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Quarles loses role as top bank cop


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Quarles loses role as top bank cop The Federal Reserve last night finally announced who will be in charge of bank regulation at the central bank when Randal Quarles’ vice chairmanship ends: no one. More precisely, in order for anything to get done on regulations, the board would have to agree for staff to work on it, which in practical terms means: Don’t expect many new rules to be coming out of the Fed for the time being.

From your guest MM host: “Quarles will no longer be in charge of regulating the country’s financial system after his vice chairmanship expires Wednesday, a move that could mark the beginning of major leadership changes at the Fed. The announcement comes as Fed Chair Jerome Powell is awaiting word on whether he will be renominated by President Joe Biden to a second term. Some progressive groups have criticized Powell and Quarles — both appointed by President Donald Trump — for rolling back some of the rules imposed on banks in the wake of the 2008 financial crisis.”

The Fed’s statement is worded in a way that connects this development directly to the expiration of his term — he will no longer be vice chair for supervision, and therefore he will no longer chair the Fed’s internal regulatory committee. In practical terms, this allows the central bank to punt on all things regulation until Biden nominates someone new for the job.

Larry Fink’s warning: Inflation is here to stay BlackRock CEO Larry Fink is in Washington for a round of meetings this week with some real-talk on what’s happening with the global economy and inflation.

Our Zach Warmbrodt: “Fink told Institute of International Finance head Tim Adams in a live Q&A Tuesday that he was less optimistic than other executives. He believes inflation is more than transitory and will ‘be with us longer’ amid supply chain snarls and rising commodity prices. Consumers seeing higher wages will have to spend more and more of their money on energy for heating and transportation, according to the chief of the world’s largest asset manager. He also blamed bigger shifts in U.S. economic policy to focus on jobs rather than consumers, saying that ‘it may come at a cost of higher prices.’

“What is Fink optimistic about? Huge pools of capital sitting on the sidelines and aggressive monetary policy by most central banks, not to mention further U.S. fiscal stimulus that will ‘hypercharge the economy.’ ‘But that being said, there are a lot of issues that make it a little more difficult to say that it’s a straight, positive line.’”

NEW MM AUTHOR ON THE WAY — Your guest host could not be more excited that Kate Davidson, who just ended a seven-year stint at the Wall Street Journal, will be returning to POLITICO to write Morning Money. She’s extremely talented and a great person to boot. Her first day is Oct. 19.

Managing Editor Sudeep Reddy emails staff that Kate “will be the first step in an exciting expansion of Morning Money to bring more scoops and original insight to a key POLITICO franchise. Ben White launched Morning Money in 2009 … and set the standard for newsletters in this domain. You’ll continue to see Ben in Morning Money in the coming months, along with other newsletters including The Nightly and The Long Game. Stay tuned for more about how we plan to expand our Morning Money ambitions.”

HAPPY WEDNESDAY — Please send any tips to me at [email protected] or @vtg2 and to Aubree Eliza Weaver at [email protected] or @AubreeEWeaver.

DEBT LIMIT CRISIS PUNTED UNTIL DECEMBER — Our Caitlin Emma and Jennifer Scholtes: “The House approved a bill on Tuesday to briefly alleviate the squeeze of the debt limit, warding off an economically destructive default for just over seven weeks.

“President Joe Biden is expected to sign the legislation in short order, allowing the Treasury Department to keep paying loans for the nation’s more than $28 trillion in debt. The extra borrowing power is estimated to last until about Dec. 3, the same day government funding will expire. That patch is far shorter than the 14-month fix Democrats had to abandon after Senate Republicans repeatedly sunk the majority party’s long-range plan for lifting the cap on the nation’s credit.”

FIRST LOOK: PROGRESSIVE EXPECTATIONS FOR FSOC CLIMATE REPORT — Public Citizen and Americans for Financial Reform in a new paper laid out a list of directives and specific policies for the Financial Stability Oversight Council to heed in its report on climate-related risks to the financial system, which will be released next week. Among their demands: Make clear that fossil fuel finance is “a primary driver of systemic climate risk” and “recognize that the dangers of the climate crisis must be mitigated now, even if they may not manifest until after the usual time horizon that regulators focus on.” The groups also call on Treasury Secretary Janet Yellen, as FSOC chair, to treat climate risk and racial and environmental injustice as “correlated and inseparable.”

PETROU ON INCREASING FINANCIAL INCLUSION — Federal Financial Analytics’ Karen Petrou in a new blog post lays out a roadmap for how regulators can increase financial inclusion. The post calls for clear metrics, like “accessibility judged not by availability in terms of potential access (i.e., via digital media), but by actual accessibility” for lower-income households. It also includes an analysis of the types of products most likely to increase inclusion.

WATERS TALKS HOUSING WITH BIDEN — Our Katy O’Donnell: “House Financial Services Committee Chairwoman Maxine Waters said Tuesday that she’d had two conversations with President Biden urging him to preserve housing and received assurances from him. ‘We’re going to hold him to that,’ Waters said during a press conference that she and other House Democrats held outside the Capitol Tuesday afternoon to push for the inclusion of housing funding in the social spending package being negotiated by congressional leaders and the White House. Some $300 billion in housing funds are on the chopping block as Democrats try to pare down the package by as much as $2 trillion.”

IMF FORESEES SLIGHT DROP IN GLOBAL GROWTH FROM PANDEMIC — AP’s Martin Crutsinger: “The International Monetary Fund is slightly downgrading its outlook for the global recovery from the pandemic recession, reflecting the persistence of supply chain disruptions in industrialized countries and deadly disparities in vaccination rates between rich and poor nations. In its latest World Economic Outlook being released Tuesday, the IMF foresees global growth this year of 5.9 percent, compared with its projection in July of 6 percent.”

SURVEY: THE ‘GREAT RESIGNATION’ CONTINUES — Last month, just under half of all workers surveyed by Prudential — 46 percent — said they were either considering or actively looking for a new job. According to the latest “Pulse of the American Worker” survey, millennials make up 59 percent of that number, as well as the largest portion of the workforce. The reasons range from seeking better compensation and benefits, to a lack of opportunities at their former job or just wanting to do something different. Among millennials, approximately a quarter of workers — 26 percent — cited the desire to work remotely, as a reason for their job search. The survey, which was conducted by Morning Consult on behalf of Prudential, polled 2,000 full-time employed adults in mid-September.

STOCKS EDGE LOWER — AP’s Damian J. Troise and Alex Veiga: “Stocks closed lower on Wall Street after a wobbly day of trading Tuesday as investors wait for more data on inflation and corporate earnings this week. The major indexes wavered between small gains and losses for much of the day, before the selling gained momentum in the final minutes of trading. The S&P 500 slipped 0.2% after having been up 0.3% in the early going.

“The Dow Jones Industrial Average fell 0.3% and the Nasdaq composite slipped 0.1%. Small company stocks, a gauge of confidence in economic growth, fared better than the broader market, driving the Russell 2000 index 0.6% higher.”

RISK OF HIGH INFLATION DOGS CENTRAL BANKERS — NYT’s Jeanna Smialek: “A key measure of inflation expectations released on Tuesday showed continued acceleration, a survey that came as Richard H. Clarida, the Federal Reserve’s vice chair, indicated that central bankers were alert to the risk of high inflation. The combination underscored that the threat of a longer period of rising prices has become more pronounced.

“In remarks prepared for the Institute of International Finance’s annual meeting, Mr. Clarida said he believed that the ‘unwelcome’ jump in inflation this year, ‘once these relative price adjustments are complete and bottlenecks have unclogged, will in the end prove to be largely transitory.’”

SEC OPENS INQUIRY INTO WALL STREET BANKS’ STAFF COMMUNICATIONS — Reuters’ Chris Prentice and Jody Godoy: “The U.S. Securities and Exchange Commission (SEC) has opened a broad inquiry into how Wall Street banks are keeping track of employees’ digital communications, three people familiar with the matter told Reuters. SEC enforcement staff contacted multiple banks in recent weeks to check whether they have been adequately documenting employees’ work-related communications, such as text messages and emails, with a focus on their personal devices, said the people, who spoke on the condition of anonymity.”

FED POLICYMAKERS HOME IN ON NOVEMBER TAPER TIMELINE — Reuters’ Lindsay Dunsmuir and Ann Saphir: “Two U.S. Federal Reserve policymakers on Tuesday said that the central bank has kept pace with a planned move to reduce its bond buying program, cementing expectations the Fed will start withdrawing its crisis-era stimulus as soon as next month.

“‘I myself believe that the ‘substantial further progress’ standard has more than been met with regard to our price-stability mandate and has all but been met with regard to our employment mandate,’ Fed Vice Chair Richard Clarida said in prepared remarks to the Institute of International Finance virtual annual meeting, as he repeated that the Fed at its last meeting agreed tapering ‘may soon be warranted’ and would likely conclude in the middle of next year.”

BITCOIN’S RECORD HIGH IS WITHIN SIGHT — Bloomberg’s Akshay Chinchalkar: “Bitcoin is flirting with a run toward its all-time high after jumping more than 90 percent since a low in July. The largest cryptocurrency was trading little changed just above $57,000 as of 10:07 a.m. in London, some $7,700 shy of its April record. A recent rally in digital tokens like Bitcoin and second-ranked Ether contrasts with the travails of assets such as stocks, bonds and gold amid a bout of jitters in global markets.”





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