White House to powwow with financial regulators - Bitcoin policy primer - JPM embroiled in bribery investigation

With Zachary Warmbrodt

WHITE HOUSE POWWOW TODAY WITH FINANCIAL REGULATORS — President Barack Obama will spend his first day back from summer vacation meeting with financial regulators — all of them! — at the White House this afternoon. The group will “discuss the progress that has been made in strengthening the financial system, including the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act,” the White House said.


On the invite list: Treasury Secretary Jack Lew, Federal Reserve Chairman Ben Bernanke, Comptroller Thomas Curry, FDIC Chairman Martin Gruenberg, Consumer Financial Protection Bureau Director Richard Cordray, Commodity Futures Trading Commission Chairman Gary Gensler, SEC Chairman Mary Jo White, Acting Federal Housing Finance Agency Director Ed DeMarco and National Credit Union Administration Chairman Debbie Matz. The meeting is closed press.

FIRST LOOK: BITCOIN POLICY PRIMER FROM MERCATUS -- As Washington gets to know Bitcoin better, the Mercatus Center at George Mason University is releasing a “primer” for policymakers Tuesday. Mercatus senior research fellow Jerry Brito and program associate Andrea Castillo warn that applying existing rules to the digital “cryptocurrency” could impede its development. Bitcoin doesn’t fit into any existing regulatory category – it’s not a foreign currency, traditional commodity or a payments network – and they said policymakers may want to consider a new regulatory category.

They also urged policymakers not to “overreact” to illicit uses of Bitcoin and said regulators need to consider the criminal uses alongside its legitimate uses. In addition, they said lawmakers and regulators should consider whether it’s necessary to preempt state-by-state licensing for Bitcoin businesses — what they call one of the technology’s “greatest obstacles.” The full report: http://bit.ly/19C3rod

BITCOIN 101 — Don’t know what a Bitcoin is, much less why the government is interested? POLITICO’s Zachary Warmbrodt breaks it down: http://politi.co/1bK5PGB

JPM EMBROILED IN BRIBERY INVESTIGATION – Breaking in The New York Times over the weekend, U.S. authorities have launched a bribery investigation into whether JPMorgan Chase “hired the children of powerful Chinese officials to help the bank win lucrative business in the booming nation.” NYT’s Jessica Silver-Greenberg, Ben Protess and David Barboza: “In one instance, the bank hired the son of a former Chinese banking regulator who is now the chairman of the China Everbright Group, a state-controlled financial conglomerate, according to the document, which was reviewed by The New York Times, as well as public records. After the chairman’s son came on board, JPMorgan secured multiple coveted assignments from the Chinese conglomerate, including advising a subsidiary of the company on a stock offering, records show.

“The Hong Kong office of JPMorgan also hired the daughter of a Chinese railway official. That official was later detained on accusations of doling out government contracts in exchange for cash bribes, the government document and public records show.” http://nyti.ms/1dhNa6T

AND IT’S NOT JUST JPMORGAN — FT’s Tracy Alloway and Jamil Anderlini: “In their rush to capitalise on China’s economic growth, virtually all the big Wall Street and European financial institutions with operations in the country have habitually hired ‘princelings’, as the children of senior Chinese officials are known.

“Goldman Sachs once hired Jiang Zhicheng, grandson of the former Chinese president Jiang Zemin, for its direct private investment arm, for instance.” http://on.ft.com/18EnIEY

HOME SALES REACH THREE-YEAR HIGH — In the latest Bloomberg survey, economists say home sales likely rose to the highest level in more than three years in July, thanks in part to growing demand for residential real estate. Bloomberg’s Victoria Stillwell: “Combined purchases of existing and new homes climbed to a 5.64 million annualized pace last month, the fastest clip since November 2009, according to the median forecasts of economists in a Bloomberg survey. Another report may show the world’s largest economy is poised to strengthen.

“Improving sales, even as borrowing costs rise, and a limited supply of homes, lots and materials are helping boost home values and builder confidence. The waning effects of across-the-board federal spending cuts, combined with gains in the housing and auto markets, will probably help lift economic growth in the second half of the year.” http://bloom.bg/149IaxJ

DO BANKS NEED A BETTER ARGUMENT AGAINST HIGHER CAPITAL? – Federal Financial Analytics’ Karen Shaw Petrou says "yes": “As the nation’s biggest banks stare down the barrel of sharply higher leverage requirements, they are reiterating that higher capital means less credit availability. So far, regulators have been wholly undeterred by this reasoning. Will it work any better now? I doubt it.” http://politico.pro/17Db4F3

THIS MORNING ON POLITICO PRO FINANCE —

HOUSE REPUBLICANS SOLICIT IDEAS ON TRIA — POLITICO’s Zachary Warmbrodt on House Republicans gathering comments from the insurance industry on possible changes to TRIA … To learn more about Pro's subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or [email protected].

GOOD MONDAY MORNING — Hope everyone had a great weekend! With M.M. author Ben White on vacation, POLITICO’s Kate Davidson and MJ Lee are filling in for the next few weeks — and we want to hear from you! Email us at [email protected] and [email protected] and with tips, questions and suggestions, and follow us on Twitter: @ katedavidson and @ mj_politico. And as always, follow @ morningmoneypro and @ POLITICOPro for all of the latest coverage from POLITICO Pro.

**A message from FEAI, the Financial Education and Advocacy Initiative: Thank you to the credit unions that have remained faithful to your core mission. For those that have grown beyond recognition, but still wish to have taxpayers subsidize you @ItsTime2Pay: https://twitter.com/ItsTime2Pay **

DRIVING THE WEEK — Obama is back in Washington after a week-long vacation in Martha’s Vineyard. ... On Tuesday, the president welcomes the 1972 Miami Dolphins to the White House for their historic perfect season (the team didn’t make it to 1600 Pennsylvania Ave. after their ’72 Super Bowl victory because of President Richard Nixon’s Watergate scandal). ... On Thursday and Friday, Obama is in New York and Pennsylvania for a two-day bus tour to discuss ways to strengthen the middle class. ...

In the financial services world, the Federal Reserve on Wednesday releases the July 30-31 Federal Open Market Committee meeting minutes, which will be watched closely for any new clues on when the central bank will start tapering asset purchases. ... Also on Wednesday, another hearing on the debit interchange lawsuit. ... The annual Kansas City Fed conference in Jackson Hole, Wyo., is Thursday and Friday — Fed Chairman Ben Bernanke won’t be there, but Vice Chairman Janet Yellen will moderate a panel. ... The Bipartisan Policy Center holds a housing policy event featuring Senate Banking Committee ranking member Mike Crapo (R-Idaho) and Housing Secretary Shaun Donovan. ...

SUNDAY SHOWS RECAP – The chaos in Egypt and the NSA’s surveillance program dominated the Sunday shows this weekend. For the full coverage, check out POLITICO’s live blog featuring Kevin Robillard and Jonathan Topaz: http://politi.co/uUViVN

JPMORGAN LEGAL WOES MOUNT — WSJ’s Dan Fitzpatrick: “A growing number of lawsuits and investigations could force the nation’s largest bank to absorb $6.8 billion in future legal losses above its existing reserves, according to a filing earlier this month. ... The numbers put JP Morgan on pace to supplant Bank of America Corp. as the big lender with the most legal problems. ... JP Morgan faces six separate investigations from the U.S. Justice Department, according to the filing, three of which hadn’t previously been disclosed.” http://on.wsj.com/1aiJORz

TOP TALKER: BO XILAI TRIAL BEGINS THURSDAY — WSJ’s Jeremy Page in Beijing: “Chinese authorities have announced that the country’s most politically sensitive trial since 1980 will begin on Thursday, when Bo Xilai, the former rising star in the Communist Party who was felled by a political scandal last year, faces charges of bribery, embezzlement and abuse of power.

“The announcement said the trial would be ‘open.’ But public access to the proceedings in Jinan, capital of the coastal eastern province of Shandong, appears to be as tightly controlled as it was for last year’s trial of Mr. Bo’s wife, Gu Kailai. She was convicted of the murder of a British businessman close to the Bo family.” http://on.wsj.com/16Y94cn

SEQUESTER HITS LOW-INCOME HOUSING — FT’s Gabriel Muller: “When Krystal Bearden returned home from hospital after emergency surgery in June, she was greeted by a letter informing her that the rent on her government-subsidised dwelling would increase by almost $1,000 a month. ... Similar dilemmas are being faced by low-income families across the U.S. as public housing programmes try to absorb the costs of sequestration — the across-the-board budget cuts in Washington, imposed amid political wrangling in Congress, that have slashed $930m from federal housing assistance programmes.” http://on.ft.com/1bJI7dK

WEAKENING DOLLAR COULD BOOST U.S. FIRMS — Reuters’s Caroline Valetkevitch: “U.S. companies’ warnings that a stronger dollar could drag on profits in the second half of the year could prove overstated. The dollar has lately been defying expectations of a rise, weakening at a time when the betting had been on strengthening as the U.S. economy outpaced other major regions.” http://reut.rs/16Y0V7W

THE NEXT FED CONSENSUS-BUILDER – WSJ’s Jon Hilsenrath: “During nearly eight years running the Federal Reserve, Chairman Ben Bernanke’s signature style has been managing by consensus. ... With Mr. Bernanke expected to give up the helm when his term ends in January, his leadership style, and the style of his potential successors, warrant extra scrutiny. An already divided Fed could become more fractious when Mr. Bernanke departs, with important implications for the central bank, markets and the economy.” http://on.wsj.com/12gGpOb

WHO IS JANET YELLEN? — WaPo’s Neil Irwin and Ylan Mui: “When Janet Yellen jumped from academia to the Federal Reserve Board, she seemed like a new breed at the buttoned-up central bank — eating lunch with staff in the cafeteria and debating ideas like she was back in the faculty lounge.

“Nearly two decades later, Yellen still carries the air of a scholar, applying a rigorous theoretical approach to America’s economic challenges, particularly unemployment. She is less experienced in the fast-moving world of high finance, or making knife’s edge decisions in the midst of a crisis.” http://wapo.st/1dkAlIQ

BERNANKE’S INFLATION RECORD HOLDS UP — Bloomberg’s Caroline Salas Gage: “U.S. markets are backing up Ben S. Bernanke’s assertion that he has the best inflation record of any Federal Reserve chairman since World War II.

“Since Bernanke took office in February 2006, inflation as measured by the personal-consumption-expenditures price index has averaged 1.9 percent. Criticism from Republicans, including House Speaker John Boehner of Ohio, that the Fed’s stimulus would spark a rapid acceleration in prices is unfounded, bond yields show. Traders anticipate prices will rise at a 2.17 percent rate in the next decade, near the Fed’s 2 percent goal.” http://bloom.bg/14bJmRg

LATEST ON EGYPT --

EU COULD SHUT OFF BILLIONS IN AID — FT’s James Fontanella-Khan in Brussels: “Brussels said it will ‘urgently review’ relations with Egypt following an escalation in violence over the past week that has left EU leaders increasingly worried about the future of peace and stability in the Arab world. EU officials said that the review was likely to recommend a suspension of various forms of aid and loans in total worth €5 billion, which had been earmarked to help Egypt in its transition towards democracy following the popular revolution that ended the military regime of Hosni Mubarak two years ago.” http://on.ft.com/16mFjkH

EGYPT STOCKS NOSE-DIVE – Reuters’s Nadia Saleem: “Egypt’s bourse suffered its largest one-day drop in four months on Sunday after hundreds of people were killed in a crackdown by the army-backed government on supporters of the Muslim Brotherhood. Cairo’s main index tumbled 3.9 percent to 5,335 points. It had dropped 1.7 percent on Wednesday, when security forces started taking action to disperse protesters, and was shut on Thursday because of the violence.” http://reut.rs/17WdYUn

ALSO FOR YOUR RADAR –

WHY U.S. TAXPAYERS ARE FLEEING THE COUNTRY —

WSJ’s Laura Saunders and Liam Pleven: “Here is a sign that life is getting complicated for U.S. taxpayers with assets abroad: More of them are deciding they are better off cutting official ties with America. In the first half of 2013, 1,809 people renounced their American citizenship or permanent-resident status, according to a tally by Andrew Mitchel, a tax lawyer who tracks U.S. data. At that pace, the 2013 total would double the previous high of 1,781 renunciations in 2011.” http://on.wsj.com/16YcQTi

OBAMACARE CONTINUES TO FIGHT OPPOSITION — POLITICO’s David Nather: “President Barack Obama says he’s not worried that all the Obamacare fights will kill the law — because people fought the creation of Medicare and Social Security too, and now they’re more popular than ever. … But this time there’s a difference. Political opposition to Obamacare is still as strong as ever, more than three years after it was signed into law.” http://politi.co/1ah03P0

DETROIT: THE RIGHT’S PERFECT PINATA — POLITICO’s Hadas Gold: “Welcome to Detroit — the latest bull’s eye for commentators on the right who have zeroed in on what they see as the three evils of liberalism, neatly condensed within city limits: Unions run amok pillaging the city’s coffers; corrupt Democratic politicians with no Republican in power since the 1960s; and a failed big-government welfare state.” http://politi.co/12gY1Jz

**A message from FEAI, the Financial Education and Advocacy Initiative: Thank you to the credit unions that have remained faithful to your core mission. For those that have grown beyond recognition, but still wish to have taxpayers subsidize you @ItsTime2Pay: https://twitter.com/ItsTime2Pay **

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