| | | | |  | | By Adam Behsudi and Sam Sutton | 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 International Monetary Fund sees a “robust, dynamic and adaptable” U.S. economy. But in its most recent assessment, it didn’t pull any punches on the weak points–most notably a ballooning deficit that needs to be addressed by, among other things, raising taxes among even lower-income earners. That tough remedy, and others such as relenting on protectionist trade policies, are unlikely to be embraced on either side of the political spectrum during an election year or beyond. IMF Managing Director Kristalina Georgieva sat down with Morning Money to explain what the U.S. needs to do to maintain its strong economic position. Pros can read the full interview here. On the political stakes of raising taxes to bring down the deficit: It is very important to start from the premise that the U.S. economy is performing so strongly that it gives some space to think about issues, like giving more attention to the deficit. [The economy] is performing very strongly, and it is very attractive for financial flows from outside the U.S. So you have this environment, and we are projecting that these conditions will remain in place for some years to come. Our policy advice is not for something to be done now or next year. It is to think about the next couple of years. What she had to say to Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell in a recent meeting: First, it was a message of gratitude for what they have done for the strength of the U.S. economy. Because not only is it good for the U.S. when you have the… economy performing well, it is good for the rest of the world. Number two, over the next months, a key, if not the key, issue will be how to balance a decision around interest rates, recognizing that if the move is too fast, it may go in the wrong direction. There could be a return of inflation. And if it is too slow, it might actually reduce the strength of this [economic] performance. With Chair Powell and Secretary Yellen, we talked about the indicators one needs to be careful to watch [and] how to make that call. On the timing of a rate cut during an election year: Central banks are independent for a reason. There is always one political process or another in any country, and yet they have to make decisions based on what data tells them is best for the country. So it’s the same here, the Fed has to assess what the data indicates. On Fed independence under another Donald Trump presidency: We never speculate about actions in the future, and we never speculate about decisions of people in their countries as to how they want the country to be run. I would say the principle we stand by is economies where central banks can take decisions based on data are better protected against the risks. On the changing consensus on trade: There is unquestionably significant change in the world economy, driven first by the evidence that in a more shock-prone world countries cannot be overly dependent on one source of supplies… We also have to recognize that in many advanced economies, there have been loss of jobs and opportunities related to low-cost producers moving in global markets on scale… This being said, we do need to ensure that there is openness in the world economy that allows smaller countries, less-developed countries, to see opportunities for themselves, and to allow everybody, especially poor people–poor people in poor countries, poor people in rich countries–to have access to lower-cost goods. That we are defending relentlessly. IT’S MONDAY — As always, send tips and suggestions to Sam at ssutton@politico.com or on Signal at 925.216.7576.
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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. | | | | | | | | | Monday … The ISM manufacturing index will be released at 10 a.m. … European Central Bank President Christine Lagarde will deliver opening remarks at the ECB’s 2024 Central Banking Forum in Sintra, Portugal, at 3 p.m. … Tuesday … Powell, Lagarde and Roberto Campos Neto, governor of the Banco Central do Brasil, will speak at a Forum on Central Banking event at 9:30 a.m. … Job openings for May will be released at 10 a.m. … Wednesday … New York Fed President John Williams will participate in a Forum on Central Banking discussion at 7 a.m. … The minutes of the Federal Open Market Committee’s June meeting will be released at 2 p.m. … Thursday … July 4 Independence Day holiday Friday … The Labor Department’s monthly jobs report will be released at 8:30 a.m.
| | Remain calm, all is well — President Joe Biden and his allies spent the weekend trying to convince the public and top donors that Thursday night’s debate performance was a speed bump rather than a brick wall. The editorial boards of The New York Times and Atlanta Journal-Constitution are calling on Biden to drop out of the presidential race. As the president and First Lady Jill Biden bounced from donor events in New York and New Jersey, New Yorker editor David Remnick published a column arguing that it would be “folly” for the Bidens “to insist on defying biology.” For its part, the campaign is urging the base to ignore what deputy campaign manager Rob Flaherty dubbed the “bedwetting brigade” and soldier on. There is a sense among donors of “air having been let out of the balloon,” New York State Democratic Party Chair Jay Jacobs told Morning Money. “But what I would say is — and there's a big ‘but’ to this — they do understand that the decision is up to Joe Biden. And if Joe Biden feels that he can do this, and he's going to run, then we're all going to get behind him. Because there’s no choice and there’s no standing on the sidelines with what’s at stake.” Bradley Tusk, a New York Democratic strategist and venture capitalist, said fundraising could be a moot point at this stage in the race. Both candidates have “100% name ID” and there is already an “insane amount available” for get-out-the-vote efforts, he wrote in an email: “Whether an undecided voter in Arizona gets 32 pieces of mail or 14 makes no difference.” Money still matters, of course. If it didn’t, the Bidens wouldn’t have spent the weekend courting high-dollar donors at hedge fund manager Barry Rosenstein’s Hamptons estate and Gov. Phil Murphy’s mansion in New Jersey. (The Biden campaign says it hauled in $26 million in grassroots donations since Thursday.) “I understand the concern after the debate,” Biden said at a Saturday fundraiser hosted by Murphy and first lady Tammy Murphy, per Lauren Egan and Myah Ward. “I get it. I didn’t have a great night, but I’m going to be fighting harder.” Those efforts haven't quashed speculation about who could take over the ticket should Biden heed calls to step aside. Even if that were to happen, it would “take a week or two to plan it,” one CEO told MM over the weekend. “Lots of moving pieces. Time will tell. [There is] not much information content in strong denials.” — What’s the mood among Trump’s allies? Big ticket donors were “already accelerating to Trump,” Point Bridge Capital founder Hal Lambert, an investor and Republican donor, said in an interview. “June’s going to be a massive haul.” — What about down-ballot races? Democrats are starting to worry about how Biden’s performance could hurt, the Wall Street Journal reported over the weekend. Former Bridgewater Associates CEO Dave McCormick, the Republican running against Democratic Sen. Bob Casey in Pennsylvania, dropped an ad on Sunday called “Bob Casey knew” that uses clips of Biden’s verbal stumbles. One Wall Street Democrat told MM that some donors may start directing their efforts toward securing a House majority as insurance against Trump, and keeping the Senate close.
| | The price of FICO — The company behind FICO scores, which are critical to most major credit decisions in the U.S., has raised the rate for obtaining a mortgage credit score by up to 500 percent since the fall of 2022, Katy O’Donnell reports. The spike is catching the attention of Washington policymakers like Sen. Josh Hawley (R-Mo.), who is urging the Justice Department to crack down on the company’s “monopolistic power over the credit scoring market.” Another student loan freeze — The Education Department suspended monthly student loan payments and interest for around 3 million borrowers after court rulings blocked elements of Biden’s new loan-repayment program, Michael Stratford reports. The administration had been relying on the plan as a safety net for Americans who had to resume student loan payments after a 3½-year Covid-related pause.
| | | | SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, our newsletter taking you inside pivotal discussions at the most influential gatherings in the world. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW. | | | | | | | | | The curious case of Chevron — The Supreme Court dealt federal agencies across the government a massive blow on Friday, killing off a decades-old legal doctrine that afforded them significant leeway when interpreting ambiguous laws. Wall Street’s top regulator may not be hit all that hard, however, several legal experts told Declan Harty. “It doesn’t matter that much for the SEC,” said Adam Pritchard, a law professor at the University of Michigan, “because I don’t think the SEC ever got a lot of deference under Chevron.” David Fredrickson, a longtime SEC attorney who is now at Covington & Burling, described the ruling as a “clear message” from the high court that the judiciary – not agencies – is in charge of interpreting the law. He added that the courts have been taking plenty of issue with SEC rules on other fronts, such as improper procedure. How extensive the fallout is from the court’s 6-3 ruling may not be grasped for a while. Yet, as Washington wrestles with the decision, the SEC could prove to be a harbinger for others in the government, said Tyler Gellasch, a former SEC attorney who now leads the Healthy Markets Association. “We already have a good preview — it’s the SEC, which effectively lost [deference] years ago at the hands of the Fifth Circuit,” Gellasch said. Still, Chevron’s death marks yet another curb in the yearslong campaign to check the administrative state's power. “This decision will help ensure that regulators stay in their lane and that the public has fair notice of their legal obligations,” former Labor Secretary Eugene Scalia, a prominent administrative law litigator, told Declan. “It is part of a much broader and important trend, in which the Supreme Court and lower courts are looking at agencies carefully to ensure they operate within the bounds of the Constitution and their governing statutes.”
| | Treasury’s crypto rule — The IRS finalized rules that will dictate how crypto brokers like Coinbase and Binance report sales of digital assets on their platforms, writes Benjamin Guggenheim. It ain’t over til it’s over — SEC Chair Gary Gensler’s crackdown on top crypto firms continued on Friday with a new lawsuit charging Consensys — a software development firm that deals in the popular Ethereum blockchain — for allegedly selling tens of thousands of unregistered crypto securities, Declan reports. — A federal judge also ruled that key elements of the SEC’s case against Binance, the world’s largest crypto exchange, can move forward, per Declan. Bitcoin miners target Senate races — The Bitcoin Voter Project — founded by Riot Platforms, Marathon Digital Holdings and CleanSpark, will launch digital ads in Ohio, Montana and Nevada to spotlight where congressional and presidential candidates stand on crypto issues, Eleanor Mueller reports. | | | | Follow us on Twitter | | | | Follow us | | | | |
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