By Jasper Goodman and Zachary Warmbrodt

Presented by Sallie Mae®

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.

When it comes to government shutdowns, Wall Street has grown numb to Washington’s chaos.

House Republicans are in disarray as they barrel toward a government funding lapse on Sept. 30. But financial analysts don’t expect it to rattle markets the way this year’s debt ceiling standoff threatened to.

Shutdowns haven’t historically moved the markets a whole lot. An analysis by Raymond James found that since 1995 the S&P 500 has risen 3.2 percent on average during the funding gaps.

An initial dip in both the markets and in economic activities is often made up by a bump that comes from an agreement to end the shutdown. Workers who are furloughed get paid later.

“There’s certainly some lost output, to some extent, but we do see something of a rebound thereafter,” Wells Fargo strategist Gary Schlossberg told MM.

Still, there may be some reasons to keep a more careful eye on markets this time around.

If the government shuts down at the end of the month, it’s likely to collide with a host of other economic X factors — the auto worker strike, the resumption of student loan payments and high oil prices, to name a few.

That creates “a little more uncertainty” around how markets might react this time, Schlossberg said. “This is taking place in the context of so many other potential body blows.”

Adding to that uncertainty is the possibility of a protracted impasse on Capitol Hill. If lawmakers manage to pass a short-term continuing resolution to temporarily keep the lights on, it could set the stage for an extended shutdown as they hash out a long-term spending deal toward the end of the year.

“If I’m telling my clients there’s something to watch for, it’s not this fight, it’s the next fight,” Raymond James Washington policy analyst Ed Mills said.

But a volatile market could also help push lawmakers to get a deal done.

“If there’s been any consistency in these debt ceiling [and shutdown] debates, … it’s been that both parties tend to react to turbulence in the financial market,” Schlossberg said. “That may be different this time around — the players are different — but if that’s the case, then that could be a safety valve.”

Happy Thursday — What’s your take on the shutdown? Are you at an agency that’s preparing to turn off the lights? Get in touch: Zach Warmbrodt, Sam Sutton.

A message from Sallie Mae®:

Students and families borrow nearly $100 billion in federal student loans each year but that should never be the first option. We need to connect more students to scholarships and grants and simplify financial aid offers to limit overborrowing and help families make informed decisions about paying for college. Learn more about common sense reforms to the Federal Higher Education financing system.

FDIC Vice Chair Travis Hill speaks at the Cato Institute at 11 a.m.

One more rate hike TK — The Fed kept interest rates steady as expected Wednesday but officials signaled another increase is in the cards for this year.

“What people are saying is, ‘Let’s see how the data come in,’” Chair Jerome Powell said at a news conference, per the WSJ.

The Fed gave a nod to the improving economic outlook. Central bank policymakers now expect growth to be 2.1 percent this year — more than twice what they projected in June.

Credit card controversy — Sen. Roger Marshall (R-Kan.) is holding up a three-bill spending package as he demands a vote on legislation to curb credit card swipe fees, our Huddle colleagues report.

Brown’s next big swing — Senate Banking Chair Sherrod Brown (D-Ohio) pulled off a stunner earlier this year with a bipartisan bill to rein in bank CEOs. His committee is trying to do it again with another thorny issue: cannabis banking.

Senators on Wednesday unveiled revamped legislation designed to enable banks to serve cannabis businesses in states where the drug is legal. Brown is planning to hold a Banking Committee vote Wednesday, in what will be the first time the Senate has acted on the issue after years of lobbying. The Ohio Democrat is expecting support from a “strong majority.”

“This was a long, arduous process,” Brown said. “Most members of the committee are going to vote for it.”

It could get messier on the Senate floor. Majority Leader Chuck Schumer has pledged to pair the bill with other cannabis legislation, including a bill dealing with the expungement of cannabis offenses.

And it’s hard to see what a path forward looks like in the House. The most viable route would probably be for it to ride on a bigger bill. But that would still require the blessing of House Republican leadership — a stamp of approval that isn’t guaranteed. It seems like a stretch, with some Senate Republicans already speaking out against the bill.

GO INSIDE THE CAPITOL DOME: From the outset, POLITICO has been your eyes and ears on Capitol Hill, providing the most thorough Congress coverage — from political characters and emerging leaders to leadership squabbles and policy nuggets during committee markups and hearings. We're stepping up our game to ensure you’re fully informed on every key detail inside the Capitol Dome, all day, every day. Start your day with Playbook AM, refuel at midday with our Playbook PM halftime report and enrich your evening discussions with Huddle. Plus, stay updated with real-time buzz all day through our brand new Inside Congress Live feature. Learn more and subscribe here.

Congress rethinks investment crackdown — Republicans and Democrats joined forces to approve legislation that would restrict U.S. investments in China by imposing sanctions on certain defense and surveillance companies. It's a narrower approach than new Biden administration rules.

After the Financial Services Committee voice vote, Rep. Andy Barr (R-Ky.) — the bill’s sponsor — told our Eleanor Mueller that he hopes it can ride on the annual defense bill that the House and Senate are hashing out.

“I don't think our bill is incompatible with either the president's executive order on outbound capital flows, or [the Senate’s] disclosure regime,” Barr said. “I think that this language can fit side-by-side with all of them.”

A message from Sallie Mae®:

Republicans try to rein in the Fed — House Financial Services in a party-line 27-20 vote approved a bill that would set limits on the Fed’s ability to launch a central bank digital currency. The bill would require the Fed to get congressional approval before launching a CBDC and prohibit it from issuing such a token directly to consumers.

ESG accountability — Declan Harty reports that the SEC voted 4-1 to expand rules aimed at deterring misleading investment fund names. Regulators are trying to rein in “greenwashing” by money managers who are capitalizing on the ESG movement.

HAPPENING 9/28 — INSIDE THE CANCER MOONSHOT: Join POLITICO on Thursday, Sept. 28 for an in-depth discussion on the future of cancer treatment and innovation. Hear from experts including scientists, government officials and industry leaders as we explore the critical roles played by private industry, nonprofits, the National Cancer Institute and the new Advanced Research Projects Agency for Health in achieving the Biden administration's goal of cutting the cancer death rate in half over the next 25 years. Don't miss this opportunity to dive into the progress of cancer treatments and learn about the challenges patients encounter in accessing care. REGISTER HERE.

Big funds, nonbank lenders should take note — FDIC Chair Martin Gruenberg devoted a speech Wednesday to risks among nonbank financial firms, Sam reports. He warned that they often lack adequate transparency and have vulnerabilities that can “seriously hamper the credit and financial intermediation needed to support the economy.” He called for stronger oversight.

A message from Sallie Mae®:

The federal higher education system does too much for too many and not enough for those who need the most assistance. Some federal lending programs allow students and families to borrow virtually unlimited amounts to pay for higher education, a policy that has driven up both student loan debt and the cost of tuition. In fact, federal debt for graduate students has reached an all-time high, according to the U.S. Department of Education. Read more about solutions for limiting overborrowing and reducing federal student debt.

Follow us on Twitter

Follow us

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings

This email was sent to [email protected] by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA

Please click here and follow the steps to unsubscribe.