The economy is tight and no one is happy

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Top CEOs are definitely not saying that storm clouds are forming over the economy. But it’s getting colder, the sky is turning gray, and the number of people who want to go out is getting smaller and smaller.

Federal Reserve Chairman Jerome Powell’s attempt to roll back rising spending without destroying the labor market has led to confusing times; good news is often bad, bad news is often good, and financial institutions and big businesses are stuck in the middle trying to figure out how to plan for what’s next.

The Business Roundtable’s fourth-quarter survey released Monday painted a stark picture of how “blah” America’s corporate sentiment will be by 2023.

Of course, most executives surveyed don’t think we’re headed for a recession. And yes, more than companies that do not plan to hire and invest in the next year. But the outlook — or, as our colleague Victoria Guida once artfully put it, “the vibe” — is turning sour. And there is growing concern about how Washington will deal with economic forces that could force the Fed to send rates through the roof.

“The Fed is pumping the brakes to curb inflation, and the survey results are not surprising in this context,” said Joshua Bolten, CEO of the Business Roundtable. He said Congress and the White House must do more to support “pro-growth” policies to strengthen the economy.

The tricky part, of course, is that economic growth is part of the problem. A report from the Institute for Supply Management found that service businesses in sectors such as healthcare and retail remained hot. There are factory orders. Wages are still rising as businesses compete for dwindling unemployed workers.

Even though Powell and other Fed officials have indicated they plan to raise interest rates in smaller increments in the near term, a resilient labor market and continued demand for goods and services may require a more aggressive approach. This should slow down the economy. And that explains why CEOs are increasingly pessimistic, even if they check the box that says they plan to increase headcount next year.

This brings us to Wall Street.

One area where rising rates hit hard and fast is the world’s mergers and acquisitions. Corporate deals are slowing down. Banks are finding it difficult to sell the debt they package to finance closing deals. And Wall Street’s rank and file are starting to feel the pinch.

Goldman Sachs is warning traders that their bonuses may not be as large as last year. JPMorgan, Bank of America and Citi reportedly plan to cut their incentive compensation pools by about 30 percent. At Morgan Stanley, CEO James Gorman said last week that the bank plans to cut workforces “around the world.”

“Some people will be let go,” Gorman said. “In most businesses, you do that after years of development.”

Tuesday — Although Zach voted for Def Leppard, Sam’s favorite musical norm in 2022 was heavy. The Beatles, Springsteen, Sturgill Simpson; mostly “I Like Walks and IPAs” playlists. MM hopes your taste is a little more interesting. Please post tips [email protected] and [email protected].

Trade deficit data released at 8:30 a.m. … FinCEN Acting Director Him Das to keynote at ABA/ABA conference at 8:30 a.m. … House Financial Services Diversity and Inclusion subcommittee hearing at 10 a.m. holds … House Veterans Affairs holds hearing on transitional housing reform at 10 a.m. … House Financial Services subcommittee on capital markets holds hearing on workforce management and corporate disclosure of diversity at 2 p.m.

What are your travel expectations this holiday season? Hit and run; high and some expensive lows? POLITICO invites you to discuss The Travel Experience Redefined. Jackie Rosen (D-Nev.) and many consumer and industry voices, Dec. 7, 8:30 a.m. ET. You can check in online or in DC at the Madison Hotel.

CANAVI AND BANKING — Natalie Fertig: “The package of cannabis legislation built around the SAFE Banking Act includes the HOPE Act and the GRAM Act. The HOPE Act would create grant funding for states to expunge cannabis-related records, and the GRAM Act would protect the gun rights of marijuana users in legal jurisdictions,” according to three people familiar with the discussions. .

— Also from Natalie: “A bipartisan group of senators led by Majority Leader Chuck Schumer and Steve Daines (R-Mont.) is working to include it in the National Defense Authorization Act, which is expected to be on the floor later this week. “

Proxy War — Declan Harty: “A federal judge has upheld the SEC’s decision to overturn Trump-era restrictions aimed at reining in companies that advise shareholders on corporate governance issues.”

FIRST IN MM – Venture capital behemoth Andreessen Horowitz (a16z) tapped former CFTC Commissioner Brian Quintenz to lead its cryptocurrency policy efforts in Washington. “With the new Congress taking office in just a few weeks, we couldn’t be more excited to have Brian begin his new full-time role today to lead our efforts on Capitol Hill,” said Anthony Albanese, chief operating officer of a16z cryptocurrency. officer

LESS THAN ZERO COVID — WSJ’s Selina Cheng: “China’s scaling back of lockdowns and mass virus testing is a response to nationwide protests against its unpopular Covid-19 controls, which a Communist Party spokesman acknowledged is a rare sign that Beijing is responding to protesters’ demands and starting to work on the economy. is the basis for reopening”.

WHEN IT HITS THE OIL CAP — The FT’s Tom Wilson, David Sheppard, Ian Smith, Ian Smith and Ayla Jean Yackley: “After Western powers imposed a ‘price cap’ targeting Russian oil, Turkish waters have become congested with oil tankers and authorities in Ankara have banned insurers from allowing any ships to sail through its straits. was covered.”

PROPS — Bloomberg’s Lu Wang: “Professional investors are loading up on bets to avoid an economic downturn, despite all warnings to the contrary. It’s a risky bet for a number of reasons.”

CEO of CITI WHISPERER – Bloomberg’s Jennifer Surane profiles Citigroup’s Sara Wechter, who oversees the bank’s policies on abortion, work-from-home and other political headaches: “Big banks avoided sensitive political issues that could interfere with business. But Citigroup didn’t run away and took steps led by an unlikely figure: Sara Wechter, a former investment banker who has been a behind-the-scenes adviser to Citigroup’s top brass for more than a decade.

ANTI-WAKE-UP – Jordan Wolman, in a new poll that finds ESG may be less politically salient than some Republicans might hope: “Voters generally think companies should be able to do business without government interference and should consider ESG risks.”

NO EASY ACCOUNT – WSJ’s Nick Timiraos: “Federal Reserve officials said they plan to raise benchmark interest rates by 0.5 percentage point at their meeting next week, but rising wage pressures could lead them to continue raising them to higher levels than investors currently expect.”

EVERY CRYPTO SUPER BOWL TITLE — Bloomberg’s Leah Nylen and Allyson Versprille: “The U.S. Federal Trade Commission is investigating several crypto firms over allegations that their advertising is misleading or deceptive, the agency said Monday.”

— NYT’s Matthew Goldstein: “As companies like FTX adopt the marketing tactics and reach of mainstream financial firms, their customers have come to believe that they are safe places to put cash in exchange for cryptocurrency.”

OP-EDS — Former SEC Chairman Jay Clayton and former CFTC Chairman Tim Massad on how regulators can act now to curb cryptocurrency abuses: “We believe the SEC and CFTC should publish a core set of standards… [that] can be easily removed from the existing requirements for our securities and derivatives exchanges.

— Meanwhile, CEO of the American Bankers Association Rob Nichols and Better Markets CEO Dennis Kelleher CNBC published a joint article calling for crypto companies to adhere to the “same regulatory standards” as traditional banks and financial institutions.

CIRCLE SPAC GROUPED — From Sam: Stablecoin payments company Circle halted plans to go public on Monday through a blank check after failing to get approval from the SEC … “While disappointed that we didn’t complete SEC qualification on time, we remain focused on being a long-term public company, Jeremy Allaire, Circle’s co-founder, chairman and CEO said in a series of tweets.”

A DROP IN THE TRUNK UNTIL THE LAST TIMES — From our Bjarke Smith-Meyer: “Cryptocurrency exchanges and companies could be fined at least €500,000 if they refuse to disclose to the tax authority details about who owns which digital assets on their platforms, according to a bill obtained by POLITICO.”

SHARBAKA SHOULD HAVE A FUTURE —Bloomberg’s David Pan and Naureen Malik on the failure of Texas’ bid to attract Bitcoin miners: “If the Bitcoin mining industry fails, there are a lot of losers. First, local governments have offered incentives such as tax breaks amounting to tens of millions of dollars. Planned energy production, which the region desperately needs to avoid another energy crisis, may not materialize.

Beth George Since January 3, he has been appointed the general director of the International Institute of Bankers. Zorc, whose resume includes positions as senior staff counsel for both the Senate Banking and House Financial Services, comes to IIB from Robinhood, where he was assistant general counsel.

Adrienne Lee Benson It was learned that Daniel Lippman started working as the chief adviser of the Deputy Prosecutor General. He was most recently senior adviser to the general counsel at the Treasury.

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