing a path forward” on oversight, said Salman Banaei, a former CFTC counsel who now heads public policy for the crypto data firm Chainalysis. Under the terms of its settlement, BlockFi agreed to register a new product called BlockFi Yield with the SEC. If it’s approved, some 400,000 U.S. customers will be able to roll their interest-bearing accounts with BlockFi into similar accounts with the full blessing of the SEC. SEC Chair Gary Gensler , who’s spent much of his first year on the job working to bring digital assets under his agency’s jurisdiction, said the “first of its kind” settlement demonstrates how the commission can help bring crypto platforms into compliance. BlockFi CEO and Founder Zac Prince was more effusive, calling the settlement a “milestone” that offers regulatory clarity for the rest of the industry. Why would that clarity matter? Remember, it wasn’t so long ago that the trading platform Coinbase claimed that the SEC had threatened to sue them over an interest-bearing product it has positioned to compete with BlockFi. (Asked about the SEC’s new stance earlier this week, Coinbase Chief Legal Officer Paul Grewal said “it's a wait and see for now.”) To that end, while BlockFi and other crypto proponents hailed the settlement as a landmark, SEC Commissioner Hester Peirce sounded a word of caution. Getting a new investment product registered can take months, and “when crypto is at issue, the timeframe is likely to be longer than it would be for more traditional filings,” she said. In order to get approved, BlockFi will also get exempted from what’s required of more traditional offerings. “Inviting people to come in and talk to us only to drag them through a difficult, lengthy, unproductive, and labyrinthine regulatory process casts the Commission in a bad light and thus makes us a less effective regulator,” she said. In the meantime, while it awaits SEC approval, BlockFi has already started updating its sales pitch to consumers. “My hope is that any folks sitting on the sidelines waiting for regulatory clarity will see today as a significant milestone for the industry,” BlockFi co-founder and SVP of operations Flori Marquez tweeted after the settlement was announced. “If you haven’t invested in crypto yet, hopefully today is the day for you to start getting involved!” IT’S FRIDAY — Enjoy the long weekend. We’ll see you back here on Tuesday. Have a story idea or tip in the meantime? Email us: ssutton@politico.com, kdavidson@politico.com or aweaver@politico.com, or find us on Twitter @samjsutton@katedavidson, @aubreeeweaver.
| | A message from EMMA Labs from the Municipal Securities Rulemaking Board: EMMA Labs is the Municipal Securities Rulemaking Board’s new innovation sandbox – where we work together with market participants and the FinTech community to create the future of municipal bond market transparency. Learn more about the MSRB’s EMMA Labs platform. | | | | | | Existing home sales data released at 10 a.m. … Fed Governor Chris Waller speaks at 10:15 a.m. … New York Fed President John Williams speaks at 11 a.m. … Fed Governor Lael Brainard speaks at 1:30 p.m. U.S. SOUNDS NEW ALARMS ON UKRAINE — Our Nahal Toosi and Mackenzie Wilkes: “A new Russian invasion of Ukraine appears imminent, possibly within ‘several days,’ with signs pointing toward Moscow using a false pretext to send in troops amid alleged shelling in a contested region, President Joe Biden and some of his top aides said Thursday. In a surprise appearance at the United Nations, Secretary of State Antony Blinken laid out the potential, ‘theatrical’ steps American officials expect the Kremlin to take.” — Stocks slid on Thursday as investors braced for the potential for war in Europe. (NYT’s Coral Murphy Marcos and William P. Davis) MUSK ACCUSES SEC OF HARASSMENT CAMPAIGN — Our Katy O’Donnell: “Tesla CEO Elon Musk on Thursday accused the Securities and Exchange Commission of a “harassment campaign” aimed at chilling his right to free speech." “The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government,” a lawyer for Musk said in a letter to U.S. District Judge Alison Nathan, who presided over a 2018 SEC settlement with Musk. THE BIG PROBLEM WITH DEMOCRATS’ GAS-TAX HOLIDAY DREAMS — The federal gas tax holiday that some Democrats are floating wouldn’t save Americans much money at the pump — but it could do serious damage to Biden’s infrastructure promises. Our Tanya Snyder explains: “The federal gasoline tax adds 18.4 cents to the price motorists pay for every gallon of gas — adding up to less than $3 for Washington when someone fills a Toyota Camry. But the gas tax also generates big money for the federal trust fund that pays for highway, tunnel and bridge projects across the country — and eliminating it for even part of the year would blow an enormous hole in those budgets.”
| | | | 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. | | | | | | | | NOTES FROM THE CRYPTO UNDERGROUND — Our Ben Schreckinger in Denver: “As the usual investors and coders descended on downtown for one of the world’s largest annual crypto gatherings, a more starry-eyed crowd gravitated to the bowels of a cavernous nightclub here to plot the next stage of the techno-revolution. “While cryptocurrencies have already threatened to disrupt financial systems, these proponents of another blockchain-based innovation want to change the way people go about pretty much everything else: fighting climate change, building infrastructure, preserving historic photographs, exploring outer space, to name a few of their projects.” Another note on crypto — An MM reader from the financial services industry writes: “I read Wednesday’s Politico Q&A with Tether’s co-founder Brock Pierce touting crypto’s ability to earn ‘between 5 and 15 percent interest on your digital dollars with near-zero risk’ because the product is offered in ‘completely securitized environments.’ That is crazy talk. I’d love to read a prospectus for such an offering – right, SEC? Or maybe the CFPB could take an interest in crypto firms hyping something for nothing to unsophisticated consumers.” Worth noting: The SEC on Feb. 14 issued a bulletin warning investors about crypto interest-bearing accounts.
| | | |   | | | | | | MANCHIN’S ‘NO DECISION’ STAND KEEPS DOUBT SWIRLING ON FED SLATE — Bloomberg’s Steven T. Dennis: “Senator Joe Manchin said he remains undecided on President Joe Biden’s nominees for the Federal Reserve , including Sarah Bloom Raskin, the embattled pick for vice chair for supervision. ‘We had a conversation and we will have more conversations,’ the West Virginia Democrat said of Raskin, who he met with earlier this week. ‘I made no decisions on anybody.’ Manchin’s vote in the 50-50 Senate will be particularly crucial for Raskin, who is facing stiff Republican opposition, including a GOP boycott of a Senate Banking Committee vote on the nominees earlier this week.” REPUBLICANS FROM ENERGY STATES URGE BIDEN TO WITHDRAW RASKIN NOMINATION — A group of 10 Republicans from states that rely heavily on the oil and gas sector urged Biden to withdraw Raskin’s nomination in a letter dated Wednesday. “If regulators like Ms. Raskin start putting pressure on local banks to not lend to energy companies it will be our smaller producers who will be impacted first, and as they start going out of business energy prices will continue to rise,” they wrote. The letter was signed by Sens. Roger Marshall of Kansas, James Lankford and James Inhofe of Oklahoma, Roger Wicker and Cindy Hyde-Smith of Mississippi, Ted Cruz of Texas, John Barrasso of Wyoming, John Hoeven of North Dakota, Mike Braun of Indiana and Bill Cassidy of Louisiana. MM sidebar: Something we find curious about this letter — it’s missing the names of some pretty prominent Republican senators from these states. Like Kevin Cramer (N.D.), John Kennedy (La.), Cynthia Lummis (Wyo.) and Jerry Moran (Kan.). What do those lawmakers have in common? They’re all on the Senate Banking Committee, where Republicans have insisted they are not trying to derail Raskin’s nomination, just find out more information so the panel can make an informed decision about her nomination. WHAT COULD DRIVE THE FED TO A ‘PLAN B’ FOR BALANCE SHEET REDUCTION — Reuters’ Jonnelle Marte and Howard Schneider: “Amid a strong U.S. housing market, low interest rates and unnervingly high inflation, the Federal Reserve has been adding to its bond portfolio even to this day, prompting calls to not just let the securities expire over time but to lay plans to begin selling them outright.”
| | | | 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. | | | | | | | | WHITE HOUSE ECONOMIST: INFLATION SHOULD MODERATE IN COMING MONTHS — WSJ’s Amara Omeokwe: “President Biden’s top economic adviser on Thursday sought to ease lawmakers’ concerns about elevated inflation , saying that several factors in the coming months should help slow a steep rise in consumer prices over the last year. ‘We expect inflation to moderate over the coming year, because we believe that the factors that have been causing high inflation will begin to ease as Covid cases gradually decrease,’ Cecilia Rouse, chair of the White House Council of Economic Advisers, said during a Senate Banking Committee hearing.” ICYMI: WaPo’s Jeff Stein reported Thursday on tensions within the administration over whether the White House should blame corporate consolidation and monopoly power for price hikes. — Asked whether he saw companies driving up prices to boost profits, CEA member Jared Berstein told lawmakers Thursday: “Profit rates and profit margins are highly elevated for firms across many sectors of the economy. That’s the short answer to your question.” He also pointed out that while wage growth is often cited as one source of inflation, other factors can contribute, including the share of national income that’s going to profits. “It is completely coherent, within the algebra of how wages and inflation interact, that non-inflationary wage growth can be paid for out of reduced profit margins,” he added. — When MM wrote about this in December, White House officials said they would pick their spots, focusing on sectors with limited competition. “I don’t think that we are in the market for looking at, ‘Here’s a one-off problem,’ and we just want to get a quick hit out of going after a corporation,” one official said at the time.
| | | Aditi Hardikar will become deputy chief of staff at the Treasury Department starting in April. Hardikar has served as a senior adviser to Deputy Treasury Secretary Wally Adeyemo since joining Treasury in January 2021. She previously worked at the Obama Foundation and in the Obama White House. Helen Brosnan is joining Fight Corporate Monopolies as executive director. Brosnan worked previously for Justice Democrats and as regional political director for Elizabeth Warren’s presidential campaign.
| | | Wall Street’s blockbuster gains in 2021 helped pad savers’ retirement accounts, lifting the average balance on some popular investment plans to new highs. — AP’s Alex Veiga The average rate for a 30-year fixed-rate mortgage was 3.92% for the week ended Thursday, according to mortgage-finance giant Freddie Mac, the highest level since May 2019. — WSJ’s Orla McCaffrey An arm of the taxpayer-funded World Bank has provided nearly $500 million in financing to four Chinese companies that appear to have employed forced laborers in the country’s Xinjiang region, according to a new report. —WaPo’s Jeanne Whalen
| | A message from EMMA Labs from the Municipal Securities Rulemaking Board: One of the first Active Lab prototypes being put to the test on EMMA Labs is a keyword search engine. The enhanced search prototype can unlock information contained in hundreds of thousands of regulatory disclosure filings submitted in PDF document form on the EMMA website by state and local governments and other issuers of municipal bonds. A search of filings submitted from January 2020 to March 2021 found more than 50,000 COVID-19 related municipal bond disclosures by state and local governments. Read the case study here. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
