| | | | |  | | By Sam Sutton | Presented by Citi | 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.
| | Voters rank the economy as the most important issue in this election. Tuesday night’s debate offered Kamala Harris and Donald Trump their best opportunity to make a case for their economic visions and convince any undecideds they can deliver on them. If any of those voters are making that decision based on who did best at sticking to their talking points, it wasn’t much of a contest. Harris stuck to her stump speech, leaning into well-trod messaging about how her middle-class background has informed an agenda that would offer American families a $6,000 child tax credit and $50,000 deductions to new businesses to help cover startup costs. Trump jumped from topic to topic regardless of the question he was asked. But Harris spent even more time on the offensive. She claimed that Trump’s platform was a retread of his first term. His plans to lower the corporate tax rate, impose expensive tariffs on imports and lower taxes for corporations would add trillions to the deficit and “make the economy worse” (Morning Money readers knew this was coming). It was a steady, if unsurprising, line of attack. But despite how poorly President Joe Biden’s administration has fared with voters when it comes to the economy, Trump could not maintain discipline with many of his counters. He took a spaghetti-at-the-wall approach. His first two minutes of speaking time veered from a defense of tariffs, to a riff on Biden-era inflation, quickly followed by an invocation of online conspiracy theories about how immigrants are “taking over” communities like Aurora, Colorado and Springfield, Ohio. That set the tone for the rest of the evening. Neither candidate unveiled any major economic policies to try to sway voters on the defining issue of the race. The contest was defined instead by their ability to stay on message. Democrats will no doubt be heartened by Harris’s performance given how severely their odds of success had been damaged by Biden’s disastrous performance against Trump in June. Trump allies like Rep. Elise Stefanik (R-N.Y.) and Robert F. Kennedy Jr. are already claiming that ABC moderators David Muir and Linsey Davis were one-sided in fact-checking the candidates. Near the debate’s conclusion, Trump pointed out that Harris’s vision is more or less the same as Biden’s and that she should own his record on both the economy and inflation. It was a big opportunity for Trump to hammer home how Harris had a role in policies that crushed Biden’s approval ratings. The Trump campaign has been working hard to tag Harris with similar negatives. She immediately distanced herself from Biden. “I am not Joe Biden, and I am certainly not Donald Trump,” Harris said, adding that she was part of a “new generation of leadership.” The vice president then reiterated that she had a plan to boost small businesses, extend child tax credits and assist first-time homebuyers and that debate viewers would be better served by a discussion about how her plans compare to those of the former president. “That’s the kind of conversation that I believe, David, that people really want tonight. As opposed to a conversation that is constantly about belittling and name-calling,” she said. Rather than picking up where he left off, Trump leaped in to say that she would defund the police, confiscate everybody’s guns and ban fracking in Pennsylvania and elsewhere. By the time he finished, the moderators were ready to move on. IT’S WEDNESDAY — So, how’d they do? If you have thoughts on how Harris and Trump performed on economic policy or messaging last night, send them my way to ssutton@politico.com.
| | A message from Citi: Over one-third of suppliers reported focusing on nearshoring in 2023. With global flows and geopolitics continuing to change, supply chain resilience has proven to be critical – and as a result, nearshoring is gaining further momentum. Many companies are executing nearshoring strategies to diversify their supply chains, reduce risks associated with distant manufacturing hubs, and move production closer to their end-consumers. Learn more in the Citi GPS Report, The Future of Global Supply Chain Financing. | | | | | The Labor Department releases its August CPI report at 8:30 a.m. … House Financial Services holds a subcommittee hearing on global governance at 10 a.m. … Senate Budget holds a hearing on Social Security at 10 a.m. Inflation: It still matters — The Labor Department’s inflation gauge will be out at 8:30 a.m. and it’s expected to show that prices climbed at an annual rate of 2.6 percent last month. Is that above the Federal Reserve’s 2 percent target? Yes. Is that enough to knock the Fed off course to cut rates later this month? No. If inflation comes in much softer than anticipated, it will amplify calls on Federal Reserve Chair Jerome Powell and other Federal Open Market Committee members to lower rates by half a percentage point — double the size of the central bank’s usual move. Markets had priced in a 31 percent likelihood of that happening as of Tuesday evening, according to CME’s FedWatch tool. — Bloomberg’s Ye Xie and Liz Capo McCormick report that some bond traders are starting to see risks that inflation will dip below 2 percent over the next decade. Here’s to a speedy recovery — Treasury Secretary Janet Yellen has tested positive for Covid-19 after experiencing symptoms. “She is engaged in her duties while working from home and will continue to do so until she can return to the office,” spokesperson Lily Adams said in a statement.
| | Basel III next game — Fed Vice Chair for Supervision Michael Barr said he would recommend a re-proposal of controversial rule changes intended to improve the resilience of large financial institutions, marking a victory for big banks that had fought against his initial rule changes, Michael Stratford reports. The changes are significant, slashing roughly in half the increased capital requirements that would have been imposed on America’s largest banks. And the revision will no longer subject banks with assets between $100 billion and $250 billion of assets — Silicon Valley Bank would have been in this category — to higher capital requirements. “We’re definitely not rushing to get this done before the election,” Barr said, adding that the Fed was “going to take the time to get it right.” Still, it’s not yet clear if the other key bank regulators — the FDIC and the OCC — have fully agreed to the Fed's new approach, which was immediately slammed by Sen. Elizabeth Warren and progressive groups as a giveaway to Wall Street banks. FDIC Chair Martin Gruenberg and Acting OCC chief Michael Hsu said in separate statements that they would continue working together on the proposal but neither committed to moving ahead with the specific revisions Barr outlined. The reactions were swift: — “A do-over was absolutely necessary,” said American Bankers Association President and CEO Rob Nichols. Senate Banking’s top Republican, Tim Scott of South Carolina, said Barr’s announcement “only underscores that this proposal should be withdrawn and properly re-proposed in its entirety.” — Warren said that the Fed “caved to the lobbying of big bank executives.” Better Markets CEO Dennis Kelleher said that the bank’s attacks on the earlier proposal “did not have facts or data supporting the action.” — Still, the decision to revamp the proposal drew praise from members of both parties on the Hill on Tuesday, Eleanor Mueller and Jasper Goodman report. Top Republicans on House Financial Services like Reps. French Hill of Arkansas and Frank Lucas of Oklahoma praised Powell’s leadership, and some Democrats signaled appreciation that the revisions would also address concerns over mortgage lending and clean energy tax credits. — Another victory for the megabanks? The revised plan will update the capital surcharge imposed on the country’s largest banks to ensure they’re not penalized for growing as a result of economic expansion, per Victoria Guida.
| | It wasn’t all good news — Despite the policy victory, financial stocks sank on Tuesday as more bank leaders warn that economic tailwinds that pushed their earnings higher this year have started to peter out, Hannah Levitt, Katanga Johnson and Paige Smith reported for Bloomberg. Consumer finances are showing signs of weakness, which could soften earnings from lending. — Still, the S&P 500 finished the day up slightly, despite downbeat reports from the banking sector.
| | The billionaire ballots — Bloomberg’s Kristine Owram and Bill Allison have a rundown on how much America’s wealthiest denizens have contributed to Trump or Harris-related efforts. There aren’t too many surprises — Blackstone Group’s Chair, CEO and Co-founder Stephen Schwarzman has given $419,600 to the Trump 47 Committee, while his colleague Jon Gray has donated a combined $463,000 to the Biden Action Fund and the Harris Action Fund. Continental Resources Chair Harold Hamm has committed more than $800,000 to pro-Trump efforts, while Google’s Eric Schmidt has donated more than $2.7 million to pro-Biden and pro-Harris committees. A few big names that are still on the sidelines: Warren Buffett, Bill Gates, Ken Griffin and Jeff Yass.
| | | | A message from Citi:   | | | | | Uneven improvement — The Census Bureau on Tuesday reported that inflation-adjusted incomes rose 4 percent last year, marking the first annual increase since 2019, Katy O’Donnell reports. But those gains were largely concentrated in white, non-Hispanic households, and there “was no significant change in median incomes for Black, Asian, and Hispanic households,” according to the report. — What’s more, the report showed that the percentage of Americans living in poverty climbed to 12.9 percent last year from 12.4 percent in 2022, The NYT’s Lydia DePillis reports.
| | Ominous! — Securities and Exchange Commission Chair Gary Gensler warned that major financial institutions should be preparing for the types of disclosures they would need to make in the event they’re forced to restructure, Declan Harty reports. Those types of events typically occur over a “crisis weekend,” Gensler said. And while "a financial institution may not have all the answers that weekend …. The more it lacks answers to these questions, however, the more difficult it will be for the restructuring to be successful." Gensler: Not a friend of the pod? — In related/unrelated news, Keurig — the coffee pod machine maker — paid $1.5 million to settle SEC charges that it made inaccurate statements regarding the recyclability of its K-Cup single use beverage pods.
| | Waters knocks Trump family’s crypto project — House Financial Services ranking member Maxine Waters (D-Calif.) used a hearing on decentralized finance Tuesday to hammer the forthcoming Trump family crypto venture, which has been targeted by scammers in recent weeks ahead of its launch, Jasper reports. "While decentralized finance, or DeFi aims to create greater efficiencies and transparency, it can also pose a heightened risk of hacks, scams, unequal information, and conflicts of interest that can harm consumers and investors," Waters said in the hearing. "We have seen this play out in the new DeFi venture that Eric Trump and Donald Trump Jr. plan to launch, called World Liberty Financial." She added that "lawmakers have a responsibility here to consider strong protections to prevent such scams moving forward." First in MM: Barr to host Scalise in Kentucky — Rep. Andy Barr will host House Majority Leader Steve Scalise in Versailles, Kentucky, on Thursday for a fundraiser benefiting vulnerable Republican incumbents and so-called young gun candidates, Eleanor reports. An invitation shared with POLITICO lists tickets starting at $1,000. Organizers expect to raise half a million dollars, said a person briefed on the plans who was granted anonymity to discuss private conversations. Barr is among those running to replace McHenry, who’s retiring, in a race that’s widely seen as a windfall for the larger conference. ESG — House Republicans are making another push this month to crack down on how public companies and asset managers implement environmental, social and governance policies, Eleanor reports for The Long Game. The efforts include bills designed to steer retirement plans away from these initiatives and limit SEC disclosures. Would Biden sign any of these bills into law? No, not likely. But passing new laws might be beside the point. “You can make the argument we have effectuated change, regardless of whether there's additional legislation or legislative activity,” Rep. Bill Huizenga (R-Mich.), who leads House Republicans’ anti-ESG working group, told Eleanor. Businesses have “adopted new and different policies because of the work that we've done.”
| | A message from Citi: Over one-third of suppliers reported focusing on nearshoring in 2023.
With global flows and geopolitics continuing to change, supply chain resilience has proven to be critical. As a result, many companies are finding it more relevant to execute a nearshoring strategy, shifting their manufacturing and production operations closer to their primary markets. Benefits associated with nearshoring include helping to diversify supply chains, bolster resilience, and reduce risks associated with distant manufacturing hubs.
Explore this and other supply chain trends in the Citi GPS Report, The Future of Global Supply Chain Financing. | | | | | Freddie Mac has appointed Diana Reid as its next CEO, effective immediately, Katy reports. She previously led PNC Financial Services Group’s real estate business division. Meina Banh has joined Chime as director of public affairs, where she’ll be tasked with building the fintech’s social impact, community engagement and public affairs strategy. She was previously a deputy director in the Office of Financial Education at the Consumer Financial Protection Bureau. | | | | Follow us on Twitter | | | | Follow us | | | | |
