| | | | |  | | By Sam Sutton | Presented by HANDS OFF MY REWARDS | 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. The clock is winding down toward a potential work stoppage that could throw freight trains, commuter rail lines and the U.S. economy to a screeching halt. As of Wednesday night, freight carriers and 13 unions representing railroad workers had yet to agree to terms that would keep critical infrastructure to domestic supply chains intact. If they don't hammer out a compromise by 12:01 a.m. Friday, a potential strike or lockout would throw kerosene on inflation and potentially send the U.S. into a recession. The White House says it's pulling out all the stops to avoid that outcome, calling Labor Secretary Marty Walsh away from a planned trip to Ireland for an all-day meeting with union leaders and freight representatives in the hopes of reaching a compromise. While some of the unions have reached tentative agreements with carriers — which largely follow recommendations put forward by a Biden-appointed emergency board — others say those recommendations do little to address outstanding concerns affecting on-call policies, paid leave and more. Failure will have severe consequences, write POLITICO's Ben White and Eleanor Mueller. Take it away, Ben and Eleanor: "If Biden succeeds, he'll be able to claim a much-needed win for U.S. consumers. If he fails, Americans will be facing shuttered railroads unable to deliver food to grocery stores, feed to animals, chlorine for drinking water or coal for power plants immediately before the high-volume harvest and holiday seasons … "In a sign of how dire the situation is, the private sector has significantly amped up efforts to convince lawmakers to step in. Congress has the ability to intervene in the event a service disruption appears imminent, and has done so in the past. "A nationwide rail shutdown that could cost the U.S. economy billions of dollars a day and adversely affect millions of Americans,' Business Roundtable CEO Joshua Bolten said. 'Bringing national rail operations to a halt would lead to widespread plant shutdowns, supply chain challenges, retail product shortages and lost jobs and productivity — a crisis that would exacerbate the economic downturn.'" Wednesday's developments were hardly encouraging. The members of a key district of the International Association of Machinists on Wednesday rejected the terms of a proposed settlement and authorized a strike. Even though other union leaders have OK'd the emergency board's recommendations, they'll be "unlikely to cross picket lines for other unions that may take a different path — upping the pressure on politicians to solve this problem before a federally mandated cooling-off period ends at 12:01 a.m. ET Friday," write POLITICO's Eleanor Mueller, Tanya Snyder and Nick Niedzwiadek. Meanwhile, commuter rails from California to Virginia have already prepared to curtail service in preparation of a strike. Amtrak on Wednesday announced it would preemptively shut down its long-distance lines starting today. (Northeast Regional and Acela trains — whose riders are this newsletter's core audience — run on dedicated Amtrak lines and will be largely spared). The White House told reporters that negotiations remained ongoing on Wednesday night. While Congress has the power to impose a settlement, the White House as of Wednesday was urging Democratic leaders to stay out of the fray and allow the negotiations to proceed without interference. Democratic leaders aren't protesting. "We'd rather see negotiations prevail so there's no need for any actions from Congress," House Speaker Nancy Pelosi said. IT'S THURSDAY — And it's a packed day for financial services policy in Washington. Please send tips, story ideas and feedback to ssutton@politico.com.
| | | | A message from HANDS OFF MY REWARDS: Despite record profits, mega-retailers and merchant groups are trying to trick Congress into passing harmful credit card routing mandates that will end popular rewards programs like cash back and travel points. Learn more at HandsOffMyRewards.com | | | | | | Jobless claims data will be released at 8:30 a.m. … Philadelphia Fed and Empire State manufacturing data out at 8:30 a.m. … The Senate Banking Committee has an SEC oversight hearing at 10 a.m. … The Senate Agriculture Committee will hold a hearing on its crypto bill at 10 a.m. … The House Agriculture Committee will hold a hearing on the farm bill at 10 a.m. GENSLER GOES TO THE HILL — SEC Chair Gary Gensler heads to Capitol Hill this morning for an annual checkup with the Senate Banking Committee that could be a preview of what's to come should Republicans flip the Senate in November. Republicans will grill Gensler for the SEC's sprawling and ambitious agenda on everything from the Treasury market and ESG investing to private market funds. This time, the lawmakers will take aim at the SEC chair for failing to appease the growing calls for "regulatory clarity" around the $1 trillion cryptocurrency market while pursuing reforms like the climate disclosure proposal, a Republican aide to the committee said. GOP senators claim that the SEC lacks the regulatory authority to justify its climate disclosure proposal. The veteran financial regulator is not expected to bite, though. Prepared testimony indicates that Gensler plans to defend the "gold standard of capital markets" that are the securities laws — a message he has been delivering with growing frequency in the face of a mounting backlash against the SEC's approach to crypto and climate disclosure. It's also one that Gensler plans to use Thursday to argue that the SEC needs more resources, writing in the testimony that the SEC had a smaller staff in 2021 than in 2016 despite the increase in activity the regulator oversees. "Markets don't stand still. The world isn't standing still. Our resources can't stand still," Gensler is set to say. — POLITICO's Declan Harty CRYPTO LEGISLATION GETS ITS DAY — While Gensler squares off with Senate Banking, CFTC Chair Rostin Behnam will go before the Senate Agriculture Committee to testify on bipartisan legislation that would give his agency sweeping authority to set new rules for crypto exchanges where Bitcoin and other digital commodities are traded. The bill — which Morning Money has covered extensively over the last few months — tasks the CFTC with oversight of retail-facing trading platforms and brokerages that face growing scrutiny following this summer's market collapse. Behnam — a former adviser to the bill's Democratic sponsor, Committee Chair Debbie Stabenow (D-Mich.) — has been pushing Congress for more authority and funding to police digital markets. While they'll likely have feedback on the finer points of Stabenow and Sen.John Boozman's (R-Ark.) crypto bill, digital asset businesses have also lobbied for the CFTC to take lead on oversight as well. SPEAKING OF CRYPTO, HERE COMES "THE MERGE" — From Bjarke Smith-Meyer and me: " Cryptocurrencies are facing scrutiny from lawmakers on both sides of the Atlantic. But a switch by one of the largest crypto networks, Ethereum, to more eco-friendly processing techniques is being welcomed by lawmakers … After years of planning, Ethereum's operators Thursday are switching over to a new system that uses a tiny fraction of the energy consumed by the old one, without taking the network offline. That switch — or 'merge,' as it's being called by enthusiasts — has been widely anticipated by lawmakers in Europe and the United States, who are concerned about cryptocurrencies' massive carbon footprint and energy demands at a time of skyrocketing energy prices." — WSJ's Vicky Ge Huangand Caitlin Ostroff: "Many investors see the Ethereum network's 'Merge' as a make-or-break moment for the crypto market. The upgrade is intended to create a more efficient and less energy-intensive blockchain. A high-profile failure could send ether plunging and pummel investor confidence." AFGHANISTAN — The Treasury and State Departments, along with international partners, on Wednesday announced the establishment of a fund to manage and disburse $3.5 billion of Afghanistan's central bank reserves for the benefit of the people of Afghanistan. The "Afghan Fund," which will maintain an account through the Bank for International Settlements, has been set up with safeguards to preclude interference from the Taliban. The structure of the Afghan Fund is drawing fire from Sen. Pat Toomey (R-Pa.), the top Republican on the Senate Banking Committee: "While the administration maintains there will be safeguards put in place to prevent the funds from being used for terrorist financing, in reality, the future of these funds rests in the hands of four individuals—only one of whom is a U.S. government official. Given that the Taliban was just caught harboring the leader of al-Qaeda, the last thing the Biden administration should be doing is opening the door to billions of dollars potentially flowing to a terrorist organization," Toomey said in a statement.
| | | | A message from HANDS OFF MY REWARDS:   | | | | | | CLASH OF THE TITANS — "More than 1,600 merchants including Walmart Inc. and Target Corp. are urging U.S. lawmakers to pass legislation that aims to break the hold that Visa Inc. and Mastercard Inc. MA have over the credit-card market. The bill, which Sen. Richard Durbin (D., Ill.) and Sen. Roger Marshall (R., Kan.) introduced in July, would give merchants the right to route many credit-card payments over networks other than Visa and Mastercard." MARKET POWER — POLITICO's Jeremy White: "California is challenging Amazon in a case that could reshape the e-commerce giant's business model by forcing it to lift restrictions on third-party vendors. State Attorney General Rob Bonta announced on Wednesday that his office was suing Amazon for requiring merchants to enter agreements that penalize them if they offer their products elsewhere for lower prices." GETTING CHOPPY — POLITICO's Victoria Guida: "Pessimism among U.S. executives is building, with a new survey of CEOs showing businesses expect to hire less, invest less and sell less over the next six months . Companies still aren't expecting a recession this year, according to the survey from the Business Roundtable." LOPSIDED REGIONAL RECOVERY — NYT's Nicole Hong and Matthew Haag: "While the country as a whole has recently regained all of the jobs it lost early in the health crisis, New York City is still missing 176,000, representing the slowest recover of any major metropolitan area."
| | | | Join POLITICO Live on Tuesday, Sept. 20 to dive into how federal regulators, members of Congress, and the White House are seeking to write the rules on digital currencies, including stablecoins. The panel will also cover the tax implications of crypto, which could be an impediment to broader adoption and the geopolitical factors that the U.S. is considering as it begins to draw regulatory frameworks for crypto. REGISTER HERE. | | | | | | | | TRE-CENTRALIZATION — Our Declan Harty: "Wall Street's top regulator wants to expand central clearing in the world's largest — and recently rattled — government debt market. The SEC on Wednesday voted to propose new rules aimed at improving trading conditions and risk management within the $24 trillion U.S. Treasury market by focusing on the clearinghouses that sit between buyers and sellers to ensure that trades are completed and to head off default concerns." CITI ON FIRE — WSJ's David Benoit: "Regulators are frustrated with the progress Citigroup Inc. has made in the two years since they reprimanded the bank for problems with the systems it has in place to prevent costly mistakes, according to people familiar with the matter."
| | | | DON'T MISS - MILKEN INSTITUTE ASIA SUMMIT : Go inside the 9th annual Milken Institute Asia Summit, taking place from September 28-30, with a special edition of POLITICO's Global Insider newsletter, featuring exclusive coverage and insights from this important gathering. Stay up to speed with daily updates from the summit, which brings together more than 1,200 of the world's most influential leaders from business, government, finance, technology, and academia. Don't miss out, subscribe today. | | | | | | | | Mark Adler is stepping in as acting director of the Public Company Accounting Oversight Board's Division of Enforcement and Investigations after Director Patrick Bryan departs on Sept. 15. Adler previously spent almost a decade at PCAOB before retiring in March 2020.
| | | CONFLICTS OF INTEREST — Bloomberg's Annie Massa, Anna Irrera and Hannah Miller on the close ties between Sam Bankman-Fried's FTX and a Bankman-Fried-owned quant trading firm that's one of the exchange's biggest customers: "At a minimum, some say Alameda is able to benefit from a dearth of regulation, a claim that carries even more weight as Bankman-Fried strives to use his position and influence in the crypto community to shape US oversight of the sector … Amplifying these concerns, the collapse in crypto has revealed a tangle of interconnections between Alameda, FTX and the broader virtual-currency markets — and a larger role behind the scenes for both firms than many had previously known." TERRA FALLS TO EARTH — Bloomberg Law's Hooyeon Kim: "A court in South Korea issued an arrest warrant for Do Kwon, the founder of the Terraform Labs cryptocurrency ecosystem, whose implosion earlier this year sparked a global crypto rout."
| | | | A message from HANDS OFF MY REWARDS: Merchant coalitions representing big-box and grocery retailers are lobbying Congress to enact harmful new credit card routing mandates. Their legislation, inaccurately titled, the Credit Card Competition Act, would allow big-box retailers–like Wal-Mart and Kroger–to rework the entire U.S. payments system solely on what is cheapest for them without regard to the value that consumers and small businesses derive from rewards programs and many other benefits. This bill would end popular credit card rewards programs like cash back and miles while adding billions of dollars to the bottom lines of mega-retailers. Learn more at HandsOffMyRewards.com | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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