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Presented by HANDS OFF MY REWARDS: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Sam Sutton and Ben White | Presented by HANDS OFF MY REWARDS | 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. If all goes according to plan, the Ethereum blockchain will become a lot more eco-friendly as soon as tomorrow. Ethereum’s transition to a proof-of-stake consensus mechanism — in which miners are granted crypto rewards for posting their assets as collateral in exchange for a shot at validating new transactions on the blockchain — is expected to bring down its energy footprint by more than 99 percent. Many policymakers, including key Democrats, have been championing efforts to give priority to crypto platforms that transition to more environmentally friendly models. And while many will celebrate Ethereum’s transition, it stands to wipe out those who invested heavily in specialized computer equipment to extract digital tokens from the world’s second most widely used blockchain. “It’s basically the apocalypse,” said BitPro CEO Mark D’Aria, whose Long Island firm specializes in reselling Ether miners’ used computer equipment. “I don’t see how it cannot be bad based on where this is heading.” Much like Bitcoin, Ethereum transactions are currently validated through a process known as proof-of-work . Computers compete to solve cryptographic puzzles that assemble a digital currency’s underlying blockchain. The computers that solve those puzzles the fastest get to record transactions to the blockchain in exchange for new crypto tokens. As crypto prices rose last year — and mining firms sprouted up across North America — there was an arms race among operators to buy up heavy-duty computer rigs that could be powered by the cheapest energy available. That’s why many corporate mining businesses, which are largely focused on Bitcoin, built out massive server farms and made huge investments in energy infrastructure — clean or otherwise — to provide electricity for their servers. For operators who mined on Ethereum, the new proof-of-stake consensus mechanism does away with all that. Their investments will be largely obsolete from a crypto mining perspective. Now, with all that said, there are a few caveats that could make this situation salvageable for Ether miners. Most Ethereum miners use graphics processing units that are also used by the video game industry and have applications in cloud computing and artificial intelligence. Hut 8 Mining — a crypto mining firm whose shares trade on the Nasdaq — recently moved nearly 200 of its GPUs to a data center in anticipation that those units might be able to provide “artificial Intelligence, machine learning, or VFX rendering services to customers,” CEO Jaime Leverton said in a statement to POLITICO. And while GPUs aren’t powerful enough to meaningfully compete with the rigs used by Bitcoin miners, they could generate earnings in the form of less valuable tokens on other proof-of-work blockchains, said Sid Powell, CEO of the crypto lending platform Maple Finance. To that end, some miners are expected to transition their machines to an older version of Ethereum’s blockchain that will remain proof-of-work. Alternatively — particularly for smaller firms or individual miners — they could try to sell off their equipment to video game businesses or enthusiasts. That won’t necessarily be easy. “That’s not a small task to sell those back to gamers one-by-one,” D’Aria said. “No one else is going to want to buy a mining [GPU] mining farm. There’s no market for that anymore.” IT’S TUESDAY — Godspeed to those looking for sleepers on fantasy football league waiver wires. Please send tips, story ideas and feedback to ssutton@politico.com.
| | | | Join POLITICO Live on Tuesday, Sept. 20 to dive into how federal regulators, members of Congress, and the White House are seeking to write the rules on digital currencies, including stablecoins. The panel will also cover the tax implications of crypto, which could be an impediment to broader adoption and the geopolitical factors that the U.S. is considering as it begins to draw regulatory frameworks for crypto. REGISTER HERE. | | | | | | | | Consumer Price Index and Core CPI is out at 8:30 a.m. … The Senate Banking Committee holds a hearing on new financial products at 10 a.m. … Commissioner Summer K. Mersinger speaks at FIA’s Washington Update in Chicago at 4:30 p.m. GOLDMAN BRINGS BACK ANNUAL JOB CUTS — Goldman Sachs is bringing back its annual practice of culling between 1 and 5 percent of its total workforce toward the end of each year with the first job cuts expected as soon as next week, sources close to the bank confirmed to POLITICO. But it's not quite time to panic over big, impending Wall Street job cuts. At least not right now. Senior officials at JPMorganChase, Citigroup and Bank of America said they had no immediate plans for cuts, though many banks are trimming back on expenses and slowing new hiring. And a significant turn for the worse in the economy could easily lead to bigger job losses in the banking industry and well beyond. Traditionally, Goldman evaluates all employees each year and lets the lowest rated go, up to about 5 percent of the total workforce. The bank suspended the practice for two years during Covid and a huge boom in investment banking deal volume. That boom is now over as mergers and acquisition deals and initial public offerings have slowed amid the Federal Reserve's campaign of interest rate hikes aimed at slowing the economy and reducing inflation. That reduction in deal flow has hammered profits at Goldman and other Wall Street banks. Still, people close to Goldman noted that the bank has grown rapidly over the last several years to a current head count of about 47,000. These people said the cuts would likely be on the lower side of the 1 to 5 percent range and did not indicate any broader plans for layoffs. For now. – Ben White FOOD PRICES — POLITICO’s Garrett Downs: “Gas prices are down, providing a boon for Democrats in November. But food prices remain sky-high, giving Republicans an opening to keep inflation a top-of-mind issue in the midterms. The price of food at the grocery store is expected to increase by up to 11 percent this year with the cost of beef, poultry, milk, eggs and fruit driving the surge. Prices could shoot even higher with droughts affecting crops and a potential rail workers strike halting shipments needed for both food and crop production. The government on Tuesday will release its latest Consumer Price Index report, and it's likely to show a continuing upward trend on food inflation despite prices for gas, fuel oil, automobiles and clothing recently retreating.” FIRST IN MM — With the Senate Banking Committee scheduled to hold a hearing on fintech later today, industry associations and startups are accelerating efforts to promote their businesses as an alternative to banks and old-guard financial services firms. More than a dozen fintech startups, consumer advocacy groups and civil rights organizations launched a coalition on Tuesday called More Than Fair to push for changes to credit-scoring systems that they say their artificial intelligence-enabled fintech platforms could improve. Credit scores are “a bit of a relic of the past,” said Dave Girouard, who’s co-founder and CEO of the AI lending firm Upstart. “More sophisticated models that would be much better at modeling risk, and would be more inclusive by nature, tend to be looked at as unusual, distinct, separate … and are perceived as a threat.” DEFENSE — The Revolving Door Project is jumping to CFPB Director Rohit Chopra’s defense after a series of attacks from Senate Republicans and the Chamber of Commerce. A new report from the watchdog group spotlights ties between some of the Chamber’s leaders and companies that have run afoul of the regulator. “With Chopra at the reins, a new day has dawned at the CFPB. Corporate criminals and their allies — namely the Chamber — understand this better than anyone,” according to the report. “They’re spooked, and they should be.”
| | | | A message from HANDS OFF MY REWARDS: Despite record profits, mega-retailers and merchant groups are trying to trick Congress into passing harmful credit card routing mandates that will end popular rewards programs like cash back and travel points. Learn more at HandsOffMyRewards.com | | | | | | THE RENT REMAINS TOO DAMN HIGH — Bloomberg’s Matthew Boesler: “Rental inflation will factor heavily into the future of monetary policy. The good news is rental inflation may be close to topping out after advancing almost 6% in the 12 months through July. The bad news is it will take a while to settle back down to anything resembling pre-coronavirus norms.” WARNING — Former International Monetary Fund Chief Economist Maurice Obstfeld says central banks are perilously close to overcorrecting for their slow-footed response to inflation. “Just as central banks (especially those of the richer countries) misread the factors driving inflation when it was rising in 2021, they may also be underestimating the speed with which inflation could fall as their economies shrink,” he wrote in the Peterson Institute for International Economics.
| | | WATCH THIS SPACE — POLITICO’s Garrett Downs: “Rail carriers on Monday halted new shipments of ammonia — a critical fertilizer component — as a potential worker strike on freight railways threatens to shut down the system as early as Friday.” THE LONG ARM OF HOUSING — From Bloomberg’s Enda Curran and Ainsley Thomson: “From Sydney to Stockholm to Seattle, buyers are pulling back as central banks raise interest rates at the fastest pace in decades, sending house prices falling. Meanwhile, millions of people who borrowed cheaply to purchase homes during the pandemic boom face higher payments as loans reset.” — The New York Fed reported on Monday that consumer expectations for home prices have now fallen by nearly two-thirds since April and are below pre-pandemic levels. SURVEY — A new survey from Goldman Sachs 10,000 Small Business Voices — the big bank’s small business advocacy organization – found that 54 percent of small business owners reported a decline in customer demand over the last few months. And while fewer than a fifth of those surveyed reported instituting a hiring freeze, nearly half have paused their expansion plans. The survey of 1,479 business owners was conducted by Babson College and David Binder Research from Aug. 29 to Sept. 1. EO — POLITICO’s Lauren Gardner: “President Joe Biden signed an executive order Monday aimed at boosting American biotechnology and biomanufacturing and promoting innovations in a variety of sectors, from health to energy and agriculture.”
| | | | A message from HANDS OFF MY REWARDS:   | | | | | | MEET THE NEW BOSS — FT’s Nicholas Megaw: “After years of fighting to attract computer engineers who would rather work for big tech groups or crypto start-ups, Wall Street firms say they are recovering lost ground in the talent war as layoffs and hiring freezes spread through Silicon Valley.” LABOR DEPARTMENT NEED NOT OPINE — From WSJ’s Justin Baer: “Fidelity Investments is weighing a plan to allow individual investors to trade Bitcoin on its brokerage platform, people familiar with the matter said, marking the financial giant’s latest foray into cryptocurrencies.” ICYMI — Reuters: “The [SEC] will set up two new offices to deal with filings related to crypto assets and the life sciences sector.”
| | | | DON’T MISS - MILKEN INSTITUTE ASIA SUMMIT : Go inside the 9th annual Milken Institute Asia Summit, taking place from September 28-30, with a special edition of POLITICO’s Global Insider newsletter, featuring exclusive coverage and insights from this important gathering. Stay up to speed with daily updates from the summit, which brings together more than 1,200 of the world’s most influential leaders from business, government, finance, technology, and academia. Don’t miss out, subscribe today. | | | | | | | | Russia withdrew more forces from the Kharkiv region on Monday, retreating from a swath of northeastern Ukraine as Kyiv’s forces continued their push into Russian-occupied territory and the government pledged that all areas seized by Moscow would be retaken. — WSJ’s Matthew Luxmoore More than six months after one of the largest infant formula manufacturing plants in the United States issued a recall and was then shut down because of contamination concerns, a newborn staple remains in short supply. — NYT’s Julie Creswell and Michael Corkery
| | | | A message from HANDS OFF MY REWARDS: Merchant coalitions representing big-box and grocery retailers are lobbying Congress to enact harmful new credit card routing mandates. Their legislation, inaccurately titled, the Credit Card Competition Act, would allow big-box retailers–like Wal-Mart and Kroger–to rework the entire U.S. payments system solely on what is cheapest for them without regard to the value that consumers and small businesses derive from rewards programs and many other benefits. This bill would end popular credit card rewards programs like cash back and miles while adding billions of dollars to the bottom lines of mega-retailers. Learn more at HandsOffMyRewards.com | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
