| | | | |  | | By Kate Davidson and Aubree Eliza Weaver | Presented by U.S. Bank | 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. A NUTRITION LABEL FOR INVESTORS — The Securities and Exchange Commission is set to unveil new rules today to standardize ESG disclosures, an idea that Chair Gary Gensler has likened to a nutrition label for investing. The move is part of a broader initiative aimed at reining in greenwashing — the SEC announced its first settlement in an ESG case on Monday, leveling a $1.5 million fine against BNY Mellon Investment Adviser for making misleading statements about ESG funds. The case offers a real-world example of the kind of behavior Gensler hopes to crack down on with new rules. Enforcement actions are an easy way to show Congress the SEC is taking the issue seriously, and more penalties are likely as the agency continues scrutinizing asset managers' ESG pledges, said Jaret Seiberg, a policy analyst for Cowen Research Group, in a note to clients. The SEC and the Justice Department are also investigating Deutsche Bank AG's asset-management arm, the Wall Street Journal reported last year, after its former sustainability chief said the division exaggerated its sustainable investing efforts.
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SEC Chair Gary Gensler is taking aim at greenwashing with new rules that could standardize ESG disclosures. | Evelyn Hockstein/Pool via AP | So why the push for a formal rule? As our Lorraine Woellert points out, the SEC already has the Investment Advisers Act of 1940, which it cited in the settlement with BNY Mellon. Lorraine explains: "Gensler has power to go after fraudsters, but he also wants to make investing safer for people who don't get the inner workings of Wall Street. "Retail investors these days are flooded with ESG pitches. Dozens of apps promise to help you 'put your money where your heart is' or 'swipe with purpose.' It can be difficult to know what's what." AS Gensler said in March: "It's easy to tell if milk is fat-free. It might be time to make it easier to tell whether a fund is really what they say they are.'" What to expect? Michael McGrath, a Boston-based law partner at K&L Gates, tells Lorraine the agenda's nod to "standardized" rules suggests the SEC might be establishing labels or categories for funds that could make it easier for rank-and-file investors to know what they're investing in. "We will almost certainly see more and more mandated ESG disclosure, which is an opportunity for expanded enforcement," McGrath said. "I would not be surprised to see more greenwashing actions before these soon-to-be-proposed rules come into effect." Fun fact from Lorraine: An estimated 800 registered investment companies have a combined $3 trillion in assets that they claim meet some sort of ESG goal. CBO OUTLOOK DAY — It's been almost a year since the Congressional Budget Office released a new budget baseline and economic forecasts. We'll finally get an update to the 10-year outlook this afternoon at 2 p.m. What should you be looking for? The Committee for a Responsible Federal Budget expects the report to show deficits and debt as a share of GDP declining in the near term but remaining high and rising over time. "Any relief from rising deficits and debt is good news, and we welcome the reprieve but don't expect it to last long," Maya MacGuineas, the group's president, said in an email. Meanwhile, the Peterson Foundation flagged rising net interest costs as a worrisome indicator. The most recent CBO forecasts, issued in July 2021, projected net interest would total $5.4 trillion over the next decade and account for 12 percent of the entire federal budget by 2031. Wednesday's report will be the first to reflect the huge shift in monetary policy over the past six months, which has already led to rising debt costs as interest rates continue their climb. IT'S WEDNESDAY — Calling all devoted MM readers! We want to know what you're loving about MM and what you can do without. Please help us out by taking this short survey. And as always, hit us up directly with your feedback, requests, ideas and tips: kdavidson@politico.com or @katedavidson, and aweaver@politico.com or @aubreeeweaver.
| | A message from U.S. Bank: U.S. Bank has given students hundreds of thousands of dollars in scholarships. Minnesota high schooler Addison Gray received hers—to study nursing—as her father battled COVID-19. "Seeing the way those nurses cared for him, it definitely reinforced going to school to help more people," she said. Because at U.S. Bank, we're small enough to care, and big enough to make a difference. Learn more. | | | | | | House Financial Services hearing on reauthorizing the National Flood Insurance Program at 12 p.m. …CBO releases updated budget and economic projections at 2 p.m. … Federal Open Market Committee meeting minutes released at 2 p.m. … Agriculture undersecretary for rural development Xochitl Torres Small testifies before Senate Banking on the Rural Housing Service at 2:30 p.m. REQUIRED READING — Planning to dive into the Fed minutes this afternoon? Don't miss this Q&Awith Bloomberg's Craig Torres and former senior Fed economist Ellen Meade, one of MM's go-to sources for decoding central bank communications. FDIC: BANK PROFITS FALLING AMID PANDEMIC — Bank profits in the first quarter fell more than 22 percent from a year earlier, the FDIC said Tuesday, as lenders set aside reserves to protect against potential losses. More from our Katy O'Donnell: "FDIC Acting Chair Martin Gruenberg said the industry faces several challenges, including uncertainties related to the trajectory of the pandemic. … Nearly 63 percent of banks insured by the FDIC reported an annual decline in quarterly net income. Profits were down about 6.5 percent from the fourth quarter of last year." QUOTH FLAVOR FLAV — Our Sam Sutton writes: "Acting Comptroller of the Currency Michael Hsu is a self-proclaimed crypto skeptic, and the events of the last three weeks haven't changed his mind. The spectacular rise and fall of Terraform Labs, the company behind the TerraUSD stablecoin and an accompanying lending platform that promised customers 20 percent yields in exchange for deposits, is 'indicative of the crypto economy's dependency on hype,' Hsu said during a speech at the DC Blockchain Summit on Tuesday. 'The hyper-focus on trading in crypto has created a highly interconnected ecosystem—something that became more clear after the collapse of the Terra ecosystem contributed to a massive sell-off in cryptocurrencies generally.' "Just as notable, Hsu claimed that TerraUSD's collapse sparked a contagion that briefly knocked the most widely used stablecoin, Tether, off its peg to the U.S. dollar. While those events had little bearing on traditional markets, his perception of the contagion risk is important to consider as many in the digital asset industry push to incorporate stablecoins and other blockchain-based assets in traditional payment or banking systems. The implication is that banks' unchecked adoption of crypto would expose the financial system to similar risks in the event of another TerraUSD-like event. "The resilience of the traditional banking system to the recent events in crypto is not an accident," he said. "Rather, it is due, at least in part, to federal bank regulators' continued and intentional emphasis on safety and soundness and consumer protection.'" LARRY SUMMERS CALLS BIDEN'S EFFORTS TO LIMIT CORPORATE POWER 'POPULIST ANTITRUST' — NYT's Ephrat Livni and Stephen Gandel: "The country's top deal cops, the Federal Trade Commission head Lina Khan and the Justice Department's Jonathan Kanter, have been pushing for the government to have more authority to block corporate deals. But criticism is mounting that antitrust efforts have gone too far, the DealBook newsletter reports. This week, Lawrence H. Summers, a Harvard University professor and former top adviser in the Obama administration, tweeted that a new era of 'populist antitrust policy' could lead to an economy that was 'more inflationary and less resilient.'"
| | | | HAPPENING TODAY—A WOMEN RULE TALK ON THE MIDTERMS : Join POLITICO'S Women Rule for a conversation with the women running the midterm campaigns and how they are shaping messaging and strategy for their candidates. The program will look into what a win for either party could mean for access to reproductive health care, economic advancement of women, and how the final stages of the Covid-19 pandemic are managed. REGISTER HERE. | | | | | | | | TREASURY TO BLOCK U.S. INVESTORS FROM RECEIVING RUSSIAN DEBT PAYMENTS — WSJ's Alexander Saeedy and Andrew Duehren: "The Treasury Department moved to cut off Russia's ability to make payments on its dollar-denominated sovereign debt, putting Russia on a path toward defaulting on its foreign debts this summer and deepening the country's economic isolation after its invasion of Ukraine. " Meanwhile, U.S. Commerce Secretary Gina Raimondo said Tuesday in Davos that economic sanctions against Russia over its invasion of Ukraine must continue even after the war ends. POLL: ECONOMY A BIGGER PRIORITY THAN PUNISHING RUSSIA — AP's Nomaan Merchant and Hannah Fingerhut: "Americans are becoming less supportive of punishing Russia for launching its invasion of Ukraine if it comes at the expense of the U.S. economy, a sign of rising anxiety over inflation and other challenges, according to a new poll. "While broad support for U.S. sanctions has not faltered, the balance of opinion on prioritizing sanctions over the economy has shifted, according to the poll from The Associated Press-NORC Center for Public Affairs Research. Now 45 percent of U.S. adults say the nation's bigger priority should be sanctioning Russia as effectively as possible, while slightly more — 51 percent — say it should be limiting damage to the U.S. economy."
| | | | A message from U.S. Bank:   | | | | | | FED SEARCHES FOR MAGIC NUMBER TO COOL HOUSING MARKET — WSJ's Nick Timiraos and Nicole Friedman: "When the Federal Reserve set out to cool the economy and slow inflation in the past, it counted on the housing market to do much of the work. By raising interest rates, the central bank made mortgages more expensive and trimmed the number of buyers. "This time, America's red-hot housing market threatens to make the Fed's job tougher. With so many buyers competing for so few available properties, home prices in the U.S. rose 18.8 percent last year, according to a home-price index maintained by S&P Dow Jones Indices and CoreLogic that measures average home prices in major metropolitan areas." POWELL: 'SOFT' ECONOMIC LANDING MAY BE OUT OF FED'S CONTROL — AP's Christopher Rugaber: "Federal Reserve Chair Jerome Powell, fresh off winning Senate confirmation for a second term earlier in the day, acknowledged for the first time Thursday that high inflation and economic weakness overseas could thwart his efforts to avoid causing a recession." NEW YORK FED FLAGS SCENARIOS WHERE CENTRAL BANK COULD SEE LOSSES — WSJ's Michael S. Derby: "The Federal Reserve could reach a point where it no longer has profits to hand over to the U.S. Treasury, if the central bank were to raise interest rates beyond recent market expectations, the New York Fed said in a report. The Fed could see paper losses on its bondholdings — and likely did at the start of this year, the report said."
| | | | DON'T MISS DIGITAL FUTURE DAILY - OUR TECHNOLOGY NEWSLETTER, RE-IMAGINED: Technology is always evolving, and our new tech-obsessed newsletter is too! Digital Future Daily unlocks the most important stories determining the future of technology, from Washington to Silicon Valley and innovation power centers around the world. Readers get an in-depth look at how the next wave of tech will reshape civic and political life, including activism, fundraising, lobbying and legislating. Go inside the minds of the biggest tech players, policymakers and regulators to learn how their decisions affect our lives. Don't miss out, subscribe today. | | | | | | | | As popular anger about rising costs mounts, a chorus of critics have been arguing that the sky-high inflation figure is actually being undercounted. — NYT's Stuart A. Thompson and Jeanna Smialek Glencore will plead guilty to multiple counts of bribery and market manipulation and pay penalties of up to $1.5bn following US, UK and Brazilian investigations that uncovered corruption at one of the world's largest commodity traders. — FT's Harry Dempsey, Kate Beioley and Stefania Palma Several bills are working their way through statehouses across the country that seek to target Wall Street banks and other companies for enacting new restrictive gun policies in the wake of mass shootings in the US. — Bloomberg's Amanda Albright
| | A message from U.S. Bank: At U.S. Bank, home means everything. For over 30 years, we've helped Habitat for Humanity build and renovate thousands of homes. And we've worked to make housing affordable for everyone, including our veterans. Our investments have helped create 84,000 affordable housing units in communities across the country. And our renewable energy project developing solar on commercial rooftops is helping offset electric costs for low-income families. Because we're small enough to care, and big enough to make a difference. Learn more. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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