Wall Street CEOs in the dock this week — Crypto contagion? — Inflation presses investors

From: POLITICO's Morning Money - Monday May 24,2021 12:03 pm

May 24, 2021

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Quick Fix

Big banks in the dock this week — Democratic power in Washington will assert itself on Wall Street this week with a pair of hearings dragging CEOs of the six largest banks in the nation to the Hill, albeit virtually. Senate Banking has a Wall Street oversight hearing on Wednesday at 10 a.m. and House Financial Services has one on Thursday at noon.

CEOs from JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo will testify. There is no financial crisis for them to answer for this time. But the CEOs are likely to face significant grilling on a range of topics from diversity to the environment, meme stocks, tax hike proposals and much else.

Democrats will hammer away on opposition to higher taxes on corporations and the wealthy while Republicans will likely press their favored theme that the Biden administration is proposing wildly higher spending that could spark serious inflation in the months ahead.

Compass Point’s Isaac Boltansky: “We expect these hearings to be disjointed and nebulous, but they will be must-watch television, nonetheless. … With [so] many issues on the docket, it is difficult to imagine these hearings producing either a unified narrative or an actionable policy prescription. …

“From the left, the nation’s biggest banks have always been a top target and they will remain on that list … From the right, there is a general frustration with the rise of the ‘Woke CEO’ and specific concerns regarding banks curtailing the availability of credit for certain industries.”

Cap Alpha’s Ian Katz : “The multi-CEO circus hearings tend to provide a few interesting tidbits but generally don’t live up to the hype. In this case, the CEOs have known about these hearings for a couple of months and have had plenty of time to prepare.

“With some notable exceptions, most lawmakers come ready with a decent opening question but aren’t very effective with follow-ups once a CEO delivers a well-rehearsed initial response. This also isn’t a particularly vulnerable moment for the big banks in Washington.”

GOOD MONDAY MORNING — So much sports ball happened Sunday that MM can’t even begin to comment on it all. But good on you, Phil Mickelson, holding it down for all us oldsters. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

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DRIVING THE WEEK

President Biden gets a briefing on the Atlantic hurricane season on Monday … He meets with the family of George Floyd on Tuesday on the anniversary of Floyd’s death and will travel to Cleveland on Thursday to deliver remarks on the economy … House Financial Services has a remote hearing at noon on Monday on “Going Public: SPAC … Direct Listings, Public Offerings, and the Need for Investor Protections” …

Senate Banking on Tuesday at 10 a.m. has a hearing with Fed vice chair for supervision Randy Quarles … Senate Banking holds its big bank CEO hearing on Wednesday at 10 a.m. and House Financial Services follows on Thursday at noon.

FIRST LOOK: DEEP DIVE ON BANKS — Via our Victoria Guida: A new report from global financial trade groups praises the resilience of the sector during the coronavirus pandemic, but it also points to a few areas that need a second look by regulators.

“The first, money market mutual funds, will be a key subject of discussion at the Financial Stability Oversight Council’s next meeting on June 11. Other topics the groups say governments should look at: the structure of the market for U.S. government debt; bank capital requirements that treat all assets as equally risky; and requirements for more collateral to be put up when derivatives contracts change value.”

JOIN TUESDAY FOR A CONVERSATION ON AMERICA'S MATERNAL HEALTH CRISIS: The maternal and infant mortality rates in the U.S. have been rising, especially for women and babies of color. One year into the pandemic, how have social determinants of health contributed to maternal and child health outcomes for Black women and other women of color? Join POLITICO for a deep-dive conversation for which we'll use Illinois as a case study to understand how social determinants of health and Covid-19 complicate efforts to eliminate maternal and infant mortality. We will also explore the various public health and policy solutions to reduce racial disparities during pregnancy and postpartum. REGISTER HERE.

BIDEN STILL HOPES FOR BIPARTISAN INFRASTRUCTURE DEAL — Our Brianna Crummy: “White House senior adviser Cedric Richmond said … Biden was still eager for an infrastructure deal but was willing to let negotiations go on a bit longer. Appearing on CNN’s ‘State of the Union,’ Richmond said the president’s effort to garner bipartisan support was made in a ‘serious manner’

“‘It's a sincere effort to move this country forward,’ Richmond said. ‘But the president has been very clear. Inaction is not an option.’ Biden reduced the size of the initial infrastructure proposal to $1.7 trillion from $2.25 trillion last week to try to meet Republicans who are concerned about the scope and definition infrastructure.”

CRYPTO CONTAGION AHEAD? — Mohamed A. El-Erian on Bloomberg Opinion: “With the volatility of cryptocurrencies likely to persist — Bitcoin alone traded in a $30,000-to-$44,000 range last week — more people are wondering whether this will spell trouble for other financial assets such as stocks and bonds.

“The answer to this ‘crypto contagion’ question, if considered narrowly, is no. It gets more complicated, however, in the broader market context, particularly in view of the cross-ownership of assets, leverage and market functioning.”

Markets

INFLATION FORCES INVESTORS TO SCRAMBLE FOR SOLUTIONS — WSJ’s Sam Goldfarb: “Signs that inflation is picking up momentum are adding a new dimension to the post-lockdown market rally, forcing investors to make difficult decisions about how to protect their portfolios from the emerging threat.

“Investors have a variety of options at their disposal but face near-record prices for old standbys like gold, sending some searching for alternatives that may be even more imperfect. Inflation fears have buffeted stocks, pulling major indexes back from records. Some have even talked up bitcoin as an inflation bet, but it fell as much as 30 percent during a trading session last week.”

BITCOIN DOWN ALMOST 50 PERCENT FROM YEAR’S HIGH — Reuters: “Bitcoin fell 13 percent on Sunday after the world's biggest and best-known cryptocurrency suffered another sell-off that left it down nearly 50 percent from the year's high.

"Bitcoin fell to $32,601 at 2 p.m. ET, losing $4,899.54 from its previous close. It hit a high for the year of $64,895.22 on April 14. Ether, the coin linked to the ethereum blockchain network, dropped 17 percent to $1,905 on Sunday, losing $391.31 from its previous close.”

Elon Musk has actually become Bitcoin’s biggest influencer — WSJ’s Akane Otani: “When Elon Musk speaks, bitcoin investors listen. The Tesla chief executive’s often-cryptic messages have sent bitcoin’s price on a roller-coaster ride this year. Prices soared nearly 20 percent one January morning when he added ‘#bitcoin’ to his Twitter biography. They jumped 16 percent in a single day the following month after Tesla Inc. revealed it bought $1.5 billion worth of the cryptocurrency.

“Then, he tweeted earlier this month that Tesla would no longer accept bitcoin as payment for its vehicles. Investors widely blame the tweet for starting bitcoin’s most punishing selloff of the year, a rout that has shaved hundreds of billions of dollars off its market capitalization and has erased gains made since late January.”

A message from ExxonMobil:

ExxonMobil's idea to capture and store roughly 100 million metric tons of CO₂ annually by 2040 would more than double the world's current carbon capture and storage capacity. That's equal to taking 20 million cars off the road. It has the potential to effectively decarbonize the entire industrial area around the Houston Ship Channel and help the City of Houston meet its net-zero ambitions by 2050. If successful in Houston, it could be applied to industrial areas in other parts of the country. Learn more at EnergyFactor.com

Fly Around

BIDEN AND FED INSIST ECONOMIC RECOVERY IS ON TRACK — NYT’s Jim Tankersley and Jeanna Smialek: “McDonald’s, Chipotle and Amazon are all raising pay as companies try to fill jobs faster than they can find workers. Airplane tickets and hotel rooms are becoming more expensive as demand rebounds thanks to newly widespread vaccinations. Supply shortages are making it tougher to buy a house or a new car.

“Republicans look at the economy and see a political liability for the Biden administration. Inflation is taking off, they warn, and worker shortages are threatening the viability of long-suffering small businesses. President Biden and his advisers assess the same set of conditions and reach a vastly different conclusion.”

And while GOP warns of inflation, Biden is betting on wage growth — AP’s Josh Boak: “The Biden administration recently gave a bit of simple advice to businesses that are unable to find workers: Offer them more money.

“This recommendation, included in a White House memo about the state of the economy, gets at a fundamental tension in an economy that is returning to full health after the coronavirus pandemic. Businesses are coping with spiking prices for goods such as steel, plywood, plastics and asphalt. Yet workers, after enduring a year of job losses, business closures and social distancing, are no longer interested in accepting low wages.”

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