| | | | |  | | By Sam Sutton | | Presented by |  | | | | | Chancellor of the Exchequer Rachel Reeves is calling on top U.S. financiers and investors to back U.K. projects as part of a broad Labour Party effort to reignite the country’s dormant economy. One hiccup: She’s also grappling with a 22-billion-pound shortfall that forced massive cuts less than a month into her chancellorship. Meaningful tax hikes could be on the table when she presents her budget on Oct. 30 — though changes to the income, national insurance and corporate rates are off-limits. Even as the country’s economic growth forecast improves, interest rates fall and inflation fades, Reeves is juggling a policy agenda that pledges to kickstart the U.K. economy at the same time she’s reckoning with massive, “difficult decisions” on spending and revenue. “[I’m] very conscious that we don't do anything that cuts across the growth agenda,” she told MM in an interview at the New York office of Barclays this week. “So we'll be looking at any changes through that prism: How do we grow the U.K. economy? How do we bring in the investment?” Reeves’ itinerary in New York included meetings with major bank CEOs like Robin Vince of BNY, Jane Fraser of Citi and Richard Haworth of Barclays Americas. She also met with Blackstone Group Chairman and CEO Stephen Schwarzman, who heads the largest private equity and real estate investment firm in the world, and Yie-Hsin Hung, the CEO of State Street’s investment management arm. There are elements of her agenda that investors are likely to appreciate. Reeves has already unveiled a new 7.3 billion wealth fund to help finance clean energy and infrastructure projects. Reeves has also announced reforms intended to spur housing construction and reviews of the pension and investment market. Her New York outreach — and her framing of the importance of private investment to Britain’s growth trajectory — has boosted confidence around Wall Street that Prime Minister Keir Starmer’s government is more pro-business than some may have assumed. Then again, she also wants to raise taxes on private equity profits to fund a 500-million-pound mental health initiative for the National Health Service. The government launched a consultation to “take action in respect of the ‘carried interest’ loophole” on July 29. “We want to make sure that these changes are done in a business-friendly way,” she told MM. Here’s what else Reeves had to say: What tax hikes are off the table: “In our manifesto, we had some clear commitments around tax. Taxes on working people are already too high. We've committed not to increase income tax, national insurance or VAT for the duration of this Parliament. And to give business confidence, we have also committed not to raise corporation tax for the duration of this Parliament.” On the U.S. election and the possibility of new Trump tariffs: “The U.S. is our number one export market, our biggest single trading partner. So we would, of course, from an economic perspective — and from my perspective as chancellor — continue to strengthen those relationships. Whether it's in foreign direct investment or other trade opportunities, exports and imports, we work with whoever is in government.” On Treasury Secretary Janet Yellen: “Both of us are keen to ensure that our economies work better for women, increasing the participation rate of women in the economy, and improving access to things like child care. But also in the U.K. — through things like women in finance, getting more women into good jobs in the City and in financial services, those are important priorities of mine, and things I had a chance to talk to Treasury Secretary Yellen about a couple of weeks ago. Whoever wins the next election here in the States — and with whoever is the Treasury secretary — I want to continue that dialogue and that really important relationship.” Pro Subscribers can read the full Q&A with Reeves here. IT’S THURSDAY — Got tips? Email me at ssutton@politico.com.
| | A message from the Georgetown Psaros Center for Financial Markets and Policy: The Georgetown Psaros Center for Financial Markets and Policy’s annual Financial Markets Quality (FMQ) Conference will convene leaders at the intersection of finance and policy on September 17. This year’s panels will discuss market structure, innovation in ETFs, financial regulation, and crypto in the financial markets. Learn more about FMQ’s schedule by visiting the Georgetown Psaros Center website. | | | | | Weekly initial jobless claims data will be out at 8:30 a.m. … Wholesale inventories for June will be out at 10 a.m. … Richmond Fed President Tom Barkin speaks at a National Association for Business Economics webinar at 3 p.m. Ripple’s expensive victory — A federal judge ordered Ripple Labs to pay more than $125 million for violating investor-protection rules with certain sales of its XRP crypto token, Declan Harty reports. It’s the culmination of one of the longest-running and most watched cases in the SEC's ongoing crypto crackdown. — Ripple CEO Brad Garlinghouse posted on X that the company respects the court's decision, calling it a "victory for Ripple, the industry and the rule of law." Jobless claims — Morning Money doesn’t typically spill much ink on weekly jobless claims. It can be a volatile metric for measuring the health of the labor market. But “jobless claims are basically a confirmation of what other parts of the whole labor market constellation is telling us, which is that there is a slowdown in hiring,” Preston Mui, a senior economist at Employ America, told your host. It’s “often proven to be an advance warning sign — not a perfect one, but pretty good.” “Pretty good” becomes “pretty important” when there’s this much uncertainty around the labor market, and what further softening could portend for the overall economy. Initial claims have been trending higher since the start of the year. Markets reacted poorly when weekly claims came in higher than expected last week and have remained turbulent since. Though still unlikely, banks like Goldman Sachs and JPMorgan Chase are raising their estimated likelihood of a recession. Market participants and Fed officials alike will be watching today’s claims data for any signs of weakness. “The market is still going to continue to really focus on the data and then come to their own conclusions with regard to how the Fed responds in September,” Seema Shah, the chief global strategist at Principal Asset Management, told MM. “If you were to see, for example, a continued, sustained drive in jobless claims,” followed by a weak August employment report, then the Fed “would respond as need be, which would likely imply a 50-basis-point cut.”
| | First in MM: Treasury tells FHLBs, you’re either with us or against us — Deputy Treasury Secretary Wally Adeyemo on Wednesday warned the chair of the Federal Home Loan Bank’s board of directors that the Biden administration is willing to back legislation that would force the bank’s hand if it doesn’t commit to spending 20 percent of its net income on affordable housing, Katy O’Donnell reports. “It would be great to work in partnership with the FHLBs to help address the need for additional housing,” Adeyemo wrote to board chair Eric Chatman in a letter shared exclusively with MM. “But if you are unable or unwilling to use your more than $20 billion in resources to help address our nation’s housing challenges, we will need to work with Congress to ensure the FHLBs are taking steps that are consistent with their mandate.” Adeyemo also urged the bank to “use a portion of your existing pool of unrestricted retained earnings to create a pool of capital that can lower the cost of new housing production across the country.” Wednesday’s letter follows a call Adeyemo held with FHLB executives last week. Sens. Elizabeth Warren (D-Mass.) and Catherine Cortez Masto (D-Nev.) and five other Senate Democrats signed letters to FHLB CEOs last Tuesday calling on the banks to up their affordable housing contributions. The FHLB system has come under harsh scrutiny in Washington in recent years, especially after revelations that they had loaned tens of billions of dollars to three banks that would fail in 2023. The 11 regional FHLBs are government-chartered cooperatives that control $1.3 trillion in assets. Their advances to their roughly 6,800 members, which include commercial banks and insurers, have first-lien status. The FHLBs agreed in May 2023 to voluntarily commit 15 percent of their net income to affordable housing and community development, up from the 10 percent currently required. Warren and Cortez Masto said the banks have so far failed to meet that pledge.
| | | | During unprecedented times, POLITICO Pro Analysis gives you the insights you need to focus your policy strategy. Live briefings, policy trackers, and and people intelligence secures your seat at the table. Learn more. | | | | | | | | | CFPB invokes ‘debanking’ debate in bid to fight discrimination — The CFPB on Wednesday night urged an appeals court to reject an industry challenge to its ability to police discrimination by financial firms. Part of the agency’s pitch to the conservative 5th Circuit Court of Appeals? Siding with the industry would prevent the CFPB from going after the “debanking” practices that conservatives have railed against, Michael Stratford reports. The CFPB is asking the appeals court to overturn a ruling by District Court Judge J. Campbell Barker last year that found that a new CFPB policy aimed at combating discrimination exceeded the agency’s power. At issue in the case is whether discrimination can ever amount to an “unfair” act or practice that is prohibited by the Dodd-Frank Act. In its brief, the CFPB said Judge Barker’s ruling was so broad it would stop the agency from combating discrimination that people “from across the political spectrum” consider improper. The bureau cited Republican attorneys general who have raised concerns about banks engaged in the “debanking” of conservatives or religious groups. “Under the district court’s logic, the Bureau could not even investigate this intentional religious discrimination to determine if it’s unfair,” the CFPB wrote in its brief. The bureau ticked off other hypothetical examples in which “a payments company refused to serve African Americans because of their race” or “a prepaid card issuer charged higher fees to men based on their sex.” The industry groups, which include the Chamber of Commerce and bank trade groups, who brought the case argue that the CFPB drastically and illegally expanded the type of conduct that’s prohibited by federal law. The groups will file their reply to the CFPB’s appeal in the coming weeks. Zelle investigation — The CFPB is also probing large banks for their handling of customer funds on the peer-to-peer payments platform Zelle, The WSJ’s AnnaMaria Andriotis, Alexander Saeedy and Andrew Ackerman report. Time to register — The Financial Crimes Enforcement Network is launching a new public service announcement campaign to educate small business owners on beneficial ownership reporting requirements. The deadline for most companies to file is Jan. 1, 2025. Political event contracts — Better Markets, Public Citizen and 21 other organizations and individuals filed a letter to CFTC Chair Rostin Behnam in support of the agency’s political event contracts proposal. The contracts “undermine the integrity of elections by introducing financial incentives that can drive manipulation and interference,” they wrote.
| | | | A message from the Georgetown Psaros Center for Financial Markets and Policy:   | | | | | Endorse and spend — A pro-crypto super PAC funded by industry firms on Wednesday endorsed a slate of 18 incumbent House lawmakers and pledged to spend $25 million across their races, Jasper Goodman reports. Pro-crypto Democrats rally behind Harris — DNC delegate Jonathan Padilla and others are planning a Crypto For Harris town hall next Wednesday evening as Democrats continue their fight to bring the nominee on board, Eleanor Mueller reports. The former head of blockchain strategy at Paypal now runs his own crypto startup, Snickerdoodle Labs. Confirmed speakers include investor Mark Cuban, former Trump aide Anthony Scaramucci, and Crypto Council for Innovation CEO Sheila Warren as well as Democratic Reps. Wiley Nickel of North Carolina and Darren Soto of Florida. Another pro-crypto Democrat, Rep. Ro Khanna of California, is slated to host a virtual roundtable this morning with crypto executives and National Economic Council Director Lael Brainard and White House deputy chief of staff Bruce Reed. The event was rescheduled from Monday, a person briefed on the plans told Jasper. Anita Dunn, who has left the White House, will not attend, another person briefed on the plans said.
| | | | 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. | | | | | | | | Peter Reid has joined Barclays as a Managing Director, Group Head of External Engagement. Reid was previously the director of strategic communications for the Secretary-General of the United Nations. Logan Dobson, a former senior aide to Sen. Cory Gardner (R-Colo.), has been named the executive director of Stand with Crypto, a nonprofit backed by the digital asset exchange Coinbase. Sabrina Siddiqui, a former Treasury spokesperson during the Obama administration, will oversee the group’s communications efforts.
| | A message from the Georgetown Psaros Center for Financial Markets and Policy: Join global experts and leaders at the Georgetown Psaros Center for Financial Markets and Policy’s annual FMQ Conference hosted on the Georgetown University campus. This year’s conference theme is Future of Financial Markets: Innovation and Uncertainty, where attendees will spend the day hearing from esteemed industry professionals and policymakers on a range of topics affecting the future of finance and policy.
From regulatory trends to technological advancements, FMQ 2024 offers unparalleled opportunities to network, collaborate, and gain actionable knowledge as panels will focus on market structure, innovation in ETFs, financial market regulation, and cryptocurrency.
Don't miss this opportunity to gain valuable perspectives from leaders at the forefront of shaping global financial practice and policy. Secure your place at FMQ 2024 and be at the forefront of shaping the future of financial markets. Register to reserve your spot today. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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