Ruble resurrection pressures Biden

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Mar 31, 2022 View in browser   By Kate Davidson and Aubree Eliza Weaver Presented by Sallie Mae® 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 strength of Western sanctions leveled against Russia following its invasion of Ukraine were evident in the immediate, dramatic plunge of Russia's currency. That was then. Barely a month later, the ruble has staged a remarkable recovery, aided by furious interventions by Russia's central bank as well as rising oil and gas prices that have boosted its energy revenue, helping keep the currency afloat. That's putting pressure on the Biden administration to do even more to help undercut President Vladimir Putin's ability to finance the war, your MM host reported this morning. "The strength in the ruble is reinforcing the argument for those who think that we need to take greater steps on the energy side," said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security. "It's definitely increasing that political pressure." But but but — "Some current and former Treasury officials, foreign exchange traders and sanctions experts say the ruble's rebound doesn't necessarily mean the West's economic weapons are losing their punch. While there may be reason to escalate sanctions, the currency's comeback primarily reflects the extraordinary steps Russia's central bank has taken to stop the ruble's freefall, they say. It is not a sign of an improvement in the Russian economy or in Putin's hand. "Still, Russia's economic policymakers have responded, so it is now the West's turn to answer, said Daniel Glaser, the former assistant Treasury secretary for terrorist financing during the Obama administration. "'It's very hard to keep sanctions the same because the target will do things to adjust," Glaser said. 'So I do think it's important to keep the pressure on, and I think keeping the pressure on means increasing sanctions."   SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today.     Deputy Treasury Secretary Wally Adeyemo is in Europe this week trying to do just that. Adeyemo is meeting with his counterparts in London, Brussels, Paris and Berlin, to discuss efforts to coordinate sanctions. In a speech Monday in London, he said Western allies are planning new sanctions on more sectors of Russia's economy, including its military supply chains. "Now that our actions have blunted Russia's ability to use its central bank assets to prop up its economy and fund Putin's brutal war, we are going to increasingly focus our efforts on going after industries that are critical to Russia's ability to project power, purchase the military equipment necessary to continue the war effort, and invest in the other tools of repression that are a part of the Kremlin's playbook," he said. While there's been much focus on the oil and gas sector , there are plenty of ways the administration can ratchet up its program, said Edward Fishman, a former Obama State Department official who played a central role in crafting sanctions after Russia's 2014 invasion of Crimea, including escalating existing sanctions. For example, the U.S. could impose full blocking sanctions on more Russian banks, and cut more of them off from the SWIFT international payments system. It could also target major players in sectors beyond banking and defense, such as mining and metals, transportation or shipping. Fishman says: "The U.S. and Europe I do believe deserve a lot of credit for the solidarity and resolve they've shown on sanctions. The sanctions are clearly impacting Russia's economy dramatically. However, I think that we've stalled out a bit." Meanwhile, Treasury officials insist they aren't worried that the ruble rebound means the sanctions are less effective. Russians are fleeing the country and trying to pull their money out, businesses are shutting down and interest rates are soaring. The central bank has tried to halt the currency freefall by limiting Russians' ability to get rid of their rubles, with steps that are artificially inflating the currency. "We don't view this as demonstrating any kind of strength in Russia's economic outlook," one official said. IT'S THURSDAY — Victoria Guida will be your MM host tomorrow. Please make sure to send her your tips and ideas at vguida@politico.com or @vtg2 on Twitter, or to Aubree Weaver at aweaver@politico.com and @aubreeeweaver. A message from Sallie Mae®: When does a private student lender become more like an education solutions provider? When they help students search for scholarships and provide free resources like college savings calculators. When they help students make informed decisions by providing all loan and repayment choices before they commit. That's the difference between lending and responsible private student lending. And these are the reasons why Sallie Mae makes sense for students and parents.   Driving the Day February personal income, spending and inflation data released at 8:30 a.m. … New York Fed's Williams speaks at a New York Fed conference on "Charting an Equitable Recovery for All" at 9 a.m. … Senate Banking hearing on addressing the housing needs of America's seniors at 10 a.m. SEC TO CRACK DOWN ON BLANK CHECK COMPANIES THAT OVERPROMISE GAINS — Our Victoria Guida: "The Securities and Exchange Commission on Wednesday proposed a crackdown on blank-check companies known as SPACs, looking to give investors the power to sue if they're presented with too rosy a picture about future financial gains. "The popularity of special purpose acquisition companies surged in recent years — with some garnering high-profile endorsements by celebrities such as Shaquille O'Neal, Serena Williams and Alex Rodriguez — prompting the SEC to give the market closer scrutiny. SPACs have no business operations and their only purpose is to acquire a private firm to then list on a stock exchange — a process that allows that firm to bypass a costlier initial public offering." FIRST IN MM: HOUSE REPUBLICANS RAISE CONCERNS OVER CFPB ACTIONS ON FEES — GOP lawmakers are seeking more details from CFPB Director Rohit Chopra on the agency's January request for information on "junk fees" ahead of a House Financial Services hearing this morning on bank overdraft fees. "We agree consumer education and simplification of disclosures should be a priority. There is, however, always a cost associated with providing financial services and access to credit," committee Republicans wrote in a letter Wednesday , led by Rep. Patrick McHenry (R-N.C.). SITUATIONAL AWARENESS — Sen. Elizabeth Warren (D-Mass.) will be on NBC News' "Meet the Press Reports" with Chuck Todd at 10:30 p.m. tonight as part of a 30-minute episode on the future of cryptocurrencies. LITTLE OVER HALF OF EVICTION AID DISBURSED, TREASURY SAYS — Our Katy O'Donnell: "State and local governments have spent $24.7 billion in federal rental assistance — little more than half the total authorized by Congress — and made 4.7 million payments as of the end of February, according to data released by the Treasury Department Wednesday. "State and local programs have spent or obligated about 65 percent of the total aid, including $5 billion in funding that has been obligated but not yet dispatched, Treasury said." Speaking of pandemic aid to states — Local governments have trillions in federal Covid cash and no workers to pay, our Eleanor Mueller reports: "State and local governments are struggling to hire and retain workers amid a tight labor market, even as private-sector employment is reaching pre-pandemic levels." FDIC SEEKS COMMENT ON PROPOSED CLIMATE-RISK GUIDANCE — Our Jordan Wolman: "The Federal Deposit Insurance Corp. is seeking public comment on a set of draft principles that would provide guidance on how big banks should manage financial risk linked to climate change. "The agency said Wednesday that the proposed guidance is meant to address 'weaknesses' in how lenders identify, measure, monitor and control potential threats posed by global warming. While all institutions have risk exposure, the FDIC said, the principles are intended for institutions with more than $100 billion in total consolidated assets." AMERICANS ADDED $4.2T IN PANDEMIC SAVINGS SKEWED TO RICH — Bloomberg's Alexandre Tanzi: "American households had an extra $4.2 trillion of readily available cash at the end of last year compared with before the pandemic, after they received more government support and trimmed spending due to Covid curbs, according to the latest Federal Reserve data. "Savings increased to $14.7 trillion from $10.6 trillion at the end of 2019, the Fed data show. The biggest portion of that increase came in the form of checking-account deposits and physical cash, which soared to $3.9 trillion from about $1 trillion. … The windfall is piling up at the top of the income distribution. About two-thirds of the excess savings were accumulated by the highest 20 percent of earners, with $1.2 trillion of it held by the top 1 percent." BIG STOCK SALES ARE SUPPOSED TO BE SECRET, BUT ARE THEY? — WSJ's Liz Hoffman, Corrie Driebusch and Tom McGinty: "For years, something strange kept happening on Wall Street . Before a big shareholder could carry out plans to sell a slug of stock, the price dropped. It was as if other investors knew what was coming. It happened when Bain Capital sold shares of Canada Goose Holdings Inc., the maker of trendy parkas; when 3G Capital sold stock in Kraft Heinz Co.; when Apollo Global Management Inc. sold shares of Norwegian Cruise Line Holdings Ltd.; and when Alaska's state oil fund trimmed its stake in an artificial-intelligence software firm. "These transactions, known as block trades, are supposed to be a secret between the selling shareholders and the investment banks they hire to execute the trades. But a Wall Street Journal analysis of nearly 400 such trades over three years indicates that information about the sales routinely leaks out ahead of time — a potentially illegal practice that costs those sellers millions of dollars and benefits banks and their hedge-fund clients." MFA GOES TRANSATLANTIC — From our friends at Politico Influence: The Managed Funds Association, which represents the hedge fund industry, will open an office in Brussels, its first permanent office outside the U.S. The trade group has tapped Taggart Davis, who most recently was JPMorgan's executive director for government relations in Brussels, as managing director and head of EU government affairs. Davis also served as vice chair of the board of directors at the American Chamber of Commerce to the EU.   A message from Sallie Mae®:   Inflation Watch EVEN AS INFLATION BITES, CORPORATE PROFITS REMAIN FLUSH — AP's Stan Choe: "What's immune to high inflation? So far, the profits at big U.S. companies . Businesses are facing higher gasoline and heating bills, just like consumers, in addition to higher expenses for labor and raw materials. But unlike many middle- and lower-income Americans, they've been making more than enough extra income to cover the additional costs." INFLATION IN GERMANY, SPAIN REACHES RECORD LEVELS — NYT's Melissa Eddy and Raphael Minder: "High energy prices and snarled supply chains drove up inflation in Europe , with Germany hitting a level not seen in more than 40 years and Spain setting a similar record, with prices soaring nearly 10 percent."   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     MARKETS IN Q1: INVASION, INVERSION SHAKE WORLD ORDER — Reuters' Marc Jones: "Investors had hoped 2022 would be the year when the market recovery from COVID-19 finally got cemented and life started to feel a little more normal. Boy were they wrong . Russia's invasion of Ukraine combined with supercharged global inflation have ignited talk of new geopolitical and economic world orders, setting some staggering milestones in the process. A $10 trillion wipeout in world stocks followed by a $9 trillion recovery; a rout in bond markets; what is shaping up to be the strongest commodities rally since World War I; and the fastest rise in global interest rates in decades." FED'S GEORGE FAVORS 'STEADY, DELIBERATE' SERIES OF RATE HIKES — Bloomberg's Steve Matthews: "Federal Reserve Bank of Kansas City President Esther George said that policy makers should raise interest rates in the face of surging inflation, though the pace of hikes may need to be deliberate to monitor economic developments during the tightening. " HUAWEI FACES DILEMMA OVER RUSSIA LINKS THAT RISK FURTHER US SANCTIONS — FT's Ryan McMorrow, Anna Gross, Polina Ivanova, Kathrin Hille: "The last time western sanctions hit Russia after it annexed Crimea, President Vladimir Putin turned to Huawei to rebuild and upgrade the territory's communication infrastructure. Now the controversial Chinese technology company is positioned to aid the Putin regime on a much larger scale, despite the threat of Washington hitting it with more sanctions." A message from Sallie Mae®: What makes Sallie Mae different from other private student lenders and federal student lending? We help students search for scholarships and provide free resources like college savings calculators and comparison tools. We help students make informed decisions by providing all loan and repayment choices to them before they commit. And last year, less than 2% of our loans defaulted. These are the differences between lending and responsible private student lending. And these are the reasons why Sallie Mae makes sense for students and parents.     Follow us on Twitter Mark McQuillian @mcqdc Kate Davidson @KateDAvidson Aubree Eliza Weaver @aubreeeweaver Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary   Follow us

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