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Politico
3 days ago
- Business
- Politico
The clap on/clap off tariffs
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 For once, it wasn't President Donald Trump who was reversing course on a tariff regime. A federal appeals court on Thursday reinstated Trump's 'reciprocal' tariffs on dozens of countries as it weighed the administration's request to leave the penalties in place while litigation over their legality continues. The constant whipsaw of U.S. trade policy poses a threat to the administration's leverage in talks with dozens of countries, Ari Hawkins, Daniel Desrochers Megan Messerly and Eli Stokols reported. 'We don't know how trading partners are going to fully react. It had been hit-or-miss with negotiations, and some progress has been made,' said Ronald Baumgarten, an of counsel at BakerHostetler who served as a deputy assistant U.S. Trade Representative for Southeast Asia and the Pacific during the first Trump administration. Some countries 'may not rush to lift retaliation' in light of the uncertainty, he added. What's more, as business leaders and Wall Street grapple with even more uncertainty around the administration's trade agenda, it could accelerate widely anticipated slowdowns in hiring, investment and corporate dealmaking. As Sam reports with Daniel and Adam Cancryn, the potential policy blowup comes at an especially vulnerable time for the economy. CEO confidence cratered in the second quarter,according to The Conference Board. The latest estimate on first-quarter economic growth reflected a slowdown in consumer spending and a plunge in corporate profits. With that as the backdrop, corporate leaders are urging the administration to change course and refocus on delivering clear-cut, lasting trade agreements — sans chaos, preferably. 'One of the things that the administration has to offer is a guarantee of certainty with respect to current and potential future tariffs,' National Foreign Trade Council President Jake Colvin, who advocates for U.S. companies on global commerce, said after the Wednesday decision by a trade court. 'The court's ruling... is an inflection point that provides an opportunity for the administration to turn even more towards deal-making.' Trump advisers, including National Economic Council Director Kevin Hassett, have dismissed the business world's trepidation over the administration's approach on trade as overblown. Still, Wall Street analysts are warning that more trouble could be ahead. 'Yo-yo' tariff rates are ultimately more damaging than the import duties themselves, said James Egelhof, the chief U.S. economist and managing director at BNP Paribas. And there's a possibility that Wednesday's court ruling could cause 'the administration to feel that it needs to take more aggressive or provocative action to re-establish credibility.' 'That could increase uncertainty, it could diminish investment,' he added. 'And it could prolong the period of tariff uncertainty beyond the summer.' IT'S FRIDAY — And as always, send your tips, suggestions and personnel moves to Sam at ssutton@ Driving the Day The Reagan National Economic Forum kicks off. Speakers include House Financial Services Chair French Hill (R-Ark.), House Ways and Means Chair Jason Smith (R-Mo.), Senate Health Chair Bill Cassidy (R-La.), Sen. Mike Rounds (R-S.D.), Deputy Treasury Secretary Michael Faulkender and former Fed Gov. Kevin Warsh … The personal consumption expenditures index for April is out at 8:30 a.m. … The University of Michigan consumer sentiment survey is out at 10 a.m. … Atlanta Fed President Raphael Bostic speaks at the Council for Economic Education's 2025 National Economics Challenge at 12:20 p.m. … Not fade away — Elon Musk may be stepping back from his role in the Trump administration, but his acolytes are here to stay. As Robin Bravender, Danny Nguyen and Sophia Cai report, 'some DOGE employees have been hired on as permanent government staffers and given high-ranking positions inside agencies.' And Republican leaders are still feeling Musk's… musk — House Speaker Mike Johnson defended the GOP's 'big, beautiful bill' — which was criticized by the Tesla founder — telling Fox News that he 'sent my good friend Elon a long text message explaining it can be big and beautiful.' — Get ready for the fight over this tax provision, per Bloomberg: 'The item … calls for, among other things, increasing tax rates for individuals and companies from countries whose tax policies the US deems 'discriminatory.' This includes raising tax rates on passive income, such as interest and dividends, earned by investors who are potentially sitting on trillions in American assets.' End of an era — Declan Harty reports that the Securities and Exchange Commission is ditching its case against the crypto behemoth Binance, which it had accused of showing 'blatant disregard' for U.S. law. Fed File 'Anyway, what's new with you?' — Federal Reserve Chair Jerome Powell and Trump met at the White House for the first time in the president's second term, Victoria Guida reports. According to Press Secretary Karoline Leavitt, the president continued to press Powell to cut interest rates. The Fed's decision to hold off on rate cuts 'is putting us at an economic disadvantage to China and other countries, and the president's been very vocal about that, both publicly and, now I can reveal, privately,' said Leavitt, per Bloomberg. The Economy Pending home sales drop –– A National Association of Realtors report released Thursday found that pending home sales decreased 6.3 percent in April. 'At this critical stage of the housing market, it is all about mortgage rates,' said NAR Chief Economist Lawrence Yun. 'Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring home buyers back into the housing market.' Wall Street The bigger problem –– Bond traders are increasingly spooked by mounting levels of US government debt — and it's now a concern that holds more risk than tariffs, according to Goldman Sachs President John Waldron, Bloomberg reports. 'While all the attention was on tariffs, I think the attention rightly is shifting — certainly in the bond market — to the US budget debate and the fiscal picture, which I would characterize as somewhat concerning,' Waldron said. 'I think the big risk on the macro right now is actually not so much tariffs.' –– Treasury yields fell on Thursday ahead of GDP and jobless claims data indicating the economy is possibly cooling, supporting the Fed's wait-and-see stance, the Wall Street Journal reports. 1MDB–– A former Goldman Sachs banker turned government cooperator was sentenced to two years in prison for his role in the looting of billions of dollars from a Malaysian sovereign-wealth fund, the Journal reports. On The Hill House Republicans' updated market structure bill — House Financial Services Chair French Hill on Thursday introduced a revamped version of landmark cryptocurrency legislation that seeks to overhaul how digital assets are regulated, with three Democrats on board as co-sponsors, Jasper Goodman and Katherine Hapgood report. Huizenga still debates his Senate run — Rep. Bill Huizenga (R-Mich.), a major force on House Financial Services, has been preparing a run for Michigan's open Senate seat and plans to make a final decision this summer, Adam Wren and Lisa Kashinsky report.
Politico
4 days ago
- Business
- Politico
Cloudy with a chance of stagflation
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 Economic analysis these days has the feel of every trailer you've seen where someone ominously proclaims that a storm is coming. A tariff tornado is headed for the U.S. economy, and Federal Reserve officials can see it coming, but they don't know which way it will swerve or how much damage it will cause. A federal court ruling on Wednesday evening threw a further wrench into the equation, striking down President Donald Trump's 'reciprocal' tariffs on a wide range of countries, saying his effort to justify them with broad claims of national emergencies exceeded his legal authority. The Justice Department moved swiftly to appeal the decision, so the question is far from settled, like most everything on tariffs. And it's safe to say that Trump will still look for ways to put taxes on imports (notably, the ruling doesn't touch sectoral levies on products like steel and autos, which were imposed under a different law). To find out how this movie turns out, you'll have to stay through the end. For now, the sun is still shining, with inflation cooling close to 2 percent and unemployment near 4 percent. But how might this play out? That question has preoccupied economists, begun to chill business activity and kept the Fed in a holding pattern as policymakers watch for fallout, beyond the 'downbeat' sentiment among manufacturers and retailers that they discussed at their rate-setting meeting earlier this month. The earliest tariff effects have cropped up in the form of lower profit margins for producers, as well as higher prices for furniture. 'If you're looking for a specific month where I would expect to see a lot more of it come through [in the Consumer Price Index], it's the June data that comes out in the middle of July,' said Omair Sharif, president of Inflation Insights. Prices could continue to climb heading into the fall, as companies get a better idea of where tariff rates will ultimately land. For the time being, Sharif noted that some retailers have been selling goods at a discount in the hopes of unloading the pre-tariff inventory they built up before the economy weakens enough to slow sales. But it might be the higher prices themselves that really spur the hit to growth by eating into consumer spending, a dynamic that could stay the Fed's hand on rate cuts until late in the year. That is, Chair Jerome Powell won't want to ease off inflation until he's certain the economy needs the help. 'The progression is both very important and very uncertain,' said Jason Furman, a Harvard professor who served as President Barack Obama's top economist. 'If inflation comes first, even if it's understood that it's because of tariffs, I think it will raise the bar on rate cuts, in terms of the job loss you need to see.' As a result, investors are increasingly expecting the central bank to stand pat until September or October, according to CME's FedWatch tool. The problem, KPMG chief economist Diane Swonk told MM, is that heading off stagflation — when higher unemployment and higher inflation happen simultaneously — requires the Fed to wait for pain. 'Everyone talks about the danger that the Fed is going to be too late,' she said. 'The mistake the Fed is hedging against is stagflation, and when you're hedging against stagflation, by design, you have to be too late.' 'If they're too soon, the consequences of that are much greater than if they're too late,' she added. Minneapolis Fed President Neel Kashkari told Bloomberg TV this week that he's not sure if the tariff picture will be clear by September. 'We will have to see what the data says, but also how the negotiations are going,' he said. Trade deals over the next few months 'should provide a lot of the clarity we are looking for,' he added. Meanwhile, all of those factors could come to a head just as the Trump administration begins in earnest to consider who should replace Powell when his term as chair ends next May. 'All those decisions are going to spark and intensify Trump's pressure on the Fed, and in addition, he could use it as an example of why he needs to find somebody who is, most important from his perspective, loyal to Trump,' said Sarah Binder, a professor at George Washington University. 'That search is going to take place at a time when the Fed is not out of the woods, given all these economic pressures.' IT'S THURSDAY — What's your favorite barometer of economic activity? Let me know: vguida@ And as always, send your tips, suggestions and personnel moves to Sam at ssutton@ Driving the day The second estimate for first-quarter gross domestic product is out at 8:30 a.m. … Richmond Fed President Thomas Barkin participates in a fireside chat before the Housing Partnership Network at 8:30 a.m. … Chicago Fed President Austan Goolsbee speaks at the 2025 Mackinac Policy Conference hosted by the Detroit Regional Chamber at 10:40 a.m. … Fed Gov. Adriana Kugler speaks at the central bank's Macro-Finance Workshop at 2 p.m. … San Francisco Fed President Mary Daly speaks at the Oakland Rotary Club at 4 p.m. … Dallas Fed President Lorie Logan speaks at the Greater Waco Member Appreciation event at 8:25 p.m … Elon bows out — 'As my scheduled time as a Special Government Employee comes to an end, I would like to thank President @realDonaldTrump for the opportunity to reduce wasteful spending,' DOGE head Elon Musk posted on X. 'The @DOGE mission will only strengthen over time as it becomes a way of life throughout the government.' Musk's off-boarding was set to begin Wednesday night, a White House official told ABC News. — The White House plans to send a small package to formalize some DOGE spending cuts to Congress next week, senior GOP officials told several House Republicans on Wednesday, our Meredith Lee Hill and Jennifer Scholtes report. Two senior administration officials also confirmed the plan. Where Dems split on Trump — Fighting the president has long been a unifying cause for Democrats on Capitol Hill, but a clash over stablecoin legislation is starting to expose fissures in the resistance, our Jasper Goodman reports. Sen. Chris Murphy (D-Conn.) has called for Democrats to make Trump's 'corruption and the destruction of democracy the No. 1 issue.' But some Democrats want to forge ahead with legislation on crypto. — Related reading: Trump's pro-crypto agenda is increasingly intertwined with his financial interests, our Jake Traylor, Declan Harty and Irie Sentner report. Big beautiful blowback — Industry groups representing fintechs, payment businesses and banks are dialing up their public opposition to a politically thorny provision of the House's tax package: a new 3.5 percent tax on foreign remittances sent by non-U.S. citizens, Sam reports. Many Wall Street and financial industry groups have refrained from airing their specific grievances with Trump's legislative agenda, but the American Fintech Council's letter suggests that opposition to major components of the bill will grow in the coming weeks as Senate lawmakers plan substantial revisions to the legislation. Trade War Tariff fallout — General Motors CEO Mary Barra defended Trump's tariff regime at The WSJ's 'Future of Everything' event. 'For decades now, it has not been a level playing field for us automakers globally, with either tariffs or non-tariff trade barriers. So I think tariffs is one tool that the administration can use to level the playing field,' Barra said. — Nearly two-thirds of the chief executives polled by PwC in the consulting firm's latest pulse survey said they're renegotiating pricing with suppliers, and 60 percent said they're passing tariff-related costs to consumers or plan to do so, according to results shared with MM. — Still, a separate poll of small business owners taken in April by the Capital One Insights Center, shown exclusively to MM, found that 89 percent of small businesses are optimistic that their businesses will grow. Roughly half of those surveyed said the previous year was the most difficult they faced as business owners. TACO Wednesday — Trump bristled when asked about the acronym TACO, which stands for 'Trump always chickens out,' that's been adopted on Wall Street. It relates to bets to take advantage of the trade environment created by the president's habit of threatening to impose tariffs on countries, and then backing off at the last moment, our Ali Bianco reports. 'To me, that's the nastiest question,' he said. At the regulators Fed nixes climate groups — The Fed has disbanded a number of internal groups that were intended to help the central bank identify and respond to financial stability threats posed by climate change, Bloomberg News reports. Trump: U.S. would still back privatized housing finance giants — Trump has pledged to preserve Fannie Mae and Freddie Mac's implicit guarantee of government support as he works to take the two mortgage-finance giants public, though the administration's top housing regulator offered few details Wednesday on what the process of ending conservatorship would look like, our Katy O'Donnell reports. A national battle over personalized pricing — In California, Georgia, Illinois, Colorado and New York, state lawmakers have introduced bills to set rules around 'surveillance pricing,' a growing practice that worries consumer advocates due to potential unfairness and use of sensitive information, but they're running into corporate pushback, our Alfred Ng reports. CRYPTO CORNER Not quite Crypto USA — Bitcoin may be surging, the president may be a crypto bull, and the industry may be getting its way on Capitol Hill. But the adoption of crypto is not exactly exploding in the U.S., Declan reports. The Federal Reserve's latest economic well-being household survey found that just 8 percent of Americans used crypto in 2024, a slight uptick from 7 percent in 2023, though far from the 12 percent that was recorded in 2021. Crypto in your 401(k)? — The Labor Department on Wednesday yanked Biden-era guidance that strongly discouraged employers from offering cryptocurrency in workers' 401(k) plan options, which Secretary Lori Chavez-DeRemer called an attempt by the previous administration 'to put their thumb on the scale' against cryptocurrency investments, our Nick Niedzwiadek reports.
Politico
5 days ago
- Business
- Politico
Crypto reckons with Trump's growing industry ties
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 Washington's most powerful cryptocurrency champion is starting to become a major headache for the industry. More than four months after he took back the Oval Office, President Donald Trump's deepening business ties in the $3.5 trillion market are predictably drawing outrage from progressive advocacy groups, Democratic lawmakers and ethics watchdogs. But the Trump family's fast-growing crypto empire is also stirring concern among lobbyists and executives who worry that the president could undermine the industry's policy agenda and even jeopardize his own efforts to establish the U.S. as the world's crypto capital. 'It's a distraction,' said one crypto lobbyist, who was granted anonymity to speak freely about Trump's business ventures. 'We're excited to have a president who is enthusiastic about crypto. But the way they've done this … it just doesn't look good.' Already, Democrats managed to temporarily sidetrack a landmark crypto bill proposing how to regulate so-called stablecoins by dredging up the president's connections with the industry. And another crypto executive expects that a separate bill proposing how Wall Street regulators oversee the industry won't advance until after the midterm elections next year because of the uproar over Trump's crypto ventures. A third industry official said the efforts are giving crypto's opponents new fodder to bash the industry, despite it ultimately being an ethics issue. The industry's brewing concerns present a new front in the pushback in Washington over Trump's increasing footprint within the industry, which critics have warned could become a new means for corporate actors and foreign entities to influence the administration. Among Trump's crypto interests are the crypto startup World Liberty Financial and the $TRUMP memecoin, a personalized crypto token that he launched just before his inauguration in January. Last week, the president appeared — albeit briefly — at a private gala dinner at his golf club in Virginia for the memecoin's top holders, sparking national news coverage. 'The bottom line here is it's so inappropriate,' Public Citizen co-President Lisa Gilbert said. 'It's not something we should ever get comfortable with.' Yet, neither the Trump administration nor the president's business ventures are blinking. On Tuesday, Trump Media & Technology Group, the company behind Truth Social whose stock is majority owned by Trump, unveiled plans to raise $2.5 billion to finance a bitcoin buying spree. Vice President JD Vance, meanwhile, is set to appear later on Wednesday at a bitcoin-focused conference in Las Vegas. In his remarks, Vance, a long-time crypto advocate who disclosed owning more than $250,000 worth of bitcoin last year, will lay out how the administration plans to forge a new and friendlier regulatory path for the industry compared to the Biden administration, a person familiar with the speech told our Irie Sentner. 'President Trump is dedicated to making America the crypto capital of the world and revolutionizing our digital financial technology,' White House spokesperson Anna Kelly said in a statement. 'His assets are in a trust managed by his children, and there are no conflicts of interest.' Indeed, Trump has promised to give crypto the long-sought 'regulatory clarity' that President Joe Biden's watchdogs failed to provide the industry. And while Trump's interests in the market could gum up progress on the industry's policy preferences, crypto and the president appear to be inseparable, with Republicans in control of Washington for the foreseeable future. 'There's an ideological alignment,' said Nic Carter, a founding partner at the crypto investment firm Castle Island Ventures who has previously criticized the Trump crypto ventures. But, he added, 'the crypto industry wants to see results in Washington, and Washington wants this spigot of money to keep flowing.' IT'S WEDNESDAY — Are you fretting about Trump's crypto ties? Have SEC tips? Want to talk Chicago food? Give me a shout: dharty@ And as always, send your tips, suggestions and personnel moves to Sam at ssutton@ Driving the day Vance speaks at Bitcoin 2025 at noon … The minutes for the Federal Reserve's May meeting are out at 2 p.m. … Start your engines — Industry groups representing fintechs, payment businesses and banks are dialing up their public opposition to a politically thorny provision of Trump's 'big, beautiful bill.' The House bill includes a new 3.5 percent tax on foreign remittances sent by non-U.S. citizens. On its face, the measure raises revenue from immigrants who send money out of the country. Trump has suggested he'd like to 'shut down' the outward flow of funds sent by undocumented immigrants, and top Republicans like GOP Policy Committee Chair Kevin Hern of Oklahoma have identified those transactions as a way to boost funding for national security projects. But on Monday, the American Fintech Council published a letter to Senate Finance Chair Mike Crapo (R-Idaho), House Ways and Means Chair Jason Smith (R-Mo.), and Ranking Members Ron Wyden (D-Ore.) and Richard Neal (D-Mass.). They said the measure would have a 'disproportionate impact on already-marginalized communities seeking to contribute to the U.S. economy' and raised concerns about how it's inconsistent with existing state-level regulations. The AFC's letter represents an escalation in industry-level pushback to the controversial remittance tax. Many Wall Street and financial industry groups have refrained from airing their specific grievances with Trump's legislative agenda, but the AFC's missive suggests that opposition to major components of the bill will likely grow. AFC said it's working with other industry groups on a joint response. The Electronic Transactions Association — which counts large banks and payments businesses like JPMorgan Chase and Visa among its members — led a similar letter to House tax writers co-signed by other trade groups like the Financial Technology Association. ETA Executive Vice President Scott Talbott said the measure would harm low- and moderate-income households, while FTA President and CEO Penny Lee raised objections about how the bill could infringe on civil liberties and push cross-border payments into unregulated channels. The Economy Vibe shift? — The Conference Board's consumer confidence index spiked in May amid signs of a de-escalation in the trade war with China that poses serious risks to commercial inventories and prices. The unexpected surge provides Trump with a welcome reprieve from the doom-and-gloom that has dominated economic surveys through the early days of his second term. 'The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards,' Stephanie Guichard, senior economist, global indicators at the Conference Board, said in a statement. — But the May survey still contained plenty of warning signs about the economy. The Expectations Index — which measures consumers' short-term outlook for income, business and labor market conditions — is still in territory that typically signals a recession is ahead. — The Federal Reserve Bank of Dallas's monthly manufacturing survey also contained signs of improvement with an increase in an index tracking new orders, but its overall findings still indicated a contraction in manufacturing activity. Durable goods orders also fell in April, according to Census Bureau data. — That doesn't bode well for future investment. Richmond Fed President Tom Barkin told Bloomberg that the uncertainty has resulted in businesses freezing investment and hiring. 'At the end of the day, there is little sign of resiliency in capex today,' Wells Fargo economists Shannon Grein and Tim Quinlan said in a client note. 'Businesses have grown increasingly cautious on the outlook and underlying capex conditions remain constrained, not just by continued uncertainty related to tariffs but around the cost and accessibility of capital and, perhaps most importantly, underlying demand conditions.' At the regulators Judge greenlights Treasury DOGE team — A federal judge in New York on Tuesday lifted the remaining legal restrictions preventing the Treasury Department's entire DOGE team from accessing the federal government's sensitive payment system that controls the flow of trillions of dollars, Michael Stratford reports. Quintenz's exit strategy — Brian Quintenz, Trump's pick to lead the Commodity Futures Trading Commission, will resign from his positions with prediction market startup Kalshi and venture capital giant Andreessen Horowitz, if confirmed, Declan reports. Independent mortgage lenders urge FHFA to crack down on FICO – The Community Home Lenders of America, which represents small and midsized independent mortgage banks, on Tuesday asked Federal Housing Finance Agency Director Bill Pulte to do something about FICO's recent string of price increases on obtaining mortgage credit scores, Katy O'Donnell reports. FHFA should call 'for the cessation of any further credit score price hikes' while 'convening an FHFA Task Force to (1) undertake a review of these recent cost hikes, (2) find ways to hasten the arrival of a viable VantageScore platform for the conforming marketplace, but also (3) explore additional reforms,' the group wrote in a letter to Pulte. TARIFFS Crime all the time — Chinese shipping companies are pitching U.S. importers on schemes that avoid Trump's costly new tariff regime, The NYT's Ana Swanson and Lazaro Gamio report. Venue change? — California Gov. Gavin Newsom's lawsuit against Trump's tariff policies may get moved to the New York-based U.S. Court of International Trade, Dustin Gardiner and Doug Palmer report. Wall Street At Goldman — The WSJ's AnnaMaria Andriotis reports on how Goldman Sachs CEO David Solomon beat back a wave of internal and external criticism in 2022 and 2023. Solomon 'has cemented control for the foreseeable future.' Consultant class — The FT: 'McKinsey sheds 10% of staff in two-year profitability drive'
Politico
6 days ago
- Business
- Politico
Wall Street's youth revolt
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 Setting aside the tumult from President Donald Trump's trade policies and the prospect of potentially catastrophic fiscal deficits, the stock market has held up reasonably well in 2025. Why? One school of thought among more seasoned Wall Street investors is that a new generation of traders simply doesn't care. 'The marginal buyer or seller is a 32-year-old, and they literally don't give a fuck,' said Josh Brown, the co-founder and CEO of Ritholtz Wealth Management. 'They are reacting to market sell-offs by adding more money to ETFs and their investment accounts. They're buying individual stocks. They're buying the most speculative options contracts that trade.' The booming popularity of retail investment platforms like Robinhood — now home to 27 million investment accounts— and Chicken Little forecasts about downturns that never materialized gave rise to a class of investors who haven't adhered to conventional logic during market-moving events. The mindset is: ''Moody's downgraded the Treasury? Fuck it. I'm buying Palantir,'' Brown said. It has echoes of the post-pandemic investment crazes that propped up shares of underperforming businesses and sent the valuation of memeified crypto tokens into the stratosphere. That has material consequences for anyone — daily newsletter writers included — who uses the stock market as a barometer for political sentiment. And it's indicative of why equity markets haven't always reflected the gloomy economic outlook visible in consumer or business surveys. The S&P 500 and Dow Jones Industrial Average are down by less than 2 percent since the start of the year. The sell-off that followed Trump's 'Liberation Day' tariff announcement was followed by a fairly rapid recovery due to strong earnings from blue chip companies and a bevy of favorable data showing that the economy has remained fairly resilient in the face of tariff-related turmoil. As economists spotlight policies that could lead to stagflation, and bond investors home in on the risks of the U.S.'s ballooning debt, the cloudy economic outlook hasn't had the same effect on equities. Investors plowed money into exchange-traded funds at a record pace this year, the Wall Street Journal reports. Bloomberg Intelligence estimates that individual investors accounted for 20.5 percent of shares traded in the first quarter, up from 19.5 percent in the previous three months. 'We're in a very different world where stock market reactions are not at all aligned with what more experienced people would think should happen,' said Brown. 'It's baffling, and it's actually one of the most interesting things I've ever seen in my time in the investment markets.' IT'S TUESDAY — I hope you had a relaxing weekend filled with barbecues, ballgames and beverages. Tip o' the hat to Declan Harty for the assist on today's newsletter top. And as always, send your tips, suggestions and personnel moves to Sam at ssutton@ Driving the Week TUESDAY … Bitcoin 2025 kicks off in Las Vegas. Speakers include David Sacks, Bo Hines, Donald Trump Jr., Sens. Jim Justice ( Marsha Blackburn (R-Tenn.), Cynthia Lummis (R-Wyo.), Bill Hagerty (R-Tenn.) and Reps. Byron Donalds (R-Fla.), Brian Jack (R-Ga.) and Bryan Steil (R-Wis.) … The Conference Board's consumer confidence index is out at 10 a.m. … Commodity Futures Trading Commissioner Christy Goldsmith Romero speaks at a Brookings Institution event on a discussion on 'The Future of Financial Services Regulation' at 2 p.m. … New York Federal Reserve Bank President John Williams speaks at the Bank of Japan Institute for Monetary and Economic Studies Conference at 8 p.m. … WEDNESDAY … Vice President JD Vance speaks at Bitcoin 2025 at noon … The minutes for the Federal Reserve's May meeting are out at 2 p.m. … THURSDAY … The second estimate for first-quarter gross domestic product is out at 8:30 a.m. … Richmond Fed President Thomas Barkin participates in a fireside chat before the Housing Partnership Network at 8:30 a.m. … Chicago Fed President Austan Goolsbee speaks at the 2025 Mackinac Policy Conference hosted by the Detroit Regional Chamber at 10:40 a.m. … Fed Gov. Adriana Kugler speaks at the central bank's Macro-Finance Workshop at 2 p.m. … San Francisco Fed President Mary Daly speaks at the Oakland Rotary Club at 4 p.m. … Dallas Fed President Lorie Logan speaks at the Greater Waco Member Appreciation event at 8:25 p.m … FRIDAY … The Reagan National Economic Forum kicks off. Speakers include House Financial Services Chair French Hill (R-Ark.), House Ways and Means Chair Jason Smith (R-Mo.), Senate Health Chair Bill Cassidy, (R-La.), Sen. Mike Rounds (R-S.D.), Deputy Treasury Secretary Michael Faulkender and former Fed Gov. Kevin Warsh … The personal consumption expenditures index for April is out at 8:30 a.m. … The University of Michigan consumer sentiment survey is out at 10 a.m. … Atlanta Fed President Raphael Bostic speaks at the Council for Economic Education's 2025 National Economics Challenge at 12:20 p.m. … Flipping a switch — After threatening the European Union with 50 percent tariffs on Friday, Trump announced on Memorial Day that he would push back the deadline for a new deal with the bloc to July 9, Ali Bianco and Ari Hawkins report. European stocks climbed on news of the pause, per Bloomberg. 'The EU and the U.S. share the world's most consequential and close trade relationship,' Ursula von der Leyen, the president of the European Commission, wrote on X. 'Europe is ready to advance talks swiftly and decisively.' — The rapid escalation and de-escalation of EU trade tensions come as the White House stares at a deadline to hatch dozens of new bilateral trade deals within weeks. As Daniel Desrochers and Phelim Kine report, 'disagreements are mounting in many of those talks and foreign governments are digging in, even those eager to cut deals, like some in Asia — a reminder of just how slow and complex traditional trade negotiations can be.' — With the Association of Southeast Asian Nations summit convening this week, leaders in the region are 'seeking to deepen ties with China and Gulf nations, and mitigate the fallout from US President Donald Trump's tariff hikes,' write Anisah Shukry, Philip Heijmans and Netty Idayu Ismail for Bloomberg. Rest in Peace — Charles Rangel, the former House Ways and Means Committee chair and a powerful force in New York politics, died on Monday. He was 94 years old. On The Hill Big, beautiful opposition — Republican senators are beginning to raise their objections to Trump's 'big, beautiful bill.' Sen. Rand Paul of Kentucky said he would not support the measure, contending that it will add trillions in new borrowing with minimal offsets, Amanda Friedman reports. — Sen. Ron Johnson of Wisconsin said on CNN's 'State of the Union' that he thinks 'we have enough to stop the process until the president gets serious about spending reduction and reducing the deficit.' State of play — Lawmakers are skeptical of Trump's push to release Fannie Mae and Freddie Mac from government control, Katy O'Donnell, Katherine Hapgood and Victoria Guida report. 'You do this the wrong way, you're going to screw up a housing market that's already teetering because of lack of supply,' said Sen. Mark Warner (D-Va.). 'And what I'm afraid of is that this is just done to try to do a money grab, you know, for their crazy tax bill. And if that's the case, I've got no interest.' At the regulators Big news for bank policy — The bank industry's lawsuit against the Federal Reserve over its annual stress testing regime is on hold through August. The temporary agreement comes after the Fed announced plans to overhaul key parts of the stress tests last month. In a statement, the Bank Policy Institute, American Bankers Association, U.S. Chamber of Commerce and other plaintiffs said the central bank is 'undertaking a good-faith effort to align the stress testing regime with the law and establish transparency and accountability for that process. A stay of the litigation will allow the Federal Reserve to focus on implementing its commitments through the rulemaking process and delivering a more accurate and reliable framework for the next stress testing cycle.' The Fed declined comment. More good news for banks — Katy O'Donnell reports that the Trump administration on Friday f iled a notice in federal court seeking to vacate the Consumer Financial Protection Bureau's Biden-era open banking rule, in a case brought by banks. Nippon Steel — Trump on Friday also signed off on a deal that will allow Japan-based Nippon Steel to acquire U.S. Steel. It's a reversal of his opposition to the deal during the 2024 presidential campaign,Doug Palmer reports.
Politico
22-05-2025
- Business
- Politico
Memecoin mania, $TRUMP style
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 Dogecoin. Dogwifhat. Fartcoin. These were once the dominant players in the penny stock-like corner of the cryptocurrency markets that plays home to memecoins — a risky type of digital asset that, unlike its big brother counterparts bitcoin and ether, has no inherent value. And then came President Donald Trump's $TRUMP. Memecoins have long been associated with online jokes. (The Elon Musk-beloved Dogecoin was famously launched as one.) But the $TRUMP token — now the fourth-most valuable memecoin in the world, per CoinMarketCap — has set off outrage in Washington. And the uproar is reaching new highs as dozens of its biggest investors head to Trump National Golf Club in Sterling, Virginia, this evening for a private dinner and reception with the president himself. Lawmakers, including Sens. Chris Murphy of Connecticut, Elizabeth Warren of Massachusetts and Rep. Sam Liccardo of California, plan to call on Trump today to release the guest list. Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, is set to roll out a proposed ban on presidential memecoins, the latest addition to an already long line of similar bills. And several critics will be protesting the dinner tonight. 'This is the Mount Everest of American corruption,' Sen. Jeff Merkley, a Democrat from Oregon, told your host for a new piece out this morning. 'This isn't about raising money for a campaign. This is about personal profit, and what he's selling is influence on himself and his Cabinet and the U.S. government.' Open to the top 220 $TRUMP holders, assuming they passed a background check, the dinner is the latest manifestation of Trump's still relatively recent embrace of cryptocurrencies — a breed of financial product whose value he once warned was 'based on thin air.' Among its expected attendees are a former online poker player, crypto billionaire Justin Sun and dozens of other traders. His crypto pivot — or his come-to-Satoshi moment, one might say — has been welcome news to the industry. Following the collapse of Sam Bankman-Fried's FTX, the crypto industry became a pariah in Washington whose future was clouded by a series of lawsuits, some existential, from the Gary Gensler-led SEC. But Trump has become crypto's unexpected savior, as our own Jasper Goodman presciently wrote last January. And while crypto lobbyists and officials worried that his personal forays into the market could hurt the industry's policy agenda, the reality appears to be that crypto may be able to have its cake and eat it, too. Case in point: The Senate now appears to be preparing for a final vote on stablecoin legislation in the coming weeks, after a bipartisan group of lawmakers advanced the bill earlier this week. Yet, even then, the memecoin is quickly becoming a leading front in the swirl of concerns over Trump's business empire. And the concerns aren't dying down. 'When Hunter Biden was trying to profit off of his family's name, people legitimately raised questions,' former House Ethics Committee Chair Charlie Dent told your host. 'I'm not saying Hunter Biden did anything illegal or that any of the Trump family members are doing anything illegal, but it all has a stench to it that turns off a lot of people.' IT'S THURSDAY — Are you heading to the $TRUMP dinner tonight? Let me know, I can keep you anonymous! dharty@ And as always, send your tips, suggestions and personnel moves to Sam at ssutton@ Driving the day Small Business Administrator Kelly Loeffler speaks at a Punchbowl event at 9 a.m. … Senate Banking holds a hearing on the Defense Production Act at 10 a.m. … Existing home sales data out at 10 a.m. Identity crisis — Trump and the GOP may be adopting a more populist tone, and considering a series of similarly minded proposals. But Megan Messerly reports that the numbers inside the president's big, beautiful bill 'are showing that for all the nods the GOP has made to its new populist base, its biggest policy swing remains weighted toward helping higher earners and businesses pay fewer taxes.' — Almost there: 'Republicans stayed overwhelmingly united on a test vote to advance the massive domestic-policy measure shortly before 3 a.m., paving the way for a vote on final passage later in the day — just in time to meet Speaker Mike Johnson's Memorial Day deadline,' Katherine Tully-McManus reports. — And they got there: Early Thursday, House Republicans pushed through the megabill with a 215-214 vote, Katherine reports, noting it's 'a major victory for Speaker Mike Johnson, who largely kept his conference together after days of around-the-clock negotiations with holdouts.' One reason Wall Street is sweating BBB? It could hit big donors— A provision of the GOP tax bill imposes new taxes on large private foundations that would potentially slap the philanthropic efforts of industry heavyweights. 'They're looking at the elites versus the non-elites. There's a lot of money in foundations who would be defined as the elite, and therefore they like to see that money go elsewhere,' said Lawson Bader, the president and CEO of DonorsTrust, a donor-advised fund and 501(c)(3) that's a powerful force in Republican fundraising circles. This 'seems to be really nothing more than a money grab that is — I think — tinged with some political DNA that has me uncomfortable.' 'The time would seem to be right' — Trump said Wednesday that he is weighing taking mortgage giants Fannie Mae and Freddie Mac public after more than 15 years of government control, Victoria Guida reports. — 'Such a move would be a massive shift for the housing market, where Fannie and Freddie play a key role by buying mortgages from lenders and selling them as securities to investors. They back roughly half the $16 trillion mortgage market,' Victoria writes. Wall Street Bad day — Stocks fell and bond yields soared after a weak auction for 20-year Treasury notes, according to The Wall Street Journal. Worries about the U.S. fiscal outlook — which have been exacerbated by turmoil around the GOP budget bill — also weighed on investors. The dollar fell. 'The soft 20-year auction fueled additional weakness,' said Michael O'Rourke, chief market strategist at JonesTrading, per Bloomberg. 'It has been a theme all week, starting with the Moody's downgrade. Additionally, there is the deficit/budget debate being fought in the background of this environment.' No way — The Trump administration is brushing aside calls from Nvidia CEO Jensen Huang to ease restrictions on chip exports to China, Bloomberg's Michael Shepard and Edward Ludlow report. 'When it comes to inside China, I do think there is still bipartisan and broad concern about what can happen to these GPUs once they're physically inside' the country, said Sriram Krishnan, White House senior policy adviser for artificial intelligence. International Players Banff-em — Provisions of the tax bill would punish global companies headquartered in 'discriminatory foreign countries,' providing U.S. tax authorities broad discretion over what that means. At the G7 meeting in Banff, that bill language could reignite a battle over the global minimum tax rate that was agreed upon during President Joe Biden's administration, The NYT's Alan Rappeport reports. Golden age of systemic risk — Federal Reserve Bank of Boston economists are warning that the banking sector's ties to private credit could pose a risk to the U.S. financial system, according to The FT's Eric Platt. Crypto Stablecoin bill forges ahead — A landmark bill that would create a regulatory framework for dollar-pegged stablecoins garnered the support of three more senators during a procedural vote on Wednesday, Jasper Goodman reports. The motion to proceed passed 69-3. A vote on final passage is expected after the Memorial Day recess. — The bill's sponsors — Sens. Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), Tim Scott(R-S.C.) and Kirsten Gillibrand(D-N.Y.). — filed an amendment that would incorporate negotiated changes sought by pro-crypto Democratic holdouts, as well as a ban on interest-bearing stablecoins. Bitcoin bulls rejoice — The original cryptocurrency hit a new all-time high of more than $110,000 Wednesday. Per CNBC's Tanaya Macheel, crypto exchange Nexo's cofounder, Antoni Trenchev, attributed the jump to 'an array of favorable ingredients in the macro cauldron.' At the regulators New slate — Kristin Johnson became the last of the Biden-era Commodity Futures Trading Commission members to announce their intention to step down from the derivatives regulator, Declan reports. Her eventual exit will likely leave the Wall Street regulator with just one person on its usually five-member commission. Big lawsuit — Fidelity National Financial is suing over a Biden-era rule that requires people involved in real estate closings to report to Treasury's Financial Crimes Enforcement Network about all-cash sales or transfers of residential property to trusts or other legal entities, Michael Stratford reports. ODDS AND ENDS First in MM: New bond council — The Bond Dealers of America are launching a new Council on Bond Market Structure that's intended to advance market-driven solutions to market structure challenges facing both the institutional and retail bond markets. The initiative 'will focus on direct engagement with policymakers to ensure that regulatory policies keep pace with market evolution,' said the organization's CEO, Michael Nicholas. On The Hill Loeffler's congressional debut — Small Business Administrator Kelly Loeffler told the Senate Small Business Committee on Wednesday that she is committed to staffing field offices as the agency goes through a major restructuring and expects to lay off 2,700 employees, Katherine Hapgood reports. During Loeffler's first appearance before a congressional committee since her nomination, Democrats tore into her over SBA's comparison of the Biden administration and Trump administration's first 100 days in terms of small manufacturer loans, as well as tariffs and reducing staff while taking on the country's student loan portfolio. FIRM clears both committees — House Financial Services passed the FIRM act Wednesday, which Senate Banking passed in March, Katherine reports. The bill would eliminate reputational risk as a component of the supervision of depository institutions.
