What Larry Summers thinks about Bitcoin — Fiscal confidence up slightly since January

By Kate Davidson and MJ Lee

WHAT LARRY SUMMERS THINKS ABOUT BITCOIN — Morning Money sat down with former Treasury Secretary Larry Summers yesterday after he spoke at the National Association for Business Economics policy conference. You can watch the interview — where he addressed a range of issues including the Fed’s tapering strategy; whether Dodd-Frank is working; and if he’d work for another Clinton White House — here. http://politi.co/1k64HUY


We also asked Summers for his thoughts on Bitcoin, and here was his surprisingly optimistic response about the future of the virtual currency (though no mention of the Winklevoss brothers):

“I think Bitcoin has the potential to be a very, very important development. I think that we are seeing many, many sectors of our economy be transformed by information technology and certainly it seems bizarre that at this late date, one has to pay as much as one does to use a debit card or to get cash from an ATM or to transfer money to one’s child living abroad. So it seems to me that there’s going to be a concerted effort to reduce financial frictions and that effort’s going to be multi-faceted and certainly Bitcoin is an innovative approach in that regard. …

“I am very mindful that there have been other things that came out of Silicon Valley that seemed very flakey to people on the outside and then proved to be an enormous deal. Very serious economists thought that the Internet was going to be no more important than the fax machine so I’m not willing to dismiss Bitcoin. At the same time, I do think it’s important to recognize that it can’t and won’t flourish as a way of avoiding legal protections.”

FIRST LOOK: BITCOIN FOUNDATION TO HOST CONFERENCE IN AMSTERDAM — The Bitcoin Foundation will hold its second annual conference May 15-17 at the Passenger Terminal Amsterdam. More information can be found at bitcoin2014.com (the website goes live at 5:30 a.m.).

Confirmed speakers so far include: Jeremy Allaire, CEO of Circle; Brian Armstrong, CEO and co-founder of Coinbase; John Beccia, general counsel and Chief Compliance Officer of Circle; Jerry Brito, senior research fellow at George Washington University’s Mercatus Center; Tony Gallippi, CEO of BitPay; J. Dax Hansen, partner at Perkins Coie; and Mike Hearn, chair of the Bitcoin Foundation’s law and policy steering committee. FIRST LOOK II: FISCAL CONFIDENCE UP SLIGHTLY SINCE JANUARY — Per the latest Peter G. Peterson Foundation release out this morning: "Despite the recent improvements in short-term deficits, the Fiscal Confidence Index, modeled after the Consumer Confidence Index, is 46 (100 is neutral), indicating voters’ continued negative fiscal outlook. Overall, voters remain deeply troubled by the country’s fiscal health, with a strong majority believing the national debt problem is getting worse (61 percent) rather than getting better (31 percent).” The Fiscal Confidence Index was 42 in January. The results: http://bit.ly/1hqB2Ro

THE POLAR VORTEX: IT’S BACK — USA Today’s Doyle Rice: “After a brief tease of spring, this winter's favorite whipping boy — a piece of the polar vortex — returns this week with a punishing blast of frigid air for much of the central and eastern USA.” http://usat.ly/1o1neyQ

BUT WILL THE COLD HURT THE ECONOMY? — Reuters’ Lucia Mutikani: “Unusually cold weather will take a bite out of U.S. economic growth this quarter, but a rebound seems likely on the horizon and expectations for stronger growth this year have not changed. Economists estimate that freezing temperatures and the ice and snow storms that have blanketed much of the nation will shave as much as half a percentage point from gross domestic product in the first quarter. That comes on top of the drag from efforts by businesses to sell off bloated inventories and a one-time hit from the expiration of benefits for the long-term unemployed.” http://reut.rs/1hjQiRt

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES – Kim Dixon and Rachael Bade on the upcoming PSI hearing with Credit Suisse. … MJ Lee talks with Larry Summers. … 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 TUESDAY MORNING — As the polar vortex returns, we’re making plans for summer vacation. Send your destination recommendations, along with any tips, comments or suggestions, to: [email protected] and [email protected]. And follow us on Twitter: @ mj_politico and @ KateDavidson.

DRIVING THE DAY — CEA Chairman Jason Furman speaks at National Association for Business Economics policy conference at 8 a.m. … FHFA house price index at 9 a.m. … Consumer confidence at 10 a.m. … Senate Banking hearing on TRIA reauthorization at 10 a.m. … Fed Governor Daniel Tarullo speaks at NABE conference 10:10 a.m. …

CFPB, FLOOD INSURANCE BILLS IN THE HOUSE TOMORROW — The House is scheduled to consider two Financial Services bills tomorrow. The first is Rep. Sean Duffy’s “Consumer Financial Protection and Soundness Improvement Act of 2013” — a package of bills aimed at reforming the CFPB.

The second is Rep. Michael Grimm’s flood insurance affordability act (the text of the new bill is here http://1.usa.gov/1ddEDPQ). As Zachary Warmbrodt reported on POLITICO Pro, the bill has some changes from a bipartisan proposal released in October, including “a requirement that FEMA increase rates for properties in the same risk classification an average of 5 percent but no more than 15 percent and impose annual mandatory surcharges of $25 for primary residences and $250 for non-residential properties and non-primary residences.” It’s unclear whether the bill will win over Democratic support.

** Since 2001, credit unions have increased the federal debt by NOT PAYING AN ESTIMATED $22.3 BILLION in federal income taxes. Congress: Why should taxpayers pay more in taxes so that credit unions can pay none? @ItsTime2Pay **

YUAN DOWN — WSJ’s Fiona Law: “China's yuan hit a four-month low Monday, dragging other currencies in the region down and fueling speculation that years of gains may be nearing an end. In a sign that global investors are retreating from bets on further appreciation, the offshore yuan, which is freely traded, fell to the same level as its onshore counterpart, which is strictly controlled. The yuan is entering its second week of declines triggered by a surprise move by the central bank to guide it lower.” http://on.wsj.com/1fjfNho

WILL YELLEN RETOOL QUARTERLY FORECASTS? — Bloomberg’s Joshua Zumbrun and Craig Torres: “As Janet Yellen seeks to forge a consensus on a new strategy for communicating the Federal Reserve’s intention to keep rates low, she can reach for a six-year-old tool: the Fed’s quarterly forecasts. Policy makers plan to abandon their promise to hold interest rates near zero at least as long as unemployment remains above 6.5 percent, according to minutes of their January meeting. … One option policy makers discussed last month is to rely instead on their forecasts for inflation, unemployment, growth and the benchmark interest rate — known as the Summary of Economic Projections —as a way to signal their policy intentions.” http://bloom.bg/1k4BuX9

HSBC’S NEW PAY PLAN FOR TOP EXECS — NYTimes’s Julia Werdigier in London: “As it reported a profit for last year that fell short of analysts’ estimates, HSBC on Monday laid out how it was changing its compensation for senior executives, becoming the first major bank here to describe how it was circumventing a new European Union cap on bonuses. The London-based HSBC said that it would award 665 of its senior managers — including its chief executive, Stuart T. Gulliver, and Iain Mackay, the chief financial officer — a fixed-pay allowance as part of their compensation.” http://nyti.ms/1mDCfM2

LURED BY LOWER DEFAULT RATES, BANKS RETURN TO STUDENT LOANS — WSJ’S Annamaria Andriotis: “The seven largest private lenders to students issued nearly $6.9 billion in loans last year, up 8.1 percent from the previous year, according to data compiled for The Wall Street Journal by MeasureOne, a San Francisco firm that tracks the student-loan market . . .

“An improving employment picture has made it easier for new graduates to find jobs, making lenders more comfortable with the private student-loan market, especially as they tighten underwriting standards. In addition, banks, searching for new revenue, are viewing students with high-income potential as lifelong customers to whom they can later sell products, such as mortgages and wealth-management services.” http://on.wsj.com/MpU8x1

BITCOIN COMPANIES RESPOND TO MT. GOX ISSUES — Six Bitcoin executives posted a joint statement last night to The Coinbase Blog defending the industry at large despite the actions of a few bad actors: “In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds.

“As part of the effort to re-assure customers, the following services will be coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner: Coinbase, Kraken, BitStamp, Circle, and BTC China. We strongly believe in transparent, thoughtful, and comprehensive consumer protection measures. We pledge to lead the way.” http://bit.ly/1hs3jY0

MORE BITCOIN TROUBLES: ‘PONY’ VIRUS TARGETS DIGITAL CURRENCIES — Reuters’ Jim Finkle: “Cyber criminals have infected hundreds of thousands of computers with a virus called “Pony” to steal bitcoins and other digital currencies, in the most ambitious cyber attack on virtual money uncovered so far, according to security firm Trustwave.

“Trustwave said on Monday that it has found evidence that the operators of a cybercrime ring known as the Pony botnet have stolen some 85 virtual “wallets” that contained bitcoins and other types of digital currencies. The firm said it did not know how much digital currency was contained in the wallets.” http://reut.rs/1c2H64R

AEI TO RECEIVE $20M DONATION FROM CARLYLE GROUP CHAIRMAN— WaPo’s Zachary Goldfarb: “Daniel A. D'Aniello, the co-founder and chairman of the Washington-based private-equity giant Carlyle Group, is contributing $20 million to the right-leaning American Enterprise Institute.

“The contribution by D’Aniello — set to be announced Tuesday — marks a new foray into policy advocacy by the top Carlyle executive, who has maintained a much lower profile than co-founder David Rubenstein. It also represents the marriage of one of Washington's business titans to one of its top think tanks.” http://wapo.st/1cJrj8Z

GOLDMAN ELEVATOR GOSSIPER REVEALED — BUT NOT AT GOLDMAN — NYTimes’s Andrew Ross Sorkin: “A three-year parlor game has been taking place on Wall Street to identify the Goldman Sachs employee behind a Twitter account that purports to reveal the uncensored comments overheard in the firm’s elevators. …

“There is a good reason Goldman Sachs has been unable to uncover its Twitter-happy employee: He doesn’t work at the firm. And he never did.

“The author is a 34-year-old former bond executive who lives in Texas. His name is John Lefevre.” http://nyti.ms/Nt4kpk

ALSO FOR YOUR RADAR —

ZUCKERBERG ON WHATSAPP’S $19B PRICE TAG — CNBC’s Kiran Moodley: “Facebook founder and CEO Mark Zuckerberg said Monday that WhatsApp fits perfectly with his goal of connecting the world and that the messaging platform was worth what his company is paying for it — and then some. Last week's $19 billion deal for WhatsApp was Facebook's largest yet — dwarfing the $1 billion it paid for Instagram. … Zuckerberg defended the move in his keynote speech to the Mobile World Congress in Barcelona. ‘Already almost half a billion people love using WhatsApp for messaging, and it's the most engaging app that we have ever seen exist on mobile by far,’ he said. ‘About 70 percent of people who use WhatsApp use it every day, which kind of blows away everything else that is out there.’” http://cnb.cx/1plsP6K

DINGELL, ‘BABE RUTH’ OF LEGISLATORS, TO RETIRE — POLITICO’S David Nather: Congress is losing a lot of policy heavyweights this year, but there’s only one whose career spans from the creation of Medicare to the passage of the Affordable Care Act.

“In his nearly six decades in Congress, John Dingell has played a central role in more issues than most ordinary lawmakers ever get to touch — everything from health care to energy, environmental laws, food safety and telecommunications policy, and an aggressive oversight approach that cut across even more issues that affect Americans daily.” http://politi.co/1fOWnl6

** The credit union tax exemption is among the largest corporate tax expenditures. As credit unions leverage their tax exemption to grow aggressively, the cost to taxpayers has grown even larger. Congress tell the credit unions @ItsTime2Pay **

Follow us on Twitter Mark McQuillian @mcqdc



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