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| | | Crypto crash: This time, it's different — "A major downturn in Bitcoin and Ether prices and the flailing death spiral of a popular stablecoin have erased hundreds of billions of dollars from investor portfolios in less than a week," our Sam Sutton reports . Now industry bigwigs fret the meltdown will bolster the efforts of key crypto skeptics in Washington. "Crypto haters, anti-crypto regulatory enthusiasts will use this as a marching signal," said Anthony Scaramucci, a pro-crypto financier best known for his 10 days as former President Donald Trump's communications director in 2017. "Gary Gensler and Elizabeth Warren (D-Mass.) are going to use it as totems to block, curtail, slow down the industry — no question that they're going to do that." Lobbyists and prominent investors are warning that the episode will "serve as a wake-up call to Congress about the dangers of a largely unregulated digital asset ecosystem," Sam reports. "As small investors are wiped out, it could also force a harsh examination of venture capitalists and other financiers behind crypto projects that are now failing. "Much of the initial scrutiny will be directed at Terraform Labs, the company behind the collapsed algorithmic stablecoin TerraUSD. Terraform, led by CEO Do Kwon, had enticed consumers to purchase both its stablecoin and an accompanying crypto token. … One week ago, the combined market cap for the two tokens was north of $45 billion. As of Thursday morning, they were basically worthless." IT'S FRIDAY — the thirteenth. Kate Davidson is back on Monday — send tips to kdavidson@politico.com or @KateDavidson, or aweaver@politico.com or @aubreeeweaver. And you can always reach me at kodonnell@politico.com or @KatyODonnell_.
| | | | A message from ExxonMobil: At ExxonMobil, we're working to supply the energy the world needs today, while developing solutions for tomorrow. Heavy transportation needs big solutions. Innovations like renewable diesel made from plants could help reduce emissions from trucks by about 3 million metric tons per year, compared to conventional fuel. Learn more about how we're helping society move toward a net-zero future at ExxonMobil.com/fuels. | | | | | | CRYPTO MELTDOWN PROMPTS YELLEN TO CALL FOR NEW REGS — AP's Fatima Hussein: Treasury Secretary Janet Yellen "said Thursday that additional federal regulation was needed to respond to the wave of speculative investment in the currency whose secrecy is an essential part of its appeal. "'We really need a regulatory framework to guard against the risks,' Yellen said of cryptocurrencies called stable coins, during a House committee hearing Thursday. Citing the rapid rise in use of digital assets, she added, 'Really, we need a comprehensive framework so that there are no gaps in the regulation.' SENATE APPROVES POWELL IN 80-19 VOTE — "The Senate on Thursday overwhelmingly voted to give Federal Reserve Chair Jerome Powell a second term," our Victoria Guida reports, "keeping him atop the world's most important central bank as he wages a risky battle against the highest inflation in 40 years. Powell has already kicked off a campaign of interest rate increases designed to rein in spending and slow growth in the hopes of taming surging prices, a move that many fear will tip the economy into recession. But the central bank has faced heat for being slow to react even as inflation showed signs of broadening across the economy last fall." POWELL: TACKLING INFLATION WILL 'INCLUDE SOME PAIN' — "What we can control is demand, we can't really affect supply with our policies," Powell told Marketplace host Kai Ryssdal in an interview Thursday. "And supply is a big part of the story here. But more than that, there are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so. So the question, whether we can execute a soft landing or not, it may actually depend on factors that we don't control." Check out the full transcript here. FED'S DALY: STRONG ECONOMY CAN TOLERATE 50-BASIS-POINT HIKES — Bloomberg's Catarina Saraiva: "Federal Reserve Bank of San Francisco President Mary Daly backed raising interest rates by a half-percentage point at each of the central bank's next two meetings, adding that she'd like to see financial conditions tighten further. 'Going up in 50-basis-point increments to me makes quite a bit of sense and there's no reason right now that I see in the economy to pause on doing that in the next couple of meetings,' Daly said in an interview Thursday with Bloomberg News." AMERICANS HUNT FOR NEW BANKS AS INFLATION STRETCHES THEIR BUDGETS — Bloomberg's Paulina Cachero: "Roaring inflation is testing how loyal US consumers are to their banks. With soaring prices stretching household budgets, consumers are increasingly switching banks as they hunt for better interest rates to boost their savings. Roughly 27 percent of retail banking consumers shifted some of their money from their primary bank to another institution in April, citing various reasons for seeking other options, according to a survey from J.D. Power." INFLATION IS HEADED LOWER, BUT MAYBE NOT LOW ENOUGH — WSJ's Greg Ip: "The bad news is that in April, for the second month in a row, inflation clocked in above 8 percent. The good news is that sometime in the next 12 months, it will very likely fall to around half that. This isn't exactly a heroic forecast. Bottom-up analysis of the consumer-price index's components, inflation-linked bond yields, and wage behavior all point toward inflation settling at roughly 4 percent. "The more important question is what comes after that? The hope by many — including the Federal Reserve — is that it keeps heading down toward the Fed's 2 percent target by itself. But there are good reasons it will stay around 4 percent or even drift higher. That wouldn't be acceptable to the Fed, and opens the door to even higher interest rates than markets now expect, more market carnage and a weaker economy."
| | | | 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. | | | | | | | | CHINA'S ECONOMIC SLOWDOWN RIPPLES AROUND THE WORLD — WSJ's Jason Douglas and David Harrison: "For decades, the world has depended on China as a massive factory floor and market. As the country's economic growth crumbles, the pain is spreading globally.Lockdowns aimed at stamping out Covid-19 are throttling activity in the world's second-largest economy. Overseas demand for China's exports is fading as economies wrestle with surging prices and rising interest rates. "The effects of China's slowdown are showing up everywhere from German factories to Australian tourist spots. Exports are weakening in Asia as China's neighbors watch their largest market sag. Companies including Apple Inc. and General Electric Co. warned investors about production and delivery problems stemming from China's troubles, as well as dwindling sales." WALL STREET EDGES LOWER — NYT: "Stocks fell slightly on Thursday, with the S&P 500 heading for its sixth consecutive weekly decline and inching closer to bear market territory. Trading was turbulent, and after a sharp rally the S&P 500 ended just 0.1 percent lower, after a drop of 1.7 percent on Wednesday. The Nasdaq composite was also volatile, and little changed by the end of the day." TWITTER TO FREEZE HIRING AS IT CUTS COSTS — Bloomberg's Kurt Wagner and Sarah Frier: "Twitter Chief Executive Officer Parag Agrawal announced a hiring freeze and other cost-cutting efforts on Thursday, a reflection of the company's state of uncertainty while it awaits Elon Musk's $44 billion takeover. The social media company won't hire new employees and may rescind offers already out, according to an internal memo obtained by Bloomberg." CRYPTO COMES TO WASHINGTON. WILL THE MILLIONS BUY INFLUENCE? — AP's Brian Slodysko and Fatima Hussein: "Erin Houchin braced for the worst when a mysterious, well-financed group started buying television ads last month in her highly competitive southern Indiana congressional race. Houchin assumed she would face a negative blitz, like the one that crushed her in 2016 when she ran for the same seat. But, in fact, the opposite happened. "American Dream Federal Action, a super political action committee financed by a cryptocurrency CEO, saturated the district with ads promoting Houchin as a 'Trump Tough' conservative who would 'stop the socialists in Washington.' That push helped secure her victory last week in a Republican primary."
| | | |   | | | BIDEN'S RURAL CHALLENGE: TURNING FLOOD OF AID INTO RESULTS – Our Ximena Bustillo: "President Joe Biden and Democrats have pushed through billions of dollars in new funding for rural development to help small communities build everything from hospitals to broadband networks. Now they're running up against a federal bureaucracy that makes it almost impossible for local leaders in the smallest, poorest areas to figure out how to get the money. "Biden and Cabinet officials have been on a "rural infrastructure tour" this spring to encourage small communities to apply for the funds. Now the White House is asking the Agriculture Department to help ensure the poorest and most underserved areas get their share. But all that outreach obscures the reality that it will be months, or even years, before the vast majority of projects are completed.
| | | | 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. | | | | | NEWLY PUBLIC DATA SHOWS FEW BLACK ECONOMISTS AT FED — NYT's Jeanna Smialek: "Black researchers made up about 1.5 percent of the Federal Reserve system's 945-person staff of doctorate-level economists at the end of 2021, a number that highlights the central bank's ongoing struggle to improve racial and ethnic diversity in its ranks. Data that the Fed on Thursday published publicly for the first time showed that 72 percent of the system's Ph.D.-level economists are white, 17 percent are Asian, and 9.4 percent identify as Hispanic or Latino. A small share report identifying with two or more races." FINANCIAL GIANTS TIPTOE INTO TIKTOK — Reuters' Chris Taylor: "As TikTok accounts focused on money gain huge followings, stodgy financial firms are wedging themselves into youth-oriented social media platforms for a piece of the action. Independent "FinTok" influencers like Mark Tilbury (@marktilbury, 7 million followers), Humphrey Yang (@humphreytalks, 3.3 million), Tori Dunlap (@herfirst100k, 2.1 million) and Erika Kullberg (@erikakullberg, 8.4 million) have audiences that billion-dollar asset managers can only dream of. "For staid financial companies that means learning a new language from scratch: speaking in bite-sized clips with a high-quality visual style to share lessons in a lively and engaging way. That is quite a challenge with investing concepts that are not 'fun,' like retirement, diversification and compound interest."
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