| | | | |  | | By Sam Sutton | | 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.
| | Welcome to Election Day. Will we know who the next president is by the time you open tomorrow’s Morning Money? That’s anyone’s guess (or anyone’s bet). But given the likelihood of a contested outcome, investors are bracing for political tumult between now and Inauguration Day. Credit rating agencies have warned that the U.S.’s polarized political ecosystem and contested elections could threaten the government’s ability to address looming fiscal challenges and rising government debt. The long-term consequences are potentially severe: Future downgrades of the country’s credit rating could shake the market’s faith in the world’s deepest and most liquid debt market, putting upward pressure on borrowing costs for governments and consumers. But those are long-term concerns. In the short term, any chaos around the vote would likely push down interest rates as investors move into safer assets if Donald Trump and Kamala Harris end up duking it out in state house or court battles. And what’s safer than U.S. government debt? “The longer the time period where you don’t know [the outcome], the more volatility there will be to the fixed income market,” Leslie Falconio, the head of taxable fixed income strategy at UBS’s Chief Investment Office in the Americas, told MM. “That will push yields lower because there’s a ‘flight to quality’ in that type of situation.” When demand for U.S. government securities rises, yields fall. The market’s reaction if Trump or Harris challenges the outcome would likely be similar to what occurred when the S&P downgraded the U.S. in 2011. Even though the ratings agency identified new risks for U.S. debt instruments, Treasury yields tumbled. Since those yields are used to price borrowing instruments from credit cards to mortgages, that should translate into lower interest rates. (Rates could fall further still on Thursday if Federal Reserve Chair Jerome Powell announces another cut, which is widely expected.) And given the extent to which Trump has laid the groundwork to challenge the outcome if he loses, markets are less likely to react severely if the results aren’t known for days or weeks, Falconio said. “The clearer shock would be if we did have a clear winner on Nov. 6, given how close this race is,” she added. IT’S ELECTION DAY — What shocks should be keeping an eye out for? As always, send your tips and news to Sam at ssutton@politico.com.
| | | | A message from BPI: Correcting the Record on the CFPB’s “Open Banking” Rule — MYTH: The CFPB’s Section 1033 rule will “sunset” screen scraping, which allows fintechs to indiscriminately collect consumer data. FACT: Wrong. The CFPB suggests it could regulate screen scraping in the future under its existing authority; however, the final rule doesn’t legally prohibit screen scraping practices. Many data aggregators will continue to rely on unsafe practices like screen scraping to obtain account and transaction data. Learn more: KeepBankingSafe.com. | | | | | | The Commerce Department will report the U.S. trade deficit for September at 8:30 a.m. … The ISM Services index for October will be released at 10 a.m. … Why the race is so tight — Inflation has been the dominant issue of the 2024 campaign. Even as price growth normalizes, prices are still rising faster in Detroit, Philadelphia and other cities in key battleground states than they are nationally, according to POLITICO’s Taylor Miller Thomas and Victoria Guida. The cost of living in Atlanta, Phoenix and Detroit grew more than the U.S. city average during Joe Biden’s presidency. “I used to have an actual plan in place, a budget,” said LaQuitta Brown , a 45-year-old Detroit resident. Now, she said, it’s hard to predict how much they’ll spend on food. “You have to make a sacrifice here, you have to make a sacrifice there. It depends what’s on sale.” — Kelsey Tamborrino and Jessie Blaeser: “A wave of private energy spending is coming — but may be too late to help Democrats” Waters eyes another shot at the gavel — House Financial Services ranking member Maxine Waters (D-Calif.) is lining up a pragmatic House Financial Services Committee agenda for next year that could ally her with GOP lawmakers — and pit her against other progressives — on issues like cryptocurrency, investing and lending, Eleanor Mueller reports. "It's going to take more interaction, more communication, and less attacks that we do on each other," Waters said during an hour-long interview in her Capitol Hill office. Her GOP counterparts say they take her at face value. “You have an opportunity to compromise and get something done,” said Rep. Andy Barr (R-Ky.), a top contender to replace retiring House Financial Services Chair Patrick McHenry (R-N.C.) who is pitching himself as a conduit between the committee and Trump. It won’t be easy. Pursuing the compromises she has floated may earn Waters pushback from progressive voices, including Sen. Elizabeth Warren (D-Mass.). She’ll also have to bring along other House Democrats who are skeptical that she’ll be willing to use her political capital to broker centrist policy — particularly under a second Trump administration. "If Trump wins the presidency, I know what she's going to do for four years: ‘Reclaim her time [and] get on coffee mugs,” said one House Democrat, who was granted anonymity to speak candidly. First in POLITICO — Zach Warmbrodt reports that Republican staff of the House Small Business Committee are recommending Congress strengthen requirements for how Washington recoups money on government-backed loans after reviewing how the SBA handled collections on Covid-era credit. Committee investigators in a new report say the SBA failed to conduct adequate cost-benefit analysis when it decided to pause certain debt-collection efforts on delinquent pandemic loans in 2022 and 2023.
| | How markets are bracing — Treasury yields fell as did dollar indexes and financial stocks on Monday as traders reckoned with new polls suggesting Harris might have the advantage over Trump, according to The WSJ. But another element of Wall Street’s so-called “Trump trade” — the oft-covered parent of his social network, Truth Social — was up at market close. — Marriott International Inc. Chief Financial Officer Leeny Oberg told analysts on Monday that a key measure of hotel demand will decline in November by “double that of past election cycles,” according to Bloomberg’s Patrick Clark. — Speaking of Truth Social, per ProPublica’s Robert Faturechi, Justin Elliott and Alex Mierjeski: “Former President Donald Trump’s social media company outsourced jobs to workers in Mexico even as Trump publicly railed against outsourcing on the campaign trail and threatened heavy tariffs on companies that send jobs south of the border.” Another Trump 2.0 Trade – A team led by Piper Sandler’s Michael Kantrowitz has put together a basket of stocks that could feel the pinch if Trump wins and taps Tesla CEO Elon Musk to carve $2 trillion from the federal budget, Bloomberg’s Alexandra Semenova reports. How PE execs are feeling — After favoring Democrats over the previous three cycles, The WSJ’s Chris Cumming reports that political contributions from private equity executives tilted toward the GOP this year. The shift reflects frustration with Biden-era policies toward the industry. — Meanwhile: “Is anyone else on pins and needles waiting for the election to find out what flavor of terrible president we’re going to get?” Cliff Asness, the founder of hedge fund AQR Capital Management, posted on X on Monday.
| | | | A message from BPI:   | | | | | SALT fight incoming — The cap on state and local tax deductions that enraged lawmakers from high-tax states will expire next year. Neither party has a strategy for how to deal with it, The WSJ’s Richard Rubin reports. “There’s a natural landing pad for a deal,” said former New York Republican Rep. Tom Reed, suggesting a version of a cap that would hit very few households. “It’s just going to take a lot of theater and political gamesmanship to get there.”
| | | | REGISTER NOW: Join POLITICO and Capital One for a deep-dive discussion with Acting HUD Secretary Adrianne Todman, Rep. Darin LaHood (R-IL), Rep. Ritchie Torres (D-NY) and other housing experts on how to fix America’s housing crisis and build a foundation for financial prosperity. Register to attend in-person or virtually here. | | | | | | | Closing message — Trump on Monday threatened to impose tariffs as high as 100 percent on imports from Mexico until it closed off its border with the United States, WaPo’s Jeff Stein reports. “If they don’t stop this onslaught of criminals and drugs coming into our country, I am going to immediately impose a 25 percent tariff on everything they send into the United States of America,” Trump said at a rally in Raleigh, N.C. “You’re the first ones I’ve told it to.” “If that doesn’t work, I’ll make it 50, and if that doesn’t work, I’ll make it 75,” he said. “Then I’ll make it 100.”
| | Adam Minehardt has joined the regulatory advisory firm FS Vector as a principal. He was previously the head of global government relations at the Stellar Development Foundation (SDF). POLITICO Influence reports that Brad Bailey, a former aide to two Republican speakers of the House, has joined private equity giant KKR as a managing director on its public policy team. Bailey spent the past five years at the American Investment Council, the private equity industry’s main trade group, most recently serving as senior vice president of government affairs.
| | | | A message from BPI: Banks support a regulatory framework that fosters competition and safeguards consumer interests. The CFPB’s latest rulemaking, known as Section 1033, jeopardizes consumers’ privacy, financial data and account security.
Banks have raised several key concerns with the CFPB rule:
· It requires no oversight of third parties using bank customer data.
· It increases the likelihood of fraud and scams by failing to address weak safeguarding practices.
· Screen scraping and other unsafe practices are allowed to persist.
· It fails to hold third parties accountable.
· It allows third parties to profit, at no cost, from systems built and maintained by banks.
· It imposes an unreasonable implementation timeline.
Learn more at KeepBankingSafe.com. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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