| | | | |  | | By Katy O'Donnell | Presented by United We Succeed | 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.
| | | Biggest single driver of high prices. Rising oil prices, Russia's invasion of Ukraine, continuing supply-chain disruptions — there's a new crisis stoking inflation every time you turn around. But the biggest single driver of rising prices is skyrocketing home costs — a more intractable problem. Shelter accounts for a third of the Consumer Price Index measure, and increases in the shelter inflation gauge typically lag home price rises by about 16 months, according to a Council of Economic Advisers analysis . So if that trend continues, it means the 18.8 percent annual increase in home prices recorded by the Case-Shiller Index in December won't show up in the CPI until April 2023. Thus, inflation headlines will probably get worse before they get better. As HUD Secretary Marcia Fudge put it at an event this month: "if we do not deal with housing, we will never deal with inflation." But Washington's hands are largely tied . The country is in the midst of a historic supply shortage after years of depressed construction in the wake of the 2008 housing meltdown. But efforts to boost the stock (especially in the job-rich places where people want to live) run into local regulatory hurdles — restrictive zoning rules and land-use policies, costly permitting processes — that make it harder to build and drive up the cost of homes that do get built. The typical home is now worth 32 percent more than in 2020 and 20 percent more than last year, according to a new report from Zillow. More eye-popping stats from the report: The inventory of homes for sale is less than half what it was pre-pandemic, and the average rent is up $283 a month – or about $3,400 a year. Little relief on the horizon: Housing starts are up, although construction logjams continue – that's the main takeaway from the new residential construction report the Census released yesterday. New-home construction rose in February to the highest level since 2006, a bright spot as builders race to meet demand. Demand could also moderate somewhat as mortgage rates rise; The average rate on a 30-year fixed-rate mortgage this week topped 4 percent for the first time since May 2019, Freddie Mac said Thursday. But that won't be enough to alter the trajectory of soaring prices this year, according to economists. Read more from your MM host here. IT'S FRIDAY — Go Heels — that was a close one. Kate Davidson will be back in your inbox on Monday! Send any tips to her at kdavidson@politico.com or @KateDavidson, and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver. And you can reach me at kodonnell@politico.com.
| | | | A message from United We Succeed: Proposed new regulations on credit cards would cause millions of low-income and minority Americans to lose access to credit. Research shows that similar regulations on debit cards cost low-income consumers about $160 per year. Furthermore, all credit card users, including individuals and small businesses, would see their points and perks slashed if these regulations pass. Congress should leave credit cards alone! Learn more. | | | | | | ICYMI: RETHINKING HOW TO ASSESS BANK MERGERS — Former Fed Governor Dan Tarullo, in a new piece published by the Brookings Institution this week, says that "realizing public benefits from a retooled approach to bank mergers requires more than just an instinct to get tougher (though more rigor is certainly warranted). What's needed first is an analysis by the involved agencies of the dynamics of the financial services industry that will enable them to assess specific bank merger applications with more of an eye to where the industry is heading, and not just where it has been." THE END OF GLOBALIZATION? — Peterson Institute President Adam Posen writes in Foreign Affairs about two trends corroding globalization over the past 20 years: "First, populists and nationalists have erected barriers to free trade, investment, immigration, and the spread of ideas—especially in the United States. Second, Beijing's challenge to the rules-based international economic system and to longstanding security arrangements in Asia has encouraged the West to erect barriers to Chinese economic integration. The Russian invasion and resulting sanctions will now make this corrosion even worse." NEW FUND WILL TARGET MOST VOLATILE BIG COMPANIES — Bloomberg's Emily Graffeo: "For any investors looking for maximum drama in the U.S. stock market, a new exchange-traded fund is looking to target only the biggest and most-volatile companies. Volatility Shares filed an application for an ETF late Wednesday that would track the S&P 500 Volatility – Highest Quintile Index, a gauge of the 100 most-volatile stocks in the U.S. equity benchmark. The index is down 1.5 percent year to date, outperforming the S&P 500's 8.1 percent decline."
| | | | JOIN THURSDAY FOR A CONVERSATION ON CRYPTOCURRENCY AND REGULATION: Cryptocurrency has gone mainstream. With the market now valued at $1.8 trillion, Washington's oversight of the fast-growing industry remains in its infancy. How should Congress and federal agencies shape future regulation of digital asset markets? Join POLITICO in person or virtually for a deep-dive discussion on what's next for crypto, regulation and the future of finance. Programming will run from 5 p.m. to 6 p.m. EDT with a reception from 6 p.m. to 7 p.m. EDT. REGISTER HERE. | | | | | BUSINESS GROUPS RUSH TO SAVE TAX BREAKS IN GLOBAL DEAL — From our Aaron Lorenzo: "Business groups are dialing up the pressure on the Biden administration to ensure that a new global tax deal doesn't undercut their member companies' cherished tax breaks. 'We strongly urge the Treasury Department to negotiate modifications to the OECD Model Rules that will preserve the full value of these important, bipartisan and long-standing tax incentives,' a group of trade associations representing major U.S. companies plans to urge Treasury Secretary Janet Yellen, according to a draft letter obtained by POLITICO." HOUSE APPROVES BILL SUSPENDING TRADE WITH RUSSIA — From our Gavin Bade: "The House of Representatives voted on Thursday to revoke normal trade relations with Russia and its ally Belarus until 2024, but Senate action could be delayed by a lingering issue over banning Russian oil imports….The legislation also directs the U.S. Trade Representative to pressure other nations to revoke trade privileges for Russia and Belarus push to suspend Russia's participation at the World Trade Organization and block Belarus, which has supported Russia's invasion of Ukraine, from becoming a full member of the global trade body." U.S. ANTITRUST ENFORCERS WON'T CHALLENGE AMAZON'S MGM DEAL — From our Leah Nylen: "The Federal Trade Commission will not challenge Amazon's acquisition of MGM Studios after the agency's commissioners split on bringing a suit, three people familiar with the situation said. The decision not to sue — without even a vote on the issue — is a major setback for the antitrust agenda of FTC Chair Lina Khan, an Amazon critic who had been urged by fellow anti-monopolists to block the online giant from buying the storied film and television studio."
| | | | A message from United We Succeed:   | | | | | | Some crypto updates from our Sam Sutton: AIRDROP — Thursday's Senate Budget Committee hearing on the use of digital assets for illicit activities was overshadowed by Sen. Elizabeth Warren's introduction of a bill designed to enhance the federal government's ability to target crypto exchanges and digital wallets. The bill, which the Massachusetts Democrat has been teasing for the last week, includes language that would give Treasury more power to block U.S. crypto exchanges and service providers from transacting with Russian addresses — potentially shutting down digital asset markets to the Russians. It also authorizes the president to impose secondary sanctions on crypto companies that are found to have assisted those under sanction. U.S. taxpayers would have to report any offshore crypto transactions over $10,000. While Warren's positions on crypto are at odds with some younger members of her party, support for her latest effort runs the ideological gamut within the caucus. Its other three sponsors are Democratic Sens. Mark Warner of Virginia, Jack Reed of Rhode Island and Jon Tester of Montana. Co-sponsors include Sens. Tammy Duckworth(D-Ill.), Debbie Stabenow (D-Mich.), Raphael Warnock(D-Ga.), Chris Van Hollen (D-Md.), Tina Smith (D-Minn.), Catherine Cortez Masto (D-Nev.) and Bob Menendez (D-N.J.). No Republicans have signed on to the bill. Suffice it to say, the early reviews from the crypto lobby aren't exactly glowing. Coin Center's Jerry Brito and Peter Van Valkenburgh published a blog shortly afterward calling the legislation "dangerously overreaching and opportunistic" and said it might "increase the Russian government's ability to isolate and control those within their borders who do not support the war." This point was echoed during Thursday's hearing when Blockchain Association of Ukraine President Michael Chobanian argued that a full-fledged blockade of Russian digital wallets could disrupt opposition efforts within the country. (Notably, the Ukrainian exchange founded by Chobanian shut down Russian ruble-denominated trading in the early days of the conflict).
| | | | 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. | | | | | UP THE HUDSON — The Blockchain Association on Thursday announced it has tapped former Internet Association government affairs pro John Olsen to lead its lobbying efforts in Albany, N.Y. While New York has developed one of the more sophisticated state-level regulatory regimes for crypto, industry leaders have criticized its BitLicense program for being cumbersome and slow. With New York City Mayor Eric Adams emerging as a vocal cheerleader for digital assets, Bloomberg reports that crypto companies have been staffing up their government affairs efforts in the hopes of shaping reforms. "The New York State regulatory framework will have an immense impact on the future of our ecosystem, and with our Albany-based office, we will be able to build relationships and begin working on the ground with state policymakers to guide regulation that encourages unprecedented growth for the crypto industry," Blockchain Association Executive Director Kristin Smith said in a statement. NO EVIDENCE OF MAJOR RUSSIA SANCTIONS DODGING , CRYPTO EXPERTS SAY — Bloomberg's Matt Robinson: "Crypto doesn't appear to be a successful tool for avoiding the sanctions that the U.S. and its European allies levied against Russian organizations and individuals including President Vladimir Putin following the country's invasion of Ukraine, a panel of cryptocurrency experts told lawmakers. 'We have not seen evidence of Russia or Putin systematically using cryptocurrencies to evade sanctions,' Jonathan Levin, co-founder of Chainalysis Inc., a blockchain-analytics firm that sells anti-money laundering services to the government, told the Senate Banking Committee on Thursday." FED RATE HIKES DOUBLE CIRCLE'S VALUATION — WSJ's Peter Rudegeair: "The Federal Reserve's decision to start raising rates has a surprising beneficiary: a cryptocurrency startup. The new rate outlook helped crypto firm Circle Internet Financial Ltd. boost the valuation of its pending merger with a special-purpose acquisition company to $9 billion. Circle issues a so-called stablecoin, called USD Coin or USDC, that is a popular vehicle to buy crypto because it is pegged to the U.S. dollar."
| | | | A message from United We Succeed: Big retailers are pressuring Congress to regulate credit cards in a way that would unfairly punish consumers and put their private financial information at risk. These proposed changes would be especially tough on Americans in low income and minority communities. When Congress voted to impose similar regulations on debit cards, consumers were promised lower prices. It didn't happen. Instead of any consumer benefits, many low income and minority Americans lost access to the banking system. If these regulations were expanded, millions could lose access to credit. Community banks and credit unions rely on revenue from card programs to serve low income and rural communities. These proposed regulations put those programs at risk. They would also threaten the security of credit cards by introducing alternative networks to process transactions - all without the consumers' knowledge. Congress must not make the same mistakes with credit cards! Learn more. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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