| | | | |  | | By Michael Stratford and Eleanor Mueller | | Presented by |  | | | Programming Note: We’ll be off this Monday for Memorial Day but will be back in your inboxes on Tuesday. 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.
| | Treasury Secretary Janet Yellen’s monthslong quest to rally European support for an effort to tap Russia’s sovereign assets to help Ukraine appears to be poised for a deal. After months of disagreement, G7 finance ministers meeting in Italy this week are converging on a plan to issue a massive loan for Ukraine that’s backed by the future earnings generated from the Russian state assets that have been frozen abroad, according to seven officials from different countries and bodies who spoke to POLITICO on condition of anonymity due to the confidential nature of the discussions. Your MM host and our colleagues in Europe, Gregorio Sorgi and Giorgio Leali, laid out the state of play in this comprehensive story. The emerging consensus on the issue falls short of the U.S.’s original push to seize the roughly $300 billion of Russian assets outright. But the compromise is still far more than the EU has agreed to and had until recently signaled would be its limit. The loan for Ukraine could be as much as $50 billion and would be repaid by the income earned on the Russian assets – rather than confiscating the funds. “This is an assured source of financing,” Yellen said at a press conference Thursday before the G7 talks. “And it's important that Russia realize that we will not be deterred from supporting Ukraine for lack of resources.” The goal, she said, was to use the Russian assets to help fund Ukraine’s military needs and reconstruction into “2025 and beyond.” Yellen may clinch a conceptual agreement this weekend but many of the thorny technical details will still need to be worked out before the G7 leaders’ meeting next month. Still up for debate is the precise amount of the loan and which countries would issue and guarantee it. Looming over the talks is the threat of retaliation from Moscow, which has especially worried European leaders. Vladimir Putin on Thursday underscored those threats with a new decree that outlines plans to retaliate against U.S.-owned assets in Russia if the Biden administration seizes frozen Russian assets. In the U.S., the Biden administration already has substantial powers — thanks to the REPO Act — to seize or move Russian assets in this country, most of which are held at the New York Fed. But depending on the contours of any G7 deal, national parliaments may also need to sign off. European officials are also concerned about sketching out a backup plan to repay the loan if the war ends and the assets are handed back to Russia. Yellen, however, downplayed those concerns, suggesting that any peace agreement to end the war could address Russian compensation to Ukraine and provide for a repayment of the loan. Looking ahead, Yellen, her G7 counterparts and central bank governors are scheduled to meet Saturday with Ukraine’s finance minister, Serhiy Marchenko. It’s Friday — Enjoy the long Memorial Day weekend. We’re observing the holiday on Monday. See you back here on Tuesday. In the meantime, send your tips to ssutton@politico.com and zwarmbrodt@politico.com. Catch me at mstratford@politico.com.
| | | | A message from the Council of Federal Home Loan Banks: Our nation’s economic health depends on a safe and secure financial system comprised of thousands of local lenders able to serve their customers successfully through all market conditions. Our nation needs the Federal Home Loan Banks. Day in and day out, for more than 90 years, we have been a dependable and crucial funding partner for financial institutions large and small, supporting community lenders who in turn support local businesses, households, and families. | | | | | Vice President Kamala Harris, Commerce Secretary Gina Raimondo, and Kenyan President William Ruto meet with Google, Mastercard, Microsoft and other executives at the U.S. Chamber of Commerce at 8 a.m. … Fed Governor Christopher Waller gives a speech on “R*” at the Reykjavik Economic Conference at 9:35 a.m. … The University of Michigan releases final consumer sentiment data for May at 10 a.m. Activity bump dampens rate-cut outlook… — Increased business activity in the U.S. and across the world is further depressing hopes that central banks may soon cut interest rates, Reuters reports. …as do continued labor market gains — The Bureau of Labor Statistics said Thursday that weekly jobless claims dropped another 8,000 in a sign that the U.S. labor market is still hot, Reuters reports. ‘Hard landing’ still possible? — JPMorgan Chase CEO Jamie Dimon said Thursday that the U.S. could still see a so-called hard landing and even stagflation, CNBC reports. Mortgage rates still slope downward — Freddie Mac said mortgage rates dipped below 7 percent for the first time since early April, Bloomberg reports. More consumers struggle to pay credit cards — A recent jump in credit card delinquencies reported by the Federal Reserve Bank of New York could tamp down consumer spending, the Associated Press reports.
| | | | THE GOLD STANDARD OF FINANCIAL SERVICES POLICY REPORTING & INTELLIGENCE: POLITICO has more than 500 journalists delivering unrivaled reporting and illuminating the policy and regulatory landscape for those who need to know what’s next. Throughout the election and the legislative and regulatory pushes that will follow, POLITICO Pro is indispensable to those who need to make informed decisions fast. The Pro platform dives deeper into critical and quickly evolving sectors and industries, like financial services, equipping policymakers and those who shape legislation and regulation with essential news and intelligence from the world’s best politics and policy journalists.
Our newsroom is deeper, more experienced, and better sourced than any other. Our financial services reporting team—including Zach Warmbrodt, Victoria Guida and Declan Harty—is embedded with the market-moving legislative committees and agencies in Washington and across states, delivering unparalleled coverage of financial policy and the financial services industry. We bring subscribers inside the conversations that determine policy outcomes and the future of industries, providing insight that cannot be found anywhere else. Get the premier news and policy intelligence service, SUBSCRIBE TO POLITICO PRO TODAY. | | | | | | | | First in MM: Blockchain Association nudges White House on SAB 121 — The Blockchain Association will send a letter to President Joe Biden today urging him not to veto a rollback of SEC crypto accounting guidance after top Democrats including Senate Majority Leader Chuck Schumer backed the push, Eleanor reports. “When you have the leader of the Senate voting in favor of pulling it back, I think that's something that they have to pay close attention to,” Blockchain Association Kristen Smith told MM. The digital assets industry, along with banking groups, say that the guidance — dubbed SAB 121 — discourages companies including banks from holding crypto because it requires them to mark it as a liability on their balance sheets. Most Democrats and investor protection groups say that the guidance protects consumers from future meltdowns. The White House said earlier this month that it would veto the measure if it reached Biden’s desk. Crypto industry notches another win at the SEC — The Wall Street regulator approved a slate of exchange filings Thursday that could further swing open the crypto market's doors to everyday American investors, Delcan Harty reports. It’s the first of two approvals needed by financial firms vying to launch an exchange-traded fund that would track ether, the world’s most valuable digital asset behind bitcoin.
| | | | A message from the Council of Federal Home Loan Banks:   | | | | | First in MM: House Republicans probe Fed on bank takeovers — Rep. Andy Barr (R-Ky.), who chairs House Financial Services’ financial institutions panel, led a letter to the Federal Reserve Thursday asking the central bank to respond to recent concerns raised by CFPB Director Rohit Chopra over the FDIC’s oversight of bank takeovers, Eleanor reports. What Chopra is proposing instead “would upend decades of precedent and would interfere with the Board’s congressionally mandated role as the primary Federal banking agency for holding companies,” Barr and five other House Financial Services Republicans write. First in MM: Bipartisan senators raise alarm over SEC’s AI proposal — Sen. Mike Rounds led Sens. Mike Crapo, Martin Heinrich and Mark Warner in a letter to the SEC on a proposed rule on how investment advisers and broker-dealers use AI, Eleanor reports. “We worry the Proposal would harm American innovation and curtail the use of many beneficial technologies, including artificial intelligence (AI), by financial services firms, potentially limiting market access to both retail and institutional investors,” the four write. McHenry calls for hearing on FDIC report — House Financial Services Chair Patrick McHenry is calling on FDIC Director Martin Gruenberg to testify next month on the third-party report on misconduct at his agency, our Jasper Goodman reports. Gruenberg would appear June 12 following a panel with Acting Comptroller of the Currency Michael Hsu and FDIC Director Johnathan McKernan. First in MM: Republicans warn FHFA on Freddie proposal — Sen. Bill Hagerty and 33 other House and Senate Republicans warned Federal Housing Finance Agency Director Sandra Thompson that a proposal by Freddie Mac to buy second mortgages would increase risk to taxpayers in a letter late Thursday, Katy O'Donnell reports. They also suggested the plan was a political ploy to boost consumer spending: “We are deeply concerned that the proposal is a thinly veiled attempt by the Biden administration to offset the effects of excessive fiscal spending and tight monetary policy as the November election approaches,” the GOP lawmakers wrote. It’s not just the GOP: Rep. Ritchie Torres, a New York Democrat, submitted a comment letter Wednesday saying “the proposal risks unfairly and inappropriately widening the gap between underserved households, including communities of color, and wealthier homeowners.” House passes CBDC bill — Three Democrats helped House Republicans pass a bill from Majority Whip Tom Emmer Thursday that would prevent the Fed from issuing or even researching a central bank digital currency, Eleanor reports. The bill faces long odds in the Senate, but Emmer says it sets the table for possible GOP control next year. House appropriators move forward with GOP totals — Republican lawmakers pushed through spending levels for fiscal 2025 Thursday that undercut last year’s bipartisan debt ceiling deal, our Caitlin Emma reports. That breaks out to a 10 percent cut for the Financial Services measure, which funds the Treasury Department, SEC and more.
| | Get your running shoes on — Because Wall Street is about to become a whole lot faster at completing trades, Declan Harty reports. On Tuesday, the U.S. securities markets are slated to move to a one-day settlement cycle — a massive pivot aimed at slashing risk in the market that has also caused some anxiety in the markets. It comes just as MSCI indexes are set to rebalance next week, likely setting off a wave of trading. But Wall Street appears ready, SEC Chair Gary Gensler said on the sidelines of an Investment Company Institute event Thursday, pointing to conversations with the industry. Tom Price, head of technology, operations and business continuity for SIFMA, similarly expressed a “high degree of confidence” about the transition in a statement out today. “Shortening the time between the trade date and settlement date reduces risk in the system, and the industry has worked hard to prepare for this important change,” Price said.
| | | | 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. | | | | | | | | | Former Fed official floats stress test makeover — Onetime Federal Reserve regulatory czar Daniel Tarullo has a provocative message for his former employer: The central bank should revisit how it performs stress tests on banks, our Victoria Guida reports. Yellen gives thumbs-down to global billionaire tax — The Treasury secretary said the U.S. will oppose a push by France, Brazil and other major economies to move toward a coordinated minimum tax on the wealthiest individuals. Yellen said she supports increasing the tax burden on rich individuals and corporations in the U.S. but not as part of an international tax accord.
| | | | A message from the Council of Federal Home Loan Banks: Our nation’s economic health depends on a safe and secure financial system comprised of thousands of local lenders able to serve their customers successfully through all market conditions. Our nation needs the Federal Home Loan Banks. For more than 90 years, we have been a dependable and critical funding partner for financial institutions large and small, supporting community lenders who in turn support local businesses, households, and families.
The FHLBanks are also key supporters of affordable housing and community development initiatives. Since 1990, we have contributed more than $8 billion in affordable housing grants, and in 2024 alone, we expect to provide approximately $1 billion in support. We are one of the largest sources of private funding for affordable housing in the country. Working with thousands of members and housing partners, the FHLBanks play a crucial role in the economic health of our communities, delivering measurable impact and, most importantly, hope. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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