| | | | |  | | 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.
| | Tariffs raise prices (duh). But across-the-board tariffs on the scale proposed by former President Donald Trump are unprecedented for modern developed economies. Economists and Wall Street analysts have warned about the possibility of a worldwide trade war. The challenge that would pose to Federal Reserve Chair Jerome Powell will be even more severe if retaliatory tariffs and industrial policies chip away at the U.S.’s dominance over global financial markets. In most contexts, that’s almost an unthinkable outcome. But the policies floated by Trump — which include a 10 percent levy on all imports, and 60 percent or more on Chinese goods — are seismic enough that Former Fed Vice Chair Donald Kohn is considering the possibility. “Another risk here is that the fracturing of the global trading system ends up fracturing the global financial system as well,” Kohn, who spent four decades working in the Federal Reserve system, told MM and Victoria Guida. “One thing that keeps rates low in the U.S. is the flow of foreign funds into the U.S.” “If that flow gets interfered with, it’s not only the goods but the financing [that would be affected],” said Kohn, who’s now the Robert V. Roosa Chair in International Economics at the Brookings Institution. “That could put upward pressure on interest rates as well.” That dynamic would be exacerbated should Trump attack the Fed’s independence, said David Wessel, the director of the Hutchins Center on Fiscal and Monetary Policy. That will “make markets less confident that the Fed can do its job and that leads the markets to push up interest rates,” he said. How Trump would navigate his relationship with the central bank during a second administration remains an open question. There has been considerable public speculation over what legal avenues he could pursue to influence monetary policy. While advisers to the former president have floated strategies that would drastically change the central bank’s mission, including eliminating its dual mandate to ensure price stability and maximum employment, Trump has not proposed direct challenges to the Fed’s independence. That is not the case for other independent agencies like the Federal Trade Commission or Federal Communications Commission. Still, there is evidence that Trump’s frequent public criticism of the Fed over interest rates had an effect on markets around the time he was waging a trade war with China. His current proposals are much more substantial. And the Fed’s work would be all the more challenging. IT’S WEDNESDAY — As always, send tips and suggestions to ssutton@politico.com or on Signal at 925.216.7576.
| | | | THE GOLD STANDARD OF FINANCIAL SERVICES POLICY REPORTING & INTELLIGENCE: POLITICO has more than 500 journalists delivering unrivaled reporting and illuminating the policy and regulatory landscape for those who need to know what’s next. Throughout the election and the legislative and regulatory pushes that will follow, POLITICO Pro is indispensable to those who need to make informed decisions fast. The Pro platform dives deeper into critical and quickly evolving sectors and industries, like financial services, equipping policymakers and those who shape legislation and regulation with essential news and intelligence from the world’s best politics and policy journalists.
Our newsroom is deeper, more experienced, and better sourced than any other. Our financial services reporting team—including Zach Warmbrodt, Victoria Guida and Declan Harty—is embedded with the market-moving legislative committees and agencies in Washington and across states, delivering unparalleled coverage of financial policy and the financial services industry. We bring subscribers inside the conversations that determine policy outcomes and the future of industries, providing insight that cannot be found anywhere else. Get the premier news and policy intelligence service, SUBSCRIBE TO POLITICO PRO TODAY. | | | | | | | | | HUD Inspector General Rae Oliver Davis and FHFA Inspector General Brian Tomney will testify at a House Financial Services subcommittee hearing at 10 a.m. … House Financial Services will hold a subcommittee hearing on bank stress tests at 2 p.m. The Trump/Wall Street File — Saba Capital Management’s Boaz Weinstein said President Joe Biden’s re-election would be a better outcome for bond markets. Biden is “less motivated by the stock market and more motivated by what’s good for America — on the subject of bonds,” he said at the Bloomberg Invest event in New York on Tuesday. “I’m not getting that political — just bonds.” — Axios: “16 Nobel economists see a Trump inflation bomb” Spicy — SEC Chair Gary Gensler also appeared at the conference, telling the audience that the crypto industry “is a field [where] the leading lights a couple years ago are either in jail, about to go to jail, or waiting for extradition.” He declined to comment on billionaire investor Mark Cuban’s claim that his position on crypto could cost Biden reelection. Targeting Russian Oligarchs’ Money — A bipartisan group of lawmakers are pressing congressional leaders for a vote on legislation that would give the Justice Department expanded powers to transfer assets seized from Russian oligarchs to Ukraine, Michael Stratford reports. The Biden administration said earlier this year that it has moved to seize nearly $700 million in assets as part of a concerted crackdown on Russian oligarchs for violating sanctions and export controls. But DOJ currently has limited authority to transfer those funds to Ukraine. The new push from Sens. Joe Manchin (I-W.Va.) and Lindsey Graham(R-S.C.) and Reps. Brendan Boyle (D-Pa.), Bill Keating (D-Mass.) and Brian Fitzpatrick (R-Pa.) follow a deal reached earlier this month by G7 countries to make a $50 billion loan to Ukraine funded by the profits on frozen Russian sovereign assets. “As Vladimir Putin intensifies his illegal invasion, we must use every available tool — particularly those with no cost to U.S. taxpayers — to support our Ukrainian allies,” the lawmakers write in their letter to congressional leaders. Judge swipes left on Visa, Mastercard settlement — A judge on Tuesday blocked a proposed agreement between Visa and Mastercard to cap swipe fees on their own, Eleanor Mueller reports. U.S. District Judge Margo Brodie’s decision on the 20-year-old case sent ripples through Capitol Hill, where lobbyists and lawmakers have been sparring over legislation sponsored by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) to rein in fees charged to merchants on credit card transactions. — The Credit Card Competition Act “is going to take a little more time. It just is. But there were a number of members who asked, when this [settlement] broke, ‘is this resolved now?’ It wasn’t,” Austen Jensen, the executive vice president for government affairs at the Retail Industry Leaders Association, told MM. — “This agreement would help small businesses more than a haphazard, experimental piece of legislation,” Nicklaus Simpson of the Electronics Payment Coalition said in a statement.
| | | | SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, our newsletter taking you inside pivotal discussions at the most influential gatherings in the world. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW. | | | | | | | | Consumer confidence falls — U.S. consumer confidence fell slightly in June, according to the Conference Board’s monthly survey. There was an “uptick in sentiment about the current labor market, but their assessment of current business conditions cooled,” Conference Board Chief Economist Dana Peterson said in a statement. Bowman on rates: Not yet — Fed Gov. Michelle Bowman on Tuesday said there is a risk that inflation could still rebound. Supply chains have normalized, the labor force participation rate has leveled off “and an open U.S. immigration policy that added millions of new immigrants in the U.S. over the past few years may become more restrictive,” she said in prepared remarks for an event in London. Cook: Cuts are coming, when is TBD — Fed Gov. Lisa Cook was more dovish at an appearance at the Economic Club of New York. “At some point, it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy,” she said in prepared remarks. “The timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks.”
| | Andrew Olmem has been named managing partner of Mayer Brown’s Washington office. Olmem, who co-led the law firm’s regulatory and enforcement practice, was a deputy assistant to Trump and was deputy director of the National Economic Council. Ron Alquist is joining the Managed Funds Association as managing director of research, MM has learned. He was most recently the principal economist and senior policy advisor for the Financial Stability Oversight Council, and his resume includes work at the Office of Financial Research, AQR, Kings Peak Assets Management and the International Economic Analysis Department at the Bank of Canada. Connor Dunn has joined the advisory and advocacy firm FS Vector as a principal. Dunn, an alum of Republican House Financial Services Chair Patrick McHenry’s office, was most recently the deputy policy director on Senate Banking for Ranking Member Tim Scott (R-S.C.).
| | Amend, extend, and say amen— JPMorgan Chase CEO Jamie Dimon isn’t the only one who sees trouble on the horizon for private credit funds. Private equity firms that used private credit funds to finance their acquisitions of companies have so far been able “to delay the day of reckoning,” Oaktree Capital Management Co-CEO Robert O’Leary said at the Bloomberg Invest conference in New York on Tuesday. “What would have been a default five years ago, [or] 10 years ago, is now a liability management exercise which turns into an extended sort of decline for these companies,” he said. “We think it all ends in the same place where there's defaults, but it may be more protracted.” That doesn’t mean there’s a bubble, TCW Group CEO Katie Koch said. But “95 percent” of private credit players entered the market after the global financial crisis. There has been little distress since then, so “we don't know exactly what that's gonna look like,” she added. Bet on rent — KKR announced a $2.1 billion deal for 5,200 apartments across the U.S., The Wall Street Journal’s Will Parker reports. It’s a signal “that some of the most prominent investment firms are betting on a broad rebound for multifamily housing.”
| | Sorry — The Internal Revenue Service apologized to billionaire investor Ken Griffin and other wealthy people whose private tax information had been leaked by a private contractor, Brian Faler reports. Griffin has agreed to drop his suit against the agency. Extension — The Consumer Financial Protection Bureau extended the compliance deadlines for its small business lending rule by 290 days, Katy O’Donnell reports. Affected lenders will have to start collecting demographic data on their small-business loans by July 18, 2025. | | | | Follow us on Twitter | | | | Follow us | | | | |
