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Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Sam Sutton 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 . FTX Founder Sam Bankman-Fried was one of the crypto industry’s most popular executives on the Hill. Now he’s politically toxic and running out of friends. The spectacular collapse of the 30-year-old former billionaire’s crypto empire is pinballing across Washington policy circles like a market contagion that can’t be contained. Interviews with more than a dozen industry lobbyists, crypto and venture executives, consumer advocates, Hill staff and regulatory agencies paint a grim picture of how Bankman-Fried’s political and policy aspirations have been obliterated over a few short days. He’s lost most of his fortune, frozen the accounts of FTX customers and landed on the shitlist of regulatory agencies from Washington to Austin. Even after Bankman-Fried pumped more than $40 million into Super PACs that spent heavily on Democratic races, one congressional staffer who requested anonymity compared the collapse to seeing the man behind the curtain in “The Wizard of Oz” — it was all smoke and mirrors. “This is an absolutely stunning turnaround from somebody who was the darling of Washington policy circles,” said Blockchain Association Executive Director Kristin Smith in an interview. “It was built on a house of cards.”
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CEO of FTX Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee on Capitol Hill on December 8, 2021. | Alex Wong/Getty Images | Rescue financing that Bankman-Fried sought from the crypto exchange Binance fell apart amid “the latest news reports regarding mishandled customer funds and alleged US agency investigations,” Binance said in a Twitter post Wednesday. The fallout could send FTX into bankruptcy. Prior to the Binance deal (and subsequent collapse), Bankman-Fried informed investors his crypto exchange faced a shortfall of up to $8 billion ,” per Bloomberg’s Gillian Tan. There are very real consumer risks here. FTX and Bankman-Fried’s trading firm Alameda Research are major forces in the highly interconnected world of digital asset investments. Other trading platforms have already started to halt transactions involving assets that have been dragged down by the crisis . SEC Chair Gary Gensler addressed the matter directly on Wednesday, noting that consumers will continue to face deep risks so long as exchanges like FTX operate outside the bounds of U.S. securities law, per our own Declan Harty . “It's like Jenga blocks all built up, and, as each block gets pulled out, it topples a bit,” he said at a conference hosted by the Healthy Markets Association. IT’S THURSDAY — Send us your tips, story ideas or feedback: kdavidson@politico.com and ssutton@politico.com .
| | | Consumer price index data released at 8:30 a.m. … Philadelphia Fed’s Patrick Harker speaks at 9 a.m. … Dallas Fed President Laurie Logan speaks at 9:35 a.m. … Cleveland Fed President Loretta Mester speaks at 12:30 p.m. … Kansas City Fed President Esther George speaks at 1:30 p.m. … New York Fed President John Williams speaks at 6:35 p.m. ELECTION AFTERMATH, DAY 2 — Our Zach Montellaro and Madison Fernandez: “ Control of both chambers of Congress was still up for grabs Wednesday, with the Senate coming down to a pair of uncalled toss-up races that appear set to take days to resolve — and the possibility that a runoff in Georgia could once again decide the majority. “And while Republicans still have the inside track to retake the House, a large number of the most competitive House seats remain uncalled, after the GOP failed to capture numerous swing seats the party expected to flip on Tuesday.” Reproductive rights: “A surge in turnout among people motivated by the erosion of abortion rights carried Democrats to victory in races for governor, Senate, attorney general and state legislatures — defying predictions that the issue had faded for voters in the months since the Supreme Court overturned Roe v. Wade,” our Alice Miranda Ollstein and Megan Messerly write. PARODY ACCOUNTS NEED NOT APPLY — Also from Declan: “Elon Musk may be poised to usher Twitter into both the payments and banking space, in what could be a new front in the battle over technology companies entering finance … The man who calls himself Twitter’s “chief twit” also said the company may even look at offering high-yield money market accounts, debit cards and checks , indicating that Twitter could wade into the highly regulated banking world as well.” PEOPLE DON’T FORGET! — NYT’S David Gelles on World Bank President David Malpass: “Three years after being nominated to lead the World Bank by President Donald J. Trump, Mr. Malpass is performing a high-wire act. He is the face of an institution that provides billions of dollars a year to finance projects aimed at mitigating the effects of climate change and helping poor countries adapt to a warmer planet. Yet he is dogged by questions about his own views on the science of climate change , as well as accusations that the World Bank is not doing nearly enough.”
| | | IT’S GOING TO GET HOTTER — WSJ’s Paul Kiernan: “The Securities and Exchange Commission and Justice Department are investigating cryptocurrency platform FTX following its sudden implosion this week .” BIG FISH — WSJ’s Mengqi Sun: “The Securities and Exchange Commission filed charges against the founder and three U.S. promoters of Trade Coin Club, alleging the crypto-trading membership club operated as a Ponzi scheme that raised 82,000 bitcoins , valued at $295 million in 2018, from investors around the world.”
| | | INFLATION REALITY CHECK — From WSJ’s Greg Ip: “If Republicans take control of Congress, they may push President Biden to cut spending. Yet to reduce the inflation rate just 1 percentage point next year via spending cuts alone would require slashing annual discretionary outlays by nearly half , or $750 billion a year, the Penn Wharton Budget Model, a nonpartisan think tank, estimates. That’s roughly equal to the entire defense budget. Spending cuts on such a scale would be so politically unpopular as to be almost unfeasible.” META LAYOFFS — NYT’s Sheera Frenkel, Adam Satariano and Ryan Mac : “Meta said it was laying off more than 11,000 people, or about 13 percent of its work force, in what amounted to the company’s most significant job cuts. The layoffs were made across departments and regions, with areas like recruiting and business teams affected more than others.” 6 PERCENT IS THE NEW 5 PERCENT — WSJ’s Matt Grossman: “Now, more [investors] are seriously considering whether the central bank’s target rate will rise as high as 6% before Fed officials take their foot off the brake—a level not reached since just before the dot-com bust in 2000 , and one that could spell far more pain ahead for stocks and bonds.”
| | | | DON’T MISS A THING FROM THE MILKEN INSTITUTE’S MIDDLE EAST AND AFRICA SUMMIT: POLITICO is partnering with the Milken Institute to produce a special edition "Digital Future Daily" newsletter with insider reporting and insights from the Milken Institute's Middle East and Africa Summit happening November 17-18. Hundreds of global leaders will convene, highlighting the important role connection plays in advancing global well-being. Whether you’re in-person at the event or following online, sign up for this special edition newsletter for daily coverage of the event. SUBSCRIBE TODAY . | | | | | | | | China is increasing Covid restrictions in southern manufacturing powerhouse Guangzhou, suspending schools and widening lockdowns after days of more incremental moves failed to arrest a swelling outbreak. — Bloomberg’s Emma O’Brien and Linda Lew Goldman Sachs Group Inc. promoted 80 bankers into its partnership on Wednesday, the biggest class since Chief Executive David Solomon took over in 2018. — WSJ’s AnnaMaria Andriotis More than 40% of corporate decision-makers see an urgent need to overhaul their supply chains in 2023 , with inflation, higher interest rates and weaker global trade acting as some of the stiffest economic headwinds, a new survey showed. — Bloomberg’s Brendan Murray | | | | Follow us on Twitter | | | | Follow us | | | | |  |
