“Federal Reserve officials are preparing to slow interest-rate increases for the second straight meeting and debate how much higher to raise them after gaining more confidence inflation will ease further this year,” the Wall Street Journal reports.
Wall Street Is Really Worried About the Debt Ceiling
“As the U.S. government hits its $31.4 trillion borrowing limit today, Wall Street’s Washington veterans are sounding the alarm that after years of brinkmanship, the possibility of an unprecedented default is real this time,” Semafor reports.
“One Wall Street lobbyist said his firm hasn’t started tabletop exercises yet to game out scenarios but when they do, he will recommend including political twists that result in wild market gyrations given the current mood in Washington.”
Bloomberg: In debt limit fight, Trump wants Republicans to play a dangerous game of chicken.
Vox: Biden has options on the debt ceiling — but none of them are good.
Wall Street and Fed Flopped in Trying to Predict 2022
Wall Street Journal: “Almost everyone on Wall Street and in Washington got 2022 wrong. The Federal Reserve expected 2021’s inflation surge to be transitory. It wasn’t. … Top Wall Street analysts predicted markets would have a so-so year. They didn’t.”
“The extent to which many investors, analysts and economists were wrong-footed has left many looking at the coming year with a sense of unease. … If there is a lesson to be taken away from the past 12 months, some investors and analysts say it is this: Be prepared for more surprises.”
SEC Chair Sees No Need for New Crypto Laws
New York Times: “Gary Gensler… is pushing back on calls for new laws, arguing that existing S.E.C. rules and Supreme Court decisions suffice and that crypto issuers and exchanges simply need to come into compliance.”
Executives in Crypto Empire Plead Guilty to Fraud
“Two former top executives of Sam Bankman-Fried’s crypto trading empire have pleaded guilty to federal criminal fraud charges and are cooperating in the case against the disgraced crypto entrepreneur,” the New York Times reports.
Wall Street Journal: “The announcement came shortly after Mr. Bankman-Fried had been transferred to U.S. custody in the Bahamas, where he was arrested last week.”
Sam Bankman-Fried to Be Extradited on Wednesday
“Federal authorities are set to whisk Sam Bankman-Fried to the US on Wednesday to face a range of criminal charges related to the collapse of the FTX crypto exchange,” Bloomberg reports.
Fed Signals More Rate Increases Likely
“The Federal Reserve approved an interest-rate increase of 0.5 percentage point and signaled plans to keep raising rates at its next few meetings to combat high inflation,” the Wall Street Journal reports.
“The decision Wednesday marked a step down after four consecutive larger increases of 0.75 point and raised the benchmark federal-funds rate to a range between 4.25% and 4.5%, a 15-year high.”
Heavy Trading Drove Mystery Rally Before Inflation Report
Bloomberg: “Stock futures suddenly spiked more than 1%. Trading in Treasury futures surged, pushing benchmark yields lower by about 4 basis points. Those are major moves in such a short period of time — bigger than full-session swings on some days.”
“And they should get scrutinized by regulators, long-time market observers say, even if a leak is only one of several possible explanations.”
Sam Bankman-Fried Arrested in the Bahamas
“FTX founder Sam Bankman-Fried was arrested by Bahamian authorities this evening after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government, setting the stage for extradition and U.S. trial for the onetime crypto billionaire at the heart of the crypto exchange’s collapse,” CNBC reports.
New York Times: “Prosecutors for the Southern District of New York confirmed that Mr. Bankman-Fried had been charged and said an indictment would be unsealed on Tuesday. The charges included wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering.”
Wall Street Journal: “The development is the latest bombshell in a case that has transfixed Wall Street and Washington since FTX, one of the largest crypto exchanges in the world, filed for bankruptcy last month after it ran out of cash and rival Binance walked away from a shotgun merger.”
Fed to Weigh Higher Rates Next Year
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.”
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