| | | | |  | | By Zachary Warmbrodt and Victoria Guida | | Presented by |  | | | 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.
| | After weeks of creeping doubt, the Federal Reserve is giving the markets just what they want. The Fed is signaling that it will stick to its plan to cut interest rates three times this year even as it projects even stronger economic growth. Stocks soared Wednesday after the central bank revealed its new outlook, with the S&P 500 and Dow Jones Industrial Average hitting record highs. Chair Jerome Powell, by staying the course, is nipping fears that the Fed would start to walk back its outlook for rate cuts this year. “No cut” talk had been seeping into the financial discourse thanks to a recent series of surprisingly strong readings on economic growth and accelerating inflation. That raised doubts after months of indications that price pressures were easing. Powell’s new message — a kind of economic and financial win-win — is that the Fed is still proceeding with caution but not backtracking after January and February’s hotter-than-expected inflation reports. The Fed won’t ignore bad news, but it also won’t overreact, he said. “They haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2 percent,” Powell said. It’s clear listening to Powell that he’s confident in the Fed’s strategy to attack the last mile of inflation, despite his frequent acknowledgments of uncertainty and recent doubts among Fed watchers. He expects inflation to come down via some mix of easing prices for goods, housing and services. “Some combination of those three things, and it may be different from the combination we had before the pandemic, will be achieved and will bring inflation back down to 2 percent sustainably,” he said. Powell said stronger jobs growth — a factor that’s fueled pessimism about cuts — is “not a reason for us to be concerned about inflation.” “We want to be careful,” he said, as he explained the risks of cutting too soon or too late. “Fortunately, with the economy growing, with the labor market strong, with inflation coming down, we can approach that question carefully and let the data speak on that.” Staying the course could also be a boon to President Joe Biden. To be sure, the Fed is still pursuing a higher-for-longer approach that will keep borrowing costs elevated and frustrate Democrats who want cuts now. But if the Fed is right, then the cuts are still coming – as soon as this summer – and the central bank is confirming that the Biden-era economy is defying expectations in a way that doesn’t threaten to make inflation worse. It’s Thursday – Send tips to zwarmbrodt@politico.com.
| | A message from the American Bankers Association: Credit card points and cash back rewards help Americans save, travel and shop — but some in Congress want to end those benefits, just like they shut down debit card rewards in 2011. The misguided Durbin-Marshall bill would eliminate credit card rewards, reduce access to credit cards and jeopardize consumer privacy. Don’t let lawmakers take away your hard-earned rewards just to pad the profits of corporate mega retailers. Tell Congress to oppose Durbin-Marshall. Act now. | | | | | The FDIC holds a board meeting on bank merger policy at 10 a.m. … Treasury Secretary Janet Yellen testifies on the administration’s budget pitch at Senate Finance at 10 a.m. … Bank regulators testify at a House Financial Services hearing on global financial standards at 10 a.m. … Fed Vice Chair for Supervision Michael Barr speaks at a University of Michigan event at noon … CFPB Director Rohit Chopra and Assistant Attorney General Jonathan Kanter talk bank merger views at a Peterson Institute event at 1:30 p.m. ... Yellen, OMB Director Shalanda Young and CEA Chair Jared Bernstein testify at House Appropriations at 2:30 p.m. Judge rejects Chamber’s haste in CFPB challenge — Michael Stratford reports that a Trump-appointed judge slapped down the U.S. Chamber of Commerce and bank lobbying groups for urging him to quickly block the CFPB’s new $8 cap on credit card late fees before he decides whether the case belongs in his court. The groups had asked him to rule quickly because the cap is set to take effect May 14 In an acerbic two-page order on Wednesday, U.S. District Judge Mark Pittman wrote that he “appreciates Plaintiffs’ efforts to educate the Court on what they believe the Court does and does not need” but noted he’s been a judge for nearly a decade and can make those decisions on his own. Pittman previously wrote that he had “concerns” about whether the lawsuit was properly filed in the Fort Worth division of the Northern District of Texas, saying only that one of the six groups suing “has even a remote tie” to the area. (The CFPB is accusing the groups of “transparent forum shopping” and wants the case transferred.) The court has become a favorite of business groups and others seeking to block Biden-era policies because they’re guaranteed to draw a conservative judge. That onslaught of cases, Pittman noted in his order, has made the Fort Worth division busier than federal courts in D.C. Because of that caseload, Pittman wrote, he “doesn’t have the luxury to give increased attention to certain cases just because a party to the case thinks their case is more important than the rest.” DOJ investigates rental price-fixing — The Justice Department is expanding its probe of the rental housing market, our Josh Sisco reports. The department has opened a criminal investigation into RealPage, a top developer of property pricing software, and some of its customers. In other DOJ news, Bloomberg reports that the department is poised to sue Apple as soon as today for allegedly violating antitrust laws.
| | | | SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, the newsletter taking you inside pivotal discussions at the most influential gatherings in the world, including WEF in Davos, Milken Global in Beverly Hills, to UNGA in NYC and many more. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW. | | | | | | | | | First in MM: Bank data venture faces heat — A coalition of consumer watchdogs and left-leaning advocacy groups is urging the CFPB to scrutinize the major financial institutions that control the data-sharing service Akoya, as the bureau revamps “open banking” rules. The groups, including Americans for Financial Reform Education Fund, Public Citizen and the Revolving Door Project, cite competition concerns with big financial firms controlling user data as well as the entity that has a say in how it can be shared. Akoya was set up as an alternative to data aggregators like Plaid, which facilitate the transfer of customer financial information in ways that big banks and asset managers like Fidelity may have less control over. (Fidelity’s parent company previously owned Akoya.) Akoya told MM in response: “Akoya is an inclusive network open to all market participants, including all financial institutions, aggregators, and fintechs. We support the CFPB's proposed open banking rule and are giving consumers greater control of their data while protecting their privacy. We never screen scrape.”
| | | | Easily connect with the right N.Y. State influencers and foster the right relationships to champion your policy priorities. POLITICO Pro. Inside New York. Learn more. | | | | | | | | Crypto’s new lobbying tactic — Major players in the crypto industry gathered for a summit in Washington Wednesday that aimed to answer a key question often posed by policymakers: What can digital assets be used for? Jasper Goodman reports that Coinbase’s “Update The System Summit” featured an afternoon of panels looking at uses for digital assets and blockchain, the digital ledger technology behind crypto. Industry leaders called for regulatory changes that they say would provide the industry clarity and keep tech innovation in the U.S. To bolster the effort, Coinbase launched a partnership with Compass Coffee Wednesday that will allow customers to pay with crypto. “It’s a fair challenge that we get from policymakers to demonstrate how crypto has a real-life application and utility,” Coinbase chief policy officer Faryar Shirzad told MM. The summit comes as the industry is pushing Congress to adopt a regulatory overhaul that would help legitimize digital assets. It’s spending big on the 2024 elections to pave the way for success next year. House Financial Services Chair Patrick McHenry said at the event that lawmakers are close to being able to pass bipartisan legislation to establish a regulatory framework for stablecoins, which he has been negotiating with ranking member Maxine Waters for more than a year. “We need a legislative vehicle, we need a deadline and we can drive these stickier issues if we have a deadline,” he said.
| | | | A message from the American Bankers Association:   | | | | | SBA defends fintech move — The head of the Small Business Administration is standing behind the agency’s decision to allow the U.K.-owned fintech Funding Circle to start offering government-backed loans, amid Capitol Hill scrutiny this week. As MM reported Wednesday, lawmakers are raising questions after Funding Circle indicated it was considering selling its U.S. business as it dealt with losses. “Funding Circle, just for the record, is fully capitalized in its U.S. operations based in Colorado,” SBA Administrator Isabel Casillas Guzman told House Small Business yesterday. “And so they're in a strong position in terms of being able to deliver against their mission of small-dollar lending.” In a second hearing at Senate Small Business, Sen. Joni Ernst had some of the toughest questions and comments on the SBA move, including whether the SBA was aware of an investment in Funding Circle by China’s CreditEase. Guzman said she couldn’t speak to the issue because the review was done by her team. The company said in a statement to MM that it received investment from CreditEase representing less than 0.5 percent of shares in 2017 and that CreditEase fully divested in February 2021, following Funding Circle’s 2018 public listing on the London Stock Exchange. The SBA awarded Funding Circle a lending license late last year. Republicans press HUD on homelessness — Eight Senate Republicans led by Senate Banking ranking member Tim Scott are accusing the Biden administration of exacerbating the homelessness crisis, Katy O’Donnell reports. Homelessness increased 12 percent in 2022 to reach an all-time high. “This surge in homelessness cannot be blamed on a lack of funding for federal housing programs,” the Republicans wrote in a letter Wednesday to departing HUD Secretary Marcia Fudge and incoming acting Secretary Adrianne Todman. “In recent years, Congress has provided HUD with record appropriations.” “The Biden administration stated that ending homelessness is among its top priorities, but these historic increases illustrate that your policies are having the opposite effect,” they wrote, pointing to increased regulations driving up the cost of housing and an influx of migrants overwhelming shelter facilities.
| | A message from the American Bankers Association: Credit card rewards are more valuable than ever right now, with high prices and inflation still stinging our pockets — but some in Congress want to take away those rewards points and cash back in order to pad the profits of corporate megastores. The misguided Durbin-Marshall bill would end popular credit card rewards programs that benefit consumers and small businesses. The legislation would impose network routing requirements on banks that issue credit cards, prioritizing cheaper networks pushed by mega retailers that could compromise consumers’ personal information in the process. Tell Congress to leave your credit card rewards alone and stop meddling in the nation’s convenient, safe and trusted payments system. It’s time for lawmakers to protect your points and stand by consumers by opposing Durbin-Marshall. Act now. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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