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Presented by Blackstone: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Ben White and Kate Davidson | | | 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. Don’t freak out about GDP — Step away from the ledge. Take a deep breath. Recession is not here yet, despite the government reporting on Thursday that the U.S. economy unexpectedly shrank by an annualized rate of 1.4 percent in the first quarter of the year. Wall Street expected a weak number, somewhere near zero, but nothing this putrid and scary looking. Surely the imminent recession driven by lingering Covid, inflation and the start of a campaign of Federal Reserve rate hikes has arrived. Well, as it turns out … not so much. Stocks rallied hard on the day as many analysts dismissed the GDP figure as overly dour, pushed down by a surge in imports and a slowdown in inventory growth that likely won’t repeat and could in fact reverse later this year, helping keep gross domestic product growth in positive territory. Facebook parent company Meta Platforms Inc.’s strong earnings also helped power a big tech stock advance with the Nasdaq closing over 3 percent higher. Looks better under the hood — The GDP report — while carrying a dismal headline number — also confirmed underlying strengths that some economists and Wall Street analysts think could help the U.S. avoid a near-term recession. When a recession does come, these people say, it could be short and mild, more like the eight-month decline of 2001 than the morass after the housing bubble burst in 2007 and 2008. The GDP report showed that consumer spending, which drives most of the economy, rose an annualized 2.7 percent in the quarter. Business spending on research, equipment and development increased at a 9.2 percent pace. These are not the kind of numbers that scream: “RECESSION IS COMING!”
| | | | 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. | | | | | ‘Massively overdone’ — It remains entirely possible that the blistering pace of inflation, which will dominate headlines again with new numbers for March to be released on Friday morning, will force the Fed to boost rates more rapidly, something that usually drives the economy into at least a short recession. The entire point of the Fed’s actions, after all, is to slow down business and consumer spending and generally pump the brakes on growth. And history shows the central bank often overshoots the mark and stalls out the economy. But talk of an imminent, devastating recession is “massively overdone,” according to Ian Shepherdson, chief economist at Pantheon Macroeconomics. “I think we could still get a long growth cycle. Recession will eventually come but when it does, it needn’t be very bad,” Shepherdson told MM. “I think of the next one being much more like the short 2001 recession rather than after the housing bust.” This time IS kinda different — Economists who slot into the bullish camp note that the huge but very short Covid-19 recession already happened. What’s ahead will be choppy with inflation and rate hikes but probably won’t feature a big recession. The last long, painful slump happened from December of 2007 to June of 2009, with the economy shrinking about 5 percent. But now, while there are bubbles in certain housing markets, there is likely to be no massive housing crash ahead. And both businesses and consumers are in much better financial shape than during and after the financial crisis. The lack of more reentrants to the labor market is vexing, but there is no shortage of work to be done. And labor force participation numbers could jump as the remaining federal stimulus flows out of people’s accounts, driving people back to work. Russia’s invasion of Ukraine has sent energy prices soaring even higher and added to general anxiety about a wider conflict. But unless it spirals out of control, the war’s impact on the U.S. economy should be fairly limited the rest of the year. At least that’s what the bulls say. Better numbers ahead? — Most forecasters expect a bounce-back to positive territory in the second quarter of this year with IHS Markit calling for 2.3 growth as some of the first-quarter hits get reversed. “We really view this is a little bit of noise, rather than any clear signal,” Mike Reynolds , vice president of investment strategy at Glenmede, told MM. “This was the result of some of the lingering effects of Covid and supply chain disruptions which may be getting better. We don’t see the U.S. at any real risk of recession.” Still, Thursday’s economic news could turn into a messaging mess for President Joe Biden… BIDEN BOOM TURNS INTO GDP BUST — Our Kate Davidson: “The contraction of the U.S. economy in the first quarter may be more of a political than an economic problem for the White House: The negative news disrupts the administration’s narrative that growth is healthy despite decades-high inflation.” IT’S FRIDAY — We made it! Seventeen weeks down, 35 to go. Have tips, story ideas or feedback? You know what to do: kdavidson@politico.com , @katedavidson, or aweaver@politico.com, or @aubreeeweaver.
| | A message from Blackstone: Blackstone's investment approach is focused on the future. We identify companies that are shaping a stronger economy and help them accelerate their growth. We can deliver for our investors by strengthening the communities in which we live and work. Learn more. | | | |  | Driving The Day | | March inflation and personal consumption data released at 8:30 a.m. FIRST IN MM: NEW POLLING ON SEC’S CLIMATE DISCLOSURE PLAN — A new survey of investors released this morning by the Americans for Financial Reform Education Fund and Public Citizen found 70 percent of investors support the Securities and Exchange Commission’s proposal to require public companies to disclose more information about their exposure to climate-related risks. The survey completed by Embold Research on behalf of the advocacy groups also found: — 65 percent of investors said it’s important for corporations, banks, and other financial institutions to disclose information about their climate change risks and strategy — 63 percent said they would factor in information about a corporation’s climate-related risks if that information was audited and disclosed to the SEC — 58 percent said they trust voluntary climate disclosures made to the SEC, while 71 percent said they would trust them if the same disclosures were validated by a third-party auditor. NEW DATA SHOWS MASSIVE JUMP IN GREEN AND SUSTAINABLE BONDS: Our Lorraine Woellert: The market surged in 2021 and it could double this year, according to the Climate Bonds Initiative. WHITE HOUSE SEEKS $33 BILLION IN UKRAINE AID — The president’s $33 billion ask, which includes more than $20 billion for military assistance, is expected to win widespread bipartisan support, our Andrew Desiderio reports. But significant obstacles to getting the aid package to Biden’s desk post-haste have already cropped up. The request includes $8.5 billion in economic aid for Ukraine, including $7.5 billion of direct support to help the country keep its government running as it faces a massive budget shortfall. BUDGET CRUNCH FORCES FinCEN TRADEOFFS — Our Katy O’Donnell: “The Financial Crimes Enforcement Network — the Treasury Department unit responsible for combating money laundering — cannot meet the responsibilities Congress has assigned it without more funding, the agency's acting director told lawmakers Thursday.” “We’re missing deadlines, and we’ll continue to miss deadlines because we don’t have the staffing to be able to carry on the efforts required,” FinCEN acting Director Himamauli Das said Thursday in testimony before the House Financial Services Committee. CITI FREED FROM DECADE-OLD REGULATORY SANCTION IN WIN FOR FRASER — Bloomberg’s Jennifer Surane and Hannah Levitt: “The U.S. Office of the Comptroller of the Currency lifted a 10-year-old consent order with Citigroup Inc. in a victory for Chief Executive Officer Jane Fraser, who’s dedicated thousands of employees to improving her bank’s risk and controls systems. “In a memo to staff obtained by Bloomberg, Fraser gave an update on the 2012 order, which was tied to the bank’s compliance with anti-money laundering laws and the Bank Secrecy Act. In the original order, the OCC had said that Citigroup failed to conduct proper due diligence on customers and was too slow to file suspicious-activity reports. The deficiencies prevented the lender from identifying risky customers and monitoring client relationships, the regulator said at the time.” BIDEN SAYS HE’S CONSIDERING CANCELING SOME STUDENT LOAN DEBT —- Our Michael Stratford: “President Joe Biden confirmed on Thursday that he’s considering canceling “some” amount of federal student loan debt but emphatically ruled out acceding to progressive demands to forgive as much as $50,000 per borrower.” WAPO: BIDEN SHOULD RESIST CANCELING STUDENT DEBT — The Washington Post editorial board says Biden should restrain himself when it comes to student loan forgiveness, arguing that “across-the-board student debt cancellation, which left-wing activists and politicians demand, would amount to a regressive subsidy for many high-income university graduates.” “Mr. Biden should continue to resist these irresponsible demands, even as his administration looks for ways to offer more targeted relief. Congress, meanwhile, should make clear that high-income borrowers need no more federal help and instead put the money into college finance programs tailored to aid the needy.”
| | | | A message from Blackstone:   | | | | | | GERMANY DROPS OPPOSITION TO EMBARGO ON RUSSIAN OIL — WSJ’s Bojan Pancevski, Laurence Norman and Georgi Kantchev: “Germany is now ready to stop buying Russian oil , clearing the way for a European Union ban on crude imports from Russia, government officials said. Berlin had been one of the main opponents of sanctioning the EU’s oil-and-gas trade with Moscow. However on Wednesday, German representatives to EU institutions lifted the country’s objection to a full Russian oil embargo provided Berlin was given sufficient time to secure alternative supplies, two officials said.” RUSSIA’S GAZPROM LANDED RECORD-HIGH PROFIT IN 2021 — Reuters: “Russia's Gazprom on Thursday forecast a fall in gas output of about 4% this year, in another sign of the impact of Western sanctions against Moscow, after the oil and gas giant reported record earnings for last year. Gazprom said in a statement that its net profit hit 2.09 trillion roubles ($29 billion) in 2021, up from 135 billion roubles in the pandemic-stricken 2020 financial year, thanks to rising oil and gas prices.”
| | | | JOIN US ON 4/29 FOR A WOMEN RULE DISCUSSION ON WOMEN IN TECH : Women, particularly women of color and women from disadvantaged socioeconomic backgrounds, have historically been locked out of the tech world. But this new tech revolution could be an opportunity for women to get in on the ground floor of a new chapter. Join POLITICO for an in-depth panel discussion on the future of women in tech and how to make sure women are both participating in this fast-moving era and have access to all it offers. REGISTER FOR THE CHANCE TO JOIN US IN-PERSON. | | | | | | | | Wild swings have been a hallmark of the U.S. stock market all year. It’s only gotten worse during the latest earnings period. —Bloomberg’s Vildana Hajric Federal prosecutors on Wednesday said Bill Hwang , the owner of Archegos Capital Management, and his former chief financial officer had deliberately misled their banks to borrow money and place enormous bets on a handful of stocks through sophisticated securities. — NYT’s Matthew Goldstein and Lananh Nguyen
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