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Presented by Ripple: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Sam Sutton | Presented by Ripple | 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. took a baby step toward launching a digital version of central bank money on Wednesday. Like any baby’s first steps, this is big news. The catch? A lot of people aren’t too crazy about this baby. Treasury will convene an interagency working group to explore the development of a central bank digital currency (CBDC), Undersecretary for Domestic Finance Nellie Liang announced in a speech at the Atlantic Council. This does not mean that the Federal Reserve is anywhere close to issuing a crypto-friendly dollar — that would happen years from now, if at all, and only if there’s buy-in from the White House and Congress. But Liang said that agencies need to proceed so the U.S. could “move forward rapidly if a CBDC were determined to be in the national interest.” As our Victoria Guida writes, this represents “the broadest and most concrete effort to date by the U.S. government to consider whether the Fed should issue a digital dollar.” Policymakers and key industry groups haven’t been quick to embrace CBDCs. Fed Chair Jerome Powell has been noncommittal. Fed Gov. Michelle Bowman is openly skeptical. And Attorney General Merrick Garland — tasked by President Joe Biden with figuring out a legal framework for a digital dollar — is slow-walking the release of a report that was due six months ago. (DOJ did not respond to a request for comment.) Crypto businesses and top Republicans — including Rep. French Hill of Arkansas, who chairs the Financial Services subcommittee on crypto — are wary of how it could harm businesses or become a tool for financial surveillance. Dante Disparte, the chief strategy officer and head of global policy at Circle, a crypto company that issues dollar-pegged tokens known as stablecoins, labeled CBDCs “a solution looking for a problem” in an interview last year. Banking groups are also concerned. The American Bankers Association threw a caution flag within hours of Liang’s remarks. “We continue to strongly believe that the risks of a U.S. central bank digital currency outweigh any theoretical benefits,” ABA President Rob Nichols said in a statement. While Nichols credited Liang's consideration of different CBDC designs — which banks fear could threaten their deposits — he also urged the administration and Treasury “to include private sector input, which was notably absent from the remarks.” Nevertheless, Lael Brainard — the former Fed Vice Chair and Biden’s new National Economic Council director — has previously noted that a CBDC could become a powerful tool for faster payments and a more inclusive financial system. What’s more, the emergence of central bank-issued currencies in China, Russia, Saudi Arabia and elsewhere has sparked concerns that the supremacy of the U.S. dollar could diminish over time. “We're years away from people in the US using a CBDC, which is what the banking industry is concerned about, which is what the crypto industry is concerned about,” Josh Lipsky, the senior director of the Atlantic Council's GeoEconomics Center, told MM. “Development of wholesale CBDC networks — with the dollar central to them — is important for the long term primacy of the dollar specifically from a national security and foreign policy context.” IT’S THURSDAY — Have tips, gossip or scoops? Let Sam know at ssutton@politico.com and Zachary at zwarmbrodt@politico.com.
| | | | A message from Ripple: Ripple's crypto solutions are built for business. Using proven cryptocurrency and blockchain technology honed over a decade, we help our partners send payments quickly and efficiently. Ripple also enables organizations of all sizes to drive broader business innovation with cryptocurrency. And we work with central banks around the world to create central bank digital currencies (CBDCs). Learn more about Ripple's business impact here. | | | | | | BLS will report revised fourth-quarter productivity at 8:30 a.m. … The SEC’s Investor Advisory Committee meets to discuss the expansion of private markets at 10 a.m. … Deputy Treasury Secretary Wally Adeyemo will visit two tribal nations in California to spotlight the impact of American Rescue Plan funds …. Fed Governor Chris Waller discusses the economy at a Mid-Size Bank Coalition of America virtual event at 4 p.m. … Minneapolis Fed President Neel Kashkari speaks at 6 p.m. HERE COMES THE VETO — Democratic Sens. Jon Tester of Montana and Joe Manchin of West Virginia crossed the aisle to support a Republican-led effort that would undo an environmental and social investing rule, our Eleanor Mueller and Allison Prang report. Biden has threatened to veto the measure, which targeted a new Labor Department rule that allows retirement plan managers to incorporate climate and social factors into investment decisions. The Sierra Club blasted the Congressional Review Act measure as a “a ploy to prop up corporate polluters while threatening workers’ savings.” Conservatives and financial services groups had criticized the DOL rule for adding “squishiness” to standards for retirement plans, Patomak Global Partners CEO Paul Atkins, a former SEC commissioner, told MM. SCOOP — Our Katy O’Donnell: “Fannie Mae, the government-run company that stands behind almost $9 trillion in U.S. residential mortgages, is planning to expand its role in homeowners’ insurance despite warnings from Republican lawmakers to stay away from the industry. “Fannie, whose massive reach has long been a target of GOP complaints about the government's prominent role in housing, is developing a pilot program to bypass traditional title insurance, according to two people with knowledge of the plan. “The program — which is part of a strategy to reduce closing costs for minority borrowers but which critics say could increase risk for taxpayers — could have major consequences for the title insurance industry, which generated $26.2 billion in premiums in 2021. “Critics of Fannie and its sister company, Freddie Mac, see the latest proposal as part of the ‘mission creep’ that they say the companies have engaged in for years.” First in MM — Rep. Andy Barr (R-Ky.), who leads the Financial Services subcommittee that oversees financial regulators and monetary policy, fired off a letter to Consumer Financial Protection Bureau Director Rohit Chopra demanding answers on a proposed rule targeting credit card late fees. The proposal — which the White House made a centerpiece of its attack on so-called “junk fees” — would shift “delinquent payment costs to other, innocent, consumers,” Barr and 16 of the committee's Republicans wrote. ESCALATION — Reuters Trevor Hunnicutt and Michael Martina: “The United States is sounding out close allies about the possibility of imposing new sanctions on China if Beijing provides military support to Russia for its war in Ukraine, according to four U.S. officials and other sources.”
| | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today. | | | | | | | | INFLATION WATCH — WSJ’s Jon Hilsenrath and Bryan Mena: “Demand for U.S. workers shows signs of slowing, a long-anticipated development that is appearing in private-sector job postings even while government reports indicate the labor market is running hot.” FADING — Reuters’s Chuck Mikolajczak: “The S&P 500 and Nasdaq fell for a second straight session on Wednesday as Treasury yields jumped after manufacturing data indicated inflation is likely to remain stubbornly high, while comments from Federal Reserve policymakers supported a hawkish policy stance.”
| | | | A message from Ripple:   | | | | | | MARK YOUR CALENDARS — Powell will head to the Hill next week to testify in front of Senate Banking (March 7) and House Financial Services (March 8). — Senate Agriculture Chair Debbie Stabenow (D-Mich.) and ranking Republican Sen. John Boozman (Ark.) scheduled a March 8 oversight hearing for the Commodity Futures Trading Commission. CONFLICTED OUT — In the wake of a major Wall Street Journal expose detailing financial conflicts of interest among federal employees, Sen. Elizabeth Warren (D-Mass.) and Rep. Pramila Jayapal (D-Wash.) are urging inspectors general at eight agencies to tighten policies to prevent staff from trading shares in the companies they oversee. “Even in cases where no law was broken, many officials violated ‘the spirit behind the law,’ adding to widespread issues of soft corruption in the executive branch,” they wrote. ON THE OFFENSIVE — Fight Corporate Monopolies, the political arm of the progressive advocacy group the American Economic Liberties Act, is targeting Republican Reps. Jim Jordan (Ohio), Darrell Issa (Calif.), Thomas Massie (Ky.) and Scott Fitzgerald (Wis.) over their opposition to the FTC’s push to ban non-compete clauses, MM has learned. Ads that will run during Fox News’ “Tucker Carlson Tonight” will hit the Republicans with claims they want “your boss to control where you work.” EPSTEIN CASE — JPMorgan Chase is pushing back on a U.S. Virgin Islands effort to access CEO Jamie Dimon’s documents in connection to a lawsuit that claims the bank aided in Jeffrey Epstein's sex trafficking. The bank accused the territory “of pandering for media attention” and said Dimon had no involvement in decisions affecting Epstein’s account, according to Reuters’s Jonathan Stempel.
| | | | DOWNLOAD THE POLITICO MOBILE APP: Stay up to speed with the newly updated POLITICO mobile app, featuring timely political news, insights and analysis from the best journalists in the business. The sleek and navigable design offers a convenient way to access POLITICO's scoops and groundbreaking reporting. Don’t miss out on the app you can rely on for the news you need, reimagined. DOWNLOAD FOR iOS– DOWNLOAD FOR ANDROID. | | | | | | | | COINBASE — Bloomberg’s Muyao Shen and Sonali Basak: “Brian Armstrong, co-founder and chief executive officer of Coinbase Global Inc., reiterated that the largest US cryptocurrency exchange’s ‘staking’ product shouldn’t be classified as a security amid a broad regulatory crackdown.” SILVERGATE — Bloomberg’s Tom Schoenberg and Max Reyes: “Cryptocurrency-friendly bank Silvergate Capital Corp. is studying whether it’s still viable and reviewing its financial controls, following the collapse of Sam Bankman-Fried’s FTX. The shares plunged as much as 25%.”
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