| | | | |  | | By 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.
| | Rumors of the labor market’s imminent decline have been greatly exaggerated for some time. Barring an act of God over the next 10 days, Donald Trump will inherit a healthy domestic economy from Joe Biden; affording his second administration an early, and valuable, political advantage that few non-incumbents are granted. Now, it’s up to him to keep the good times rolling. Later this morning, economists expect the Labor Department to report that the economy added 155,000 jobs in December; a solid, albeit unspectacular total. The consensus projection is that the unemployment rate remained flat at 4.2 percent — comfortably below the U.S.’s historical average — and that hourly wages outpaced inflation and climbed at an annual rate of 4 percent. If the final, full-month labor market report card for the Biden era is as steady as anticipated, it will create an even wider avenue for Trump to take credit for an economy that many Wall Street investors and analysts expect to remain favorable through the early days of his second presidency. He’s already started to use his bully pulpit at Mar-a-Lago to that effect, trotting out SoftBank CEO Masayoshi Son in December to pledge an investment of $100 billion that will go toward the creation of 100,000 jobs. DAMAC Properties of Dubai founder and chairman Hussain Sajwani — who has partnered with the Trump Organization on golf courses in the Middle East — made a similar $20 billion commitment to invest in U.S. data centers earlier this week. Ok, so what?: The danger for Trump will be if the economy’s performance falters even slightly from the sky-high expectations that investors have for his administration. There’s already evidence that the post-election euphoria that propelled the stock market to new heights has started to falter. The yields on 10-year Treasuries — a barometer for longer-term inflation expectations — rocketed this week as the president-elect doubled down on plans to slap tariffs on key allies. “Markets are all about how conditions come in relative to expectations,” said Unlimited Funds CEO Bob Elliott, who previously led research at hedge fund giant Bridgewater Associates. “One of the challenges that the new administration is facing from a markets perspective — and we know that they're very focused on market outcomes — is that essentially all the possible good work that they could do has already been priced in before they've shown up.” Furthermore, Trump may soon have to grapple with similar economic forces that bedeviled Biden for much of his administration. Trump repeatedly claimed that prices — and interest rates — would come down if he were elected back to the White House. But if the economy grows at a healthy clip and the labor market remains strong, it will weaken the Federal Reserve’s case for bringing down interest rates. It’s taken longer than expected for price growth to slow to the Fed’s annual 2 percent target. Central bank policymakers have already downshifted plans to lower borrowing costs in 2025. Trump’s agenda — which some economists believe will be inflationary — could also slow their pace. If that happens, Trump may soon have to reckon with rising bond yields and a jittery stock market. “The equity market is starting to have a little heartburn” over the potential that Trump’s agenda may prove inflationary — rather than stimulative – which would force the Fed to keep borrowing costs elevated, Brendan Walsh, a principal at the research firm Markets Policy Partners, told MM. “The normal way that you would keep the good times rolling will push rates higher, which will crimp the ability for good times to roll.” It’s FRIDAY — Whooooaaa, la da ta da…. If you’ve got news tips, suggestions or feedback, you can reach Sam at ssutton@politico.com.
| | The Labor Department will release the December jobs report at 8:30 a.m. … The University of Michigan’s Consumer Sentiment survey will be released at 10 a.m. … The SEC has a closed meeting at 10 a.m. … Mark your calendars — Your MM host and his colleagues will be heavily caffeinated on Jan. 16. That’s when the Senate Finance Committee is expected to hold a confirmation hearing on Trump’s Treasury pick, Scott Bessent, report Benjamin Guggenheim, Adam Behsudi and Michael Stratford. If confirmed, Bessent is poised to play a key role in high-pressure tax policy, debt ceiling and budget negotiations that will dominate the congressional calendar over the next several months. — Also on Jan. 16? Senate Banking will hold a hearing on Trump’s nominee to lead the Department of Housing and Urban Development, Scott Turner, at 10 a.m., Eleanor Mueller reports. End of an era — BlackRock, which has long been the face of corporate sustainability efforts, has withdrawn from the Net Zero Asset Managers initiative, an international group of asset managers that had committed to net-zero greenhouse gas emissions by 2050, The WSJ’s Jack Pitcher reports. In a letter to clients, firm Vice Chair Philipp Hildebrand wrote that BlackRock’s memberships in some climate-related organizations had “caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials.” — Corporate giants have been abandoning net-zero groups in droves as Trump prepares to return to the White House. JPMorgan Chase was the last of Wall Street’s megabanks t o ditch the Net-Zero Banking Alliance earlier this week. ICYMI, and for more context, check out Jordan Wolman’s reporting on Wall Street’s messy climate journey in The Long Game. Bowman’s comments on tailoring and consolidation — Fed Gov. Michelle Bowman, a leading candidate to replace Gov. Michael Barr as Vice Chair for Supervision, told the California Bankers Association on Thursday that it’s time to recommit to tailoring regulation of financial institutions. Barr’s initial Basel III endgame proposal, as well as new long-term debt requirements that would apply to all banks with over $100 billion in assets, would flatten requirements across large banks, she said, warning that approach could lead to “substantial industry consolidation.” “We should be cautious of these types of piecemeal regulatory proposals and instead think more holistically about the aggregate impacts as part of our process,” she said. Stunning, Heartbreaking — WaPo’s Julian Mark and Aaron Gregg: “The wildfires devouring neighborhoods in the greater Los Angeles area are on track to be the costliest blaze in U.S. history, according to analysts, who estimate total economic losses of as much as $150 billion.”
| | Finally, a footrace for reconciliation nerds— House and Senate Republicans have been squabbling over whether to tackle Trump’s big-ticket agenda items in “one big, beautiful bill” — which is Speaker Mike Johnson’s preference — or two separate pieces of legislation. Now, they’re going to try both, pitting the two chambers in a race to see who could show quicker progress, Jordain Carney, Jennifer Scholtes and Meredith Lee Hill report. House Financial Services takes shape — House Financial Services Chair French Hill (R-Ark.) has tapped Reps. Andy Barr (R-Ky.) and Ann Wagner (R-Mo.) to stay on as the chairs of the sought-after financial institutions and capital markets subcommittees, Eleanor reports. — And this would be big news for Fed watchers: Hill is also considering forming a new working group focused on monetary policy, three people with knowledge of the talks told Eleanor. — Eleanor also has the details on new subcommittee assignments on Senate Banking. Sen. Bill Hagerty of Tennessee will chair the National Security Subcommittee; Sen. Katie Britt (R-Ala.) will lead housing and transportation, Sen. Thom Tillis (R-N.C.) is heading up financial institutions; Sen. Mike Rounds (R-S.D.) will chair securities and insurance; Sen. John Kennedy (R-La.) leads economic policy and Wyoming Sen. Cynthia Lummis will chair the digital assets. First in MM: McBride, Kim introduce credit repair bill — Freshman Rep. Sarah McBride (D-Del.) will introduce her first bill today alongside Rep. Young Kim (R-Calif.), Eleanor reports. The legislation would make it harder for credit repair organizations to mislead customers, including by forbidding CROs to charge customers until six months after providing proof that their credit score has improved. “These CROs exploit legal loopholes to target cash-strapped Delawareans by charging large upfront fees based on false hopes," McBride, who will be the first freshman Democrat to introduce a bill this Congress, said. "Our bipartisan bill eliminates those loopholes."
| | | | Harder than it looks — Elon Musk, the world’s wealthiest man and one of Trump’s top advisers, admitted that he may come up short on his pledge to cut $2 trillion from the federal budget. Per POLITICO’s Andrew Howard, Musk told Stagwell CEO Mark Penn, a former adviser to President Bill Clinton, in a livestream conversation on X, that the final cuts may be closer to $1 trillion. — That would still be substantial. Trump’s allies in Congress will still have their work cut for them to find offsets depending on what’s included in the tax bill. The Committee for a Responsible Federal Budget on Thursday estimated that doubling the state and local tax (SALT) deduction cap to $20,000 — which could be a sweetener for Republicans in high-tax states like California and New York — would reduce revenue by $170 billion on top of the $3.9 trillion deficit impact that would result from an extension of Trump’s 2017 tax cuts.
| | BlackRock pushes for FDIC extension — BlackRock is asking the FDIC to push back its Jan. 10 deadline for the firm to agree to terms that would shape its ability to invest in FDIC-regulated banks. The months-long squabble over the so-called “passivity agreement,” which would give the FDIC oversight of the asset management behemoth’s investments in financial institutions, stems from concerns that BlackRock holds undue influence over the banks in its portfolio. Republican FDIC Director Jonathan McKernan has expressed concerns about how large index funds could push banks into environmental, social or governance (ESG) policies, while Consumer Financial Protection Bureau Director Rohit Chopra, who is also an ex-officio board member, has cautioned that firms like BlackRock and Vanguard wield “an extraordinary amount of power to impose their preferences and regulations on businesses throughout the economy” — even when they’re only “passive” investors. Vanguard signed a new passivity agreement with the FDIC on Dec. 27. In a letter to the agency obtained by POLITICO, BlackRock’s Head of Regulatory Affairs Brian Tecmire asked the FDIC to explain the “urgency with which you are approaching this matter and why you provided only a two-week period for us to review and agree to the terms of the proposed agreement.” He also requested clarity on the agency’s feedback to a draft term sheet that BlackRock had four weeks ago, which was “based on the terms of the Federal Reserve’s passivity agreement—which BlackRock and other investment firms have agreed to—and was meant to serve as a baseline for discussing a passivity framework that would work for both agencies.” The FDIC did not respond to a request for comment.
| | First in MM: Dems push Biden on Special Drawing Rights — Sens. Cory Booker (D-N.J.), Ron Wyden (D-Ore.), Bernie Sanders (I-Vt.) and Peter Welch (D-Vt.) are calling on Biden to support a new allocation of the International Monetary Fund Special Drawing Rights (SDRs) — a reserve asset that can be converted to government-backed money — to help developing countries mitigate the effects of slowing global growth and higher borrowing costs. Issuance of $650 billion in SDRs would “help to counteract the effects of a global slowdown, save many lives in developing countries, and preserve many U.S. export-related jobs — including manufacturing and union jobs,” they wrote, according to a copy of the letter shared with MM.
| | Our colleagues at Morning Agriculture scooped that Senate Ag ranking member Amy Klobuchar (D-Minn.) is planning to hire her legislative director, Lauren Santabar, to be her committee staff director, according to four people familiar with the matter. Santabar has been Klobuchar’s legislative director since 2022. | | | | Follow us on Twitter | | | | Follow us | | | | |
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