| | | | |  | | 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.
| | The big show in MM world this week is Federal Reserve Chair Jerome Powell’s two days of testimony on Capitol Hill. Let’s set the scene and preview what lawmakers plan to ask, with a big reporting assist from Eleanor Mueller and Jasper Goodman. The unrelenting economy, vanishing rate cuts and a looming election Powell is expected to signal caution about when the Fed will start lowering interest rates and with good reason. Apollo’s Torsten Slok captured the moment with the hottest of takes Friday: The Fed won’t cut rates this year. “The reality is that the U.S. economy is simply not slowing down, and the Fed pivot has provided a strong tailwind to growth since December,” he wrote. Slok’s view isn’t mainstream, to be sure. But things are trending in his direction as jobs, growth and inflation data surprise to the upside. Remember when rate cuts were supposed to begin this month? Powell will face some new pressure to hang tight. Rep. Andy Barr, the Kentucky Republican who will be among the first to question him Wednesday, said “we need to reinforce with Chairman Powell that these inflation numbers are really stubborn, and they have not achieved their price stability mandate.” Underlying the back-and-forth on rates will be the interplay with November’s election. Republicans, who are hammering President Joe Biden over elevated prices, want to put Powell on notice that he shouldn’t play politics. “I appreciated his [“60 Minutes”] comment about integrity and making sure that the Fed monetary policy actions are independent of politics and that rate cuts — if they come, when they come — will be data dependent and not based on political considerations,” Barr said. “We’ll want to hold him to that. I have confidence in Chairman Powell.” On the flip side, Democrats are eager to tease out his take on why the U.S. economy’s stunning resiliency isn’t getting through to voters. Biden is facing pressure to find a way to show he’s doing something on inflation when he gives his State of the Union address Thursday. Rep. Emanuel Cleaver, a Missouri Democrat, said he’s thinking of asking Powell why "the American public does not feel as if the economy is anywhere close to the level that I know it to be based on my everyday involvement with this committee." Keep in mind the next big economic data point is coming Friday with February’s jobs numbers. Per Bloomberg, payrolls are expected to have grown by 200,000, down from 353,000 in January. Banking bits Next weekend marks the one-year-anniversary of Silicon Valley Bank’s failure, and regional lender jitters are re-emerging with continuing troubles at New York Community Bancorp. Look for Powell to face questions about the stability of the banking system, including the degree of risk he sees looming in commercial real estate loans. He may echo Fed Vice Chair for Supervision Michael Barr, who downplayed the potential for NYCB fallout last month. But it’s clear the bank is continuing to struggle with real problems. It’s also a ripe opportunity for Powell to make news on what will happen next with the Fed’s planned hike in capital requirements for large lenders. Bank regulators have had more than a month to start parsing hundreds of comment letters raising concerns, and they’ve gotten an earful of bipartisan pushback for months amid an intense industry lobbying campaign. A big question looming from lawmakers is whether Powell wants to conduct a major re-think of the proposal or just tweak the plan, which in its current form is facing almost guaranteed litigation from big banks. “It has to be withdrawn and re-proposed,” said Rep. Barr, one of the rule’s toughest critics. “I'm seeking a commitment from the chairman that he recognizes the irredeemable flaws of this proposal.” Happy Monday — What are you watching on Super Tuesday? Send tips to zwarmbrodt@politico.com.
| | | | A message from Bank Policy Institute: From the heartland to the financial centers, Americans reject costly new capital requirements. The Federal Reserve’s Basel Endgame proposal will create a drag on our economy for years to come and will hurt working families and small businesses. Tell regulators that it’s time to #StopBaselEndgame and re-propose. Learn more at StopBaselEndgame.com. | | | | | Monday … Senate Judiciary holds a Georgia field hearing on human rights in housing at 11 a.m. Tuesday … Primary elections are happening across the country, including California, Texas and Virginia ... House Financial Services Chair Patrick McHenry, PNC CEO William Demchak and former Trump NEC Director Gary Cohn share lessons learned from the March 2023 bank failures at Brookings … Fed Vice Chair for Supervision Michael Barr, FDIC Chair Martin Gruenberg and Acting Comptroller Michael Hsu discuss the Community Reinvestment Act at the NICRC conference at 12 p.m. … House Rules considers a batch of capital markets bills at 4 p.m. before a floor vote this week Wednesday … ADP’s employment report for February is out at 8:15 a.m. … The SEC finalizes its climate-risk disclosure rule at 9:45 a.m. … Powell testifies at House Financial Services at 10 a.m. … CFTC Chair Rostin Behnam testifies at House Ag at 10 a.m. … January job openings data is out at 10 a.m. … The Fed releases its Beige Book economic survey at 2 p.m. Thursday … DOL updates fourth-quarter productivity data at 8:30 a.m. … Powell testifies at Senate Banking at 9:40 a.m. … Biden gives his State of the Union address at 9 p.m. Friday … DOL releases February jobs numbers at 8:30 a.m.
| | | | 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. | | | | | | | | | Court derails shell company crackdown — Per the NYT, a federal court ruled that Treasury can’t force some small businesses to report ownership details under a policy aimed at combating crime by anonymous shell companies. The disclosure mandate took effect at the beginning of this year. Transparency International U.S. said in a statement: “We expect this ruling to be promptly appealed to, and overturned by, the 11th Circuit Court of Appeals, and in the meantime urge FinCEN to continue implementing the [Corporate Transparency Act] as much as it can in accordance with Judge [Liles] Burke’s opinion." Biden’s SOTU challenge – A new WSJ poll finds that voters are more upbeat about the economy but the president’s still not getting much credit. About 37 percent approve of Biden’s handling of inflation, up seven points from December, and 40 percent approve of his handling of the economy, a four-point increase that's in the poll’s margin of error. Shutdown progress – Congressional leaders released bill text of half a dozen spending measures, in a key step toward funding the government. It covers departments and agencies that handle transportation, energy, housing, agriculture and veterans programs. Trump trades – Katy O’Donnell reports that the prospect of Donald Trump returning to the White House is reviving investor hopes that government-controlled mortgage giants Fannie Mae and Freddie Mac could once again become private businesses. Fannie’s stock rose from 96 cents on Jan. 12 to $1.28 by March 1, and Freddie’s rose from 80 cents to $1.08. Some news in Katy’s piece: Former FHFA Director Mark Calabria, who has advocated for reducing the government’s mortgage footprint, says he would consider working for a second Trump administration. Elsewhere in Trump land, Declan Harty reports that last-minute lawsuits are threatening to derail the public listing of Trump Media & Technology Group. At stake is a potential $3.2 billion windfall for Trump as he faces more than $500 million in civil judgments.
| | | | A message from Bank Policy Institute:   | | | | | Ozempic’s risk to taxpayers — Former Biden NEC Director Brian Deese argues in a NYT essay with MIT’s Jonathan Gruber and former CEA economist Ryan Cummings that the U.S. government should use its negotiating power to bring down the costs of weight-loss drugs like Ozemic and Wegovy. At current prices, they estimate that making the class of drugs available to all Americans will cost more than $1 trillion per year, exceeding savings from reducing diabetes and other weight-related health care costs by $800 billion annually. They call it “an enormous risk to America’s taxpayers.” Oil watch — Per the FT, Opec+ members led by Saudi Arabia and Russia are extending oil production cuts until the end of June, as they try to boost prices. In other oil news, the government funding plan unveiled Sunday would block Strategic Petroleum Reserve sales to China, per Reuters. Shipping threat — Edith Hancock reports that Houthi rebels are vowing to keep attacking British shipping in the Red Sea after sinking the MV Rubymar, the first ship to go down since the group started targeting commercial vessels in November.
| | Gensler on notice — The SEC on Wednesday is set to finalize climate-risk disclosure requirements for public companies. There’s a real chance of backlash from the left, depending on the extent to which SEC Chair Gary Gensler and his colleagues pare back the plan in a bid to survive industry litigation. (MM has previously reported that Republicans are also planning to challenge the rule under the Congressional Review Act.) Sen. Elizabeth Warren told Eleanor ahead of the SEC vote that it’s “important that investors have full information about all the climate practices of the businesses they invest in.” “The fact that some in the industry are fighting so hard not to have to reveal this climate information says a lot about how much we should be worried about the activities taking place behind closed doors, how much we don't know,” she said. “And they want to make sure we don't know.” Asked whether she’s frustrated, Warren responded: “Do I want to see us do the right thing? Yeah, definitely.” On a related note, our friends at E&E News have a dive into the rift between the Export-Import Bank and climate activists, as the bank continues to back fossil fuel projects abroad. It appears there’s daylight between the Biden administration and Ex-Im, with a White House National Security Council spokesperson telling E&E: “Ex-Im made an independent decision to move forward with this financing under its authorities, and its decision does not reflect administration policy.”
| | | | DON’T MISS POLITICO’S HEALTH CARE SUMMIT: The stakes are high as America's health care community strives to meet the evolving needs of patients and practitioners, adopt new technologies and navigate skeptical public attitudes toward science. Join POLITICO’s annual Health Care Summit on March 13 where we will discuss the future of medicine, including the latest in health tech, new drugs and brain treatments, diagnostics, health equity, workforce strains and more. REGISTER HERE. | | | | | | | | Rep. Bryan Steil on EWA — MM caught up with the Wisconsin Republican on his earned-wage access bill, which backers hope will get a vote in the coming weeks. EWA apps give consumers access to earnings before they receive a paycheck, and his legislation would formalize federal standards while exempting EWA from being regulated as credit. House Financial Services was supposed to vote on it last week, but the markup was cut short amid government funding drama. “There are reasons that payroll now is run on a biweekly or monthly basis, but what that has done is disconnect people from the reward of their work in many industries,” Steil said. “So I think this financial tool allows us to reconnect people to the reward of their work.” Steil’s bill is facing resistance from consumer watchdog and labor groups, which is a sign it will also run into meaningful pushback from Democrats. He said he’s working to shore up support, including by offering an amendment that would require EWA providers to offer a “no-cost” option to consumers. “I’ve had some really good conversations with a number of my Democratic colleagues,” he said. “I, like others, am well aware we’re in a world of divided government now, where for anything to become law it’s going to have to have the signature of a Democratic president and support of a Democratic Senate. The ultimate goal is to help inform people about how the bill works and to allay concerns that I think are incorrectly made by those that oppose the legislation.” It sounds like he still has a high bar to clear, with the “no-cost” proposal falling flat with bill critics. They say EWA providers would offer a free option that’s slower while still forcing consumers who need the money more immediately to pay fees. “This has always been dangled out there to entice legislators as a quote unquote consumer protection of the bill,” said Center for Responsible Lending senior policy council Andrew Kushner. “But it’s not meaningful to consumers and in particular it’s not a reason why these transactions should be exempt from TILA [the Truth in Lending Act] which is the main point of the Steil bill.”
| | CFPB people moves — Julie Margetta Morgan will serve as associate director of research, markets and regulation ... Brian Shearer has been named assistant director of policy planning and strategy ... Gracie Bouwer will serve as the deputy assistant director of policy planning and strategy
| | | | A message from Bank Policy Institute: Farmers agree: Basel Endgame is bad for the economy.
National Council of Farmer Cooperatives: "[W]e are concerned our industry will be subject to unintended consequences of the Proposals if they go forward in their current form, including: (A) increased end-users’ costs of hedging; (B) fewer banking organizations acting as FCMs to the agriculture industry and as swap dealers in commodity OTC derivative contracts, thereby reducing end-users’ risk management options; and (C) less liquid and more volatile markets.”
American Farm Bureau Federation: “Well-functioning derivatives markets provide price stability for consumers of agriculture products. Many farmers and ranchers use derivatives to make sure that they can cover their supply costs. Companies that process agricultural products into food, fiber and biofuels also use derivatives as protection from steep increases in their inputs. The Basel III capital proposals will jeopardize reliable financial risk management tools used throughout the food supply chain.”
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