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Presented by Chime: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Zachary Warmbrodt | | | 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 muscling through a dramatic hike in interest rates, a series of geopolitical calamities and a post-pandemic hangover. It’s forcing Republicans to rethink one of their big lines of attack against President Joe Biden. This week, GOP lawmakers are kicking the tires on their latest economic messaging as Treasury Secretary Janet Yellen appears on Capitol Hill for a round of hearings. Republicans are recalibrating while Democrats gush about the story they can tell about jobs, wages and GDP. A clear GOP target is the lasting effect of inflation, which is hard for Democrats to refute. Yes, price spikes have subsided but stuff is still more expensive than it was a few years ago. Most voters continue to disapprove of Biden’s handling of inflation, according to the latest Economist/YouGov poll from late last month. Rep. Andy Barr of Kentucky told Yellen that “asking Americans to feel good about Bidenomics is like asking them to smile during a root canal — the discomfort is just too hard to ignore.” Inflation, Barr added, “should not be confused with the overall level of prices.” Financial Services Chair Patrick McHenry asked Yellen, “What do you say to the American people that are unhappy with paying more for the basics of life?” “Households have been struggling through the pandemic with many burdens, including a higher cost of food and some increase in gas prices,” she said. “We’ve had … a couple of years of high inflation, and it’s a top priority of this administration to bring inflation down and to use the tools we have to reduce the burdens on hardworking households.”
| | | | CONGRESS OVERDRIVE: Since day one, POLITICO has been laser-focused on Capitol Hill, serving up the juiciest Congress coverage. Now, we’re upping our game to ensure you’re up to speed and in the know on every tasty morsel and newsy nugget from inside the Capitol Dome, around the clock. Wake up, read Playbook AM, get up to speed at midday with our Playbook PM halftime report, and fuel your nightly conversations with Inside Congress in the evening. Plus, never miss a beat with buzzy, real-time updates throughout the day via our Inside Congress Live feature. Learn more and subscribe here. | | | | | Republicans are trying to make the case that looming Biden-era regulations could inflame the situation, the genesis of which they attribute to excessive spending. Their main target with Yellen this week is a planned hike in capital requirements to shore up large banks, which the industry warns could curtail lending and other financial services (as it tends to warn in response to new regulations). “Too much spending created excess demand,” Barr said. “But now the administration and the Fed is proposing to constrain the supply of credit, which will exacerbate inflation through this Basel III Endgame [capital proposal] precisely when corporate and commercial real estate borrowers will need to refinance at higher rates.” (The rules will likely be phased in over a period of years.) Senate Republicans at a Thursday hearing with Yellen are expected to continue pounding on the economy and inflation, as well as the Biden administration’s handling of Iran, China, climate policy and data privacy. Conservatives are also warning about the rising cost of federal debt thanks to higher interest rates. Democrats are trying to counter with fresh economic data and GOP mea culpas. Former Trump National Economic Council Director Larry Kudlow said earlier this month, “I was wrong about the slowdown and the recession, so was the entire forecasting fraternity.” Rep. Emanuel Cleaver, a Missouri Democrat, referenced Kudlow’s concession at Tuesday’s hearing, prompting pushback from Republicans but delivering another opening for Yellen to tout the economy. “I absolutely believe it’s headed in the right direction,” she said. Happy Wednesday — Send tips to zwarmbrodt@politico.com.
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Chime is expanding banking with no overdraft fees to everyday people. Cost is a barrier to many, which is why Chime never charges overdraft or monthly fees — and there are no minimum balance requirements for our checking and savings accounts. We reach customers traditional banks don't, can't or won't and are helping everyone unlock financial progress. Learn more. | | | | | U.S. trade balance data is out at 8:30 a.m. … Fed Governor Adriana Kugler talks about her economic outlook at Brookings at 11 a.m. … Richmond Fed President Tom Barkin speaks at the Economic Club of Washington, D.C. at 12:30 p.m. … CBO releases its budget and economic outlook at 2 p.m. Yellen stays out of banking fight dividing Dems — The Treasury secretary frustrated lawmakers on both sides of the aisle Tuesday when she refused to take a position on plans by the Fed, FDIC and OCC to hike capital requirements for large lenders – one of the most contentious financial policy issues in Washington today. The former Fed chair said banks should be subject to strong capital and liquidity standards but that it was up to the agencies to evaluate the specifics. Yellen said she wasn’t aware Treasury had provided any formal feedback to the Fed and that she had not met with Biden on the topic. “I can’t come to any conclusion other than you’re sharing those insights with others but you’re not willing to share them with Congress,” Rep. Bill Huizenga (R-Mich.) said. “It’s a bad choice, but that’s your choice.” Tuesday’s hearing also illustrated the rift among Democrats over the issue. Rep. David Scott (D-Ga.) said the plan would be “terrible for our economy,” the latest in a series of Democratic lawmakers to raise concerns. But Scott was called out later by Rep. Nydia Velazquez (D-N.Y.), who said “he does not speak for all members on this side of the aisle.” Velazquez, one of the panel’s most senior members, said she supports stronger capital requirements. Ranking member Maxine Waters (D-Calif.) also gave a forceful defense. “Wall Street is peddling lies about what needed capital reforms will do, going as far as taking out expensive TV and social media ads, and even setting up a website to purportedly educate the public — except it is filled with misleading claims,” Waters said. “What they don’t want you to know is that the only people who benefit from lower capital requirements are the wealthy bank executives.” More banking jitters — Bloomberg reports that shares of New York Community Bancorp sank by double digits for the fourth time in five days, closing at the lowest level since 1997. Investors have pummeled the bank since last week amid concerns about its real estate exposure and expectations of stricter regulation. Yellen told lawmakers Tuesday she has concerns about commercial real estate and that regulators are working closely with banks on managing the issue. Remembering Buz Gorman — Conference of State Bank Supervisors general counsel John “Buz” Gorman passed away after an eight-month battle with glioblastoma, the group said. He started his career at CSBS in 1996 and served as its general counsel for 15 years.
| | First in MM: Chamber warns FTC on fee crackdown — The U.S. Chamber of Commerce in a new letter to the FTC said the agency’s proposed rule on unfair or deceptive fees is “potentially unlawful” and would be “impossible” for some industries to implement.
SEC targets trading firms — A new rule approved Tuesday would require more trading firms to register with the agency as dealers in the markets for Treasurys and other securities, Declan Harty reports. Nearly four dozen companies are expected to be captured by the rule. MFA President and CEO Bryan Corbett, whose hedge fund group had been a leading critic of the proposal, said the final version “is a significant improvement” but may not have sufficient exclusions.
| | | | A message from Chime:   | | | | | Consultants warn of jail time for divulging Saudi work — The FT reports that the heads of consulting giants McKinsey and BCG told a Senate panel that their employees in Saudi Arabia could face jail time if the companies hand over unauthorized details on the services they provide for the country’s sovereign wealth fund. Fly-ins of the week — The Small Business Payments Alliance will be on the Hill to discuss its opposition to the Durbin-Marshall bill that would crack down on credit card fees … The Independent Bankers Association of Texas will have 100 bankers meet with the Texas congressional delegation, Acting Comptroller of the Currency Michael Hsu and House leadership …
| | | | YOUR GUIDE TO EMPIRE STATE POLITICS: From the newsroom that doesn’t sleep, POLITICO's New York Playbook is the ultimate guide for power players navigating the intricate landscape of Empire State politics. Stay ahead of the curve with the latest and most important stories from Albany, New York City and around the state, with in-depth, original reporting to stay ahead of policy trends and political developments. Subscribe now to keep up with the daily hustle and bustle of NY politics. | | | | | | | | First in MM: A new pitch from Coinbase — Per Jasper Goodman, the U.S. cryptocurrency exchange is out with a new report on the "state of crypto" that touts digital assets as a solution to an array of issues with traditional finance. It’s part of the industry's ongoing efforts to build support among lawmakers as they weigh legislation that would help legitimize the industry. "Too many Americans can't afford an emergency in the United States, yet there's a lack of urgency from lawmakers to update a broken financial system charging billions in fees and breaking the backs of hardworking Americans," Kara Calvert, Coinbase's head of U.S. policy, said in a statement. DeFi and the SEC — CoinDesk reports that the SEC decided against a crypto carveout in its new dealer registration rule.
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