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Presented by Goldman Sachs: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Zachary Warmbrodt | Presented by Goldman Sachs | 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 Biden administration is approaching a critical pivot point in its push to shore up the financial system against climate risks. The table is just about set with big proposals to implement over the coming year, and the churn of key personnel is starting to be felt, as it always does at the end of a president’s term. A few noteworthy moves happening just this week: — CFTC Chair Rostin Behnam announced Wednesday that the agency’s long-awaited guidelines for voluntary carbon offsets trading are expected to land as soon as this month. The offsets are seen as vital tools for companies to reach net-zero emissions goals. But the market has been beset by credibility and transparency problems, and officials want to make sure the offsets can be trusted. — Your MM host and Daniel Lippman scooped that one of the Treasury Department’s top climate finance hawks, Graham Steele, plans to step down in January. He had been overseeing efforts to scrutinize how property insurers are responding to extreme weather. Before joining the administration, he had been a thought leader on ways the government should regulate the finance industry in response to climate change. — House Financial Services Chair Patrick McHenry said he’ll ask the GAO to determine whether new climate guidance for big banks can be blocked by Congress, underscoring how Republicans are working to defang even relatively limited government attempts to focus Wall Street’s attention on the issue. Stepping back, Washington is about to reach the point where most if not all of the big climate risk safeguards of the Biden era have been vetted and proposed. They’ve been historic in some ways and contentious to be sure, but there’s no doubt they’ve also been quite restrained. It’s largely been the realm of guidelines and disclosure rather than direct pressure to retrench from fossil fuel investments and other activities that contribute to climate change. The biggie in the unfinished business category is the SEC’s corporate climate-risk disclosure rule. It’s been pending in the proposal stage for 20 months, amid concerns about whether it would be struck down in court. As Declan Harty and Jordan Wolman wrote earlier this week, the SEC is being outpaced by Brussels and even Sacramento when it comes to imposing climate transparency requirements on companies. Now, as they say, comes the hard part for Biden administration officials and regulators who have spent the last couple of years trying to redefine how Washington polices finance in the era of global warming and rising seas. “The proof is in the pudding,” Georgia State University assistant professor Todd Phillips, formerly of the Center for American Progress, the FDIC and the House, told MM. “They’ve proposed a lot of things. They have finalized some things. Next year, or next term, it really comes down to enforcing whatever is put out and making sure that the private sector complies with their legal obligations.” Happy Thursday — How would you grade the Biden administration’s approach to addressing climate risks in finance? Send thoughts: zwarmbrodt@politico.com.
| | | | A message from Goldman Sachs: Minority-owned businesses already face significant challenges accessing capital. 81% of Hispanic small business owners and 85% of Black small business owners are concerned about their ability to access capital. The Federal Reserve’s Basel III Endgame proposal would make it even harder for minority-owned businesses to access loans and credit. Tell the Fed: Stop the Squeeze on Small Businesses. | | | | | | The FDIC will vote to finalize its post-SVB special assessment on banks at 10 a.m. … Treasury, Fed, SEC and CFTC officials speak at the annual Treasury Market Conference in New York … CFTC Commissioner Christy Goldsmith Romero and CFPB Director Rohit Chopra speak at the Consumer Federation of America’s Financial Services conference … FDIC chief faces more heat — The WSJ late Wednesday reported that FDIC Chair Martin Gruenberg, according to current and former agency officials, has built a reputation “for bullying and for having an explosive temper” — a “screamer” despite his “sleepy demeanor” in Hill hearings. It’s sure to ratchet up congressional scrutiny of the FDIC veteran following a Monday expose that detailed sexual misconduct and toxic behavior by FDIC employees. Lawmakers pressed Gruenberg on his handling of the incidents during two days of hearings this week. On Wednesday, Gruenberg told the House Financial Services Committee that he had never been investigated for workplace misconduct but later corrected his testimony to say he was interviewed as part of a review prompted by a concerned employee. First in MM: Jane Fraser’s message to the APEC CEO Summit — The Citigroup CEO will tell the gathering of leaders in San Francisco that “we should all challenge one another to explore trade agreements that take on market access — a critical hurdle to more diverse supply chains and less-concentrated trading relationships.” Fraser will note that recent regional trade deals have lowered tariffs and protected investment and intellectual property between major economies. “As business and government leaders, we mustn’t lose faith in the tools that have enabled growth and progress over these past decades,” she said in prepared remarks. “And we should be conscious to avoid policies that swing the pendulum too far towards resilience and away from affordability and economic growth.” On the sidelines of the summit, President Joe Biden and China’s Xi Jinping held a “tightly-scripted diplomatic encounter” intended to calm fears over a U.S.-China military conflict. But Biden said after the meeting that he still believes that Xi is a dictator, a comment that is likely to inflame tensions with Beijing.
| | | | A message from Goldman Sachs:   | | | | | Stablecoin talks stabilizing? — Jasper Goodman scoops that bipartisan stablecoin bill discussions are happening in the House after falling apart over the summer. Rep. Maxine Waters, the top Democrat on House Financial Services, said in an interview that a deal is possible by the end of the year. House members press Biden on the Hamas-crypto connection — McHenry and a bipartisan group of more than 50 other House lawmakers asked Biden and Treasury Secretary Janet Yellen to provide Congress with data on any digital wallets used by Hamas-linked groups, Jasper reports. Dems pile on Basel proposal — Senior Democrats on House Financial Services Wednesday told top officials from the Fed, FDIC and OCC that they have doubts about plans to hike capital requirements for large banks, Eleanor Mueller reports. “We’re in a world of confusion here,” Rep. Jim Himes (D-Conn.), a former Goldman Sachs vice president, said at a hearing. “A lot of us are struggling to see the clear need for additional capital.” Himes urged Fed Vice Chair for Supervision Michael Barr to provide analysis that informed the proposal, echoing requests that House Republicans have repeatedly made. Rep. Gregory Meeks (D-N.Y.) pressed regulators about the rule’s potential impact on affordable mortgages. “I’m concerned about mortgage access completely,” Meeks said. “It is absolutely key and essential.”
| | Is the Bank Secrecy Act unconstitutional? — Crypto think tank Coin Center argues in a new report that "there’s much to find constitutionally troubling in our nation’s financial surveillance dragnet."
| | EU rate hikes hit harder than expected — Europe's economy will grow less than forecast after a rapid round of interest rate increases “took a heavier toll than previously expected,” according to the European Commission. It also warned that an escalation of the conflict in Gaza could trigger further deterioration.
| | | | Enter the “room where it happens”, where global power players shape policy and politics, with Power Play. POLITICO’s brand-new podcast will host conversations with the leaders and power players shaping the biggest ideas and driving the global conversations, moderated by award-winning journalist Anne McElvoy. Sign up today to be notified of new episodes – click here. | | | | | | | | | SEC vs. bank regulators — Declan Harty reports that officials from the Fed and OCC on Wednesday signaled they may have issues with an SEC plan that would overhaul how investors’ assets are safeguarded on Wall Street, including by custody banks. The SEC’s plan, rolled out eight months ago, is intended to make sure that investment advisers aren’t abusing customer money. But the proposal has sparked complaints that the SEC is stepping on the toes of other financial watchdogs, such as the bank regulators. The Fed’s Barr and Acting Comptroller Michael Hsu told House lawmakers that the proposal could change the way banks hold client cash — a move that the industry argues would result in higher costs and hamstring lending activity. “We have some concerns,” Hsu said.
| | | | A message from Goldman Sachs: Even without the Fed’s proposed new bank capital requirements, accessing and affording capital is an ongoing challenge for small business owners.
Only 29% of small business owners say their business can currently afford to take out a loan given high interest rates.
- 65% of small business owners who have applied for a new business loan or line of credit in the past year have found it difficult to access affordable capital.
- 31% of small business owners cite 2023 as being the most difficult year over the past four years.
The 10,000 Small Businesses Voices community is calling on the Fed to reconsider implementing the Basel III Endgame. Stop the Squeeze on Small Businesses.
Source: Survey of 1,240 Goldman Sachs 10,000 Small Businesses participants conducted by Babson College and David Binder Research from October 9-12, 2023. The survey included small business owners from 48 U.S. states, Washington, D.C., and Puerto Rico. | | | | | A progressive deep dive into an economics ‘Sea Change’ — The Roosevelt Institute is out with a new look at how “Bidenomics” – and its approach to industrial policy, worker empowerment and markets — went mainstream. Private credit boom — The American Investment Council has a report on how private credit has grown as an economic force the last several years, going from $100 billion in assets under management in 2005 to $1.5 trillion in 2022. People moves — Block head of federal affairs Tom Manatos will be the Financial Technology Association’s board chair next year … Kartik Athreya has been named director of research and head of the Research & Statistics Group at the New York Fed … Charlie Flanagan has been promoted to head of applied artificial intelligence at Balyasny Asset Management.
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