Peak Bidenomics

Presented by Electronic Payments Coalition: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy.

Oct 26, 2023 View in browser   By Zachary Warmbrodt 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. QUICK FIX Experts are bracing for a blow-out GDP number today that shows the economy surged over the summer, driven by consumer spending. It’s a great headline for “Bidenomics” at a time when voters just aren’t buying what the president has done for their bank accounts. But economists predict this may be as good as it gets for the near future — and some fear it may spur the Federal Reserve to do more to slow growth and fight inflation. Here’s a breakdown:   The World Strategic Forum (WSF) is taking place on November 6-7th in Miami, Florida at the Biltmore Hotel Coral Gables. WSF 2023 will discuss ‘Mastering the New Economy’, examining the ways in which business and society can thrive despite current economic and environmental challenges. The conference will gather 100+ speakers from companies including Volkswagen, Siemens and C3.ai, as well as U.S. Senator for Tennessee Bill Hagerty; Florida’s Chief Financial Officer Jimmy Patronis; Former President of Colombia Iván Duque Márquez and Former President of Ecuador Jamil Mahuad. Learn more and register now at www.worldstrategicforum.com.     What economists expect today The Federal Reserve Bank of Atlanta’s “GDPNow” model estimates the economy grew 5.4 percent in the third quarter. Private sector economists are also putting out forecasts of around 5 percent. It means the economy may have expanded at its fastest rate in two years. “The U.S. economy's resilience will likely be on full display,” according to Wells Fargo economists. Along those lines, the Treasury Department is releasing a new report today that says the U.S. economy has not only outperformed expectations this year but has also helped support the global outlook. “The progress we have made on growth, labor markets and inflation stands out across the globe, and remains an important source of strength for the global economy,” Treasury acting assistant secretary Eric Van Nostrand and deputy assistant secretary Tara Sinclair write. Sounds great! Are voters feeling it? If they are, they’re not giving President Joe Biden much credit. His economic approval ratings are still in the red by double digits, including his handling of inflation. More than half of the people surveyed in an Oct. 21-24 Economist/YouGov poll said the economy is getting worse. What could go wrong?  Economists, including those surveyed by Bloomberg, are expecting growth to slow heading into next year. Borrowing costs are rising, pandemic financial buffers are being drawn down and student loans are coming due – not to mention the hot wars playing out in the Middle East and Ukraine. The talk among CEOs is that they aren’t thrilled about what’s in store for the economy next year. It underscores the fact that the third-quarter GDP number may be stellar, but it’s a dated snapshot. The question then becomes: To what extent will Jerome Powell’s data-driven Fed take action based on the new stat, which could suggest more work is needed to head off inflation? The FOMC, at the moment, is expected to hold rates steady when it meets next week. “That’s where I constantly feel this tension between the Fed having been and continuing to be extremely data dependent — and backward-looking as a result — versus what would be optimal in the current environment, which is a forward-looking perspective,” EY-Parthenon chief economist Gregory Daco told MM. The key issue, according to Daco, is whether consumers and business leaders still have the buffers they need to keep spending into 2024 amid a persistently high-cost, high-interest rate environment. “The answer to that question, in my opinion, is no,” he said. “But depending on how you respond to that question, you’re going to want to be more or less hawkish in terms of monetary policy.” Happy Thursday — What’s your take on the latest GDP data? Send it this way: zwarmbrodt@politico.com.   A message from Electronic Payments Coalition: Don’t Let Durbin-Marshall Steal YOUR Data: Senators Dick Durbin and Roger Marshall introduced legislation allowing big-box retailers like Walmart and Target to process credit card transactions based solely on what is cheapest for them, disregarding YOUR data security. Durbin-Marshall would shift billions in consumer spending to higher-risk payment networks, weakening America’s payment system and putting consumers in a vulnerable position. Last year, Congress wisely rejected a similar Durbin-Marshall bill, and they must do so again.   Driving the day Third-quarter GDP is out at 8:30 a.m. … Senate Banking and House Financial Services hold terrorism financing hearings in the morning … Fed board member Christopher Waller delivers opening remarks at the Economics of Payments Conference at 9 a.m. … SEC Chair Gary Gensler talks climate disclosure at the U.S. Chamber of Commerce at 9:15 a.m. … McHenry's running — House Financial Services Chair Patrick McHenry announced late Wednesday that he will seek reelection, hours after stepping down as acting speaker pro tempore. The move may surprise some on K Street who expected him to retire after this session. He will be term-limited as the top Republican on Financial Services in 2025 but could ask for a waiver. UAW, Ford have a deal — The United Auto Workers reached a tentative agreement with Ford, in a major breakthrough nearly six weeks after a walkout at the Big Three automakers. Meet Morgan Stanley’s new CEO — Ted Pick, who leads the Wall Street giant’s investment-banking and trading operations, will succeed longtime CEO James Gorman on Jan. 1, per the WSJ. Who is Speaker Mike Johnson? — It’s the question Washington is scrambling to answer. MM has some pointers. The House’s first evangelical speaker is a “policy-minded, ideological purist,” our Congress team reports. The Louisianan is also somewhat anonymous, and that worked in his favor during the House GOP’s grievance-driven brawl the last three weeks. Most senators have had little or no personal contact with Johnson, including Senate Minority Leader Mitch McConnell and Majority Leader Chuck Schumer. Most importantly for Wall Street: His speakership is opening the door to a stop-gap funding bill that could avert a government shutdown next month. POLITICO’s vast team of policy beat reporters has an extensive rundown of where he stands on the issues. Your MM host points out that Johnson could bolster efforts by coastal lawmaker to keep flood insurance rate hikes at bay, a fight long waged by fellow Louisianan and No. 2 House Republican Steve Scalise. So what about crypto and the rest of the House Financial Services Committee’s agenda? Committee Republicans predict that Johnson will allow their work to continue uninterrupted. (Coinbase’s politician database says Johnson’s crypto sentiment is “unclear.”) "Mike is not a financial services guy per se, but I think he will defer to Patrick [McHenry] and the members of the committee to be able to do our work," Rep. Blaine Luetkemeyer (R-Mo.) told our Eleanor Mueller. "He'll rely on the expertise of the committee." Banks plan Fed fight over swipe fees — The Fed proposed a sharp reduction in its cap on debit card swipe fees, in a blow to banks and a big win for retail merchants, Katy O’Donnell reports. As MM previewed Wednesday, banks are vowing to take on the Fed. “We are deeply disappointed with the Federal Reserve’s proposed reduction in debit interchange fees, and strongly disagree with the flawed data and incomplete process that produced this result,” American Bankers Association president and CEO Rob Nichols said in a statement. “We will join with other stakeholders to firmly oppose this change.” Crypto SBF to take the stand — FTX founder Sam Bankman-Fried is expected to testify at his fraud trial as soon as today, Declan Harty reports. Defense bill becomes crypto flash point — Jasper Goodman and Eleanor report that the annual defense authorization bill is emerging as the latest battleground over crypto policy, with industry skeptics and backers on a collision course as they try to add measures to the must-pass legislation. Lawmakers are in the process of reconciling the House and Senate versions of the bill. Sen. Elizabeth Warren (D-Mass.) said in an interview that she wants to beef up crypto money laundering safeguards that the Senate included in its iteration of the NDAA. House Financial Services Chair Patrick McHenry (R-N.C.) is eyeing the bill as a vehicle for his plan to revamp the way the SEC and the CFTC police crypto trading. Warren and McHenry face real hurdles. For Warren, some of the lawmakers who backed the money laundering provision that made it into the Senate NDAA are skeptical that the Treasury Department needs any more authority than it has. As for McHenry, Rep. Maxine Waters, the top Democrat on House Financial Services, says she’s not ready to sign off on his push. Senate Banking Chair Sherrod Brown (D-Ohio) also signaled Wednesday that he would oppose it.   PLAYBOOK IS GOING GLOBAL! We’re excited to introduce Global Playbook, POLITICO’s premier newsletter that brings you inside the most important conversations at the most influential events in the world. From the buzzy echoes emanating from the snowy peaks at the WEF in Davos to the discussions and personalities at Milken Global in Beverly Hills, to the heart of diplomacy at UNGA in New York City – author Suzanne Lynch brings it all to your fingertips. Experience the elite. Witness the influential. And never miss a global beat. BE PART OF THE CONVERSATION. SUBSCRIBE NOW.     Regulatory Corner Gensler walks into the lion’s den — Declan reports that SEC Chair Gary Gensler will speak this morning at the home base of one of his fiercest industry critics, the Chamber of Commerce. The topic is the most controversial part of his agenda: Corporate climate disclosure. The SEC proposed climate-risk reporting requirements more than a year and a half ago and has yet to finalize the plan, amid an aggressive lobbying campaign from the Chamber and other big business groups. The Chamber is among the entities expected to consider a legal challenge based on how the regulation pans out. SEC records show nearly a dozen meetings between Gensler’s office and the Chamber over the rule. What to watch for: Any hint of timing or potential changes. Gensler has repeatedly demurred over setting a timeline for implementing the disclosure requirements, but he’s facing mounting pressure from the left to act. He has signaled that the agency is weighing changes to help the rule survive the courts. Activist group appeals Nasdaq diversity decision — The Alliance for Fair Board Recruitment asked the Fifth Circuit Court of Appeals to reconsider its decision to let the SEC bless Nasdaq’s board diversity rule, per Declan.   A message from Electronic Payments Coalition:   Iran Congress divided on sanctions — Top Hill Republicans and Democrats are at odds over how to proceed on ratcheting up Iran sanctions, as Democrats express wariness about forcing the administration's hand, Eleanor reports. Rep. Maxine Waters said in an interview that Democrats will "take a look" at Republican bills but that "I'm trying to be in step and in tune" with the White House. The fault lines are likely to surface this morning when House Financial Services and Senate Banking hold hearings on Iran and terrorist financing. Sen. Tim Scott, the top Republican on Banking, is proposing legislation to freeze $6 billion in Iranian assets tied to a U.S. prisoner release. Sherrod Brown signaled this week that he may not take it up. A spokesperson said he is still reviewing all Iran sanctions legislation. At this morning's Senate hearing, Brown will say "we’ve strengthened our money laundering rules and our sanctions tools in a bipartisan way, and we can do it again." "I look forward to working with my colleagues on this committee to stem terrorist financing, address the problems posed by crypto, and further strengthen sanctions," he said in prepared remarks. China Republicans target Chinese financial services — Senate Banking Republicans are urging Treasury and USTR to scrutinize the expansion of China’s payment networks and the potential impacts on the U.S.   A message from Electronic Payments Coalition: CONGRESS: Don’t Let Durbin-Marshall Steal YOUR Data: Cyber-attacks against consumers are on the rise, with large retailers like Target falling victim to breaches that expose customer information to hackers and foreign countries. Now, mega-retailers like Walmart and Target want to leave you even more vulnerable to credit card cyber-attacks so they can pocket billions of dollars in additional profits. After Senator Dick Durbin passed similar routing mandates for debit cards in 2010, the fraud rate for debit cards increased by NEARLY 60%. A similar outcome for credit cards would likely cost OVER $6 BILLION in additional fraud and likely require passing much of the bill onto consumers. Last year, Congress wisely rejected a similar Durbin-Marshall bill, and they should do so again. Congress must protect consumers, preserve the integrity of the payment ecosystem, and reject this detrimental and unnecessary government intervention into the U.S. payment system.     Follow us on Twitter Mark McQuillan @mcqdc Zachary Warmbrodt @Zachary Victoria Guida @vtg2 Declan Harty @ @declanharty Eleanor Mueller @eleanor_mueller Katy O'Donnell @katyodonnell_ Sam Sutton @samjsutton   Follow us

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings This email was sent to rouf@idiot.cloudns.cc by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA Please click here and follow the steps to unsubscribe.