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Presented by U.S. Bank: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Kate Davidson, Victoria Guida and Aubree Eliza Weaver | Presented by U.S. Bank | The Treasury Department’s importance is reflected in part by its proximity to the president — just steps from the West Wing, at 1500 Pennsylvania Avenue. And the secretary is often regarded as an administration’s lead economic policymaker. In the Biden administration, however, Treasury Secretary Janet Yellen appears to be playing more of a supporting role. Yellen hasn’t wielded as much influence as her recent predecessors, and the agency has often taken a backseat to the National Economic Council or been overruled by the White House, according to two dozen people, including current and former administration officials, people close to the White House and others who know her. From your MM host and our Victoria Guida: “Among the cases they cite: She was rebuffed in her objection to Biden’s choice of a progressive law professor to be the top banking regulator within her own department. The White House failed to consult Treasury on remarks Biden was preparing to give on the debt ceiling and tasked another Cabinet official with reaching out to CEOs. “And when Democrats were deliberating over how to finance the president’s signature Build Back Better proposal, White House officials led the discussions with Congress, not Yellen or another senior Treasury official.”
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Treasury Secretary Janet Yellen testifies before the Senate Banking Committee on May 10. | Elizabeth Frantz/Pool via AP | Why is Yellen not a bigger force in the West Wing? Some chalk it up to Biden’s tendency to defer to his inner circle of longtime advisers, while others say Yellen’s team at Treasury hasn’t done enough to stake out her territory. Others say she simply has a different style, one with fewer sharp elbows and more collaboration. Her lower profile has surprised her supporters, and frustrated some who say the White House lacks a credible, confidence-building message on the economy — and especially on inflation. “Janet Yellen seems like this not-so-secret weapon,” said one administration official, who, like most of those interviewed for the story, asked not to be identified by name so they could speak candidly. “If we haven’t used her yet, are we ever going to utilize her?” Not out of the loop: White House officials insist Yellen is an indispensable member of the president’s team, and she’s the only cabinet member who attends the daily White House senior staff briefing. “She’s not the person who says the most in any given meeting; she’s not the person who’s as flashy and out there,” said National Economic Council Director Brian Deese. “But when she speaks, whether it’s around the Situation Room table, around the NSC, or with the chief of staff, with the president, her words and her perspective carry enormous weight.” That’s not obvious to many who spoke with POLITICO, including people inside and outside the administration. Still effective: Her defenders point out that she’s revived a stalled global tax deal, implemented vast portions of the president’s Covid recovery plan and reinvigorated the Financial Stability Oversight Council. One area where her influence clearly played a big role was her advocacy of Fed Chair Jerome Powell, whom Biden tapped for another term as central bank chief. But people close to the White House and Yellen say she isn’t shaping or driving policy initiatives or getting out front publicly as much as some of those who held the job before. That may partly be her preference — she is seen as a technocrat, a widely respected, above-the-fray leader rather than a flame thrower in a political messaging war. Her deliberate, collaborative approach, honed over years working at the Fed, stands in contrast to the fast-break mentality in the West Wing, they said. “I think she has something that few in Washington have,” former Treasury Secretary Larry Summers said. “There’s no one in the world who doesn’t trust her. There’s no one who doesn’t think that she’s got huge and fundamental integrity, a lot of intelligence and a ton of decency. Those are very powerful assets and it would be a mistake for anyone to underestimate their staying power.” IT’S THURSDAY — Thanks to those of you who’ve filled out our short MM survey! If you haven’t had a chance, take a minute and let us know what’s working and where we can improve. And keep reaching out directly with tips, story ideas or any other feedback: kdavidson@politico.com, @katedavidson and aweaver@politico.com, @aubreeeweaver.
| | A message from U.S. Bank: U.S. Bank has given students hundreds of thousands of dollars in scholarships. Minnesota high schooler Addison Gray received hers—to study nursing—as her father battled COVID-19. “Seeing the way those nurses cared for him, it definitely reinforced going to school to help more people,” she said. Because at U.S. Bank, we’re small enough to care, and big enough to make a difference. Learn more. | | | | | | First-quarter GDP revised estimate and corporate profits at 8:30 a.m. … SEC Chair Gary Gensler speaks at the Investment Company Institute leadership summit at 8:45 a.m. …CBO Director Phil Swagel testifies before House Budget Committee on the CBO budget outlook at 11 a.m. DEFICIT WILL SHRINK TO $1 TRILLION THIS YEAR BEFORE SOARING — Our Jennifer Scholtes (with an assist from your MM host): “The U.S. deficit will shrink to $1 trillion this year, before beginning to soar in 2024, just as Americans prepare to elect the next president, Congress’ nonpartisan budget forecaster predicted Wednesday. “While the nation’s shortfall has substantially declined following last year’s $2.8 trillion deficit, the Congressional Budget Office estimates the gap between spending and revenue will grow starting in 2024, reaching more than 6 percent of GDP a decade from now. The U.S. has only run greater deficits than that six times since 1946, CBO noted.” And our Brian Faler notes, tax receipts are booming, thanks in part to spiking inflation. CBO said Wednesday it now expects federal revenue this year to jump by a whopping $800 billion — equivalent to the Pentagon’s annual budget. “That translates to a 19 percent increase, the biggest one-year hike in more than 40 years, and it comes on top of an 18 percent increase last year,” Brian writes. SEC MOVES TO CURB GREENWASHING — Our Lorraine Woellert: “The Securities and Exchange Commission voted Wednesday to advance a pair of proposals that would impose new rules governing how funds and advisers market investments. “One of the proposals is meant to govern funds that purport to build investment strategies around environmental, social or governance factors. It seeks to rein in greenwashing by restricting ESG labeling to offerings that meet certain requirements and make detailed disclosures. “The latter proposal would broaden the agency’s 21-year-old names rule, which bars companies from attaching deceptive or misleading titles to the mutual funds or other investments they sell.” FHFA’S THOMPSON CONFIRMED — Our Katy O’Donnell: “The Senate on Wednesday confirmed Sandra Thompson to a five-year term as the top regulator of mortgage giants Fannie Mae and Freddie Mac. The Senate approved her nomination as Federal Housing Finance Agency director in a 49-46 vote. Thompson has been acting head of the agency since June, when President Joe Biden fired Trump-appointed FHFA Director Mark Calabria.” LAWMAKERS SCRUTINIZE CREDIT-REPORTING COMPANIES’ HANDLING OF CONSUMER COMPLAINTS — WSJ’s AnnaMaria Andriotis: “Lawmakers are probing how Equifax Inc., Experian PLC and TransUnion handled consumer complaints about errors on their credit reports during the pandemic. Democrats on the House Select Subcommittee on the Coronavirus Crisis informed the companies of the probe Wednesday morning, according to letters viewed by The Wall Street Journal. “ IN THE MINES — Our Sam Sutton writes: “With Democrats pushing to make climate concerns a focal point of digital asset regulation, former EPA Chief of Staff Mandy Gunasekara has linked up with noted Bitcoin maximalist Dennis Porter to form a new 501c4 organization that will promote the crypto mining industry’s policy efforts around Washington. “Called the Satoshi Action Fund, the new nonprofit is raising money to spotlight the industry’s role in developing a digital economy. While Porter and Gunasekara declined to name the group’s donors, they also said they were considering putting their resources to work in the 2022 midterm cycle. ‘We've seen as policymakers like Elizabeth Warren, as well as some press media, go after Bitcoin mining in a way that paints it in a negative light,’ Porter said, adding that he viewed Satoshi Action Fund as a way to ‘go on the offensive to start protecting Bitcoin data centers/miner operators.’”
| | | | DON'T MISS 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. | | | | | | | | FED MINUTES: TOO EARLY TO JUDGE IF INFLATION HAS PEAKED — Victoria Guida: “Federal Reserve officials had hoped at their last meeting to see more evidence that price increases were no longer accelerating but weren’t confident that inflation had peaked, newly released minutes from their May gathering show. “A number of Fed policymakers, before April consumer price data was released, said recent monthly data ‘suggest that overall price pressures may no longer be worsening.’ But those same officials ‘also emphasized that price pressures remained elevated and that it was too early to be confident that inflation had peaked.’” You can read the full minutes here. KANSAS CITY FED CHIEF GEORGE TO RETIRE — Victoria again: “Federal Reserve Bank of Kansas City President Esther George will retire in January, she announced Wednesday, opening up another key vacancy at the central bank. Her retirement is mandated by Fed rules that generally require the heads of its regional branches to step down at age 65. George has been head of the Kansas City Fed since October 2011.” FED’S INFLATION FIGHT GETS A BOOST AMID WALL STREET ROUT — Bloomberg’s Katherine Greifeld: “Beneath the latest global market disruptions are clues that the Federal Reserve is making slow but sure progress in its bid to curb the excesses of this inflation-addled business cycle. Ever-tightening financial conditions and the draining of stock-market froth suggest Wall Street is taking the Fed’s hawkish stance seriously, a development that should eventually help cool the expansion. Meanwhile falling market-derived inflation expectations constitute a rare win for monetary officials on a mission to convince Americans that price pressures will ease soon enough.
| | | WORLD BANK’S MALPASS SAYS WAR IN UKRAINE MAY TRIGGER GLOBAL RECESSION — Reuters: “World Bank President David Malpass on Wednesday suggested that Russia's war in Ukraine and its impact on food and energy prices, as well as the availability of fertilizer, could trigger a global recession . Malpass told an event hosted by the U.S. Chamber of Commerce that Germany's economy, the world's fourth largest, has already slowed substantially due to higher energy prices, and said reduced production of fertilizer could worsen conditions elsewhere.” DAVOS GATHERING OVERSHADOWED BY GLOBAL ECONOMIC WORRIES — AP’s Kelvin Chan: “Soaring inflation. Russia’s war in Ukraine. Squeezed supply chains. The threat of food insecurity around the world. The lingering COVID-19 pandemic. The risks to the global economy are many, leading to an increasingly gloomy view of the months ahead for corporate leaders, government officials and other VIPs at the World Economic Forum’s annual meeting in the Swiss resort town of Davos. The war has been a thread, setting back the global economic recovery from the pandemic, economists say.”
| | | | A message from U.S. Bank:   | | | | | | Energy Secretary Jennifer Granholm said President Joe Biden is laser-focused on knocking down sky-high gasoline prices, though she concedes that even the most powerful person on the planet has limited influence to do that. — CNN’s Matt Egan Mortgage lenders are scrambling to survive a sharp drop-off in the number of homeowners refinancing their loans, with demand drying up as interest rates rise. — WSJ’s Orla McCaffrey Stocks rose broadly on Wall Street Wednesday after minutes from the Federal Reserve’s most recent meeting indicate the central bank intends to move “expeditiously” to raise interest rates back to more neutral levels in its fight to tame inflation. — AP’s Damian J. Troise and Alex Veiga After years on the sidelines, the insurance industry is increasingly embracing the digital assets sector. — WSJ’s Mengqi Sun
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