Presented by

Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

Top CEOs aren’t quite saying there are storm clouds forming over the economy. But it’s getting colder, the skies have gone gray and the ranks of those willing to venture outside are dwindling.

Federal Reserve Chair Jerome Powell’s attempt to beat back rising costs without obliterating the labor market has made for 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 clear picture of just how “bleh” corporate America’s feeling going into 2023.

Sure, most of the executives surveyed don’t think we’re headed for a recession. And yes, more companies than not plan to hire workers and invest next year. But the outlook — or, as our colleague Victoria Guida once artfully put it, “the vibe” — is getting more sour. And there’s a growing sense of anxiety over how Washington will handle the economic forces that might compel the Fed to send rates through the roof.

“The Fed has been pumping the brakes to rein in inflation, and the survey results are unsurprising in that context,” said Business Roundtable CEO Joshua Bolten in a statement. Congress and the White House, he said, need to do more to support “pro-growth” policies to strengthen the economy.

The tricky thing, 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 like health care and retail remain white hot. Factory orders are up. Wages are still climbing as businesses compete for a dwindling number of unemployed workers.

Even as Powell and other Fed officials signal that they plan to raise interest rates in smaller increments in the near term, a resilient labor market and steady demand for goods and services could require a more aggressive approach. That should slow down the economy. And that explains why CEOs are increasingly pessimistic, even if they check “yes” next to the box indicating they plan to increase their employee headcount next year.

Which brings us to Wall Street.

One place where rising rates are hitting hard and fast is in the world mergers and acquisitions. Corporate deal making is slowing. Banks are having a hard time selling off the debt they’ve packaged to finance the deals that have closed. And Wall Street’s rank and file are about to start feeling the pinch.

Goldman Sachs is warning traders that their bonuses might not have as much pop as last year. JPMorgan, Bank of America and Citi reportedly plan to slash their incentive compensation pools by around 30 percent. And over at Morgan Stanley, CEO James Gorman said last week that he plans to make cuts to the bank’s workforce “all over the globe.”

"Some people are going to be let go," Gorman said. “In most businesses, that's what you do after many years of growth."

IT’S TUESDAY — While Zach rocked out to Def Leppard, Sam’s go-to music in 2022 was heavy-duty normcore. The Beatles, Springsteen, Sturgill Simpson; basically the “I like Hiking and IPAs” of playlists. MM hopes your tastes are a bit more interesting. Please send tips to [email protected] and [email protected].

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

What are you expecting from travel this holiday season? Hit and miss; highs with and some expensive lows? POLITICO invites you to debate the Travel Experience Redefined, with Sen. Jacky Rosen (D-Nev.), and a host of consumer and industry voices, Dec. 7, 8.30 a.m. ET. You can join online or at the Madison Hotel in D.C. Register here.

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

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

PROXY WAR — Our Declan Harty: “A federal judge backed the SEC's decision to undo Trump-era restrictions intended to rein in the companies that advise shareholders on corporate governance issues.”

FIRST IN MM — Venture capital behemoth Andreessen Horowitz (a16z) has tapped former CFTC Commissioner Brian Quintenz to lead its crypto arm’s policy efforts in Washington. “With the new Congress taking office in just a couple of weeks, we couldn’t be more excited to have Brian starting today in his new full-time role to lead our efforts on Capitol Hill,” said Anthony Albanese, a16z crypto’s chief operating 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 unpopular Covid-19 controls, a Communist Party mouthpiece acknowledged, in a rare sign that Beijing is responding to protesters’ demands and beginning to lay the groundwork for reopening the economy.”

WHEN THE OIL CAP HITS — FT’s Tom Wilson, David Sheppard, Ian Smith and Ayla Jean Yackley: “A traffic jam of oil tankers has built up in Turkish waters after western powers launched a ‘price cap’ targeting Russian oil and as authorities in Ankara demanded insurers promise that any vessels navigating its straits were fully covered.”

PROPS — Bloomberg’s Lu Wang: “Professional investors are loading up on bets that an economic recession can be avoided despite all the warnings to the contrary. It’s a dangerous bet -- for a variety of reasons.”

CITI’S CEO WHISPERER — Bloomberg’s Jennifer Surane profiles Citigroup’s Sara Wechter, who has steered the bank’s policies on abortion, work-from-home and other political headaches: “Big banks used to avoid touchy political issues that could interfere in business. But Citigroup hasn’t shied away, making moves guided by an unlikely figure: Sara Wechter, a former investment banker who for more than a decade has been a behind-the-scenes counselor to a roster of Citigroup’s leaders.”

ANTI-ANTI-WOKE — Our Jordan Wolman on a new survey that found that ESG might be less of a political cudgel than some Republicans might hope: “Voters feel that companies should generally be able to conduct business and take ESG risks into account without government interference.”

NO EASY NARRATIVE — WSJ’s Nick Timiraos: “Federal Reserve officials have signaled plans to raise their benchmark interest rate by 0.5 percentage point at their meeting next week, but elevated wage pressures could lead them to continue lifting it to higher levels than investors currently expect.”

EVERY CRYPTO SUPER BOWL HEADLINE — Bloomberg’s Leah Nylen and Allyson Versprille: “The US Federal Trade Commission is probing several crypto firms over allegations their advertisements were deceptive or misleading, the agency said Monday.”

— NYT’s Matthew Goldstein: “As companies like FTX took on the marketing tactics and girth of mainstream financial firms, their customers came to believe they were safe places to deposit cash in exchange for cryptocurrency.”

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

— Meanwhile, American Bankers Association CEO Rob Nichols and Better Markets CEO Dennis Kelleher published a joint op-ed in CNBC calling for crypto companies to be held to the “same regulatory standards” as traditional banks and financial institutions.

CIRCLE SPAC SCRAPPED — From Sam: The stablecoin payments company Circle terminated plans to go public via a blank-check company on Monday after it failed to get approval from the SEC … “While disappointing that we did not complete SEC qualification in time, we remain focused on building a long-term public company,” Circle’s co-founder, Chairman and CEO Jeremy Allaire said in a series of tweets.”

UNTIL RECENTLY, A DROP IN THE BUCKET — From our Bjarke Smith-Meyer: “Crypto exchanges and companies will be fined at least €500,000 if they refuse to disclose details of who owns what digital assets on their platforms to the taxman, according to a draft bill obtained by POLITICO.”

SUPPOSED TO BE THE FUTURE OF THE GRID — Bloomberg’s David Pan and Naureen Malik on how Texas’s bid to attract Bitcoin miners isn’t panning out: “There are a lot of losers if the Bitcoin mining industry goes bust. For one, local authorities provided incentives such as tax abatements that reached into the tens of millions of dollars. The power generation planned that the region sorely needs to avoid another energy crisis may not materialize.”

Beth Zorc has been named CEO of the Institute of International Bankers effective Jan. 3. Zorc, whose resume includes stints as senior counsel on staff at both Senate Banking and House Financial Services, is coming to IIB from Robinhood, where she was associate general counsel.

Adrienne Lee Benson has started as a senior counsel to the deputy attorney general, Daniel Lippman has learned. She most recently was a senior adviser to the general counsel at Treasury.