Wall Street Journal: “A smaller 0.5-point increase would mark a new phase of policy tightening as they calibrate how much higher to lift rates. Policy makers expect price pressures to ease meaningfully next year, but brisk wage growth or higher inflation in labor-intensive service sectors of the economy could lead more of them to support raising their benchmark rate next year above the 5% currently anticipated by investors.”
Democrats Unload on Crypto Industry
“At a moment when Congress is finally debating whether and how to seriously regulate the cryptocurrency industry, a split appears to have formed in the Democratic Party. Some of its lawmakers are contemplating how to harness blockchain technology into a force for innovation, while scaling back its early excesses,” Semafor reports.
“Then there’s a group you might call the ‘bullshit caucus.'”
Said Sen. Jon Tester (D-MT): “It’s all bullshit. I don’t think it passes the smell test. I can’t figure out what supports it.”
Added Sen. Elizabeth Warren (D-MA): “Finally, there are more people blowing the bullshit whistle. There’s been a lot of lobbying around Congress and an effort to try to scare off lawmakers. To say ‘Oh, crypto is just so complicated. No one can understand it. Let the crypto world remain unregulated.’ That is precisely the argument that was made in the run-up to the 2008 crash.”
Sam Bankman-Fried Claims His Fortune Is Gone
Sam Bankman-Fried, who was once reportedly worth more than $25 billion, told Axios that he has only about $100,000 left.
Said Bankman-Fried: “I don’t know. I had $100,000 in my bank account last I checked. It’s complicated. Basically everything I had was just tied up in the company.”
Politico: “Bankman-Fried’s unrelenting public campaign has crisis management specialists, public relations experts and even some lawmakers warning that refusing to stay quiet is unlikely to salvage his reputation — and that he’s putting himself in growing legal danger.”
Lawmakers Face Crypto Reckoning
Washington Post: “From the burst of the dot-com bubble at the turn of the millennium to the rampant privacy mishaps at Facebook decades later, federal policymakers historically have been slow to anticipate the troubles of the digital age. Only after massive, costly scandals have lawmakers and regulators been stirred to action, sometimes with less-than-desirable results.”
“The nascent world of cryptocurrency — where digital tokens replace dollars, investments and payments, all without the need for traders, governments or banks — has presented perhaps the most complicated challenge to date.”
Republicans Set to Target Wall Street
“Republican lawmakers, who will be in the House majority come January, are pressing party leaders to send a message to big financial firms: Stop appeasing the left with ‘woke’ business practices, keep financing fossil fuels and cut ties with China. Republicans will have committee gavels and subpoena powers to back that up,” Politico reports.
“GOP lawmakers are singling out major asset managers and their Washington trade groups as targets because of climate investing practices they see as hostile to oil, gas and coal. Some Republicans want to continue hauling in big bank CEOs to publicly testify — a tradition established by liberal Democrats. GOP senators are already demanding that law firms preserve documents related to how they advise clients on environmental and social initiatives, signaling a potential investigation. Wall Street firms and Washington lobbyists are preparing for subpoenas.”
FTX Collapse Sets Back Crypto Agenda
“The collapse of crypto exchange FTX has dealt a blow to the crypto industry’s hopes of pushing favorable legislation through Congress in the near term and ratcheted up pressure on the Securities and Exchange Commission and other regulators to crack down,” the Wall Street Journal reports.
Top Democratic Donor’s Fortune Wiped Out
“The entire $16 billion fortune of FTX co-founder Sam Bankman-Fried has now been wiped out, one of history’s greatest-ever destructions of wealth,” Bloomberg reports.
Bankman-Fried pledged to spend as much as $1 billion during the 2024 campaign cycle.
Fed Approves Fourth 0.75-Point Rate Rise
The Federal Reserve lifted interest rates by 0.75 percentage point to combat inflation and signaled plans to keep raising them, though possibly in smaller increments, the Wall Street Journal reports.
That marks the fourth consecutive increase of that size as officials seek to reduce inflation by slowing the economy.
If the Phillies Win the World Series
Wall Street Journal: “When Philadelphia baseball teams do well, in a pattern that has held for a century, financial markets tend to strike out. It started with the old Philadelphia Athletics (before they left town). Their 1929 championship preceded the stock crash and Great Depression. In 1980, the Phillies won their first World Series, and a recession raged right through 1983, when the team again got to the final round and lost. The Phils won the World Series a second time in 2008, and boom: a home-run financial crisis.”
“Now, the scrappy Phils will be back on the big stage against the favored Houston Astros, and it is as if this struggling economy already knew it was going to be in trouble.”
Fed President Spoke at Invite-Only Bank Client Event
“James Bullard, the president of the Federal Reserve Bank of St. Louis, spoke last Friday at an off-the-record, invitation-only forum held by Citigroup, and open to clients,” the New York Times reports.
Mortgage Rates Hit 20-Year High
U.S. mortgage rates hit 6.94% last week, the highest they’ve reached since 2002, Bloomberg reports.
The Fed Charts an Aggressive Path
“Federal Reserve officials have coalesced around a plan to raise interest rates by three quarters of a point next month as policymakers grow alarmed by the staying power of rapid price increases — and increasingly worried that inflation is now feeding on itself,” the New York Times reports.
“Such concerns could also prompt the Fed to raise rates at least slightly higher than previously forecast as officials face two huge choices at their coming meetings: when to slow rapid rate increases and when to stop them altogether.”
“Central bankers had expected to debate slowing down at their November meeting, but a rash of recent data suggesting that the labor market is still strong and that inflation is unrelenting has them poised to delay serious discussion of a smaller move for at least a month.”
Mortgage Rates Advance to 16-Year High
U.S. mortgage rates advanced to a fresh 16-year high of 6.81%, extending a rapid ascent in borrowing costs that’s seen dealing a bigger blow to the housing market, Bloomberg reports.
Fed Chair Gets Bipartisan Support
Politico: “The extraordinary show of bipartisan support — Powell’s policies are widely backed by Republicans — is a reflection of both the years he has spent cultivating relationships on Capitol Hill and an acknowledgment that rising prices are also a huge political liability that lawmakers can’t easily address themselves.”
U.S. Economists Win Nobel Prize in Economics
“U.S.-based economists Ben Bernanke, Douglas Diamond and Philip Dybvig were awarded the Nobel prize in economic sciences for 2022 for their research on banks and financial crises,” CNBC reports.
“Bernanke was chairman of the Federal Reserve from 2006 to 2014.”
Fed’s Inflation Fight Has Some Fearing Deep Downturn
“Some economists fear the Federal Reserve—humbled after waiting too long to withdraw its support of a booming economy last year—is risking another blunder by potentially raising interest rates too much to combat high inflation,” the Wall Street Journal reports.
“The Fed has lifted rates by 0.75 percentage point at each of its past three meetings, bringing its benchmark federal-funds rate to a range between 3% and 3.25% last month—the fastest pace of increases since the 1980s. Officials have indicated they could make a fourth increase of 0.75 point at their Nov. 1-2 meeting and raise the rate above 4.5% early next year.”
Bloomberg: “The Federal Reserve is closing ranks around a goal of quickly raising their benchmark interest rate to around 4.5% then holding it there, while being prepared to go higher if elevated inflation fails to show signs of easing.”
U.S. Mortgage Rates Surge
Bloomberg: “Over the past seven weeks, mortgage rates have soared 1.30 percentage points, the largest surge over a comparable period since 2003 and illustrating the abrupt upswing in borrowing costs as the Federal Reserve intensifies its inflation fight.”
Investors Warn of Rising Market Stress
“Investors and Wall Street analysts are sounding the alarm about a possible ‘market accident,’ as successive bouts of tumult in US stocks and bonds and a surging dollar cause rising levels of stress in the financial system,” the Financial Times reports.
“A gauge of strain in US markets — produced by the Treasury’s Office of Financial Research — has soared to its highest level since the coronavirus pandemic ructions of May 2020.”
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