| | | | |  | | By Sam Sutton | Presented by Sallie Mae® | 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. Wall Street shrugged at House Speaker Kevin McCarthy’s debt ceiling speech at the New York Stock Exchange, but those shoulders are about to get more tense. “They view [a potential default] as infinitely far off, in political time,” American Action Forum President Douglas Holtz-Eakin, a former CBO director and chief economist of the Council of Economic Advisers during the George W. Bush administration, told MM on Tuesday. “Congress always gets around to these things at the last minute, so there's no point in getting all wound up about it,” he added. That could change quickly. Goldman Sachs on Tuesday warned that a potential collapse in capital gains tax receipts could accelerate the so-called X-date — when the U.S. will not be able to meet its financial obligations — to as soon as mid-June, nearly two months ahead of earlier projections, our Brian Faler reports. The fact that big banks and other financial institutions have largely remained on the sidelines as Washington hurdles toward a potential default “is really not about genuine disinterest — nor do I think it's an expression of confidence in the current crew negotiating this — I think it's not yet time to really put pressure on,” Holtz-Eakin said. If tax receipts do come in weaker than expected after yesterday’s filing deadline, Wall Street will “start to engage.” “I hope that they're starting to get concerned,” he added. Whatever concerns financial leaders have about a default — and they’ve issued plenty of warnings about the calamity that would ensue should that occur — played a backseat to recent turmoil in the regional banking sector during earnings calls. Goldman CEO David Solomon identified uncertainty over the debt limit as a potential source of volatility during the bank’s first-quarter earnings call Tuesday morning. An hour earlier, responding to a question from POLITICO, Bank of America CFO Alastair Borthwick told reporters that he didn’t have much to say on the status of (nonexistent) negotiations between the White House and McCarthy. “Obviously, we're all hoping that gets resolved successfully,” he added. IT’S WEDNESDAY — Aren’t we all? Send tips, gossip and suggestions to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com.
| | A message from Sallie Mae®: The current federal student loan system too often fails the very people it was designed to help—those who truly need the most financial support. Students, families and taxpayers deserve a better, more transparent system that works as it was originally intended and protects against overborrowing. Learn more about solutions to reform the federal student loan program. | | | | | WEDNESDAY … SIFMA is hosting a webinar on market structure reforms with SEC Chief Economist Jessica Wachter at 10 a.m… President Joe Biden will give a speech about middle class workers at 2 p.m. … Financial Services has a subcommittee hearing on capital markets at 2 p.m. … The Fed beige book will be released at 2 p.m. … New York Fed President John Williams speaks at 7 p.m. More on the debt ceiling — Biden’s speech at a union training facility in Maryland this afternoon will focus on how the spending cuts championed by McCarthy and other Republicans will pose a threat to veteran’ health care, child care, and opioids treatment, a White House official told MM. — Our Sarah Ferris, Olivia Beavers and Jordain Carney: “During House Republicans’ first private meeting in weeks, McCarthy and his leadership team laid out the basics of an opening strategy to relieve the nation’s looming debt crisis — a proposal the speaker previewed at a high-profile Monday speech on Wall Street. But while GOP leaders still hope to turn that plan into a formal bill within days, a handful of disgruntled members made clear inside the morning meeting that achieving unity would take more time.” Stablecoin hearing — Your MM host wasn’t the only one surprised by House Financial Services Chair Patrick McHenry’s (R-N.C.) decision to post a seven-month-old stablecoin discussion draft over the weekend. A source close to the committee’s ranking Democrat Rep. Maxine Waters (D-Calif.) — who was granted anonymity to discuss pending legislation — said there’s been no bipartisan work on that bill since it was shot down by rank-and-file lawmakers last fall. That bill needs significant revisions following the collapse of FTX and other crypto trading platforms, they said. Americans for Financial Reform and more than a dozen other progressive groups dinged the bill for being “overly permissive” and urged the committee to withdraw it from consideration, according to a letter provided to MM. Financial Services’s digital assets subcommittee will hold a hearing on stablecoin legislation at 10 a.m. The panel includes New York Department of Financial Services Superintendent Adrienne Harris, Dante Disparte of Circle, former Paxos executive Austin Campbell, Jake Chervinsky of the Blockchain Association and Delicia Reynolds Hand, director of financial fairness at Consumer Reports. A VERY LONG DAY — From Sam and Declan: “Republicans ripped into SEC Chair Gary Gensler at his first House oversight hearing in 18 months, claiming his crackdown on cryptocurrency has failed to bring stability to digital asset markets. ‘Your approach is driving innovation overseas and endangering American competitiveness,’ Financial Services Chair Patrick McHenry (R-N.C.) told Gensler Tuesday after calling the SEC’s approach to policing the market ‘nonsensical.’” — On a related front, Coindesk’s Jamie Crawley reports that Coinbase CEO Brian Armstrong indicated that the crypto exchange – which the SEC’s been circling for months – might move “away from the U.S. if the regulatory environment for the industry does not become clearer.” First in MM: Van Duyne presses Guzman on PPP fraud — Rep. Beth Van Duyne (R-Texas), who chairs the oversight subcommittee on House Small Business, is asking SBA Administrator Isabella Casillas Guzman to document the steps her agency has taken to claw back fraudulently claimed Paycheck Protection Program and the Economic Injury Disaster Loan funds, according to a letter provided exclusively to POLITICO. Van Duyne will lead a hearing on Covid-19 related fraud at 10 a.m. featuring testimony from SBA Inspector General Hannibal “Mike” Ware.
| | | | A message from Sallie Mae®:   | | | | | Tim Scott’s Wall Street haul — Sen. Tim Scott locked down a top private equity executive’s support during the first quarter as he explores a bid for the Republican nomination in 2024. New Mountain Capital founder Steven Klinsky gave the max to the South Carolina Republican’s Senate campaign fund in March – money that can be easily transferred to a presidential race should Scott announce. Klinsky, a pioneer of the leveraged buyout sector whose firm now controls $36 billion of assets, is a longtime Republican donor who gave $200,000 to the pro-Trump Super PAC America First Action in 2020. He’s also been an active member of the American Investment Council, a powerful Washington-based private equity industry group that’s helped beat efforts to raise taxes and impose new regulations on buyout funds. Other big Wall Street names on Scott’s first-quarter filing include Ken Mehlman of KKR, Pam Hendrickson of The Riverside Company — the AIC’s current board chair — and Blue Owl Capital co-founder Marc Lipschultz. Speaking of Scott, Brown wants his help on banking legislation — Senate Banking Chair Sherrod Brown (D-Ohio) told our Eleanor Mueller on Tuesday that he's "talking to Sen. Scott on a number of these things" like bank deposit insurance and stronger penalties for bank executives. "We hope there's some consensus on all of them," Brown said in an interview. The effort is one reason Brown has yet to unveil his CEO clawback legislation, he said: "If he's willing to go along, we can move it more quickly." Inglourious bankers — Senate Budget leaders say Credit Suisse stonewalled attempts to investigate the Swiss financial institution’s business with Nazis. Some accounts linked to the fascist political party were still active in 2020. The bank adopted an “unnecessarily rigid and narrow scope, and refused to follow new leads uncovered during the course of the review,” Ranking Republican Chuck Grassley (R-Iowa) said in a statement. EPSTEIN — Reuters Jonathan Stempel: “A federal judge on Tuesday ordered JPMorgan Chase & Co (JPM.N) CEO Jamie Dimon to set aside two days for depositions about what he knew about the bank's relationship with sex offender and former client Jeffrey Epstein.” TROUBLE FOR THE REGIONALS — Bloomberg’s Redd Brown: “US regional banks reporting first-quarter earnings over the coming weeks will barely grow their customer deposits amid turmoil that engulfed the sector.” — Unrealized losses are shrinking: Bank of America “is still deeply underwater on its bonds that it is holding to maturity, but unrealized losses shrunk by $9.5 billion from three months ago and $17.1 billion from six months ago, when rates were peaking,” according to The WSJ’s Ben Eisen. — Goldman pares back: The bank announced it “had sold part of the portfolio of Marcus personal loans and put the rest up for sale, even though it had to take a revenue hit to do so,” writes The WSJ’s AnnaMaria Andriotis.
| | | | GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat. | | | | | | | | | Even more on the debt ceiling — From Declan: SEC Chair Gary Gensler warned lawmakers on Tuesday that financial markets — and especially, the government debt market — could “be in one heck of a mess” if a deal is not struck before the so-called X-date. “If we were to go over that default cliff, it would be, of course, unprecedented,” Gensler said. “But it’d be one heck of a mess in the capital markets. It would hurt the equity markets, it would hurt the rest of the fixed-income markets and it would ripple into the banking system as well — not to mention all the money-market funds.” TAXMAN — Our Benjamin Guggenheim: “Republican designs to cut IRS funding would only add to the government's red ink, a top Treasury Department official said Monday.”
| | | | 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. | | | | | | | | Jeff Dinwoodie has joined Cravath, Swaine & Moore as a partner in the firm's Washington, DC office. The former chief counsel to SEC Chair Jay Clayton and Treasury official was most recently a lawyer at JPMorgan. Beau Rothschild is joining Chamber Hill Strategies as a principal. He was most recently with Populus Financial Group and is a House GOP alum. – Daniel Lippman
| | A message from Sallie Mae®: Students and families are borrowing more, and often too much, to pay for higher education. Of the $1.7 trillion outstanding student loan debt in 2022, $1.59 trillion—about 93%—is made and held by the federal government. Complicated applications, confusing financial aid offers and federal loan programs with virtually unlimited access to funds are contributing to this cycle of growing federal student loan debt. As a responsible private lender and education solutions provider, see how Sallie Mae is promoting meaningful reform in higher education financing. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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