| | | | | |  | | By Victoria Guida and Zachary Warmbrodt | Presented by Structured Finance Association | 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. Federal Reserve policymakers are all but guaranteed to raise interest rates on Wednesday, and don’t count them out for more. Markets are giving healthy odds that today's expected hike will be the central bank’s last, given the latest 3 percent print of the consumer price index. But for now, it looks like the threat of another increase will be hanging over the remaining meetings this year. San Francisco Fed President Mary Daly, in an interview with CNBC after the CPI numbers came out, said two more hikes (this would include July) was still a “reasonable projection.” And Fed Chair Jerome Powell has made clear that the central bank is determined to get all the way back to 2 percent inflation, even if it takes a couple of years to get there. In an article out this morning, your MM host talks about why this battle has become increasingly controversial. Namely, it’s non-housing services inflation that’s particularly giving Fed officials agita, and the central bank can’t control where its rate increases hit hardest any more than we can selectively choose where on our body to lose weight. “Could they crush the economy? Absolutely,” said Norbert Michel, director of the libertarian Cato Institute’s Center for Monetary and Financial Alternatives. “But why the hell would you do that?” (Michel and Cato’s Jai Kedia argue in a blog post that services inflation is driven principally by supply issues that the Fed can’t control.) Omair Sharif of Inflation Insights made a similar point, noting that a large chunk of excess services inflation has actually come from the transportation sector — especially auto insurance and repair. Those are both primarily driven by supply-side issues, which the Fed does not control, he said. So how much does the Fed need to whack services to get to 2 percent inflation? That’s another tricky question. Over the past couple of decades, nonhousing services inflation has often been above 2 percent, while goods inflation has often been negative – and remember that before the pandemic, the Fed was worried about overall inflation being below 2 percent. So if goods inflation can get back to something like 0 percent, maybe services inflation doesn’t need to come down that much. But that’s an uncertain if. More from the story: “An analysis from White House economists found that roughly half of non-housing services inflation is sensitive to shifts in wages, suggesting that the Fed does have some ability to cool prices in those sectors. They also found that wage-sensitive services inflation lags trends in worker income by roughly 10 months.” Either way, it looks like it will be some time yet before we find out whether the Fed has well and truly achieved a soft landing. It’s Wednesday — What should we be asking lawmakers before we lose them for a month? Send tips.
| | | | A message from Structured Finance Association: Did you know? Securitization serves all kinds of markets, even those traded on iTunes! Music royalties from artists like Miles Davis, Otis Redding, James Taylor, Phil Collins, R.E.M, Stevie Nicks, Isaac Hayes, Cyndi Lauper, and Pink Floyd are secured by bonds issued by members of the Structured Finance Association. Learn more at www.structuredfinance.org. | | | | | | The CFTC votes on clearing and margin-related rules at 9:30 a.m. … House Financial Services votes on crypto and illicit finance bills at 10 a.m. … The SEC votes on rules including cybersecurity safeguards at 10 a.m. … Treasury Under Secretary Jay Shambaugh and State Under Secretary Jose Fernandez testify on U.S. economic security at Senate Foreign Relations at 10 a.m. … The Fed is expected to announce a rate hike at 2 p.m., followed by a press conference from Powell … Another merger to shore up the banks — Banc of California has agreed to buy PacWest, as the midsize lenders struggle to recover from industry jitters. PacWest has been among the most prominent of the wobbly banks this year, losing deposits and seeing its share price fall. FTC preps lawsuit that might break up Amazon — Our Josh Sisco scoops that the FTC is finalizing a long-awaited antitrust case against Amazon and will likely challenge a host of its business practices. If successful, the lawsuit could prompt the restructuring of the $1.3 trillion tech giant and define the legacy of FTC Chair Lina Khan. She rose to prominence with a 2017 academic paper identifying Amazon as a monopolist.
| | | | YOUR TICKET INSIDE THE GOLDEN STATE POLITICAL ARENA: California Playbook delivers the latest intel, buzzy scoops and exclusive coverage from Sacramento and Los Angeles to Silicon Valley and across the state. Don't miss out on the daily must-read for political aficionados and professionals with an outsized interest in California politics, policy and power. Subscribe today. | | | | | | | | One less headache for Biden — UPS and the Teamsters agreed to a tentative contract, averting an economy-crippling strike that loomed as soon as Aug. 1. IMF turns more upbeat on global outlook — The IMF’s chief economist tells the FT that the risk of a crash landing for the global economy has receded, with the organization predicting 3 percent growth this year. The forecast is 0.2 percentage points higher than what the IMF predicted three months ago. The IMF now expects the U.K. to avoid a recession and believes the odds of a U.S. soft landing have increased. “Things are moving in the right direction,” the IMF’s Pierre-Olivier Gourinchas said. Raimondo appearance derailed by climate protest — Our Ari Hawkins reports that a demonstration by a climate action group forced Commerce Secretary Gina Raimondo off stage at an event Tuesday. Raimondo was abruptly removed by staff but continued a fireside chat in another room with tightened security.
| | | | A message from Structured Finance Association:   | | | | | Housing advocates warn regulators about hiking bank capital — The National Housing Conference, the NAACP, the National Urban League, the Mortgage Bankers Association and the National Association of Realtors are urging regulators to not raise bank capital standards for bank-originated mortgages with down payments below 20 percent. “If these standards are adopted, they will have a devastating impact on our efforts to increase Black homeownership and disadvantage all first-time, and, in particular, first-generation homebuyers who do not have the benefit of multi-generational wealth or higher than average incomes,” they said in a letter to the Fed, FDIC and OCC. The groups sent the letter as the Fed and FDIC plan to vote Thursday on revamping capital rules for the largest banks. Watchdogs challenge banker script on capital — Better Markets is out with a new fact sheet in which it tries to rebut bank executive and lobbyist arguments against forcing banks to tap more capital, describing the talking points as “a smokescreen to conceal their self-interest in keeping the amount of capital as low as possible to keep their bonuses as high as possible.” “There is no evidence banks have ever been overcapitalized and there has never been a banking or financial crash caused by banks that had too much capital,” the group said.
| | | | JOIN 7/27 FOR A TALK ON WOMEN LEADERS IN THE NEW WORKPLACE: In the wake of the pandemic, U.S. lawmakers saw a unique opportunity to address the current childcare system, which has become increasingly unaffordable for millions of Americans, but the initial proposals went nowhere. With the launch of the Congressional Bipartisan Affordable Childcare Caucus in May, there may be a path to make childcare more affordable. Join Women Rule on July 27 to dive into this timely topic and more with featured speakers Rep. Nancy Mace (R-S.C.), Rep. Ro Khanna (D-Calif.) and Reshma Saujani, Founder & CEO of Moms First and Founder of Girls Who Code. REGISTER HERE. | | | | | | | | Republicans pitch more regulator funding ahead of crypto vote — Our Eleanor Mueller reports that House Republicans have agreed to potentially ramp up funding for a key regulator in their planned crypto policy revamp, as they try to win the support of Democrats at committee votes today and Thursday. Republicans on House Financial Services and House Agriculture — who are proposing a plan to divvy up crypto oversight between the SEC and the CFTC — would appropriate $120 million over five years for the CFTC to implement their bill, according to an update released Tuesday. Financial Services plans to vote on the bill today, followed by Agriculture on Thursday. Financial Services will also vote on stablecoin legislation Thursday. Rep. Warren Davidson, the No. 2 Republican on the House digital assets subcommittee, said he expects a bipartisan vote at Financial Services today after touching base with members Tuesday night. He declined to specify how many Democrats have pledged their support. “I'm encouraged,” he said. “I have a number in mind, but I don't really want to share it.” Elizabeth Warren: House crypto bill is DOA — Sen. Warren told Eleanor Tuesday that the House GOP bill that would overhaul SEC and CFTC crypto regulation is a "non-starter.” "I don't see how a bill like that makes it through," no matter how many House Democrats back it, Warren said. "We've got enough people over here who are skeptical of any bill whose origins are in the crypto industry itself." "For example, it has not one word to stop the use of crypto for drug traffickers, the North Korean missile program or cyber thieves," she said. "This isn't a bill about solving the real problems in the crypto world. This is a bill to pretend that there is oversight while insiders continue to make more and more and more money." Warren said there will be "news to come, I hope" on whether crypto financial crime safeguards make it into a manager’s amendment for the defense policy bill the Senate is considering this week. She’s pushing for the provision with Sens. Kirsten Gillibrand, Cynthia Lummis and Roger Marshall.
| | | | A message from Structured Finance Association: Safety in numbers is true in finance like everywhere else. When loans are pooled together into a bond, the bond’s value stays stable even if a few of the bundled loans aren’t repaid on time. The risk of default is reduced. Structured finance is all about packaging loans together to reduce overall risk and in that way lower the cost of financing for borrowers. This process, called securitization, allows banks to sell loans and to make new loans at prevailing market rates. The result: A dynamic – and safer – financial services system for everyone. Thanks to years of experience and market reforms, the benefits are widespread for lenders, savers, and consumers. The Structured Finance Association represents every participant in the securitization market. Find out more at www.structuredfinance.org. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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