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| | How will Donald Trump solve the affordability crisis that felled Joe Biden’s presidency? The plan is fairly straightforward: Deregulation, expanding energy production and brow-beating Federal Reserve Chair Jerome Powell into reducing borrowing costs. That’s much easier said than done. “If it was so simple, they would just do it,” Norbert Michel, a vice president at the libertarian-leaning Cato Institute, told our Victoria Guida. The rate of inflation remains well above the Fed’s annual 2 percent target. Powell is expected to announce later today that the central bank will hold rates steady in order to keep a lid on climbing prices. And while Trump swore to bring down consumer prices, forces that have pushed up the cost of eggs and other staples are beyond his control. Not only that, “there are also inherent tensions with corporate America in what he is offering to voters. He has pledged to increase oil production to reduce prices at the pump. But oil companies — which are at the mercy of global pricing — are generally only motivated to increase production when prices rise,” Victoria writes. “So, while there’s technically room for the U.S. to produce more oil, ‘there’s a split here between physical capacity and what’s economically likely to happen,’ said Rory Johnston, an oil market analyst at research service Commodity Context. “‘The only thing that’s going to get you more production is higher prices,’ he added.” And those headwinds don’t even begin to account for other core facets of Trump’s agenda — high tariffs and mass deportations — both of which could cause prices to rise even higher. More from Victoria: “Asked about Trump’s efforts to lower Americans’ cost of living, Vice President JD Vance told CBS’s “Face the Nation” that the administration is looking to raise wages relative to prices, a way of easing cost burdens that is seen by economists as much more beneficial to the economy over the long term than actively decreasing prices. Inflation-adjusted wages grew 1 percent over the course of 2024, according to the Bureau of Labor Statistics, although they fell for much of Biden’s presidency. But Vance also maintained that Trump would ultimately lower costs. ‘Prices are going to come down, but it’s going to take a little bit of time,’ he said.” It’s WEDNESDAY — As always, you can find Sam at ssutton@politico.com.
| | | | A message from the Consumer Bankers Association: One in five Americans don't have access to credit. That means many Americans in need will struggle to make ends meet under the CFPB's regulation of overdraft. This regulation disregards years of consumer-driven progress by banks to offer customers more flexible ways to handle short-term financial needs. It will ultimately reduce access to overdraft, harming consumers who rely on this lifeline to keep the lights on, feed their families, and pay rent in a pinch. Learn more. | | | | | Senate Commerce will hold a hearing to consider Howard Lutnick’s nomination for Commerce secretary at 10 a.m. … The Senate Finance Committee will hold a hearing on the nomination of Robert F. Kennedy Jr. to be Health and Human Services secretary at 10 a.m. .… The Fed will announce its rate decision at 2 p.m. … Powell will hold a press conference to discuss that decision at 2:30 p.m. Freeze tag — The Trump administration’s late-night order to freeze “all federal financial assistance” unleashed chaos on Tuesday across agencies, statehouses and non-government organizations whose operations rely on the uninterrupted flow of federal funds. The unprecedented directive — which Democrats immediately labeled a constitutional crisis— threatens to choke off trillions in federal funds that support everything from Meals on Wheels and energy subsidies to Opportunity Zones and Northeast Corridor infrastructure projects. As policymakers raced to determine which programs were affected, White House Press Secretary Karoline Leavitt insisted during her debut briefing that this is “not a blanket pause” on federal aid. — Congressional Republicans aren’t resisting Trump’s incursion on their power of the purse. Tom Emmer, the no. 3 Republican in the House, cheered the order during an interview with Meredith Lee Hill. “You're going to see things like this, and your first reaction is going to be, ‘Well, this isn't the way it's been done,’” the Minnesota Republican said. “You need to understand, he was elected to shake up the status quo.” — Former Indiana Governor and Office of Management and Budget Director Mitch Daniels praised the maneuver. “I support from both a fiscal and a process standpoint,” he told MM, adding that the freeze should demonstrate that you can halt a lot of federal spending and “the sky won’t fall.” “It’s well worth any temporary disruption that it causes,” he added. — To be sure, the initial disruptions were substantial. Before a federal judge stayed the order late Tuesday afternoon, Washington insiders and lobbyists were scrambling to get a sense of what programs had been frozen. Even Leavitt couldn’t say for certain if massive federal programs like Medicaid were impacted. Sen. Ron Wyden, the ranking Democrat on Senate Finance, posted on Bluesky that his staff had “confirmed reports that Medicaid portals are down in all 50 states following last night's federal funding freeze.” — As Robert King and Kelly Hooper report, the boondoggle prompted OMB to release a follow-up memo clarifying that Medicaid should not be affected. By late afternoon Tuesday, the White House said it was working to ensure the portal for accessing Medicaid payments is open. “We have confirmed no payments have been affected — they are still being processed and sent,” Leavitt posted on X. “We expect the portal will be back online shortly.” — Lack of clarity on the directive also sparked confusion within the housing sector. Lobbyists were unable to confirm that Federal Housing Administration loans and Ginnie Mae securities are not covered by the freeze, Katy O’Donnell reported, which briefly led some major lenders to consider cutting off access to FHA loans, one industry leader said. It wasn’t until late Tuesday afternoon that the Department of Housing and Urban Development clarified that the freeze would not apply to FHA single-family mortgages or claims. — Democratic attorneys general said they plan to file suit over the freeze, writes Kyle Cheney. Advocacy groups like the National Council of Nonprofits, along with public health and small business leaders, have also filed for a temporary restraining order to block the freeze, per E&E’s Pamela King. On the Hill, Senate Democrats are stepping up opposition to Trump administration nominees until Trump’s “power grab” is resolved, per Chris Marquette, Sam Ogozalek and Oriana Pawlyk. Heavyweights — Polymarket is tapping longtime Trump adviser David Urban to lobby on its behalf as it pushes for regulatory changes that would introduce new betting platforms to the U.S. market, Declan Harty reports. “The momentum has been building for a while,” a senior Biden appointee, who was granted anonymity to speak freely, told Declan. “Now they feel like they have a straight flush.” How long can the honeymoon last? — A Reuters/Ipsos poll found that support for Trump’s early policy moves has already started to soften. Meanwhile, consumer sentiment is fading as concerns about the labor market and business conditions mount, according to the latest Conference Board survey. Musk’s new venture — Also from Declan: “Elon Musk's X has struck a deal with Visa to equip the social media platform with payment capabilities, inching the company closer to the highly regulated world of finance.”
| | | | Power shifts, razor-thin margins, and a high-stakes agenda. We’ve transformed our coverage—more reporters, more timely insights, and unmatched policy scoops. From leadership offices to committee rooms, caucus meetings, and beyond, our expert reporting keeps you ahead of the decisions that matter. Subscribe to our Inside Congress newsletter today. | | | | | | | Power grab — Axios’s Marc Caputo and Emily Peck scooped that Trump will offer buyout packages to federal employees who don't want to return to the office if they resign by Feb. 6. — The president also fired National Labor Relations Board member Gwynne Wilcox and general counsel Jennifer Abruzzo, setting the stage for a legal battle that will test Trump’s ability to dismiss appointed regulators. — “As the first Black woman board member, I brought a unique perspective that I believe will be lost upon my unprecedented and illegal removal,” Wilcox said in a statement, per Bloomberg. “I will be pursuing all legal avenues to challenge my removal, which violates long-standing Supreme Court precedent.” Warren targets Lutnick’s crypto ties — Cantor Fitzgerald CEO Howard Lutnick will appear before the Senate Commerce committee this morning for a confirmation hearing. Sen. Elizabeth Warren (D-Mass.), the ranking Dem on Senate Banking, sent a letter to the Wall Street executive on Tuesday night demanding more information about his company’s work with Tether — an offshore crypto firm whose opaque operations and alleged links to illicit finance have been scrutinized by Washington policymakers. “In particular, your deep involvement with and support for Tether, a known facilitator of criminal activity that has been described as ‘outlaws’ favorite cryptocurrency’ raises concerns about your judgment and ability to put the interests of the American people ahead of your own financial interests,” Warren wrote. Bessent’s first day — Treasury Secretary Scott Bessent took the oath of office on Tuesday, Michael Stratford reports. He spent his first day on the job in meetings with senior Treasury officials.
| | | | A message from the Consumer Bankers Association:  
| | | | | Tim Scott’s agenda — Senate Banking Chair Tim Scott told reporters that “conservatives will be happy” with Trump’s pick to replace Consumer Financial Protection Bureau Director Rohit Chopra, our Eleanor Mueller reports.The South Carolina Republican also endorsed the idea of using the reconciliation process to shrink CFPB funding: “I say amen to that.” Debanking — Scott also announced the witnesses for an upcoming hearing on debanking, reports Katherine Hapgood. They include Nathan McCauley, CEO and co-founder of Anchorage Digital, a crypto platform; Evan Hafer, founder and executive chairman of Black Rifle Coffee; and Stephen Gannon, partner at Davis Wright Tremaine LLP.
| | | | New Year. New Washington. New Playbook. With intensified congressional coverage and even faster delivery of policy scoops, POLITICO’s reimagined Playbook newsletter ensures you’re always ahead of the conversation. Sign up today. | | | | | | | A (measured) recovery — Markets recovered somewhat after Monday’s market selloff on the DeepSeek news, with the Nasdaq climbing by 2 percent and the S&P 500 gaining a little less than 1 percent, per The WSJ. — Famed investor Howard Marks said the firesale of tech stocks earlier in the week was overblown. “If it were just objective, clinical, unemotional investors looking at Nvidia there would be no reason why yesterday’s news should knock all these other things down,” Marks said at the Global Alts 2025 conference in Miami, per The FT. “It just shows the pervasiveness of psychology and the irrationality of the markets in the short-run.”
| | | | A message from the Consumer Bankers Association: The CFPB's regulation of overdraft ignores the needs of the 1 in 5 Americans who lack access to credit.
Overdraft services, which must be clearly disclosed by law, provide a financial lifeline for those who actively choose to opt in. Removing access to these services would strip Americans in need of this informed choice, forcing many to turn to less-regulated, potentially riskier, and far more costly alternatives.
Banks know their customers want flexibility and choices. That's why banks have built new solutions and tools that provide more control and information to customers to help manage their money. By ignoring these efforts, the CFPB's regulation reduces access to overdraft services for those who need them most.
See how CBA is fighting to protect consumers' financial flexibility. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
