• Senate Majority Leader Chuck Schumer (D-N.Y.) called on House Republicans to detail the proposed spending cuts that they would require in order to agree to raise the federal debt ceiling, saying that Democrats are ready to “move quickly” well in advance of the expected default date. In remarks on the Senate floor, Schumer called the GOP strategy “dangerous” and “destabilizing” and said Republicans have “an obligation” to show the public whether their proposed cuts include programs such as “Social Security or Medicare or child care or Pell Grants.” (The Hill)
• Goldman Sachs Group Inc. and Mastercard Inc. are teaming with New York City to create a $75 million fund to offer businesses in the city with less than $5 million in revenue loans ranging from $2,000 to $250,000 at a fixed below-market interest rate of 4%. Goldman Sachs will provide about $50 million to the NYC Small Business Opportunity Fund, the largest public-private fund for small businesses in the city’s history. (Bloomberg)
• President Joe Biden nominated Ron Borzekowski to be the director of the Office of Financial Research in the Treasury Department, a position that has been filled on an acting basis for almost a year. Borzekowski, the executive director of the Data-Intensive Social Science Center at Yale University, previously led the Consumer Financial Protection Bureau’s Office of Research and filled a critical agency role on the Financial Stability Oversight Council. (Politico Pro)
• Kansas City Federal Reserve President Esther George said in an interview that the Fed should formulate a plan to divest its $2.6 trillion in mortgage-backed securities “earlier than later,” noting that while banking officials agree on the need to focus the Fed’s portfolio only on Treasury-issued assets, they do not yet have a plan in place to get there. George described the Fed’s current holdings, which represent about a quarter of the total mortgage-backed securities market and a sizable portion of the Fed’s own $8 trillion securities portfolio, as “enormous,” raising questions about the appropriate role of the Fed in the mortgage-backed securities market. (Reuters)

Worth watching:

• Acting Comptroller of the Currency Michael Hsu will join a panel discussion on crypto assets and cybersecurity at the Institute for Law and Finance. 

Tracking Cryptocurrency Adoption and Perspectives

Morning Consult

SEC fines Bloomberg $5 million for disclosure violations on fixed-income prices

Chelsey Cox, CNBC

Bloomberg Finance LP, founded by former New York mayor and once-presidential candidate Michael Bloomberg, paid $5 million to settle civil charges over misleading disclosures. The company failed to disclose methodologies used to value certain fixed-income securities to users of BVAL, its paid subscription service.

Dems ask watchdog to investigate IRS’s tardy audit of Trump

Benjamin Guggenheim, Politico

Committee Democrats want the GAO to probe why the IRS didn’t ask Treasury or Congress for more resources if the agency was struggling to fully audit Trump’s voluminous returns.

China Slams US on Debt Limit and Accuses Washington of Sabotage

Taonga Clifford Mitimingi and Jacob Gu, Bloomberg

China invoked the US’s brinkmanship over its own debt limit as it hit back at Treasury Secretary Janet Yellen’s criticism of Beijing’s handling of debt issues in developing countries.

Who Pays for Your Rewards? Indebted Cardholders, Paper Finds

Alexandre Tanzi, Bloomberg

Credit cards with rewards are rewarding only for those who know how to profit from the system, according to a paper released by the Federal Reserve.

US Business Openings on Yelp Reached Record Last Year

Alexandre Tanzi, Bloomberg

Business openings reached an all-time high in the US last year, with the vast majority of states exceeding pre-pandemic levels, according to Yelp Inc. data.

Debt default would cost 6 million jobs, push jobless rate to 7 percent: analysis

Sylvan Lane, The Hill

The U.S. economy could suffer an economic hit comparable to the 2007-08 financial crisis and recession if the federal government defaulted on its debt, according to an analysis released Monday.

Companies Cut Temp Workers in Warning Sign for Labor Market

Sarah Chaney Cambon, The Wall Street Journal

Employers are shedding temporary workers at a fast rate, a sign that broader job losses could be on the horizon. In the last five months of 2022, employers cut 110,800 temp workers, including 35,000 in December, the largest monthly drop since early 2021.

Biden’s new tax hammer

Hans Nichols, Axios

President Biden will deliver a major economic speech this week spotlighting fringe economic proposals championed by House Republicans — including a controversial bill to abolish the IRS and replace it with a 30% national sales tax.

Sens. Warner, Crapo seek answers from Treasury on CDFI application process

Dave Kovaleski, Financial Regulation News

U.S. Sens. Mark Warner (D-VA) and Mike Crapo (R-ID) are urging the U.S. Department of Treasury to consider all comments received in response to the Community Development Financial Institution (CDFI) application and Annual Certification and Data Collection Report (ACR).

House Republicans sponsor bill that would direct GAO to examine the Fed

Dave Kovaleski, Financial Regulation News

U.S. Reps. Brad Finstad (R-MN) and Thomas Massie (R-KY) are among a group of House Republican lawmakers sponsoring a bill that would direct the U.S. Government Accountability Office (GAO) to conduct an examination of the Federal Reserve Board and the Federal Reserve banks.

House GOP keeps up attacks on IRS with bill to abolish the agency

Katie Lobosco, CNN

The Republican-controlled House has made the Internal Revenue Service a political target after Democrats bolstered the agency with new funding last year.

State Street CEO Warns a US Downgrade Could See Treasuries Drop

Chris Anstey, Bloomberg

State Street Chief Executive Officer Ron O’Hanley warned against betting on a Treasuries rally in the wake of any downgrade of the US credit rating amid the political battle over the debt limit.

Warren: Republicans threatening to ‘wreck’ economy in debt ceiling battle to protect wealthy

Aris Folley, The Hill

Sen. Elizabeth Warren (D-Mass.) on Monday took a jab at Republicans in the ongoing debt ceiling fight, accusing the party of trying to “wreck the economy” to protect wealthy taxpayers.

Rich Customers Pull Money From Banks Offering Paltry Interest Rates

Rachel Louise Ensign, The Wall Street Journal

Wealthy savers are starting to take their cash out of bank accounts in search of higher yields. Big banks are still paying paltry interest on checking and savings accounts despite the Federal Reserve’s steepest rate increases in decades.

Bank funding for renewables stagnates vs oil and gas – report

Reuters

The share of bank finance going to renewable energy rather than fossil fuels has little changed in six years, raising questions about how fast lenders are pushing energy clients to become greener, according to research published Tuesday.

BlackRock’s iShares regains pole position from rival Vanguard

Steve Johnson, Financial Times

Last year’s net ETF flows at $221bn were lower than in 2021, but Vanguard’s $214bn marked a far steeper decline.

Robinhood-owned Say launches shareholder messaging

Hope King, Axios

Say Technologies, a Robinhood subsidiary, is launching a new messaging feature that enables public companies to send tailored communications directly to retail investors within its network, and allows them to respond.

With regulatory spotlight on bias, appraisers worry about losing their independence

Kyle Campbell, American Banker

As the Biden administration’s effort to root out bias among home appraisers marches on, those in the field worry the push could undermine their independence.

Gemini is Laying Off More Staff, Citing ‘Bad Actors’ in Crypto Industry

Aidan Ryan, The Information

Gemini, the crypto startup whose customers have been caught up in the Genesis bankruptcy, is laying off 10% of staff, according to an internal message viewed by The Information.

New York Regulators Warn Crypto Companies Against Commingling Customer Funds

André Beganski, Decrypt

The New York Department of Financial Services released a set of guidelines for safeguarding digital assets.

SEC Scrutiny Blocks Some Crypto Firms From Going Public

Dave Michaels and Peter Rudegeair, The Wall Street Journal

Crypto companies seeking to go public over the past year have faced increased scrutiny from the Securities and Exchange Commission, as financial distress and failures spread across the volatile industry.

Apollo-Backed Coinstar, Creditors Tap Advisers as Payments Near

Reshmi Basu, Bloomberg

Coinstar LLC, the Apollo Global Management-backed company known for kiosks that swap coins for cash, and a group of its creditors have tapped advisers to explore options ahead of fast-approaching amortization payments, according to people with knowledge of the matter.

French Hill wants to work with Senate Dems, Treasury on crypto

Brendan Pedersen, Punchbowl News

The 118th Congress may be one of the most crucial for the future of national crypto policy, and Rep. French Hill (R-Ark.) is going to be smack dab in the middle of it.

SEC Commissioner Makes Controversial Case For ETH, XRP, Faults Howey’s Test

Aliyu Pokima, ZyCrypto

SEC’s Commissioner Hester Pierce points out loopholes in the popular Howey’s test used to classify assets as securities. Disgruntled with the back and forths in the regulatory framework, she calls for actual positive movements in the digital asset space.

The Unknown Hedge Fund That Got $400 Million From Sam Bankman-Fried

David Yaffe-Bellany et al., The New York Times

After the collapse of FTX, prosecutors and lawyers have scrutinized its discredited founder’s huge investment in Modulo Capital.

U.S. Supreme Court spurns attorney-client privilege fight in crypto tax probe

Nate Raymond, Reuters

The U.S. Supreme Court on Monday threw out a case about the scope of attorney-client privilege involving a law firm’s bid to withhold records from prosecutors related to a cryptocurrency-promoting client in a tax investigation.

Crypto’s Wormhole Hacker Moves $150 Million to Tap Popular Trade

Muyao Shen, Bloomberg

A digital-asset wallet linked to one of crypto’s biggest hacks has moved more than $150 million of stolen funds for the first time in months to tap a trade involving staked Ether.