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Politico
2 days ago
- Business
- Politico
Trump's crypto embrace opens the door to a Wall Street overhaul
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 is bracing for a clash pitting upstart cryptocurrency firms against traditional financial heavyweights. At stake could be nothing less than the future of stock trading. Crypto behemoths — think Coinbase, Robinhood and Kraken — have set their sights on the $62 trillion equity market. They want to offer investors the ability to trade 'tokenized' versions of stocks like Apple, Tesla and JPMorgan Chase. That means those assets could trade cheaply around the clock and around the world, not just when the stock market is open, they say. Their efforts are setting the stage for what could be the biggest regulatory showdown in a generation: Rewriting U.S. stock trading rules in a way that could vault crypto companies into the highest echelons of the financial services industry. Driving this transformation is President Donald Trump, who has openly embraced crypto since taking back the White House, placing industry allies in top regulatory positions, igniting a run-up in token prices and sparking new optimism about its future in the U.S. Wall Street traditionalists, who once downplayed the threat of crypto, are fighting back. They are lobbying the Securities and Exchange Commission and demanding that the new entrants play by the same rules as the established stalwarts, such as requirements that they register with the agency and certain investor protections around stock trading. But some firms are also hedging their bets by accepting crypto. 'Many in traditional finance mistakenly believed that the crypto regulatory debate was really about crypto,' said Tyler Gellasch, a former SEC official who now leads an investor advocacy group. 'It's not.' If traditional finance, or TradFi for short, gets its way, tokenized stocks would be treated the same as run-of-the-mill stocks, which means they would look and trade no differently than shares do today. But if some of the upstarts get their way, crypto could benefit from a looser set of trading rules tailored to their business models. That could splinter the market, critics say. One pool of money would trade crypto versions of stocks while another would trade the old-fashioned way, which could make both sides vulnerable to more price swings, they say. 'Creating loopholes in traditional markets in the name of crypto is a helluva gamble to take with markets relied upon by millions of American retirees, college savers and businesses,' Gellasch said. The crypto industry's push revolves around what digital asset enthusiasts call tokenization, which is effectively the process of putting assets like stocks on the blockchain. In their eyes, the blockchain — or, to those of you not steeped in crypto jargon, the technology that undergirds digital assets — is inevitably bound to take over financial markets and replace their often decades-old infrastructures. Equity tokenization 'opens up whole new opportunities for financing and trading,' said DRW founder and CEO Don Wilson, whose Chicago trading firm is a giant in both crypto and other traditional markets. 'Ten years out, we're not even going to talk about it as tokenized equities. We're not going to use that phrase.' Tokenized stocks have been on the crypto industry's to-do list for years. But it wasn't until Trump — a one-time crypto scourge turned industry champion — came back to Washington that firms dove in with full force. Coinbase, the largest crypto exchange in the U.S., and other firms are seeking the SEC's blessing to go ahead despite lingering questions about the products' permissibility under existing law. Others, like Robinhood and Kraken, are taking a slower approach, focusing their attention on overseas markets, an acknowledgment that regulating tokenized shares remains an open question in the U.S. Either way, tokenized stocks will require some help from the SEC — and that's where the fight begins. A pack of traditional finance heavyweights including Citadel Securities, the trading powerhouse owned by GOP megadonor Ken Griffin, have started sounding the alarm about the SEC offering a workaround to its existing rules so that certain companies can offer tokenized stocks. Fundamentally, they say, tokenized shares are no different than traditional ones and regulating them in a new manner could create an unlevel playing field and split the market. 'Policymakers definitely have to come in and make adjustments, but what we don't want to see is suggesting that because something's using one form of technology for the same product, it's somehow treated differently than another form of technology,' Securities Industry and Financial Markets Association CEO Kenneth Bentsen Jr. said. 'That seems nonsensical to us.' A person close to Robinhood said upending the existing apparatus and rules around stock trading overnight 'isn't realistic.' But crypto firms, the person added, do need 'some relief from the existing rules to make it work.' The SEC isn't showing its hand yet. Last week, Chair Paul Atkins said he asked staff at the Wall Street regulator to work with companies 'to provide relief where appropriate to assure that Americans are not left behind' before suggesting the existing rules around stock trading in the U.S. could soon undergo a massive facelift. 'Whether an incumbent or a new entrant, the SEC welcomes all market participants who are hungry to innovate,' he said. Crypto already scored an important victory last month when Trump signed a bill creating a regulatory framework for a type of token pegged to the U.S. dollar known as stablecoins. 'The banks got absolutely rolled on the stablecoin bill and are now facing enormous amounts of quickly moving, unfair competition,' said Corey Frayer, who served as former SEC Chair Gary Gensler's crypto adviser. 'Wall Street is either going to learn that lesson and be very vocal to make sure that everybody has to play by the same rules, or they're going to watch the SEC destroy the goose that laid their golden egg.' And yet, eating Wall Street's lunch is never actually that simple. TradFi firms have long had a knack for adapting to new trends, albeit perhaps not at the quickest rate. And throwing money at the problem is always an option, which could result in a wave of deals and, ironically, make those legacy firms the next generation of crypto giants. Some major TradFi players like BlackRock have already jumped into the tokenization frenzy. And whether everyday investors actually want to hold blockchain-based versions of Apple, Tesla and JPMorgan Chase shares remains an open question. After all, crypto, despite the headlines, remains a niche business. Just 8 percent of Americans reported using crypto in any way in 2024, according to the Federal Reserve, down from 10 percent two years earlier. Happy Friday — For all things markets, reach out to Declan at dharty@ And for econ policy thoughts, Wall Street tips, personnel moves or general insights, email Sam at ssutton@ We'll see you next Friday. Driving the Day St. Louis Fed President Alberto Musalem speaks at Mississippi Delta event on financial well-being at 10:20 a.m. … And on SATURDAY at 8:15 a.m. Vice Chair for Supervision Michelle Bowman will deliver remarks on the economic outlook and community banking at a Kansas Bankers Association event... Puerto Rico The Trump administration jettisoned five members of the Financial Oversight and Management Board for Puerto Rico amid a protracted legal battle with bond holders over the local power utility's multi-billion dollar bankruptcy. Gloria Gonzalez, a deputy energy editor at POLITICO, spoke with Sam about how upheaval at 'La Junta,' as the unpopular financial board is known locally, will impact bond holders and Puerto Ricans' utility bills. La Junta, which oversees Puerto Rico's finances, has refused to pay more than $2.6 billion to settle bond holders' claims; any more would force the territory's residents to pay even more for service from one of the most expensive and unreliable grids in the U.S. Meanwhile, investors are refusing to budge on taking less than the roughly $12 billion they say they're owed. 'The court fight has been going on for years. Mediation efforts have gone nowhere. It became clear recently that the board was not willing to change its position and offer more money to settle the debt despite unfavorable appellate court rulings,' Gonzalez said. Congressional Democrats hammered bond holders at a recent hearing — which caught the attention of powerful MAGA activist Laura Loomer — and the White House canned most of the seven-member board days later. The expectation is that whoever Trump nominates as replacements 'will be more favorable to the bondholders' case,' Gonzalez said. But the financial and economic effects go beyond those claims, she added. 'The board oversees Puerto Rico's finances and has to sign off on major actions such as proposed government budgets and critical infrastructure projects,' she said. With the board now unable to hold a quorum, recovery and reconstruction efforts from Hurricane Maria in 2017 will be further delayed. What's more, if the bond holders are successful, it would likely increase the energy burden on Puerto Rican residents and businesses and contribute to more migration off the island. 'It's incredibly challenging for the territory to sell itself as a place to come do business when it does not have a reliable power system.' Macro Talking Points The implements of modern statecraft are now largely financial and economic — tariffs, sanctions, investment restrictions and export controls. Those policies throw up powerful economic barriers and they are difficult to unwind. Just as importantly, there are no rules of engagement, said Daleep Singh, a former top adviser to President Joe Biden on the global economy and national security. 'If we don't have a playbook or a doctrine to guide why, when, how and to what extent we use these tools, then we are going to have a more fractured global economy,' said Singh, who's now the vice chair, chief global economist and head of global macroeconomic research at PGIM Fixed Income. 'We are going to have rival blocs. We'll have escalating retaliation. We'll have increasing weaponization of interdependence, and we'll have an erosion of trust in U.S. leadership.' Singh said the Biden administration's move to freeze Russian central bank assets following the invasion of Ukraine— a decision he helped craft — represented a turning point that merits a reassessment of the U.S.'s reliance on coercive economic levers to apply pressure on foreign adversaries, and what guardrails are needed to dictate their future use. That decision 'was made almost improvisationally — and that's a self-critique, more than anything else,' he said. 'We didn't really have the capacity in the moment, the crucible moment, to think about the equilibrium effects five and 10 years out, and are we net better off for making this decision?' As Singh warned in a recent essay published by Foreign Affairs, the long-term danger of continuing with that improvisational approach to applying economic penalties is that it will become self-defeating — and not just for the U.S. 'We'll have a less prosperous and less stable world,' he said. The Rest The Fed — Trump will nominate Council of Economic Advisers Chair Stephen Miran to outgoing Federal Reserve Gov. Adriana Kugler's seat, Sam reports. Meanwhile, Bloomberg's Saleha Mohsin writes that Fed Gov. Christopher Waller is now the favorite among the president's advisers. Intel — Trump called for the ouster of Intel's Lip-Bu Tan. The CEO of the struggling chipmaker was already facing challenges from his board, per The WSJ's Lauren Thomas. Two and twenty and 401(k)s — The president signed an executive order on Thursday to allow retirement accounts to invest in private markets and crypto assets, per Declan. Trade — As dozens of countries wrestle with Trump's new tariff regime, Commerce Secretary Howard Lutnick said he expects China will be given more time to negotiate. Banking — Trump also signed his long-awaited 'debanking' order, directing federal regulators to punish banks that illegally discriminate against conservatives with fines and other penalties, writes Michael Stratford. Separately, a federal judge ruled that the Fed's longstanding cap on debit card swipe fees is illegal.
Politico
5 days ago
- Business
- Politico
Whoever Trump picks to lead BLS is in for a ride
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 Two things can be true at once. President Donald Trump's firing Friday of BLS Commissioner Erika McEntarfer — a Biden appointee who'd been confirmed with overwhelming bipartisan support — pierced BLS's reputation and created tremendous challenges for whoever he will task with shoring up the quality of its work. And given the degree to which BLS data provides a baseline on the state of the economy for federal policymakers, Wall Street powerbrokers and business leaders, the stakes are high. Here's more from your hosts: 'Trump's federal hiring freeze has made it harder for the bureau to restaff its data collection and processing teams, even though key BLS positions were excluded from DOL's buy-out offer. The bureau has eliminated hundreds of indices that measure wholesale prices and stopped collecting data in smaller markets like Provo, Utah, and Buffalo, N.Y. In the rest of the country, the number of price inputs used to calculate the Consumer Price Index — one of the primary gauges for inflation — has declined by around 15 percent. 'I don't know how you address that because you're not allowing them to hire people to replace the attrition,' said Omair Sharif, president of Inflation Insights. 'This person coming in has got a huge, huge challenge because they're starting off behind the eight-ball from a credibility perspective.'' And that doesn't even begin to address some of the thornier difficulties that were already at play before Trump returned to the White House: There's been 'a yearslong drop in response rates that accelerated after the pandemic — putting into question the effectiveness of such a foundational methodology for BLS. Potential solutions, including shifts that would allow participants to self-administer a key survey used to measure unemployment, are underway. But Trump's heavy-handed reaction to a negative jobs report risks undercutting that progress, said Susan Houseman, a senior economist at the Upjohn Institute for Employment Research who had previously chaired the agency's Technical Advisory Committee. 'Criticizing — with no basis — the BLS and other statistical agencies for fabricating numbers can have very bad effects on response rates,' she said. 'This kind of talk really can damage that and further undermine data quality.'' Trump says he plans to name a replacement for McEntarfer this week, though whoever it is will now have the uphill task of winning back a skeptical audience. The White House has framed her dismissal as a byproduct of incompetence, though the president keeps undercutting that effort by claiming the numbers were being purposefully 'rigged' to damage Republicans. But as the administration pitches lawmakers on a budget that would slash $56 million and roll the storied agency into the Commerce Department, your hosts are wondering, who wants this job? If you have an answer, our contact information is below. It's Tuesday — For econ policy thoughts, Wall Street tips, personnel moves or general insights, email Sam at ssutton@ Do you work at BLS? Have thoughts on what's been an eventful week? Contact Nick at nniedzwiadek@ Driving the Day The Commerce Department will report the June trade deficit at 8:30 a.m. … The ISM Services Index is out at 10 a.m. … The Center for a New American Security holds a discussion on U.S. trade wars with CNAS senior fellow Emily Kilcrease; Wendy Cutler, vice president of Asia Society Policy Institute; Thorsten Benner, director of the Global Public Policy Institute in Berlin; and Meredith Lilly, Carleton University professor at 10:30 a.m. … Speaking of data quality… — A Reuters poll of top policy experts found that 89 percent said they were concerned about the quality of official U.S. economic data. — The massive revisions to the May and June labor market reports were the largest on record since at least 1979, with the exception of those during the pandemic, according to Reuters. — According to The Washington Post, interim BLS Chief William Wiatrowski emailed agency staff that the 'mission is unchanged — to provide high quality data to the nation.' But who will measure the inflation? — The Congressional Budget Office released its final dynamic estimate on the fiscal effects of Trump's 'big, beautiful bill.' The final tally? $4.1 trillion in the red. 'Because the bill's red ink is not offset by more spending cuts or new revenue, CBO found, the legislation will drive up interest rates,' Jennifer Scholtes reports. Trade More tariff uncertainty — Trump on Monday threatened to once again raise tariffs on India over its purchases of Russian oil, reports Gregory Svirnovskiy. — Per The NYT's Alan Rappeport: 'The president's second-term trade agenda has clear echoes of his 'Art of the Deal' approach, essentially demanding that trading partners show him the money in the form of investment pledges or else face astronomically high tariffs. The financial promises give Mr. Trump the opportunity to flex his negotiating prowess in relatable terms and show off the splashy sums he is pulling into America, adding to the reality show intrigue of his trade agenda.' Last call — The administration has issued guidance saying any cargo loaded onto a vessel for transport before 12:01 a.m. on Thursday will avoid Trump's 'reciprocal' tariff regime, per Bloomberg's Justin Sink. At the regulators Lever up – Acting Commodity Futures Trading Commission Chair Caroline Pham said the agency is actively exploring ways to allow futures exchanges to list levered crypto products, according to Bloomberg's Lydia Beyoud. Wall Street Now, dessert — Companies are beginning to report cash savings linked to Trump's new tax and spending law, The Wall Street Journal's Jonathan Weil reports. At the 'high end of the range,' those savings amount to an 11 percent boost to analyst estimates of 2025 free cash flow. Now, dessert pt. II — Two CEOs clocked more than $1 billion in compensation this year, including stock-based pay, writes Theo Francis for The WSJ. Alexander Karp of Palantir Technologies and Hock Tan of Broadcom.
Politico
01-08-2025
- Business
- Politico
Trump's gift to the markets: a weaker dollar
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 The dollar has fallen by about 8 percent since Donald Trump took office. Setting aside whatever that may say about investor confidence in U.S. trade policies or fiscal deficits, it has been pretty great for stocks. 'It's truly a sugar rush,' said Mark Hackett, the chief market strategist at Nationwide. If you're a multinational business, 'you love a weaker dollar,' he said. 'Not only does it [help] you compete globally, but you also get this immediate sugar rush from translating foreign earnings back into your income statement.' Put another way, if U.S. companies simply maintained prices on products they sell abroad, the greenback's decline has enabled them to repatriate the proceeds of foreign sales made with local currencies into more dollars than they would have had the same transaction occurred before Trump's inauguration. That's music to the ears of Trump, who has said he wants 'not a weak dollar, but a weaker dollar.' That's why he and his administration aren't leaning against this trend. 'You make a hell of a lot more money with a weaker dollar,' he told reporters recently. 'When you have a strong dollar, you can't sell anything. It's only good for inflation, and it's good psychologically. It makes you feel good.' As Trump suggests, companies that generate a lot of foreign revenue — including tech powerhouses that help drive the stock market's overall performance — are seeing real gains from these currency moves. The 100 largest companies listed on the tech-heavy Nasdaq exchange generate about 45 percent of their revenue abroad, according to Goldman Sachs. For companies on the S&P 500, non-U.S. sales represent a hefty 28 percent of revenue. Last week, Netflix Chief Financial Officer Spencer Neumann told analysts that the softer dollar was a factor in the streaming service's decision to raise its full-year earnings forecast. Mark Zuckerberg's Meta has also lifted its third-quarter projections thanks in part to a currency-related boost. 'It's particularly good for service exporters,' said Kenneth Rogoff, a Harvard professor and former chief economist at the International Monetary Fund who has written extensively about the dollar. 'In some sense, that's what Big Tech is.' In other words, the president is getting the Secret Deodorant currency he's always desired: soft enough for companies to bank profits overseas, strong enough to preserve its status as a primary currency for central bank reserves and cross-border transactions. But policies out of Washington might not be able to sustain this equilibrium. If the same factors that influenced the dollar's recent decline — such as the often confusing direction of U.S. policy — fester, the result could be more inflation as consumer purchasing power degrades. Uncertainty about trade arrangements, after all, is far from over; despite Trump's recent trade agreements with the European Union and Japan, he still has an itchy trigger finger when it comes to raising taxes on allies like India. Trump's late-night tariff blitz Thursday night drove down global stocks overnight, with U.S. markets set to open in the red. Over time, those tariffs could encourage the drift of capital to other markets, boosting U.S. export prospects but weakening the dollar further. If consumer prices start to surge, it could force the Federal Reserve to keep rates higher for longer. Investors 'are missing not even the long-term, but medium-term cost of tariffs, which are going to come sooner than they are pricing it,' said Josh Lipsky, the senior director of the Atlantic Council's GeoEconomics Center. On the flip side, if bigger profit margins push up domestic stocks — particularly tech giants that are spending heavily on powerful artificial intelligence capabilities — it could reinforce investor notions that the U.S. economy and financial markets will continue to dominate, Steve Englander, head of global G10 FX research and North American macro strategy at Standard Chartered Bank, told POLITICO. That's good for the dollar and could potentially reverse some of the sugar high. Notably, the Treasury Department isn't endorsing a weak dollar, though they don't mind the downward drift. Joseph Lavorgna, who serves as counselor to Treasury Secretary Scott Bessent, said the dollar is still strong despite having dropped relative to other currencies, particularly the euro. 'The real broad trade-weighted dollar was very high, and it has weakened off of near-record levels,' he said. He said preserving the country's reserve currency status, and Treasury securities' central role in global markets, is key to the department's approach. Otherwise, 'the ultimate goal is just to produce a strong economy that lifts wages across the board with inflation moderating.' In the meantime, if a slightly weaker dollar continues to help earnings and share prices for blue chip U.S. companies? The administration will take it. Happy Friday — Welcome to Trump's new tariff regime, and welcome back to our Friday Capital Risk edition, where we're aiming to dive deeper on how political and policy developments are moving markets, affecting risk and rippling through the economy. Also, we've got the jobs report. But most importantly, Sam's going to watch the limping Giants take on the Mets. We'd love your feedback: ssutton@ and vguida@ And as always, you can direct your MM tips and pitches to Sam. The End of an Era at the EPA Environmental Protection Agency Administrator Lee Zeldin is trying to repeal a scientific finding that's been a cornerstone of modern climate regulation. With the agency's Obama-era determination that greenhouse gases harm public health now on the chopping block, Sam spoke with Alex Guillen — POLITICO's eyes and ears at the EPA — about how the obliteration of the the 'holy grail' of climate regulation could weigh on automakers, power companies and other heavy industries. Automakers and power companies have always wanted to see pre-Trump climate standards rolled back, Alex said. But he has 'a hard time believing most regulated companies are truly thrilled about this effort to repeal the endangerment finding.' 'Trying to end all federal regulation of greenhouse gases is a contentious effort at best, and creates something all companies hate: regulatory uncertainty,' he added. 'Who knows what the next president will do?' Firms will find it hard to pivot after spending years tailoring their operational and investment decisions to adhere to electric vehicle standards, greenhouse gas mitigation strategies or renewable energy projects, Alex said. But we'll likely see a slowdown in the shift toward clean energy and EVs. Some utilities may choose to keep older coal plants online for longer. Automakers may redeploy resources toward internal combustion vehicles. (Ford, specifically, said Zeldin's actions would allow it to reduce its carbon credit commitments by $1.5 billion. Alex noted that it may redirect that money to develop more advanced internal combustion engines.) There are market-based components to those decisions as well. It's easier to use existing coal power plants to meet the surge in energy demand from artificial intelligence projects and new data centers. And while consumers are increasingly interested in EVs, Alex notes that SUVs still represent 'a lion's share of new vehicles' in production. But that doesn't change the underlying risk that the next administration takes a similarly aggressive approach to push businesses back in another direction — barring new climate legislation. That's unlikely unless either party obtains supermajority control of the Senate and the rest of the government. In other words, 'the odds of any kind of substantial climate legislation being passed into law seemingly are as close to zero as one can get,' Alex said. Macro Talking Points Seema Shah, the chief global strategist at Principal Asset Management, told MM that she's tracking how the administration's changes to immigration policy will affect the ability of businesses to hire — and how markets will react once the decline in foreign-born workers becomes a bigger factor in monthly payroll data. 'Even bigger than tariffs, that probably has the potential to drive' market dynamics, Shah said. The labor market's breakeven point — i.e., the number of jobs the economy needs to add each month to keep unemployment steady — has plummeted as foreign workers exit the labor force and immigration (legal or otherwise) slows to a halt. Near the end of Joe Biden's administration, most estimates pegged the breakeven point at somewhere between 150,000 to 200,000; now, it's likely closer to 50,000 to 100,000 – depending on whom you ask. The Labor Department will release the July jobs report at 8:30 a.m. The abrupt decline has been well-telegraphed by labor market experts. But that doesn't mean market participants have digested what that will mean for output, Shah said. If we see 'a 40,000 payroll print — even if it's driven by immigration — that doesn't mean that the market isn't going to freak out by that number,' she said. 'The next step to think about then is going to be: 'But what does that mean for future U.S. growth?'' Jed Kolko, a former Commerce undersecretary for economic affairs who's now a senior fellow at the Peterson Institute for International Economics, published a paper earlier this week contending that the decline in population growth reflected in the breakeven rate means that 'any given level of monthly payroll growth, consumption growth, or output growth reflects a stronger economy than it did a year ago.' But it may take time for that to sink in for market participants, investors — and even Fed policymakers. 'As cloudy as things are today for the Fed, it's going to get worse and worse over the next six months,' Shah said. Housing Here it comes — Bloomberg reports that Trump is asking the CEOs of big banks for pitches on how to monetize the mortgage giants Freddie Mac and Frannie Mae, which have been under federal conservatorship since 2008. The president has reportedly met or reached out to JPMorgan Chase's Jamie Dimon, Goldman Sachs CEO David Solomon and Bank of America's Brian Moynihan, but 'talks are likely to include other banks as well.' FIRST IN MM: Low-income housing coalition digs into Senate housing bill — The Senate Banking Committee's bipartisan housing bill, the ROAD to Housing Act of 2025, has already earned accolades from groups of all stripes. The National Low Income Housing Coalition, which advocates housing policy for people with the lowest incomes, is also supportive but found there are 'provisions that could increase burden for tenants if implemented without sufficient guardrails,' according to a bill analysis shared with Adam Behsudi. Case in point: NLIHC points out that provisions to increase housing supply do not include any additional funding to create or preserve units for extremely low-income renters. Odds and Ends Today in trade — As the clock ticked down on Trump's deadline for new trade agreements, the administration agreed to provide Mexico a 90-day extension for negotiations, Ari Hawkins reports. There's no sign Trump will give China a similar extension on its Aug. 12 deadline, per Daniel Desrochers and Jake Traylor. — Meanwhile, Trump's use of an emergency powers law to impose broad tariffs on dozens of countries got a frosty reception from several judges in the Washington D.C.-based Federal Circuit Court of Appeals, write Kyle Cheney and Doug Palmer. First in MM: Rick Scott's wishlist for the next Fed chair — Sen. Rick Scott (R-Fla.), who has repeatedly called on Fed Chair Jerome Powell to resign, sent a letter to Trump on Thursday outlining what he'd like in a new Fed chair: 'It's clear that we need an immediate change of leadership,' he wrote. 'We need someone who will turn the Fed around, right-size its operations and its balance sheet, prioritize the American people, and welcomes oversight to ensure accountability and transparency.' Big changes at Goldman — The bank's Chief Global Lobbyist Michael Paese is stepping down after 16 years, per Bloomberg. The end — Bridgewater Associates founder Ray Dalio has sold his remaining stake in the firm, The WSJ's Juliet Chung reports. He remains an investor in Bridgewater's funds.
Politico
31-07-2025
- Business
- Politico
It's getting frothy out there, again
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 is awash with bubble concerns. Get used to it. Four months after President Donald Trump's 'Liberation Day' sent investors spiraling over his tariff plans, the markets have roared back to new all-time highs. It's a stunning turnaround that has reaffirmed the administration's belief that investors appreciate Trump's grand plans to remake global trade, as our Sam Sutton and Victoria Guida wrote last week. Yet, underneath the sea of green returns, there are concerns that individual investors are once again getting out ahead of their skis in buying up risky assets. 'People have become increasingly more emboldened to take bigger and bigger risks,' Interactive Brokers Chief Strategist Steve Sosnick said. 'When risk-taking works out really well, you're sort of psychologically incentivized to take it.' From new-age meme stocks to the reemergence of blank-check entities to companies buying up cryptocurrency tokens, individual investors just can't seem to get enough of risk. And for now, the push is at least offering them the chance for steep gains. Shares in new-age meme stocks like GoPro, Krispy Kreme and Kohl's have soared this year at times, thanks to the same types of way-too-online investors who sent the OG meme stocks (GameStop, AMC Entertainment and Bed Bath & Beyond) higher in 2021. Blank-check companies, better known as SPACs, or special purpose acquisition companies, are back in vogue. And companies big and small are buying up bitcoin and other tokens left and right, a trend that has already been stoking concern for months despite its tendency to juice those companies' stock prices. Bubble concerns are nothing new in 2025. In the months following Election Day, investors bid up just about everything and anything in the hope that Trump would accelerate growth across corporate America and foster newer industries such as crypto. But the market's rise set off a wave of warnings from Wall Street veterans including JPMorgan Chase CEO Jamie Dimon and hedge fund billionaire Paul Tudor Jones that assets were far too hot — and sure enough, most everything came tumbling down in April. Now, some traders and economists are reviving their warnings. 'In 2020, I suggested that this decade could turn out to be the roaring 2020s, and that's the way it's going. It could get frothier,' said Ed Yardeni, president of Yardeni Research. The market's rise, he added, doesn't have to end as badly as the 1920s did. But a significant correction or bear market is certainly possible, he said. 'Here we are in record time at all-time highs, and everybody's already forgetting how miserable they felt when the stock market was taking a dive' earlier this year, Yardeni said. Of course, despite the lingering questions about Trump's tariffs and the Federal Reserve's next moves, the broader economy is chugging along nicely, as the Commerce Department's initial gross domestic product estimate for the second quarter showed. (And as any good market-watcher knows, the markets are not the economy.) Ritholtz Wealth Management CEO Josh Brown said in a recent interview that there are always signs of silliness in a bull market, and that, right now, 'it's really tough to be on the sidelines watching this thing run away.' And yet, all good things must also come to an end — eventually. Rich Bernstein, who leads the investment management firm Richard Bernstein Advisors LLC, said the current market shares many similarities with the dot-com bubble of the late 1990s, including the emphasis among executives and investors in growing new technologies, a new financial system and new products. 'It's a new era — and that very often accompanies bubbles, too,' he said. It's THURSDAY — And the MLB trade deadline has finally arrived. Here's to hoping the Cubs can pull something off. Send me your SEC, CFTC and Wall Street thoughts to dharty@ And as always, you can direct your MM tips and pitches to Sam at ssutton@ MORNING MONEY: CAPITAL RISK — POLITICO's flagship financial newsletter has a new Friday edition built for the economic era we're living in: one shaped by political volatility, disruption and a wave of policy decisions with sector-wide consequences. Each week, Morning Money: Capital Risk brings sharp reporting and analysis on how political risk is moving markets and how investors are adapting. Want to know how health care regulation, tariffs, or court rulings could ripple through the economy? Start here. Driving the day Commerce will release its June report on the personal consumption expenditures index at 8:30 a.m. … Senate Finance holds a hearing on the nominations of Bryan Switzer to be a deputy U.S. Trade Representative for Asia, textiles, investment, services and intellectual property; Gustav Chiarello III to be assistant HHS secretary for financial resources; Michael Stuart to be HHS general counsel; and Derek Theurer to be deputy Treasury undersecretary for legislative affairs. Some good news for Trump — The Federal Reserve held interest rates steady Wednesday as expected, but the announcement wasn't all bad news for President Donald Trump, who has been on a fierce pressure campaign to convince the central bank to slash borrowing costs. As Victoria reports, Fed board members Christopher Waller and Michelle Bowman dissented on the decision and made clear that they believed rates should have been cut — a rare move that indicates 'opinion within the central bank is starting to shift [Trump's] way.' — To be clear, this doesn't happen often. From Victoria: 'While the Fed's regional branch heads sometimes dissent from monetary policy moves, it's much more unusual for one of the seven board members to do so, let alone two of them — an outcome that hadn't happened since 1993. — Yes, but… Fed Chair Jerome Powell isn't signaling much about the central bank's future plans. He told reporters, when asked about the possibility of a rate cut, that the Fed has 'made no decisions about September,' per Victoria. The Winklevii have thoughts on CFTC chair — Your host and Sophia Cai scooped late yesterday that crypto billionaires Tyler and Cameron Winklevoss — yes, those same Harvard-educated twins of Facebook fame — pressed Trump in a call this past weekend to reconsider his pick to run the small-but-powerful Commodity Futures Trading Commission, Brian Quintenz. The twins told the president that they do not believe Quintenz, a former Wall Street regulator, aligns with Trump's agenda, according to one person familiar with the conversation. — Their call came just before the Senate Agriculture Committee was scheduled to vote Monday on advancing Quintenz's nomination. The panel mysteriously scrapped the vote just before it was set to kick off, sending lobbyists, CFTC officials and lawmakers scrambling to figure out what happened. — The White House is backing Quintenz: 'Brian Quintenz remains President Trump's nominee to serve as chairman of the CFTC,' White House spokesperson Liz Huston said in a statement. 'He will help execute President Trump's mission of making America the crypto capital of the world, and we look forward to his swift confirmation.' ICYMI: The White House has crypto thoughts — In a landmark report, the Trump administration laid out a series of recommendations 'aimed at promoting cryptocurrency markets, the latest sign of Trump's embrace of the once politically outcast industry,' your host reports. Trade So what if you didn't do a deal? — That's the conundrum facing several countries, including some of the U.S.'s biggest trading partners, that have yet to strike a new trade agreement with Trump before his Friday deadline. As Daniel Desrochers, Eli Stokols, Phelim Kine and Ari Hawkins report, Trump is planning to sign new executive orders Thursday that would lift the tariff rates on those countries. And that, they write, has 'sent their leaders, as well as officials from other sizable economies scrambling to try and secure a last-minute deal or extension — although most are downbeat about that prospect.' — More tariff news: Trump on Wednesday set a 50 percent tariff on semi-finished copper imports, per our Doug Palmer. And Daniel reports that he also imposed a 50 percent tariff on Brazilian goods, 'following through with his threat to punish the country over several political disputes.' At the regulators FIRST IN MM: Warren, Dems press OCC on Trump stablecoin ties — Sen. Elizabeth Warren (D-Mass.) and two Democratic colleagues are pressing the nation's new top stablecoin regulator over how to manage potential conflicts of interest tied to President Donald Trump's family crypto ventures. In a letter to newly confirmed Comptroller of the Currency Jonathan Gould, the senators questioned how the OCC would respond to potential pressure from Trump as the agency begins overseeing the stablecoin market — where the Trump family business is now a player with its own stablecoin. Gould is in the early stages of implementing the new stablecoin regulatory regime created under the GENIUS Act, which Trump signed into law earlier this month. The legislation gives the OCC expanded oversight of nonbank stablecoin issuers. Michael Stratford has the full story. 'Privatizing Social Security' — 'Treasury Secretary Scott Bessent on Wednesday framed the president's new 'Trump accounts' as a transformative tool for long-term wealth building and a 'backdoor for privatizing Social Security,' Michael reports. The Economy About that GDP report — While the GDP reading Wednesday was undeniably a win for the administration, 'Commerce's report also showed signs of strain that could weigh on economic activity' and even affect the Fed's path toward lowering rates, Sam reports. — 'While consumer spending accelerated from the first quarter, the 1.4 percent rate of growth reported in the April-June period represents a slowdown from what was reported throughout most of President Joe Biden's administration. U.S. exports fell over the previous three months, particularly within the auto sector. And real final sales to private domestic purchasers — which reflect consumer spending and private investment — increased 1.2 percent in the quarter, a slowdown from the previous three months. White House officials had pointed to that metric as a sign of strength after the first-quarter GDP numbers proved disappointing.' Bigggg drop-off — Jed Kolko, former Commerce undersecretary for economic affairs who's now a senior fellow at the Peterson Institute for International Economics, has a new paper on what job growth could look like in the near future. The breakeven rate — the amount of monthly payroll growth needed to keep pace with the labor force — has fallen by nearly half since early last year. Per Kolko: 'With slower population growth, any given level of monthly payroll growth, consumption growth, or output growth reflects a stronger economy than it did a year ago.' Wall Street Square that — Charles Schwab's Q3 2025 Trader Sentiment Survey found that 57 percent of traders now have a positive market outlook, double the results of the Q2 survey. By the same token, the same percentage of those surveyed also believe the market is currently overvalued — and less than a quarter said they have a high degree of conviction in their three-month outlook. Jobs report Breyon Williams has joined Groundwork Collaborative as its new chief economist. Williams, who holds a Ph.D. in economics from the University of South Carolina, was previously a researcher at Mathematica and also has been a lecturer at American University.
Politico
29-07-2025
- Business
- Politico
Trump's economic approval ratings look Biden-esque
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 Voters took a very dim view of President Joe Biden's handling of the economy. Now, President Donald Trump's economic approval ratings are starting to resemble those of his predecessor. Recent polls taken by Gallup and Fox News had the president's economic stewardship underwater by 24 percentage points and 11 points, respectively. The latest survey from Reuters-Ipsos found that just 35 percent of voters approve of his economic agenda — in line with the mid-to-low 30s notched by Biden during the back half of his presidency. A WSJ survey released over the weekend found that the majority of voters hold negative opinions of Trump's 'big, beautiful bill.' And as noted in a recent poll conducted by Emerson College, support for the administration's signature legislative achievement is similar to what Biden drummed up for the 'Build Back Better' agenda. 'What I see in the economic numbers is frustration that Trump's not bringing down costs — and doesn't seem that focused on bringing down costs,' said Bharat Ramamurti, who was a deputy director of the National Economic Council under Biden. Trump's weak polling should concern the White House for several reasons. For one, voters held generally favorable views of Trump's economic policies for most of his first term. That was a critical advantage for him during the 2024 campaign. Furthermore, negative perceptions of his agenda are persisting even though recession and reinflation fears have eased since he began scaling back his 'Liberation Day' tariff regime. (A closely watched consumer confidence index will be released by the Conference Board at 10 this morning.) As alums of the Biden and Obama administrations can attest, it's hard to sway voters on the economy even when the data is trending in the right direction. If growth, inflation or the labor market worsen, Trump will have to address those weaknesses to an electorate that's already unsatisfied with his performance. 'He has not been able to prosecute a case that he is fighting effectively on the economy in the [same] way that he was able to in the first term,' said Daniel Hornung, who was also a former deputy on Biden's NEC. 'As we saw – pretty convincingly — over the course of the long recovery from the financial crisis, people don't have fond views of a slow-growing economy.' In a statement, White House spokesman Kush Desai said, 'the Fake News spent months ginning up paranoia and fear about how President Trump's tariffs would fuel inflation and spark an all-out inflation. The opposite has happened.' New tariffs and trade deals have boosted revenue and opened up markets for American businesses, he added, and 'the best is yet to come as the Administration's pro-growth agenda of deregulation, The One Big Beautiful Bill's tax cuts, and new trade deals continue to take effect.' Nevertheless, most mainstream economists assume that growth and employment will slow in the latter half of the year. And there's still an expectation that prices will rise as new tariffs take effect — including the new 15 percent levies that will be applied to European and Japanese imports. 'When you look forward, I think that's where things really get scary,' said Wayne Winegarden, an economist at the free market think tank Pacific Research Institute. 'This is a huge, huge tax increase on the economy. It's a huge kind of reducing the efficiency of the U.S. economy.' One final thought: In politics, you only have to do better than your competition. While The WSJ's poll had Trump's approval rating underwater, it also found that congressional Republicans hold sizable leads over Democrats on both the economy and inflation. It's TUESDAY — As always, you can direct your MM tips and pitches to me at ssutton@ Driving the day The Census Bureau will release June data on the trade balance of goods, retail inventories and wholesale inventories at 8:30 a.m. … The Conference Board will release its consumer confidence survey at 10 a.m. … The Labor Department will release its June report on job openings and turnover at 10 a.m. … Senate Banking holds a markup of the 'ROAD to Housing Act of 2025' at 10 a.m. … Horrifying — Bloomberg's Myles Miller and Dawn Lim: 'An armed shooter attacked 345 Park Ave. in Manhattan, the tower housing Blackstone Inc.'s global headquarters and the National Football League among others, killing at least five people, according to a city official. The suspected shooter is dead, three officials said. Victims include at least one police officer. At least two other people died at the tower.' Vought's thoughts on Powell — In an interview with Newsmax, White House budget director Russ Vought said his investigation into the Federal Reserve's headquarters renovation hasn't concluded. Per Newsmax's James Rosen: 'Asked point blank if he and Trump regard the chair as 'an honest man,' Vought replied: 'I think that's a question that needs to be borne out by the review of the facts and what we find... We heard what he said in committee. We've seen his response to our letter. We're not there yet in terms of his response being the end of the query.'' Seems like a big deal — European Union officials told Gregorio Sorgi that Brussels won't be able to enforce a provision of the new trade framework that calls for $600 billion of investment in the U.S. economy. 'This part of the deal is largely performative,' said Nils Redeker from the Jacques Delors Centre think tank. '[The EU] is not China, right? So nobody can tell private companies how much they invest in the U.S.' — Speaking of China, per Ari Hawkins: A three-judge panel on the U.S. Court of International Trade rejected a request to restore a tariff exemption for low-value imports from China. At the regulators Well, Declan's evening freed up — The White House asked the Senate Agriculture Committee to delay a vote on Brian Quintenz's nomination to chair the Commodity Futures Trading Commission, Declan Harty reports. The future of independent agencies — Michael Stratford — back on the prudential beat after some paternity leave — reports that a federal appeals court temporarily paused a lower court's reinstatement of two Democratic appointees on the board of the federal credit union regulator who had been fired by Trump earlier this year. Move along — U.S. District Judge Sparkle Sooknanan ordered the Department of Housing and Urban Development to comply with its statutory obligations and create a detailed plan to administer fair housing program grants that the agency is accused of withholding, Katherine Hapgood reports. On The Hill INNOVATE Act 2.0 — Senate Small Business Chair Joni Ernst (R-Iowa) and House Small Business Chair Roger Williams (R-Texas) partnered on an updated version of the INNOVATE Act on Friday that would reauthorize and make changes to small business innovation and technology programs, Katherine reports. The bill would create an enforceable foreign-ties due diligence standard across the federal government to safeguard intellectual property from Chinese Communist Party industrial espionage and prioritizes investment in technologies of the future. The Economy The new 'synergies' — CEOs are bragging about reducing headcount. A cooling labor market, attrition and artificial intelligence are helping major companies like Amazon, Bank of America and Wells Fargo slash their workforces, writes Chip Cutter in The WSJ. On the AI front — The Economist reports on the new strategies tech companies are deploying to meet the growing energy needs of AI data centers. *Eyebrow raised* — The New Yorker's Eyal Press: 'Trump's 'populist' [no tax on tips] policy is backed by the National Restaurant Association—probably because it won't stop establishments from paying servers below the minimum wage.' Jobs report Pravina Raghavan, most recently the former CDFI Fund Director, joins Locus, a CDFI, as its new CEO. Gina Metrakas joins Capital One as the Head of Federal Advocacy, She most recently served as Chief of Staff to the Secretary of Housing and Urban Development and was previously HUD's COO.
