| | | | | |  | | 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. NEW YORK — New capital requirements are coming. They could hit bank loan books just as credit markets actually start to tighten, Bank of America CEO Brian Moynihan said Wednesday. “It's fairly straightforward,” Moynihan said at an event at Bloomberg’s headquarters in New York. “If our capital ratios go up by 100 basis points. We basically — simply put — can’t make about $150 billion in losses.” (For context, BofA’s loan and lease balances were around $1 trillion at the end of the first quarter.) Now, to be sure, Moynihan has also said recently that it has gotten harder for borrowers to take out loans as credit conditions tighten and that banks have less capacity to lend in the aftermath of the regional banking turmoil. On top of that, with BofA still projecting a recession sometime in the next nine months or so, “companies are just being a little bit more careful,” he said. Still, his commentary about what the new upholstery on his capital cushion might do to his bank’s loan book will be welcome news to institutional investors and Wall Street asset managers who’ve been licking their chops at the profits they stand to make as banks pull back from commercial lending markets. Those firms typically issue or purchase loans through privately raised investment vehicles that aren’t subject to the same regulations as banks — much to the chagrin of bankers — and were already experiencing a boom well before Federal Reserve Vice Chair Michael Barr announced his intention to raise capital requirements. Stepping up oversight of these so-called shadow banks is a big reason why the Financial Stability Oversight Council moved to reverse Trump-era rules that made it harder to beef up oversight of big nonbanks. Treasury Secretary Janet Yellen cited nonbank lending activity as a potential risk at a National Association for Business Economics conference earlier this year. Just as importantly, the credit conditions that could carve out new opportunities for asset managers come with some real risk. A lot of the industry’s “growth has happened in a period where we've not had a good old fashioned credit crunch,” PGIM CEO David Hunt said at Wednesday’s event. “There will be a shakeout.” IT’S THURSDAY — Send tips, gossip and suggestions to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com.
| | A message from the American Bankers Association: Some in Congress want to end popular credit card reward programs. The so-called Credit Card Competition Act would impose unnecessary routing restrictions on credit card transactions, forcing an end to card reward programs including cash back and travel points. Don’t let the big-box retailers and lawmakers pushing this legislation take away your hard-earned rewards. Learn more and take action. | | | | | Senate Finance has a hearing on "Consolidation and Corporate Ownership in Health Care” at 10 a.m. … Sen. Mark Warner , (D-Va.), Deputy Treasury Secretary Wally Adeyemo and Senate Finance ranking member Mike Crapo (R-Idaho) will make an announcement about extending capital to underserved communities at noon … The SEC has a closed meeting at 2 p.m. A note for Khan/Kanter — Bloomberg: “Companies looking to do any kind of merger deal these days have to be prepared for pushback from antitrust regulators, according to JPMorgan Chase & Co.’s top M&A banker. ‘Litigation in takeover situations has increased by about ‘four times,’ Anu Aiyengar, global head of M&A at JPMorgan, said at the conference. ‘This is a new environment,” Aiyengar said. “How do we deal with the unknown? That’s a little bit of what the regulatory environment is — dealing with the unknown.’” Rinse, wash, Durbin — Eleanor Mueller reports that Senate Majority Whip Dick Durbin and Sen. Roger Marshall (R-Kan.) on Wednesday revived their bill to crack down on credit card swipe fees — enlisting a pair of bipartisan backers, Sens. J.D. Vance (R-Ohio) and Peter Welch (D-Vt.), to their efforts. The bill, which would force banks to offer merchants at least two networks for handling credit cards, faces widespread opposition from Wall Street groups like the American Bankers Association, Independent Community Bankers of America and the National Association of Federally-Insured Credit Unions – who’ve cast the bill as a giveaway to large retailers. Tarbert to Circle — Former CFTC Chair Heath Tarbert is stepping down from Citadel Securities to join Circle, a stablecoin issuer that’s been leading the crypto industry’s efforts to pass legislation to regulate dollar-pegged digital tokens. He will start as Circle’s chief legal officer and head of corporate affairs on July 1. “I’ve long been intrigued by both [Circle co-founder and CEO] Jeremy Allaire’s vision of moving money safely at internet speed and Circle’s tangible accomplishments as a respected, trusted global leader in payments with a regulatory-first approach,” he said in a statement. — Another former CFTC commissioner is pivoting to a role outside the crypto industry. Mark Wetjen, a former acting chair who went on to be one of Sam Bankman-Fried’s top advisors in Washington at FTX, is now a senior advisor at Patomak Global Partners, Zach has learned. Rest in peace — William Spriggs, the chief economist for the AFL-CIO and a familiar name to MM readers, died Tuesday night. “His work has impacted a generation of economics and workers around the world and his legacy will live on for lifetimes to come,” the AFL-CIO said. Biden’s statement: “Bill was a towering figure in his field, a trailblazer who challenged the field’s basic assumptions about racial discrimination in labor markets, pay equity, and worker empowerment.” Stay safe — Our Sean Reilly: The toxic haze blanketing the East Coast is “the latest manifestation of a trend that those regulators are effectively helpless to confront in the short term: bigger and longer-lasting wildfires linked to the effects of climate change.”
| | | | A message from the American Bankers Association:   | | | | | Miffed or MiFID? — Our Declan Harty: “SEC Chair Gary Gensler is not budging in the face of Wall Street's calls for an 11th-hour extension to relief from U.S. investment research rules. Financial industry trade groups have been pushing the SEC and Congress to keep allowing U.S. banks and brokers to separately bill investors for trading and research without having to register as investment advisers — a move they say could stave off a shake-up in the U.S. investment research business.” — Also from Declan: “The SEC on Wednesday finalized a pair of rule changes intended to thwart fraudsters and empower compliance executives operating in the $8.5 trillion security-based swaps market.” Binance — NYT’s Emily Flitter and Matthew Goldstein: “In court filings, the S.E.C. accountant, Sachin Verma, detailed a tangle of transactions that companies associated with the giant cryptocurrency exchange had made through two banks: Silvergate Bank and Signature Bank, both of which failed this year.”
| | A message from the American Bankers Association: Like millions of Americans, you’ve probably used credit card points to book a vacation or save on a tank of gas. These card benefits could soon vanish if some in Congress have their way. Backed by mega retailers, the so-called Credit Card Competition Act would hurt competition in the market and pad the bottom lines of the big-box stores. The misguided proposal would impose government mandates on credit card routing networks and eliminate the funding that credit cards use to pay for popular perks. Tell Congress you don’t want to lose your rewards. | | | | | BlackRock fields an attack on ESG — Boaz Weinstein, the chief investment officer of Saba Capital Management, used an appearance at Wednesday’s Bloomberg event to detail his activist broadside against a trio of funds managed by BlackRock— including an ESG vehicle. “With respect to stripping shareholder rights, banning shareholder proposals — which they've done — it puts them on the ‘G’ side of governance as the worst company in the S&P 500,” said Weinstein, who’s a prolific Democratic donor. That’s not the only ESG story — Bloomberg’s Saijel Kishan profiles Will Hild, the executive director of anti-ESG lobbying group Consumers’ Research, as he undertakes a campaign against Bank of America: Hild “works behind the scenes crisscrossing the nation to lobby Republican state officials to take up the cause, but Hild is equally comfortable being out front—sending bombastic text messages about the evils of ‘woke’ corporations or making media appearances touting ESG as a threat to America.” More BlackRock — Pensions & Investments’s Sophie Baker: “Xiaodong ‘Tony’ Tang, head of BlackRock China, is leaving the firm to explore other opportunities … Mr. Tang ‘expressed an interest in exploring opportunities outside BlackRock,’ the email said. Details on his future plans could not immediately be learned. There is no change to the firm's strategy or commitment on China.” What’s driving the bull run? — It’s really eight megacap tech stocks, writes The WSJ’s James Mackintosh: “These stocks account for the shift from a bear to a tentative new bull market. And their resurgence comes alongside significant shifts in market behavior, especially when it comes to interest rates. In particular, the megacap stocks no longer seem to care what the Federal Reserve does.”
| | | | GET READY FOR GLOBAL TECH DAY: Join POLITICO Live as we launch our first Global Tech Day alongside London Tech Week on Thursday, June 15. Register now for continuing updates and to be a part of this momentous and program-packed day! From the blockchain, to AI, and autonomous vehicles, technology is changing how power is exercised around the world, so who will write the rules? REGISTER HERE. | | | | | | | | Canada — Reuters’s Steve Scherer and David Ljunggren: “The Bank of Canada on Wednesday hiked its overnight rate to a 22-year high of 4.75%, and markets and analysts immediately forecast yet another increase next month to ratchet down an overheating economy and stubbornly high inflation.” Maybe cooling? — Bloomberg’s Alexandre Tanzi: “Wage growth in US job postings has been softening for more than a year now, and at the current rate it could return to pre-pandemic levels by early 2024, according to Indeed Hiring Lab.”
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