| | | | |  | | By Zachary Warmbrodt | | | 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.
| | How to finance Ukraine’s reconstruction is in focus as the world marks two years since Russia’s invasion. In addition to finding hundreds of billions of dollars to pay for it, another critical piece of the puzzle will have to be solved: Luring back insurers in the middle of a hot war. MM recently sat down with Crispin Ellison, partner at the consultancy Oliver Wyman, to talk about the lead role his firm and parent company Marsh McLennan are playing to help draw insurance capital back to Ukraine. Ellison said there’s very little of it available after the industry lost about $8 billion on the invasion. Marsh is working with Ukraine's government on a pro-bono basis. “At the moment, you want high-risk investors to come to Ukraine and invest in low-risk projects,” Ellison said. “High-risk insurers insure them. And then as they get more confident the high-risk investor will invest in slightly higher-risk projects. And you’ll start to bring in other investors and other insurers as you build confidence.” Two big takeaways stood out in our discussion: Data and public financial support will be key to insuring Ukraine’s infrastructure and investment. The latter demand – funding a government buffer to shore up insurers – may hinge on the extent to which the U.S. and its allies tap into $285 billion of frozen Russian central bank assets. Treasury Secretary Janet Yellen said Tuesday that finding a way to unlock the funds is “necessary and urgent.” Marsh helped launch a war-risk data platform in November that gives insurers, investors and governments an unclassified window into the scope of the conflict. The database has revealed that 66 percent of the 1,470 local governments in Ukraine have not had a single explosive incident since the invasion two years ago, according to Ellison. Strikes are divulged according to the month they occurred, and the service has around 350 users. The other big catalyst is securing public money to help backstop insurers and make them more willing to operate in Ukraine. “The private sector will not initially on its own insure this sort of war,” Ellison said. A recent example is the effort to insure grain shipping through the Black Sea. To help mitigate the costs to insure ships, Marsh put together an arrangement where the Ukraine government contributed money to a first-loss fund to back up insurance claims. The impact, according to Ellison, “is suddenly you have affordable insurance for up to 1,000 ships.” “Initially it was just for ships carrying grain, but we aim to soon agree on an expansion of the program to cover all commercial shipping including steel, iron ore, other products,” he said. “That’s facilitating about 8 percent of Ukraine’s GDP. It’s enormous.” What’s next? Ukraine President Volodymyr Zelenskyy wants to open up airspace, and so the focus is on how to insure commercial aircraft in western Ukraine. It’s a much more costly endeavor. Just do the math on a cargo ship taking fire versus a large passenger airplane. The financial demands further illustrate the pressure for a government-funded buffer to make it work for private insurers. Marsh and others in the insurance sector estimate it would take around $500 million of public funding to get going. “That’s the ‘24 challenge,” Ellison said. “It will be a public-private partnership.” Happy Wednesday — What insurance news are we missing? Send tips to zwarmbrodt@politico.com.
| | | | A message from Electronic Payments Coalition: CRS: UNCLEAR IF DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP EITHER CONSUMERS OR SMALL BUSINESSES The independent Congressional Research Service (CRS) released one of many reports questioning whether the Durbin-Marshall Credit Card Bill would help consumers or small businesses. CRS echoed an earlier report by the Richmond Fed noting that consumers failed to see any meaningful cost savings because of similar legislation imposing routing mandates and price caps on debit card interchange. Learn more HERE. | | | | | Revised GDP for Q4 is released at 8:30 a.m. … Sen. Tim Scott hosts a roundtable with Black investors and business owners in the Senate Banking hearing room at 3 p.m. Sign of the times — Sen. J.D. Vance says FTC Chair Lina Khan is one of the few Biden administration officials “doing a pretty good job,” The Hill reports. The populist-leaning Ohio Republican sounds pleased with her work on antitrust enforcement. Shutdown update — According to Senate Majority Leader Chuck Schumer, Speaker Mike Johnson made “unequivocally” clear during a White House meeting that he wants to avoid a government shutdown. Housing surge — Katy O’Donnell reports that home prices in the largest metropolitan areas hit a record high in December, according to the closely watched Case-Shiller 20-city composite index. A big deadline — SIFMA is out with an important reminder: The securities industry is 90 days away from shortening the trade settlement cycle. Beginning May 28, trades will settle the next business day, down from the current timeline of two days after a trade. Crypto feedback — Circle chief strategy officer Dante Disparte has thoughts on Tuesday’s MM lead, which broke the news that Heritage Action will make anti-CBDC legislation a new benchmark for grading conservative lawmakers. Disparte’s a CBDC critic himself but thinks some of the backlash is a distraction from revamping U.S. crypto policy. A top priority for Circle is for Congress to pass legislation that sets up a federal pathway for stablecoins. “Being opposed to everything feels to be the streak we have in the United States right now,” he said. “It’s easy to be vehemently opposed to CBDCs but they literally do not exist. No serious, free democracy and no serious central bank is going to launch a CBDC without political authorization, and even the Fed has acknowledged as much. I don’t want it to become a distraction politically from a real issue that affects real people in real ways, like passing legislation.”
| | | | CONGRESS OVERDRIVE: Since day one, POLITICO has been laser-focused on Capitol Hill, serving up the juiciest Congress coverage. Now, we’re upping our game to ensure you’re up to speed and in the know on every tasty morsel and newsy nugget from inside the Capitol Dome, around the clock. Wake up, read Playbook AM, get up to speed at midday with our Playbook PM halftime report, and fuel your nightly conversations with Inside Congress in the evening. Plus, never miss a beat with buzzy, real-time updates throughout the day via our Inside Congress Live feature. Learn more and subscribe here. | | | | | | | | Marc Rowan for Fed chair? — The Apollo CEO told the Economic Club of Washington, D.C. that he’d be willing to lead the Fed or the Treasury Department but that “I can’t tell you today whether I’m a Democrat or Republican.” “I don’t even know what the labels mean anymore,” Rowan said Tuesday in a Q&A with Carlyle co-founder David Rubenstein. Rowan, whose firm manages $650 billion, was in town for a day of meetings with regulators and lawmakers. A couple big issues were top of mind during his visit. Private equity firms like Apollo are facing scrutiny for their growing role providing credit. On a personal level, Rowan has been leading the charge against leaders at the University of Pennsylvania, his alma mater, over antisemitism. On the economy, Rowan said “we’re in reasonable shape” and that things may get better for several reasons. He cited pending infrastructure, semiconductor and clean energy projects that have yet to go online following an influx of federal investment. He also noted foreign investment inflows, a ramp-up in defense production capability and the re-shoring of supply chains. “Every single one of those is positive for employment, and none of them has hit yet,” he said. “And yet today everyone has a job. So I don’t see a situation where people are not going to have jobs. … I do not see an employment crisis. If we don’t have an unemployment crisis, it usually means demand is good.” FWIW, Goldman Sachs CEO David Solomon on Tuesday followed JPMorgan Chase CEO Jamie Dimon in casting a degree of doubt on bets that the U.S. will avoid a recession, Bloomberg reports.
| | | | A message from Electronic Payments Coalition:   | | | | | House to vote on capital markets revamp — Eleanor Mueller reports that the House plans to vote next week on a package of bills that would ease securities rules for startups and investors, a priority for Chair Patrick McHenry. Rep. Maxine Waters, the top Democrat on Financial Services, has spoken out against the plan. Durbin open to credit card bill changes — Senate Judiciary Chair Dick Durbin is leaving the door open to changing his credit card fee bill in the wake of Capital One's plans to acquire Discover Financial. "We're going to make sure that the act represents the reality in the marketplace," he told reporters Tuesday. His bill has drawn fierce banking industry backlash. Durbin said he is "studying" the Capital One-Discover deal, which is facing opposition from progressives and at least one Republican lawmaker. He said he has "misgivings about mergers," though he stopped short of saying this one should be blocked. (h/t Jasper Goodman and Ursula Perano.) First in MM: Labor, consumer groups blast EWA bill — Around 140 labor, civil rights, consumer and community groups are opposing earned-wage access legislation that House Financial Services plans to vote on Thursday. EWA providers give consumers access to earnings before they receive a paycheck, and the bill at issue would exempt the services from being regulated as loans. AFL-CIO, the American Economic Liberties Project and the Center for Responsible Lending are among the groups speaking out against the bill in a new letter. They say the proposal perpetuates "the myth that these fintech cash advances are not credit.”
| | | | YOUR GUIDE TO EMPIRE STATE POLITICS: From the newsroom that doesn’t sleep, POLITICO's New York Playbook is the ultimate guide for power players navigating the intricate landscape of Empire State politics. Stay ahead of the curve with the latest and most important stories from Albany, New York City and around the state, with in-depth, original reporting to stay ahead of policy trends and political developments. Subscribe now to keep up with the daily hustle and bustle of NY politics. | | | | | | | | What China hawks are reading — Per the FT, McKinsey claimed in marketing materials that it had advised the Chinese government on boosting domestic consumption and reforming healthcare policy, raising questions over the firm’s denial that it ever worked for Beijing.
| | | | A message from Electronic Payments Coalition: CRS QUESTIONS WHETHER DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP ANYONE AT ALL Every member of Congress should read the CRS analysis which discusses the impact this legislation could have for small businesses and American families. Report after report has plainly demonstrated that consumers and small businesses did not save any money when Congress passed the 2010 Durbin Amendment, imposing new mandates on debit cards. Now, a decade later, why would anyone assume a monumental restructuring of our nation’s secure, worry-free credit card system would yield different results? After considering the facts, the only logical solution would be to strongly OPPOSE the Durbin-Marshall Credit Card Bill. Click HERE to learn more. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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