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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 Victoria Guida 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 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.
| | | It’s CPI week again — The next inflation reading on Tuesday could be pretty ugly, north of 8 percent, given the surge in oil prices last month. So you’re going to be hearing a lot about the differences between headline and core inflation. The consumer price index includes food and energy — commodities with prices that are much more volatile because they’re set by trading on exchanges, rather than by businesses. So while the topline number will undoubtedly be high, the White House is hoping there will be signs for optimism in core CPI, which excludes those prices. If core CPI does tick down, that could be a positive signal that macroeconomic factors feeding inflation are starting to ease. Of course, it would still be cold comfort for families that are paying more for food and gas. So, messaging from the administration will focus not only on this difference but also on the fact that oil prices have since come down from their March peak, thanks in part to commitments by the Biden administration to release 1 million barrels a day from emergency reserves. But it’s going to be a rough ride. Inflation is expected to cool somewhat over the course of the year. Less congressional spending, lower growth, higher interest rates, etc. But JPMorgan economists in a Friday research note said they actually expect real consumer spending to rise in the coming year. Chase card data showed a drag on spending in March as gas prices rose, but a report from the Institute for Supply Management indicates the services side of the economy is speeding up, the JPM economists said. They also cite signs of progress on supply chain bottlenecks. (Maybe, but MM will believe it when we really see it). “The supplier delivery time index edged down in March, more than reversing the increases in the previous two months that had coincided with the Omicron surge and signaling some easing in supply chain pressures,” they wrote. This economy is really in the eye of the beholder. It’s easy to paint an optimistic picture, pointing to underlying strengths in the economy. It’s also easy to paint a bleak one, with so many factors pummeling businesses and consumers; economists surveyed by the Wall Street Journal this month put the probability of a recession sometime in the next year at 28 percent, up from 18 percent in January. The question is whether the scales will tip more notably in one direction as 2022 goes on. Oh, by the way: We’re interested in what you’re hearing about who might be the next nominee for Fed vice chair for supervision. Gossip is plentiful; MM has heard names like Elise Bean, a former investigator for the late Sen. Carl Levin; former Treasury official Mary Miller; Acting Comptroller of the Currency Michael Hsu; and onetime FDIC Chairwoman Sheila Bair, a Republican ally of Elizabeth Warren who just stepped down as chair of Fannie Mae’s board. The White House has indicated that there won’t be anyone put forward until after the four pending central bank nominees are confirmed, but that doesn’t mean we can’t talk about it in the meantime. IT’S MONDAY — I’m your MM host all week while Kate Davidson takes a well-earned vacation. Send any tips to me at vguida@politico.com or @vtg2, and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver.
| | A message from Sallie Mae®: What does it mean when we say Sallie Mae makes sense? It means we recommend students maximize scholarships, grants, and federal financial aid before considering a private student loan. It means we assess a customer’s ability to afford a loan before approving them. And it means 9 in 10 of our loans in repayment are being paid back on time. See all the reasons why Sallie Mae makes sense. | | | THIS WEEK — Labor Department releases CPI data on Tuesday … Fed Governor Lael Brainard speaks Tuesday at the WSJ Jobs Summit … Earnings season kicks off Wednesday … Treasury Secretary Janet Yellen speaks Wednesday at the Atlantic Council on the path forward for the global economy … University of Michigan releases preliminary consumer sentiment data for April on Thursday … Friday is tax day … House and Senate on recess this week
| | | | DON'T MISS ANYTHING FROM THE 2022 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is excited to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage and insights from the 25th annual Global Conference. This year's event, May 1-4, brings together more than 3,000 of the world’s most influential leaders, including 700+ speakers representing more than 80 countries. "Celebrating the Power of Connection" is this year's theme, setting the stage to connect influencers with the resources to change the world with leading experts and thinkers whose insight and creativity can implement that change. Whether you're attending in person or following along from somewhere else in the world, keep up with this year's conference with POLITICO’s special edition “Global Insider” so you don't miss a beat. Subscribe today. | | | | | | | | DC POISED TO CLAMP DOWN ON OLIGARCH REAL ESTATE — Our Katy O’Donnell: “As political pressure grows to crack down on Russian oligarchs, U.S. policymakers are training fresh scrutiny on an industry that has long avoided anti-money-laundering rules: real estate. “House Financial Services Chair Maxine Waters (D-Calif.) plans to introduce legislation in the coming weeks to shore up anti-corruption laws related to the industry, according to her staff. And Treasury’s main unit for combating such wrongdoing, the Financial Crimes Enforcement Network, is working on regulations to cut down on money laundering through property holdings.” ANGRY AMERICA POISED TO PUNISH DEMS — Our Ben White: “The professionals who track American attitudes toward the economy say they can see the trouble coming. Angry voters slammed by higher prices and scarred by two years of fighting the pandemic are poised to punish Democrats in midterm elections, according to some of the leading experts in consumer sentiment and behavior.” INFLATION MAY PEAK IN MARCH, BUT IT’S A SLOW GO TO FED’S 2 PERCENT — Bloomberg’s Olivia Rockeman and Reade Pickert: “March may prove to be the high-water mark for U.S. inflation, but price pressures will likely remain both elevated and persistent against a backdrop of firmer services demand and geopolitical risks. With annual inflation running well above the Federal Reserve’s goal of 2 percent, officials have pivoted hard on policy. They’re expected to raise interest rates by a half point in May and begin reducing assets on the central bank’s balance sheet.” S&P GLOBAL PLACES RUSSIA IN ‘SELECTIVE DEFAULT’ — NYT’s Eshe Nelson: “ S&P Global has placed Russia under a ‘selective default’ rating after the Russian government said last week that it had repaid about $650 million in dollar-denominated debt in rubles. The ratings agency said late Friday that it didn’t expect investors to be able to convert the ruble payments into U.S. dollars that were equivalent to the original amount due, pushing Russia toward its first default on foreign currency sovereign debt in more than a century.”
| | | | INTRODUCING DIGITAL FUTURE DAILY - OUR TECHNOLOGY NEWSLETTER, RE-IMAGINED: Technology is always evolving, and our new tech-obsessed newsletter is too! Digital Future Daily unlocks the most important stories determining the future of technology, from Washington to Silicon Valley and innovation power centers around the world. Readers get an in-depth look at how the next wave of tech will reshape civic and political life, including activism, fundraising, lobbying and legislating. Go inside the minds of the biggest tech players, policymakers and regulators to learn how their decisions affect our lives. Don't miss out, subscribe today. | | | | | | | | And now a dispatch from crypto reporter extraordinaire, Sam Sutton: POLITICO was on hand at Bitcoin 2022 in Miami Beach, where tens of thousands of crypto’s faithful flocked to hear the industry’s most powerful evangelists sing the praises of digital assets and disintermediated finance. While the four-day conference had all the trappings of a trade show — wallet providers, trading platforms and crypto ATM companies plied their wares around a massive replica of El Salvador’s planned Bitcoin-mining volcano — it also served as a quasi-religious celebration of the industry’s emergence as a political force. “This is a really powerful voting bloc, and it’s often a single-issue voting bloc: don’t screw with my Bitcoin, don’t screw with my crypto,” said Mike Novogratz, the billionaire founder and CEO of crypto investment firm Galaxy Digital, during his April 6 keynote. Billionaire GOP megadonor Peter Thiel tapped into the same vein on Thursday with a speech that whipsawed between market analysis and harangues against members of his newly-annointed Bitcoin “enemies list” — a group that includes Warren Buffett, JPMorgan Chase CEO Jamie Dimon and BlackRock CEO Larry Fink. “It’s a movement, and it’s a political question whether this movement will succeed or whether the enemies of the movement will succeed in stopping us,” Thiel told an enthusiastic crowd, instructing Bitcoin’s true believers to defeat “the finance gerontocracy” and propel “a revolutionary youth movement” that will “go out from this conference and take over the world.” Top crypto executives who met with POLITICO off the main stage — away from the T-shirts emblazoned with “KYC is Illicit Activity” and “Anti-Fiat Social Club” — were a tad more circumspect in describing how they plan to navigate crypto’s fast-shifting policy landscape. While their industry benefits from revolutionary fervor, treating regulators and traditional financial institutions as direct adversaries carries risk. “Regulation’s important. Consumer protection’s important. And it’s not just important for the consumers, it’s important for the industry; it’s the way we’ll get clarity, we’ll get rules of the road, we’ll get wider adoption,” said Noah Perlman, a former Morgan Stanley managing director who’s now chief operating officer at the digital trading platform Gemini. “I do worry that it sort of taints the regulatory outlook against the whole industry.” SEC OR CFTC? – To that end, digital exchange executives at Bitcoin 2022 said they were encouraged by SEC Chair Gary Gensler’s recent indication he was exploring coordinating with the Commodity Futures Trading Commission on oversight of crypto exchanges where both securities and commodities are traded. Robert Zagotta, CEO of the crypto exchange Bitstamp USA, said Gensler’s comments were a “bright spot,” given the SEC leader’s previous assertions that most crypto falls under securities laws. A joint oversight framework “absolutely would create clarity for us,” said Marco Santori, chief legal officer at Kraken, adding that it would help clarify what assets could be traded on his company’s trading platform. STABLECOINS — From Victoria, your guest MM host : “Acting Comptroller of the Currency Michael Hsu on Friday laid out a vision for how the digital infrastructure for stablecoins could be designed to protect consumers as well as the U.S. dollar, in some of the most extensive remarks by a top regulator on the virtual tokens to date. “Hsu, ina speech at an event hosted by the Institute of International Economic Law at Georgetown, said the cryptocurrency industry and regulators should be focused on ensuring that transactions can work across blockchain networks, that stablecoins — whose value is tied to an underlying asset — are in fact stable, and that they can be used safely.” — Those remarks were well-received among the top ranks of Circle, the second largest dollar-backed stablecoin by market cap. “He's demonstrating a really strong grasp of technology issues, of the operational issues of the market structure issues — there are a lot of very important very subtle things here,” Circle’s CEO Jeremy Allaire said in an interview following Hsu’s speech on Friday. “I've had the pleasure of meeting with Michael many times, and every time I meet with him, I feel like he’s deeper down the rabbit hole — and I mean that in a really good way.”
| | | | A message from Sallie Mae®:   | | | | | | EX-GOLDMAN BANKER CONVICTED IN PLOT TO LOOT 1MDB FUND — AP’s Tom Hays: “A former Goldman Sachs banker was convicted Friday of bribery and other corruption charges accusing him of participating in a $4.5 billion scheme to ransack the Malaysian state investment fund known as 1MDB. A jury reached the verdict at the U.S. trial of Roger Ng in federal court in Brooklyn. Jurors had heard nearly two months of evidence about tens of millions of dollars in bribes and kickbacks allegedly orchestrated by Malaysian financier and fugitive socialite Low Taek Jho, better known as Jho Low.” WHY AUTOS ARE AN INFLATION RISK — NYT’s Jeanna Smialek: “Car prices have helped push inflation sharply higher over the past year, and economists have been counting on them to level off and even decline in 2022, allowing the rising Consumer Price Index to moderate markedly. But it is increasingly unclear how much and how quickly car prices will slow their ascent, because of repeated setbacks that threaten to keep the market under pressure.” WHY STOCKS ARE RALLYING AMID WAR, SOARING INFLATION — WSJ’s Gunjan Banerji and Caitlin McCabe: “Investors are confronting one of the most uncertain periods of their lifetimes. Stocks are rallying anyway . The S&P 500 has rebounded 7.6 percent from its 2022 low on March 8, cutting its losses for the year to about 6 percent — roughly half of what they were weeks ago. In many ways, investors say, the rebound has been as broad as it has been impressive, lifting everything from travel stocks to utilities to unprofitable technology companies.” BANK DEPOSITS COULD DROP FOR FIRST TIME SINCE WWII — WSJ’s David Benoit: “U.S. banks have a streak of increasing deposits as a group every year since at least World War II. This year could break it. Over the past two months, bank analysts have slashed their expectations for deposit levels at the biggest banks. The 24 institutions that make up the benchmark KBW Nasdaq Bank Index are now expected to see a 6 percent decline in deposits this year. Those 24 banks account for nearly 60 percent of what was $19 trillion in deposits in December, according to the Federal Deposit Insurance Corp.” THE WHEAT WHALE THAT CAME OUT OF NOWHERE — NYT’s Emily Flitter: “In early March, just days after Russia invaded Ukraine, a strange thing happened in the market for wheat futures: Trading came to an unexpected halt. “Prices of wheat had spiked soon after the war started. That made sense, since Russia and Ukraine together account for about 30 percent of the world’s wheat exports and a conflict would probably cause shortages. But professional traders who speculate on the direction of wheat prices using so-called futures contracts, and businesses that use those contracts to lock in prices for the grain, couldn’t figure out why the price of one of the most popular contracts had shot up so suddenly that it prevented them from trading.”
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