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Politico
4 days ago
- Business
- Politico
Navigating a knife's edge economy
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 As Federal Reserve policymakers gather today to make their latest interest rate decision, the economy is weakening — but not enough to prompt Chair Jerome Powell to lower borrowing costs. If the Fed stands pat, as is widely expected, it will undoubtedly rankle President Donald Trump, who has been pressing Powell in recent days to drop interest rates by a full percentage point. But a particularly telling signal — for Trump and for markets — will come alongside the Fed's decision: officials' quarterly forecast. June's report, known as the Summary of Economic Projections, will be the first time central bank policymakers have weighed in on the potential path for rates, growth and inflation since Trump's sweeping new tariff regime announced April 2. The story told by those forecasts could influence the reaction from Trump, who has also shown renewed interest in thinking about who will replace Powell as chair when his term ends next year. That said, nobody can predict with any certainty how tariffs will feed through the economy this year. Just ask Stephen Miran, Trump's chief economist. 'Folks that do have precise forecasts are kind of silly and kidding themselves about how much certainty they could possibly have,' he told your MM host on Friday, citing continued uncertainty about where the tax bill will land and how trade deals will shake out. For now, though, Miran said there's no evidence that tariffs are stoking inflation or causing a 'substantial drag' on the economy. The narrative told by economic indicators is mixed. Inflation has continued to cool, and unemployment is holding around 4.2 percent. U.S. retail sales data out Tuesday showed consumer spending has declined, but that's also coming off a pre-tariff buying spree earlier this year. Sales were still up 3.3 percent compared to May 2024. Industrial production declined modestly in May, according to the latest Fed data, and the Fed's own rate policies are pinching in some areas: a gauge of U.S. homebuilder sentiment fell to its lowest level since December 2022. Don't forget the added risk of the conflict between Israel and Iran, which has caused oil prices to jump. All of that paints a muddy picture. Still, from the Fed's perspective, signs of resilience could add to their resolve to hold rates steady for the time being. After all, a stronger labor market could make it easier for companies to raise prices in the face of tariffs because workers have more spending money. 'Let's say we don't get a recession and the labor market is OK,' said Torsten Slok, chief economist at Apollo Global Management. 'In that case you will have even more upside pressure on inflation.' 'The starting point for inflation is really important,' he added. 'If the starting point was 1.5 percent, it would've been much more manageable to have a trade war.' Your host also has a new 'Capital Letter' column out this morning that explores Miran's vision for how Trump's tariffs will ultimately lead to fairer trade. 'At the center of his argument is the idea that the U.S., as the dominant buyer of the world's goods, will ultimately have enough leverage to make foreign trading partners eat the cost of tariffs, leading to more revenue and supply chains that are more aligned with U.S. interests,' Victoria writes. 'Foreign manufacturers will have to lower their prices to accommodate tariff rates, Miran believes. If they don't, then U.S. importers will turn to factories in other markets rather than absorbing the cost of tariffs themselves.' For now, that's not really how it's playing out. Debates are raging across the world about how to divide the tax burden of tariffs in a way that is least disruptive, and in many sectors, that looks like: 'factories take a third, the U.S. corporate takes a third, and then the consumer takes a third,' according to Ajit Menon, U.S. head of global trade solutions at HSBC, the largest trade bank by revenue. But Miran's argument is that these dynamics will take some time. 'In the long run, this tax incidence logic absolutely is going to hold,' he said. 'In the short run, is there going to be volatility in prices? It's absolutely possible.' Pros can read the Q&A here. IT'S WEDNESDAY — What should we ask Chair Powell? Send ideas to vguida@ Programming note: We'll be off this Thursday but will be back in your inboxes on Friday, June 20. Driving the day The American Enterprise Institute hosts an event on U.S. trade and the global economic outlook at 10 a.m. Speakers will include Jason Furman, former top economic adviser to President Barack Obama, Goldman Sachs Chief Economist Jan Hatzius, AEI Senior Fellow Desmond Lachman and former longtime Treasury official Mark Sobel … HUD Secretary Scott Turner speaks at the Exchequer Club at 1 p.m. … The Federal Reserve will make its interest-rate announcement at 2 p.m. … Fed Chair Jerome Powell's press conference will follow at 2:30 p.m. … GENIUS leaves the stable — The Senate passed landmark cryptocurrency legislation on Tuesday that is aimed at creating the first-ever U.S. regulatory framework for digital tokens known as stablecoins that are pegged to the value of the dollar, our Jasper Goodman reports. But the bill faces an uncertain future in the House, where Republicans are weighing how much to change the Senate legislation and whether to package it with a market structure bill. Timing for the tax bill — A host of concerns from diverse pockets of the GOP are threatening Majority Leader John Thune's grand plan of winning Senate passage of the GOP tax bill by July 4, our Benjamin Guggenheim and Jordain Carney report. Are you listening, bond market? — The Federal Reserve will hold a board meeting next week to take up a proposal aimed at easing capital requirements for the nation's largest banks, our Michael Stratford reports. Treasury Secretary Scott Bessent has called the changes to the backup capital rule, known as the supplementary leverage ratio, a top priority for the Trump administration, arguing they would boost liquidity in the Treasury market and spur demand for U.S. government debt. 'The White House Office of Management and Budget is already reviewing proposals submitted by the Fed's peer bank regulators, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency,' Stratford reports. 'The Fed has yet to send its proposal to OMB, according to the office's website.' MM sidebar: Your host remembers back in 2021, when the Fed said it would consider changes to the SLR 'shortly.' Tariff update — Two companies in Illinois that are suing to block Trump's tariffs on dozens of countries are asking the Supreme Court to fast-track their challenge, our Ari Hawkins reports. A ruling against the president could permanently block Trump's ability to use emergency powers to impose tariffs. Employee of the year — Dave Lebryk, a longtime top career official at the Treasury Department who resigned earlier this year amid a clash over DOGE's access to the payments systems, was honored Tuesday night by the Partnership for Public Service as Federal Employee of the Year. Former Treasury Secretary Tim Geithner, now chairman of Warburg Pincus and with a much lower public profile of late, gave unusually direct remarks at the event, according to remarks provided to MM: 'In honoring Dave you are honoring one of the foundational strengths of the American government, a tradition in which talented people devote their careers to trying to bend the arc of policy toward competence, to defending the public interest, to serving as a check on damaging ideas, and to trying to talk our leaders into better ideas,' he said. 'This is a tradition we should honor. It's a tradition we should preserve and strengthen.' Another former head of Treasury, Janet Yellen, also spoke: 'Dave has been a quiet force at Treasury for nearly 40 years,' she said. 'He started as a presidential management intern and rose through the ranks to become our fiscal assistant secretary—the highest-ranking career official at the Department. That title doesn't begin to capture his impact.' On The Hill Big beautiful price tag — The tax package House Republicans passed last month would increase the U.S. deficit by $2.8 trillion over a decade when considering economic effects, according to the Congressional Budget Office, our Jennifer Scholtes reports. 'CBO did find that the legislation would modestly boost economic growth over a decade, by 0.5 percent on average,' Scholtes writes. 'But those effects would be swamped by the costs of higher interest rates, forecasters found, which would boost payments on the national debt by an estimated $440 billion over that time. Over five years, inflation would increase 'by a small amount' because of the bill, the budget office predicts.' Crapo goes big on permanence — Senate Finance Chair Mike Crapo is aiming to make a slew of provisions in the GOP tax bill permanent — not just business breaks for things like research and investment expenses. An expanded Child Tax Credit, a new charitable break, the New Markets Tax Credit program, Opportunity Zones and others would all become a fixture of the code in his plan, our Brian Faler reports. The Economy Amazon eyes AI-related workforce cuts — Amazon CEO Andy Jassy in a note to employees Tuesday said the company, one of the largest U.S. employers, plans to reduce its workforce in coming years because artificial intelligence will eliminate the need for certain jobs, WSJ reports. Bessent on the pods — A Treasury analysis of labor market data shows that Trump is the only president since Richard Nixon to see positive real wage growth for non-supervisory workers in the first five months of his presidency, Treasury Secretary Scott Bessent told the New York Post in a podcast that will air on Wednesday.
Politico
6 days ago
- Business
- Politico
Buyer beware? Wall Street offers private markets to the masses.
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 Wall Street's push to open up private markets to everyday investors is running into resistance. Just don't tell President Donald Trump's administration and allies. Policymakers across Capitol Hill, at the Securities and Exchange Commission and the Labor Department are laying the groundwork for a major overhaul of the vast and opaque private markets that help fuel the global economy. Their goal: to make it easier for ordinary investors to put their money into everything from privately held startups to real estate funds. The private markets — long hailed as a high-risk, high-reward alternative to more mainstream investments like those found on U.S. stock exchanges — remain largely out of reach for most investors because of regulatory barriers. But Trump's rulemakers want to open their doors up once and for all, dovetailing with the industry's own efforts to do the same. There's just one potential problem: What's on the other side of those doors is a market that is starting to look a lot less like a sure thing. The S&P 500, a benchmark for U.S. stocks, recently outperformed private market funds for the first time since 2000, the Financial Times reported. Private equity deal-making has ground to a near halt. Some big investors like Yale's endowment are dumping massive private market portfolios. And Moody's Ratings warned last week that the investment industry's campaign to offer individuals access to private markets is riddled with risks — for the firms, investors and the economy. 'It's a really bad idea to get retail investors involved,' said former Federal Deposit Insurance Corp. Chair Sheila Bair. 'Passive stock funds are by far the lowest cost and best return. So just stick with it. Let the professionals do the fancy stuff.' For critics, the concerns include a lack of transparency in the private markets, questions about how rigorously companies are valued and the fact that many of the buzzy businesses that investors tend to gravitate toward will likely fail. Advocates for opening up the private markets argue that systemic concerns are overblown and that measures of performance can vary dramatically based on which benchmark is being used. With proper guardrails, the markets stand to offer investors a new means to build up their wealth, they say. And that has become all the more critical as fewer companies go public and limit the universe of lucrative investments available to everyday people. What's more, many Americans historically had exposure to the private markets through pension funds, proponents say. But corporate America's move toward defined-contribution plans like 401(k)s, which generally don't invest in private assets, has robbed them of such access. 'Policymakers in Washington believe that historically the only people that had access to the private markets were the uber wealthy and pension-fund recipients. Why not, with appropriate guardrails, allow other retirees through their 401(k)s to also have access?' said American Investment Council CEO Drew Maloney, whose group represents both private equity and private credit firms. 'It's about giving investors more choices.' Still, the criticisms threaten to undercut the push to expand private markets — a pillar of the Trump administration's financial regulatory agenda. Last month, SEC Chair Paul Atkins directed the agency's staff to reconsider 23-year-old guidance that he said had blocked individual investors from putting their money into funds that invest in private markets through hedge funds and private equity funds. (On Friday, Atkins also named longtime private equity and hedge fund attorney Brian Daly to lead his investment management division.) And the House Financial Services Committee recently advanced three bills aimed at loosening up who can invest in the private markets by changing the so-called accredited investor definition. Of course, U.S. financial markets are built on an ethos of buyer beware, and the industry's effort to offer private-market products to mom-and-pop investors is not a guaranteed success, no matter what policymakers do. But while there are concerns about the state of the markets, Elisabeth de Fontenay, a law professor at Duke University, says regulators appear to be 'full steam ahead.' 'The markets have changed,' said Dalia Blass, a partner at Sullivan & Cromwell who led the SEC's Investment Management Division during the first Trump administration. 'The public markets are no longer what they were. They're important, but they're not the sizable component that they used to be, and if retail investors are just exposed to public markets and nothing else, they are losing out on the [value creation] that we all used to benefit from when companies IPO'd.' 'So there is this shift,' she added, and 'are you going to shift the retail investor opportunity to match the shift in the market is something that we need to talk about.' IT'S MONDAY — A belated happy Father's Day. If you have tips, news or gossip for me, don't hesitate to give a shout: dharty@ Sam is taking some much-deserved time off this week, so if you have tips for MM, Jasper Goodman is taking the lead tomorrow. You can reach him at jgoodman@ Driving the Week Tuesday… The Senate will vote on the GENIUS Act, a landmark bill proposing a regulatory framework for stablecoins. … The Business Roundtable hosts its CEO Workforce Forum at 8 a.m., featuring JPMorgan Chase's Jamie Dimon, Deputy Labor Secretary Keith Sonderling and Accenture CEO Julie Sweet. Wednesday… The American Enterprise Institute hosts an event on U.S. trade and the global economic outlook at 10 a.m. Speakers will include Jason Furman, former top economic adviser to President Barack Obama, Goldman Sachs Chief Economist Jan Hatzius, AEI Senior Fellow Desmond Lachman and former long-time Treasury official Mark Sobel. … HUD Secretary Scott Turner speaks at the Exchequer Club at 1 p.m. … The Federal Reserve will make its interest-rate announcement at 2 p.m. … Fed Chair Jerome Powell's press conference will follow. Thursday… Juneteenth National Independence Day Welcome to G7 week — President Donald Trump landed in Canada on Sunday facing 'a potentially calamitous tariff deadline and a burgeoning crisis in the Middle East. But he's unlikely to leave the three-day summit with a breakthrough on either front,' Adam Cancryn reports. — 'Trump officials are struggling to lock down trade pacts that they predicted were imminent in the wake of a first deal with the U.K. nearly a month ago. Even early chatter of a deal with Japan by this week's conference appears unlikely, said two people close to the White House, granted anonymity to discuss internal deliberations. And now, with the U.S. occupied by turmoil in the Middle East, Trump aides and advisers are tempering expectations for what the G7 may ultimately produce,' Adam writes. — As for Mark Carney, this week's gathering of global leaders poses a major test for Canada's new leader, reports Nick Taylor-Vaisey. From Nick: 'Carney came to power by campaigning openly against Trump's belligerence. But now he has a direct line to the president, with whom he's negotiating an economic and security deal.' In the markets — Volatility, volatility, volatility. After the Cboe Volatility Index — the commonly referred to 'fear gauge' of Wall Street — spiked on Friday, markets look to be on edge again this week. As Bloomberg's Grant Smith and Anthony Di Paola report, oil traders are watching for higher prices after Israel's strikes on Iran 'heightened the risk to Middle East supplies.' ICYMI: Tax package inbound — Meredith Lee Hill, Jordain Carney and Benjamin Guggenheim reported Friday that text on the Senate GOP's tax package is expected to drop today. At the regulators What to do about Fannie and Freddie — Trump's surprise vow to take the housing giants Fannie Mae and Freddie Mac public is being met with new questions from GOP lawmakers and the mortgage industry, 'setting up a potential rift' in Washington, Katy O'Donnell reports. — 'I want to get them out of conservatorship,' said Sen. Mike Rounds of South Dakota, who is also chair of the Senate Banking subcommittee that has authority over Fannie and Freddie. 'But I want to be very careful about how we do it, because we need the secondary market, and we need it to work.' First in MM: A new PCAOB defender — From your host: 'A Republican-led push to fold the top U.S. audit watchdog into the SEC risks blocking federal authorities from inspecting European Union auditors for years, a group representing EU audit authorities warned in a recent letter seen by POLITICO.' It's crunch time — 'The Federal Reserve announced on Friday it would release the latest results of its annual stress tests for the nation's biggest banks on June 27,' Michael Stratford reports. Fly Around Corporate America eyes stablecoins — 'Walmart, and other multinational giants have recently explored whether to issue their own stablecoins in the U.S.,' the Wall Street Journal's Gina Heeb, AnnaMaria Andriotis and Josh Dawsey report. — 'A move to launch crypto-based payments by Walmart or Amazon that bypasses the traditional payments system would send shivers through the nation's banks and card-network giants,' they add. Real estate? In this economy? — While Trump may be best known as the real estate mogul-turned-reality television star-turned-president, the billionaire's recent financial disclosure for 2024 show that his well-known interests in the world of crypto are becoming a fixture in his business empire, The New York Times' Ben Protess and Andrea Fuller report. Jobs report The SEC's hiring spree — SEC Chair Paul Atkins's team became that much clearer Friday when the Wall Street regulator named Brian Daly of Akin Gump its new head of investment management, your host reports. The SEC also officially named Jamie Selway as its trading and markets director, while tapping Kurt Hohl as chief accountant. — Erik Hotmire, a former spokesperson at the agency under then-Chair Chris Cox, is returning to the SEC as public affairs director, starting today, the agency said.
Politico
13-06-2025
- Business
- Politico
What Goldman CEO David Solomon is thinking
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 Business leaders are feeling better about President Donald Trump's agenda than they were in the aftermath of the 'Liberation Day' tariff announcements. But with major trade deals still outstanding — and key questions about future tax policy and the federal government's fiscal trajectory unresolved — CEOs are starting to plan for 2026 with an incomplete roadmap on how major economic policies will shake out, Goldman Sachs Chairman and CEO David Solomon tells POLITICO. 'At the moment, there's a sense that things are moving forward constructively,' Solomon said in an interview shortly after Trump touted a new agreement with China that represented a further de-escalation in trade tensions. 'People would like the level of certainty around the policy direction to continue to increase.' As with all things in Trump 2.0, the direction of travel can change on a dime. Hours after the China framework was unveiled — and Treasury Secretary Scott Bessent told lawmakers that the administration would likely delay its July 8 deadline for trade negotiations— the president said he would unilaterally set tariff rates in the coming weeks. (The interview with Solomon took place before both events.) Wall Street banks and the overall economy have fared well despite the uncertainty generated by abrupt changes to tariff rates and Congress's stop-and-start progress on the 'big, beautiful bill' that's at the center of Trump's domestic agenda. While many investment bankers have been dour about the current state of dealmaking, Solomon was bullish on Goldman's pipeline and said both the economy and deal activity have proven 'more resilient than I would have expected.' Trump, along with top administration officials like Bessent, have pointed to the string of recent economic data as a sign that the administration's overall agenda is working — despite the bellyaching of most economists — and that growth should accelerate when the tax and spending bill is enacted. Solomon shares the administration's perspective that current tax cuts should be extended. Nevertheless, with bond investors skittish about how the legislation could affect deficits, the banker said that the long-term outlook for future economic growth is hazy. 'We're in a place where we've increased our debt and deficit levels. And there doesn't seem to be a path — at the moment — to reducing them,' he said. 'That's something that I think we're going to have to wrestle with. And it's something that, over time, has the potential to crowd out investment and slow down growth.' 'Can we have a higher level of growth that can make it easier for us over time to absorb the spending levels and the deficit levels that we have?' he added. 'That's unclear at this point and time.' You can read my full Q&A with Solomon in POLITICO Magazine. IT'S FRIDAY — If anyone else reading this happens to run a major U.S. bank, I'd like to hear from you. Email me at ssutton@ Driving the Day University of Michigan's preliminary consumer sentiment reading for June is out at 10 a.m. … Breaking overnight — Eric Bazail-Eimil: 'Israel said Thursday that it launched a 'preemptive strike' against Iran, raising the specter of a broader regional conflict between the long-time Middle East adversaries.' Rates on the brain — Trump lashed out at Federal Reserve Chair Jerome Powell once again over interest rate policy on Thursday, labeling the central banker a 'numbskull' for not reducing borrowing costs. 'We're going to spend $600 billion a year, $600 billion because of one numbskull that sits here [and says] 'I don't see enough reason to cut the rates now,'' Trump said, per CNBC's Kevin Breuninger. — 'Let's say there was inflation. In a year from now, raise your rates. I don't mind, raise your rates. I'm all for it. I'll be the one to be calling you,' Trump said, according to Bloomberg's Justin Sink. 'He'll be too late for that, too.' On trade — Trump also raised expectations for when his administration will broker a comprehensive trade agreement with China, writes Doug Palmer. Plouffe heads to Coinbase — David Plouffe, a top Democratic strategist and former adviser to President Barack Obama and Vice President Kamala Harris, is joining Coinbase's global advisory committee, Christine Mui and Chris Cadelago report. On the Hill Rescissions, rescissions — From Katherine Tully-McManus and Jennifer Scholtes: 'House Republicans have narrowly advanced a request from the White House to claw back $9.4 billion that lawmakers have already approved for public media and more than a dozen accounts across the State Department focused on foreign assistance.' Cost of doing business — Low-income households stand to lose as much as $1,600 a year in federal resources due to cuts in the House version of Trump's 'big, beautiful bill, per Jennifer's write up of the latest analysis from the Congressional Budget Office. Annual resources to the highest-income households would climb by $12,000. — The CBO and projections from the Penn Wharton Budget Model and Yale Budget Lab have consistently estimated that the legislation will add to the deficit over the next decade. Treasury Secretary Scott Bessent told Senate Finance lawmakers on Thursday that he expects the opposite to occur, per Bloomberg's Cam Kettles. — From Yahoo Finance's Ben Werschkul and David Foster: 'The claims from 1600 Pennsylvania Avenue go as high as $8 trillion in black ink (an $11 trillion chasm with the experts) in claims that go beyond what even Capitol Hill Republicans are projecting … As for reconciling the two, some economists essentially throw up their hands.' Mad-libbing SALT — Senate Republicans may leave out the House's higher state-and-local tax deduction from its version of the bill in order to allow negotiations to continue. Senate Finance Chair Mike 'Crapo and I had a long conversation about it,' said Sen. Markwayne Mullin (R-Okla.) per Benjamin Guggenheim and Jordain Carney. 'Maybe it'd be better to just carry communication rather than stake our flag right down.' Not so fast — Senate Banking Chair Tim Scott (R-S.C.) threw cold water on Texas Republican Sen. Ted Cruz's effort to include language in the megabill that would bar the Fed from paying interest to banks, Jasper Goodman and Victoria Guida report. Next step in stablecoins — Jasper also reports that the Senate's landmark stablecoin legislation moved one step closer to passage on Thursday, clearing a procedural vote 67-30. At the regulators New IRS chief — The Senate voted along party lines to confirm Billy Long to be the next head of the Internal Revenue Service. The former six-term Missouri congressman will enter the tax agency 'during a period of upheaval' due to workforce reductions and an overhaul of its technology systems, reports Bernie Becker. Regulatory uncertainty — The pace and volume of regulatory shifts that have occurred so far this year are creating 'unanticipated business risks,' according to KPMG's mid-year report. 'Growing regulatory divergence and fragmentation add another layer of complexity to establishing a clear path from strategy and operations to effective risk and compliance,' Amy Matsuo, the consulting firm's U.S. regulatory insights leader, said in a statement. 'Will a deregulatory policy really equate to deregulation?'
Politico
11-06-2025
- Business
- Politico
Big trouble in Labor data
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 President Donald Trump is testing the American economy's ability to simultaneously withstand rapid-fire tariffs, a sharp decline in immigration and an overhaul of tax policy. A key federal agency responsible for tracking how the country fares is beginning to show signs of strain. The Labor Department has scaled back data-collection efforts that feed into its statistical bureau's monthly inflation estimate, a step that economists and agency alums say will weaken the quality of economic reports that are critical to businesses and policymakers. The move follows a similar decision to eliminate hundreds of gauges that track wholesale prices charged by toymakers, tool manufacturers and other companies. And additional cutbacks are likely in store if Congress approves Trump's proposal to slash $56 million from the Bureau of Labor Statistics — the independent agency behind the Consumer Price Index and the monthly employment report — and combine other statistical bureaus into a single agency under the Commerce Department. 'We're likely to continue to see data series get cut, sample sizes reduced, and some products might get cut entirely, depending on what happens in the budget process,' said Jed Kolko, a former Commerce undersecretary for economic affairs, whose office oversaw the Census Bureau and Bureau of Economic Analysis. 'Some of our statistics might get less accurate. They might become more volatile month-to-month or quarter-to-quarter. And for series that get revised, we might see bigger revisions.' Any erosion in the quality of American economic data would create risks for Trump as he moves ahead with an agenda that many fear will lead to higher prices, lower growth and softer monthly employment. Recession fears have faded since early spring, but the economic outlook remains highly uncertain. Federal Reserve policymakers rely on BLS reports to determine their decisions around where to set interest rates. Businesses utilize them to draw up investment and hiring plans. While the cuts largely affect granular data on specific industries or regions, any further diminishment would be akin to erasing portions of America's economic roadmap, said Guy Berger, a labor market economist who leads economic research at the Burning Glass Institute. 'It's the crown jewel of American data collection. Without good data, we don't know what's going on,' he said. The Labor Department will release its report on the CPI for May at 8:30 a.m. Fears about the Trump administration's plans for U.S. statistical agencies have been percolating for months and were inflamed after administration officials delayed and redacted a recent Agriculture Department forecast because it predicted an increase in the nation's trade deficit. There has been no indication that the administration has taken such a heavy hand with BLS. But the federal employment freeze, coupled with the administration's deferred resignation program and layoffs of probationary employees, has exacerbated staffing shortages that have dogged BLS for years, former officials told POLITICO. The cuts have alarmed Senate Democrats, led by Arizona's Ruben Gallego, who are pressing Labor Secretary Lori Chavez-DeRemer and Bureau of Labor Statistics Commissioner Erika McEntarfer for answers on what impact they could have on future inflation data. 'These numbers affect nearly every household in the country—impacting Social Security, wages, interest rates, and how businesses and families make financial decisions,' they wrote in a letter on Tuesday. Labor Department spokesperson Courtney Parella said the concerns about data quality are 'false narratives in an obvious attempt to detract from the successes of President Donald Trump and his administration.' 'The mainstream media strikes again,' she said. 'Over half a million jobs have been added since the president took office, and consumer sentiment is on the rise because hard-working Americans can see for themselves that we are restoring economic prosperity.' Still, there's a tacit acknowledgment within the administration that the statistical agencies are facing challenges that have affected their output. The Labor Department exempted BLS field data collectors from participating in the April round of deferred resignations to ensure the agency could continue to fulfill its legal obligation to produce certain reports. And its budget and staffing concerns aren't unique to the Trump 2.0 era. With fewer federal workers available to conduct in-person visits, or follow up on with non-respondents, response rates to BLS surveys that are critical to inflation and the labor market have been in persistent decline since before the pandemic. That's likely contributed to hefty downward revisions to monthly non-farm payroll reports that became increasingly common in the aftermath of the pandemic. 'You're getting more revisions because of the lower response rates. That can also be exacerbated by lower resources and lower staff, because the staff can issue reminders to employers who haven't reported,' said former BLS Commissioner Erica Groshen. 'They also do quality control. The imputations may not be quite as good, and the ability to find anomalies that need to be followed up on may not be quite as good.' Those challenges could persist — or worsen — if Trump successfully slashes the agency's budget. 'The agencies, BLS included, are in survival mode,' said Michael Horrigan, a former top BLS official who is now president of the employment think tank Upjohn Institute. 'You can't save that money simply by cutting sampling or cutting indexes. The only way to save that kind of money is by cutting survey programs.' IT'S WEDNESDAY — Tip o' the hat to Nick Niedzwiadek for his help with this morning's edition. As always, for tips, suggestions and personnel moves, you can reach me at ssutton@ Driving the Day The Consumer Price Index for May is out at 8:30 a.m. … Treasury Secretary Scott Bessent testifies at House Ways and Means at 10 a.m. … Turner testifies at a Senate Appropriations subcommittee meeting at 3:30 p.m. … Bessent testifies at a Senate Appropriations subcommittee meeting at 3:30 p.m. … Concepts and plans — After two days of talks with Chinese officials, the Trump administration says it has a framework in place to scale back the trade war. 'The two largest economies in the world have reached a handshake for a framework,' Commerce Secretary Howard Lutnick said, per The WSJ. 'We're going to start to implement that framework upon the approval of President Trump, and the Chinese will get their President Xi's approval, and that's the process.' — In the meantime, a federal appeals court ruled that Trump's global tariffs can stay in effect – at least for now, according to Bloomberg's Zoe Tillman and Erik Larson. Big, beautiful tweaks — House Republicans on Tuesday finalized changes to Trump's megabill that will nix a policy cracking down on the fraud-plagued employee retention tax credit created during the pandemic. Republicans were relying on this provision to recoup $6.3 billion in savings to offset the massive legislation, per Jennifer Scholtes, Meredith Lee Hill and Katherine Tully-McManus. — In the Senate, GOP leaders are scrapping plans to make changes to Medicare that might ameliorate deficit hawks, per Jordain Carney and Robert King. — Senate Majority Leader John Thune said his chamber's take on the domestic-policy megabill would include Trump's key tax priorities — though he stopped short of specifying if the Senate would match the House's language, writes Jordain. — Meanwhile, at POLITICO's Energy Summit, lawmakers on both sides of the aisle, industry executives and former Republican officials raised red flags about how the bill could stymie U.S. energy production, writes James Bikales. Overnight reactions — Bloomberg's Anand Krishnamoorthy and Winnie Hsu: 'Financial markets showed little enthusiasm despite optimistic tone from the US and Chinese officials after two days of talks aimed at diffusing trade tensions.' Fed File Bessent on deck? — The race for who will replace Federal Reserve Chair Jerome Powell is heating up. Days after Trump said he'd make a pick 'soon,' Bloomberg's Saleha Mohsin, Nancy Cook and Joshua Green report that Treasury Secretary Scott Bessent may be in the running to be the next Fed chair. On The Hill First in MM: Warren pushes Trump administration to restore fair housing grants – Sen. Elizabeth Warren is pressing Craig Trainor, Trump's nominee to lead the Housing and Urban Development Department's fair housing office, on cuts the administration has made to fair housing grants and enforcement cases before Trainor's nomination hearing before Senate Banking on Thursday. 'Defendants in fair housing organizations are emboldened, allegedly ignoring correspondence from HUD investigators, looping [Department of Government Efficiency] employees into email traffic in the hopes that DOGE will intervene on their behalf, and walking away from settlements,' the Massachusetts Democrat wrote in a letter to Trainor onTuesday. Trainor, she said, would be charged with running a 'decimated fair housing office on behalf of an Administration that has taken repeated steps to minimize, rather than enhance, the enforcement of fair housing laws.' Warren called on Trainor to commit to enforcing and upholding fair housing laws – including in disparate-impact cases – and to restore canceled grants. GOP heavyweights push back on foundation tax — The Philanthropy Roundtable and several other right-leaning organizations focused on free markets are dialing up their opposition to a component of the megabill that would raise taxes on large private foundations. 'Our organizations support conservative and free market leaders whose research and analysis inform policy ideas, increase government accountability and transparency efforts, educate the public, drive civic engagement and promote American values,' they wrote in a letter to Thune and Senate Finance Chair Mike Crapo (R-Idaho). Crypto advances in the House — A pair of House committees advanced sweeping cryptocurrency legislation late Tuesday, our Jasper Goodman reports. The landmark crypto bill, which would create the first-ever U.S. regulatory framework for crypto assets, divided Democrats on the House Financial Services and Agriculture committees, which share jurisdiction over the legislation. It now goes to the House floor. On Financial Services, two Democrats — Reps. Ritchie Torres of New York and Cleo Fields of Louisiana — bucked the party's leader on the panel to support the legislation. But the vote was still a weak showing for the Republican sponsors of the bill, who have sought to attract wide bipartisan support for their pro-crypto push. Some Democrats who supported a GOP-led crypto market structure bill last year voted against the CLARITY Act on Tuesday, in part a reflection of how polarizing the debate over crypto policy has become under Trump. Banking CDFIs — From Victoria Guida: 'Banks that focus on low-income areas are warning that the Trump administration is set to withhold funds appropriated by Congress for so-called community development financial institutions, the latest drama for a corner of the industry that has historically enjoyed bipartisan support.' Jobs report Tom Quaadman is joining the Investment Company Institute as its chief government affairs and public policy officer. Quaadman, a 17-year veteran of the U.S. Chamber of Commerce, 'will be an excellent addition to our strong team and help us deliver results on the Hill and in the administration for funds and the Americans using them to invest for the future,' ICI spokesperson Stephen Bradford said. Former FDIC official Alexandra Steinberg Barrage and Matthew Bornfreund, a former Federal Reserve attorney, have joined Morrison Foerster as partners in the firm's financial services and fintech Groups in the transactions department, based in the Washington office. Karina Lubell, former chief of the competition policy and advocacy section at the Justice Department's Antitrust Division, is joining Brunswick Group as a partner in its Washington office.
Politico
10-06-2025
- Business
- Politico
A Wall Street regulator in turmoil
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 It was supposed to be one of the hottest regulatory jobs in President Donald Trump's administration. Now, Brian Quintenz — a former Wall Street regulator who has been tapped to lead the small but powerful Commodity Futures Trading Commission — is preparing to take over an agency in disarray. The CFTC is still primed to break out of obscurity as a major financial rulemaker in the years ahead under Trump. Lawmakers are moving to hand the agency new authority over cryptocurrency trading that will expand its jurisdiction well beyond traditional financial derivatives products linked to the prices of cattle, orange juice and financial indexes. And that's on top of its role in overseeing increasingly popular though contentious betting markets. But a string of departures is presenting a test for Quintenz's chairmanship even before he gets in the building — stoking concerns about what he'll be able to do atop the agency. The CFTC's two remaining commissioners plan to leave the agency this year, potentially leaving Quintenz as the sole member of the normally five-person commission. What's more, the agency was recently sanctioned in court over how it handled a 2023 case, in which it had alleged 'a large-scale fraud scheme,' drawing a rebuke from its own acting chair, Caroline Pham. And the House's fast-moving proposal for divvying up oversight of crypto markets is worrying some officials, lobbyists and executives that the derivatives watchdog could wind up taking a backseat to its big brother, the Securities and Exchange Commission. (Lawmakers are set to mark up the bill today.) 'He's walking into a clusterfuck,' a former Wall Street regulator, who was granted anonymity to speak candidly, told MM. Quintenz, a former CFTC commissioner, is set to appear before the Senate Agriculture Committee later today for his confirmation hearing. He did not respond to a request for comment. As chair, he'd be expected to pursue a deregulatory agenda focused at least in part on fostering newer markets and innovations like crypto. And for many long-time agency officials, he's squarely built to handle the moment. 'If there's anybody who's up to that challenge, it's Brian,' said Josh Sterling, a former CFTC official and partner at Milbank who was in the mix to chair the agency under Trump. 'He's one of the most genial and respectful people you'll ever meet in public service, and I think he has some pretty fixed ideas about what he wants to do, as any leader would.' Pham and CFTC Commissioner Kristin Johnson are expected to depart, and some observers question how far the agency would be able to go under a single-person commission. But former CFTC General Counsel Dan Davis, who worked at the agency during the first Trump administration, said all signs point to a lone commissioner being able to legally act on behalf of the commission even if they are its only member. Still, Quintenz is facing potential headaches from Capitol Hill. The House's proposed bill outlining how crypto should be regulated in the U.S. contains a provision that would allow certain SEC-registered firms to deal in a limited amount of digital assets activity that would otherwise fall under the CFTC's authority without registering with the derivatives watchdog. GOP committee aides with knowledge of the bill told reporters Monday that the section is designed to provide SEC-registered firms that don't deal with the CFTC the ability to conduct a small amount of crypto activity. For some lobbyists and officials, however, the provision represents a potentially slippery slope toward handing the SEC jurisdiction over CFTC markets. One person familiar with the deliberations told MM they were concerned it could undercut the bill's push to give the CFTC more funding to set up its new oversight of crypto. They also questioned how active the CFTC was in helping lawmakers and staff draft the bill. 'The SEC is fully mobilized and marching forward, and [the CFTC is] doing nothing,' said the person, who was granted anonymity to discuss the dynamics. 'That's not a good thing.' The CFTC pushed back on the idea that the agency did not actively provide assistance on the bill, with a spokesperson saying in a statement that career staff provided feedback that Pham, as acting chair, reviewed and approved to make sure it aligned with the administration's goals. GOP committee aides also said the CFTC was engaged in the process, saying the legislation is the product of years of work that has crossed administrations. But while other regulators are already knee deep in devising their crypto agendas for the coming years, the CFTC is still waiting on Quintenz — and he appears to be itching to get in, too. 'We are at the precipice of a golden age for innovation, for our derivatives markets, and for the CFTC,' he said in his prepared testimony. IT'S TUESDAY — What are you watching for in Quintenz's appearance before Senate Ag today? Let me know: dharty@ And as always, for tips, suggestions and personnel moves, you can reach Sam at ssutton@ Driving the day The NFIB's Small Business Optimism Index is out at 6 a.m. … Housing and Urban Development Secretary Scott Turner testifies at House Appropriations at 10 a.m. … House Financial Services holds a markup on crypto market legislation at 10 a.m. … Senate Foreign Relations holds a hearing on the nominations of Jacob Helberg to be undersecretary of State for economic growth, energy and the environment; Andrew Puzder to be U.S. representative to the European Union; Paul Kapur to be assistant secretary of State for South Asian affairs and Benjamin Black to be CEO of the U.S. International Development Finance Corp. at 10 a.m. …. Senate Agriculture holds a hearing on Quintenz's nomination for CFTC chair at 3 p.m. Can I get a deal on that? — While President Donald Trump is publicly sticking by his 25 percent tariffs on foreign cars, major U.S. trading partners such as the European Union, Japan and South Korea 'are laboring under the impression that the auto tariffs, which Trump imposed in April, are still on the table' of trade negotiations, Daniel Desrochers and Megan Messerly report. — 'If Trump is really unwilling to lower or eliminate his tariffs on foreign cars, it could prove to be a major hurdle to securing meaningful trade deals with some of the country's top trading partners. Japan, South Korea and Germany sold more than $121 billion in cars and car parts in the U.S. in 2024,' they report. T-minus 24 days — House Speaker Mike Johnson is not backing down from the Republicans' self-imposed July 4 target for passing Trump's 'big, beautiful bill,' Gregory Svirnovskiy reports. More crypto news — As Quintenz heads to Capitol Hill and House lawmakers prepare to mark up their proposed market structure legislation, Republicans hope to push through landmark legislation this week setting up a regulatory framework for stablecoins — crypto tokens whose value is tied to assets like the U.S. dollar, Jasper Goodman and Jordain Carney report. ICYMI: The stealth Senate dealmaker who could deliver Trump's tax cuts by Benjamin Guggenheim At the regulators 'Security weaknesses' — Four of Wall Street's biggest industry groups are calling on regulators to beef up their cybersecurity, Michael Stratford reports. In the wake of a massive hack of the Office of the Comptroller of the Currency's email system, the American Bankers Association, Bank Policy Institute, Managed Funds Association and the Securities Industry and Financial Markets Association wrote to Treasury Secretary Scott Bessent that they are 'deeply concerned' about agencies' cyber protections. DOJ shrinks anti-bribery unit — The Justice Department has more than halved its team focused on enforcing anti-bribery laws to 15 prosecutors, Reuters reports. Earlier this year, Trump signed an executive order pushing for a pause in enforcing the decades-old law that bars U.S. companies from using bribes to conduct business overseas. On The Hill Dems want a committee vote — 'Democrats on the Senate Banking Committee are pressing Chair Tim Scott to hold a vote on the panel's portion of the GOP's 'big, beautiful' reconciliation bill, writing in a letter to the South Carolina Republican that he should 'immediately schedule a markup' on the legislation,' Jasper reports. Crypto Paraguayan president's posting problems — From Bloomberg's Ken Parks: 'Paraguayan President Santiago Peña deleted a post on his X account after a likely hack by crypto scammers who claimed the South American nation had approved Bitcoin as legal tender.' A crypto arrest — 'Federal prosecutors in Brooklyn have charged the founder of a U.S.-based cryptocurrency payments firm with operating what they allege was a sophisticated international money laundering scheme that moved over half a billion dollars on behalf of sanctioned Russian banks and other entities,' CNBC's MacKenzie Sigalos reports. Jobs report Kevin McKinley has joined Andreessen Horowitz's government affairs team to lead the venture firm's state-level policy efforts. McKinley, who previously managed Meta's legislative policy team in California, is a16z's first government affairs hire to focus solely on state-level policy. Michelle Bowman was officially sworn in as the Federal Reserve's new vice chair for supervision on Monday, the central bank announced. Former SEC official Brad Bondi — a partner at Paul Weiss and Attorney General Pam Bondi's brother — lost his bid to lead the D.C. bar association, per Bloomberg Law's Tatyana Monnay. Investment banking titan Ken Moelis is stepping down from his eponymous firm, per the WSJ's Lauren Thomas.
