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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 | 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. The U.S. economy is already teetering from soaring prices, and Federal Reserve leaders are signaling they’ll do whatever it takes to bring inflation to heel. Another shock to the system could be in store for midnight on Thursday. That’s the end of a federally mandated cooling off period for contract negotiations between 13 unions and the U.S. rail freight industry. If both sides don’t come to an agreement, the unions could launch a strike that would shatter supply chains and send the price of everything — food, gas, consumer products, you name it — into the stratosphere. The effects of a strike would be immediate and profound. Amtrak is already canceling service on routes that rely on freight lines and certain shipments for sensitive materials like ammonia — a key ingredient in fertilizer — have already been scuttled. Beyond the economic considerations — 40 percent of the U.S.’s long-haul freight rides the rails — a nationwide railroad strike could be a massive black eye for Democrats seeking to avoid a drubbing this November. From POLITICO’s Tanya Snyder, Alex Daugherty and Ben White: “At the heart of the dispute is a compromise proposal that an emergency board appointed by [President Joe] Biden issued last month. While most of the unions have tentatively agreed to those terms or appear close to doing so, train conductors and engineers say they will hold out for more protections against what they call harsh work rules. “If the parties can’t agree on their own, the only way to avoid a strike falls to Congress. But lawmakers typically dislike getting involved in contract disputes, and Democrats are particularly allergic to stepping into the fracas.” The potential crisis has thrown congressional Democrats in a pickle over whether to impose a settlement between the unions and management — a move that could upset valuable alliances with organized labor. That’s a vulnerability that Senate Minority Leader Mitch McConnell was all too happy to point out when he spoke with reporters on Tuesday. “The president is bragging about how much influence he has with unions and how much influence they have with him,” the Kentucky Republican said. With the deadline fast approaching, the White House let it be known that the president and Transportation Secretary Pete Buttigieg were “leading an effort to blunt a strike’s effects on critical resources such as food, drinking water and electricity,” write Snyder, Daugherty and White. “The bottom line is we’re urging both sides to come together to come to an agreement, period,” Senate Majority Leader Chuck Schumer said on Tuesday. IT’S WEDNESDAY — And quoth the proud namesake of a Garden State Parkway rest stop, “you’re halfway there.” Please send tips, story ideas and feedback to ssutton@politico.com.
| | | | 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 SEC has an open meeting on Treasury clearing standards at 10 a.m. … The House Ways and Means Committee will hold a hearing on the future of trade between the U.S. and Taiwan at 11 a.m. WALL STREET GOES CRYPTO — POLITICO’s Declan Harty: “A group of Wall Street titans is set to enter the cryptocurrency market in the coming months with a new type of exchange — one that could make trading digital assets look a lot more like dealing with U.S. equities. Financial executives have long debated how to enter the $1 trillion crypto market without setting off alarms in Washington. Now, with lawmakers and regulators beginning to hash out how to oversee the space, Citadel Securities, Charles Schwab and Fidelity Investments’ digital assets arm are pushing in with the impending launch of EDX Markets.” — From me: “Kohlberg Kravis Roberts on Tuesday announced that it would tokenize one of its newest private equity funds in a bid to make its products more accessible to smaller investors … The arrival of a KKR-branded tokenized offering marks a potentially major development in the institutional adoption of technologies that have largely powered niche markets for crypto tokens like Bitcoin and Ethereum.” TRUST US, IT’S FINE — A blockbuster report from NYT’s Kate Kelly, Adam Playford and Alicia Parlapiano on the trades made by Washington lawmakers and their family members: 97 current senators or representatives “reported trades by themselves or immediate family members in stocks or other financial assets that intersected with the work of committees on which they serve … Over the three-year period, more than 3,700 trades reported by lawmakers from both parties posed potential conflicts between their public responsibilities and private finances.”
| | | | 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. | | | | | | | | THAT WAS ROUGH — Bloomberg’s Molly Smith: “What started as a pandemic-driven supply shock has morphed into widespread inflation rooted just as much in resilient demand, underscored by unexpectedly high numbers that dashed hopes price gains were ebbing. While consumers are showing some signs of slowing, they’re still largely keeping up with persistent price pressures, powered by historic wage gains. All told, the Fed has a much harder task on its hands than previously thought. If Americans won’t dial back spending further, odds favor the central bank becoming that much more aggressive to take more wind out of the economy’s sails with the goal of bringing inflation down.” — Glenmede Chief Investment Officer of Private Wealth Jason Pride : “While the gain in headline CPI was lower at 0.1% m/m, consensus expectations were calling for outright deflation due to the prospect of falling energy prices. However, food prices grew at an 11.4% annual pace last month, which is its fastest velocity since Sony released the Walkman.”
| | | | A message from HANDS OFF MY REWARDS:   | | | | | | MARKETS CRATER — WSJ’s Karen Langley and Caitlin Ostroff : “Stocks suffered their worst day in more than two years after hotter-than-expected inflation data dashed investors’ hopes that cooling price pressures would prompt the Federal Reserve to moderate its campaign of interest-rate increases.” TREASURY YIELDS SPIKE — WSJ’s Sam Goldfarb: “U.S. government bond prices fell sharply Tuesday, pushing the yield on the 10-year Treasury note close to its 2022 high, following the release of surprisingly high inflation data.” BANKER LAYOFFS — The coverage of layoffs at Goldman Sachs has pushed other banks’ headcount plans into the spotlight. JPMorgan Chase President Daniel Pinto on Tuesday warned that cutbacks will have consequences. “You need to be very careful when you have a bit of a downturn to start cutting bankers here and there because you will hurt the possibility for growth going forward,” he said, per Bloomberg’s Hannah Levitt. “The banking business has a big component of variable compensation, so therefore you can adjust not just letting people go, you can adjust by reducing comp.” TWITTER — WSJ’s Alexa Corse and Sarah Needleman: “Twitter Inc. shareholders approved the $44 billion takeover that Elon Musk is trying to abandon on the same day that a whistleblower alleged at a hearing on Capitol Hill that the social-media company misled regulators about security failures.” MIND THE GAP — The Census Bureau on Tuesday released new data that shows income inequality climbed last year for the first time since 2011. SBA ZEROES IN ON ENTREPRENEUR DIVERSITY — The Small Business Administration is making a concerted effort to foster diversity among entrepreneurs, SBA chief Isabella Casillas Guzman said at a Washington Post Live event Tuesday. The agency is helping ensure that hundreds of billions of dollars in government contracts go to “small, disadvantaged businesses” run by “entrepreneurs of color and women and veterans,” she said. The SBA also wants to help workers in “leveling up their skill sets” in a way that improves their access to capital, she added. Casillas pointed to the Community Navigator Pilot Program as “a great example of expanding a network of advisers around the country to ensure inclusiveness — to ensure that we're able to provide these emerging entrepreneurs with the critical success tools that they need.” — POLITICO’s Eleanor Mueller BUDGET TIME — After touting the Inflation Reduction Act as a rare exercise in deficit reduction, the nonpartisan Committee for a Responsible Federal Budget slammed the Biden administration on Tuesday with a new estimate that says the president’s policy accomplishments will add almost $5 trillion to the federal deficit through 2031. “This is on top of the trillions of dollars we were projected to borrow before President Biden took office,” the group said.
| | | | 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. | | | | | | | | David Vandivier has been appointed executive director of The Psaros Center for Financial Markets and Policy at Georgetown University’s McDonough School of Business. Vandivier’s resume includes senior roles at the White House during the Obama administration, as well as Treasury Department, the Senate Banking Committee and, most recently, as co-head of government affairs for BNY Mellon.
| | | TORNADO CASH WITHDRAWALS — Also from me: “The Treasury Department’s Office of Foreign Assets Control on Tuesday released new guidance on how individuals who had previously used the sanctioned crypto mixing service Tornado Cash might be able to withdraw their assets from its protocol.” ICYMI — Read POLITICO’s Derek Robertson on “The Network State” and tech-world manifestos.
| | | The leader of the Senate Foreign Relations Committee is pushing ahead with his effort to reshape American policy toward Taiwan despite misgivings from the White House and some members of his own party. — POLITICO’s Gavin Bade The U.S. may begin refilling its emergency oil reserve when crude prices dip below $80 a barrel , according to people familiar with the matter. — Bloomberg’s Jennifer Jacobs, Saleha Mohsin, and Annmarie Hordern
| | | | 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 | | | | |  |
