| | | | | |  | | By Victoria Guida and Aubree Eliza Weaver | | | Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers 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.
| | | All crypto all the time — Cryptocurrencies are top-of-mind for federal regulators these days, and stablecoins — a type of virtual currency whose value is tied to another asset, most often the dollar — are high on that priority list. Tether, which issues the world's largest stablecoin, and cryptocurrency exchange Bitfinex have agreed to pay $42.5 million to resolve charges that they operated illegally, including that Tether for years misstated that its token was fully backed by dollars, when in reality it was not most of the time. The move on Friday by the Commodity Futures Trading Commission comes mere weeks before an expected report from U.S. regulators on next steps for stablecoins more broadly. Though Tether tends to get a lot of attention because it's the biggest stablecoin, Treasury officials have made clear that they're also thinking about what these assets might look like in the future, particularly if they are considered safe enough to actually become a retail payment method (Tether is generally used as a medium of exchange on crypto networks). So, even though this penalty suggests that regulators will go after stablecoin issuers that aren't being upfront with investors, a concern for them is also assets that are relatively safe, and how they might interact with the payment system and funding markets. Think, for example, Diem, the proposed stablecoin formerly known as Libra. (Your MM guest host wrote a bit about this last month.) It's not just stablecoins in the news. A Bitcoin futures exchange-traded fund from ProShares is expected to start trading this week, a long-awaited development that will allow people to profit off price increases in the popular cryptocurrency without actually owning it. Other ETFs could follow. This is a major victory for an industry that has been trying to secure some kind of exchange-traded product related to Bitcoin for years, although allowing a futures ETF but not an ETF tied directly to Bitcoin itself suggests lingering hesitancy at the SEC about the stability and health of the spot market. Even so, our Kellie Mejdrich reports that "the move is setting up a conflict between [SEC Chair Gary] Gensler and investor advocates who are his long-time allies. They argue that giving consumers exposure to a volatile, opaque market still carries big risks, even if the funds are a step removed from crypto trading." IT'S MONDAY — Hope you had a good weekend. Send any tips to me at vguida@politico.com or @vtg2 and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver. | | A message from the American Bankers Association: America's banks firmly believe that everyone should pay their taxes, but a proposal in Congress would force banks to provide details to the IRS on what's going in and out of almost every bank account in the country. This dragnet of data collection raises serious questions about Americans' right to privacy. Learn more about the issue and take action here. | | | | | | The Georgetown University Law Center hosts DC Fintech Week, with FDIC Chair Jelena McWilliams, Acting Comptroller of the Currency Michael Hsu, Acting FinCEN Director Him Das, SEC Chair Gensler and Treasury Undersecretary of Domestic Finance Nellie Liang … American Bankers Association conference on Monday and Tuesday … The Milken Institute Global Conference happening Monday through Wednesday, featuring FDIC's McWilliams, HUD Secretary Marcia Fudge, former Treasury Secretary Steven Mnuchin, Fed Governor Randal Quarles, House Financial Services Chairwoman Maxine Waters (D-Calif.) and House Minority Leader Kevin McCarthy … FSOC open meeting on climate report on Thursday at 5 p.m. … Speeches from Fed governors Christopher Waller and Michelle Bowman on the economic outlook … Senate Banking hearing on sanctions policy with Deputy Treasury Secretary Wally Adeyemo on Tuesday at 10 a.m. … House Financial Services hearing on U.S. participation in international financial institutions on Wednesday at 10 a.m. FSOC CLIMATE REPORT THIS WEEK — The Financial Stability Oversight Council — the panel of U.S. regulatory chiefs chaired by Treasury Secretary Janet Yellen — has pushed back the meeting where it will unveil its report on climate-related risks to the government and the financial system. The FSOC will now meet in open session on Thursday, Oct. 21, to discuss the climate report. The council will also meet in closed session to talk about the forthcoming paper on stablecoins from a subset of regulators known as the President's Working Group on Financial Markets. MM sidebar: Treasury always posts reports after the council has actually voted on them, so look for the climate document sometime after the meeting. There's a possibility that FSOC members will suggest revisions during the meeting, which would delay publication slightly, but regardless, we should all have it in our hands posthaste. FOSSIL FUEL INVESTMENT DROPS AND RENEWABLES AREN'T READY — WSJ's Christopher M. Matthews, Collin Eaton and Benoit Faucon: "An energy price shock is serving as a reminder of the world's continued dependency on fossil fuels—even amid efforts to shift to renewable sources of energy. Demand for oil, coal and natural gas has skyrocketed world-wide in recent weeks as unusual weather conditions and resurgent economies emerging from the pandemic combine to create energy shortages from China to Brazil to the U.K. "The situation has laid bare the fragility of global supplies as countries drive to pivot from fossil fuels to cleaner sources of energy, a shift many investors and governments are trying to accelerate amid concerns about climate change. The transition figures to be challenging for years to come, energy executives and analysts say, due to a stark reality: While fossil fuel investment is falling, fossil fuels account for most energy—and green energy spending isn't growing fast enough to fill the gap." | | | | 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. | | | | | $2.7T IN CRISIS SAVINGS STAY HOARDED BY WARY CONSUMERS — Bloomberg's Catherine Bosley and Michael Sasso: "Consumers in Europe and the U.S. aren't rushing to spend more than $2.7 trillion in savings socked away during the pandemic, dashing hopes for a consumption-fueled boost to economic growth on both sides of the Atlantic. In the wake of lockdown easing during the Northern Hemisphere's summer holiday season, excess savings in euro-area bank balances declined only marginally in August, and Italy still recorded an increase, according to calculations by Bloomberg Economics. In the U.S. there has also been no drawdown, the figures show." FIRST LOOK: BANK GROUP HITS BACK ON IRS REPORTING PROPOSAL — ABA's John Kinsella in a new blog post: "Over the past several weeks, ABA and others who have advocated against this proposal have been criticized by various supporters for taking a stand against a proposal that our members, the small business community and millions of bank customers believe to be an unfair overreach that will have significant negative consequences. These statements include implications that we are advocating for 'tax cheats,' providing misinformation ourselves and exaggerating the difficulties banks will face in implementing this proposed regime. Nothing could be further from the truth. " … Media reports and draft summaries floating around Congress suggest the proposal may be changed, with a higher de minimis threshold and perhaps exclusions and carveouts to pare back the program's scale. In fact, one set of talking points from supporters suggest the original proposal … is itself a 'myth.' If there is a new proposal to consider, it should be shared publicly for all to see its real implications." FIRST LOOK II: CREDIT PORTFOLIO MANAGERS BULLISH ON GLOBAL MARKETS — While there is still some turbulence across global markets and economies, corporate portfolio managers aren't ready to give up just yet. According to a survey out today from the International Association of Credit Portfolio Managers — whose members manage the corporate loan portfolios at more than 100 global banks and insurance companies, including JPMorgan and Goldman Sachs — respondents are forecasting modest increases in corporate defaults over the next year, but add that credit conditions are still strongly favorable. Managers say they have slightly reduced the amount of risk in their portfolios, but still reported a positive outlook. However, they aren't without concerns: rising energy prices, supply chain issues and labor market challenges have all "raised questions about whether signs of higher inflation are temporary or longer term." | | | | A message from the American Bankers Association:   | | | | | | RISING MORTGAGE RATES SHIFT LENDERS' FOCUS TO BUYERS — WSJ's Ben Eisen: "Mortgage lenders are refocusing on home buyers to drum up business during a slowdown in refinancing. Purchase mortgages made up almost half of the loans that were packaged into government-backed securities and sold to investors in the third quarter, according to Inside Mortgage Finance, an industry research group. That is the highest share since before the pandemic depressed interest rates and set off a record flurry of refinancing." TREASURY: SUSPECTED RANSOMWARE PAYMENTS NEARLY DOUBLED THIS YEAR — WSJ's Ian Talley: "The volume of suspected ransomware payments flagged by U.S. banks has surged this year, on pace to nearly double last year's, the Treasury Department said Friday, highlighting the scale of a problem that governments across the world have described as a critical national security threat. Nearly $600 million in transactions were linked to possible ransomware payments in so-called Suspicious Activity Reports financial services firms filed to the U.S. government in the first six months of this year, according to a Treasury Department report. That is more than 40 percent more than the total for all of 2020." | | | | BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we've got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don't miss out on this influential global community. Subscribe now. | | | | | 'FINANCIAL JUSTICE RATINGS' FIGHT POLICE BRUTALITY WITH FINANCE — NYT's Stephen Gandel: "Napoleon Wallace, a bond analyst and municipal budget wonk, sees disaster in the finances of America's largest cities where others do not. When it comes to assessing the value of municipal bonds issued by many American cities, he says investors — and the public — are often looking at the wrong numbers, overlooking the true embedded costs of a social justice system that has become normalized. He believes paying more attention could be a path for change. To Mr. Wallace, factors that contribute to inequality, including police misconduct, add up to trouble for both residents and city finances." EMERGING-MARKET CURRENCIES HURT BY GROWTH WOES AFTER RATE HIKES — Bloomberg's Karl Lester M. Yap and Netty Idayu Ismail: "Central banks' longstanding strategy of hiking interest rates to defend currencies is failing to work its magic in emerging markets this time. A gauge of developing-nation currencies has sunk to the weakest level since March 2020 relative to average local-bond yields. That suggests investors are discounting the appeal of rising interest rates, fretting instead over the toxic combination of slower global growth and faster inflation." REGIONAL BANK LOAN GROWTH COULD HINT AT HEALTHIER SUPPLY CHAINS — Reuters' David Randall: "If regional banks show signs of accelerating loan growth when they report earnings in the week ahead, it could signal an easing of the supply chain bottlenecks that have weighed down the U.S. economic recovery from the pandemic, analysts and investors said."
| | A message from the American Bankers Association: A proposal in Congress would force financial institutions to provide details to the IRS on the inflows and outflows of any bank account worth $600 or more. While supporters say the proposal is aimed at reducing the tax gap by targeting wealthy tax cheats, this data dragnet would actually capture information from almost everyone with a bank account, not just those suspected of tax avoidance.
Everyone should pay their fair share of taxes, but this proposal goes too far and raises serious questions about Americans' right to privacy—while damaging the hard-earned trust between banks and their customers. Tell Congress to oppose this misguided proposal and demand that the IRS focus on tax cheats, not all taxpayers.
It's not too late to protect your financial data. Learn more about the issue and take action here. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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