CLARITY Act clears Senate Banking Committee

Scott Melker discusses Senate passing the CLARITY Act with a 15-9 vote, Jerome Powell stepping down, and other big crypto headlines of the day.

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Video Transcript

00:00 Scott Melker

The clarity Act markup has officially passed through the Senate Banking Committee, meaning now it needs to merge with the agriculture Committee bill and then hopefully head to the Senate floor. Meanwhile, we have three companies closing their convertible notes and debt and looking for ways to add more Bitcoin to the balance sheet. Three different companies, three different strategies. We're going to talk about that. and of course, the sun setting of one Jerome Powell.

00:26 Scott Melker

Let's go.

00:54 Scott Melker

What is up everybody? Welcome to the daily Wolf on Yahoo Finance. I'm your host Scott Melker, also known as the Wolf of all streets. We're going to spend the next 15 minutes diving into everything that's happening in crypto markets right now. It's the perfect day to put everything in context because of course we have Jerome Powell in his last day at the Fed, but we will get to that at the end. Obviously, the biggest and main story today is one we've been covering every single day.

01:21 Scott Melker

The US Senate Committee advances crypto bill in milestone for digital assets. As I told you yesterday, this was not without its controversy, without its mayhem, without its viral clips and certainly without Elizabeth Warren absolutely losing her mind repeatedly. But what's interesting here is we expected a vote of 1311, a partisan vote with Republicans voting for and Democrats voting again but against, but it ended up actually getting 15 votes for with also Brooks and Gallego both joining the Republican

02:07 Scott Melker

cause. So now we can say that this is a bipartisan passage of the clarity Act from the Senate Banking Committee. But that's not really the story. Because what really happened here is they realized that it was time. They've done enough work on this. It's been pending for months and they were going to pass this version once again with the ethics clause still pending. So both Gallego and also Brooks said they still are not going to vote for a version of this that hits the Senate floor

02:49 Scott Melker

that does not have an ethics clause that bans insiders including the president and his family from participating and enriching themselves from crypto markets. So, just to be clear, once again, now this has passed the Senate Banking Committee. So the chairman of the Senate Banking Committee and Agriculture Committee and their minions need to get together now and somehow merge this into one coherent bill, which is not the easiest thing in the world and not something that we can take for granted will get done.

03:22 Scott Melker

Especially because we know that we are running up against time. We have Memorial Day effectively in a week. and after that, we are going to have a recess and then we have July 4th and then it's midterm season. If this doesn't all somehow fall perfectly into place over the next month and a half, it's likely not going to get done at all. So they've got their work cut out for them. If we do get this merged and one cohesive bill hitting the floor, then it hits the Senate floor where it will actually be debated and voted on and we know that there will be a lot of opposition and that the bank lobby will still be coming in hot.

04:09 Scott Melker

They literally wrote 8,000 letters to their senators in a matter of days ahead of this markup trying to block this bill. I told you last week that they were on Sunday of Mother's Day scrambling to get this done to try to oppose this bill. So very hard for me to imagine it passing even though now poly market has it at over 70%. And I mean, you know, in other news, Elizabeth Warren literally went out on a limb and said if this passes, it's going to blow up the entire economy.

04:47 Scott Melker

Because we are prone to hyperbole and having our heads explode on the floor of the Senate. So that's the first story today, which we will obviously be tracking massively. The second story here is interesting because we have three companies with three different strategies. No, no, no pun intended there. on how to proceed with buying more Bitcoin. We're going to show you the first one right here. This was news yesterday. Actually, my buddy Matt Cole over there at Strive who I interviewed last week at consensus,

05:25 Scott Melker

he rang the bell on the Nasdaq this morning to celebrate this. But the news was that Strive Seda sets US first with daily 13% Bitcoin backed dividend preferred. So there was a lot to this. This came in their earnings call this week. So much like STRC, which I've told you about at length from strategy and Michael Sailor, we have Strive Seda. Now this offers a 13% yield, which is a bit higher obviously than what STRC is offering at 11.5%. But now they will be the first

06:06 Scott Melker

listed security in the United States to pay cash dividends every single business day. So obviously that 13% when you get paid daily is going to compound faster over a monthly or yearly rate over 14% and you still get the tax benefit much like STRC of having this be a return of capital rather than a capital gain. So, the other big story here is that in the quarter, they retired all of their debt. Strive is entirely debt free here. They own over 15,000 Bitcoin and they have stated that Seda will be the way

07:00 Scott Melker

that they continue moving forward to buy more Bitcoin. Now, I told you last week that Marathon was basically becoming an AI company that was going to mine some Bitcoin. They sold $1.5 billion worth of Bitcoin to close their convertible notes from last year and to re tool their balance sheet to be ready for AI to become basically an AI data center. So their strategy was actually to sell some Bitcoin. To be clear, Strive did not sell Bitcoin. They issued, they they issued their stock and they used cash reserves

07:44 Scott Melker

and used other tools to get this done. So, those are two different strategies but both wanting to clear all of their debt. And now, the next story obviously is this guy, strategy right here, Michael Sailor, strategy to repurchase 1.5 billion of 2029 convertible notes. This is really interesting. So, as I've told you, there's been an evolution with Michael Sailor of how to structure things to buy more Bitcoin. And if you've listened to him and as he's told me in our interviews in the past,

08:29 Scott Melker

he's really arrived at the conclusion that the best way is through STRC. But he has all these other convertible notes and products that he's released in the past that he wants to close down. Now, interestingly, he has a lot of cash as well, still in the Treasury. He could probably close this note with it and they're going to get an 8% discount on it. And he could also sell some Bitcoin. or, you know, do some financial engineering on the stock of micro strategy. but in their disclosure, they said that they could sell Bitcoin to do this. This is part of that new evolution of

09:12 Scott Melker

be a net buyer instead of saying never sell. But I think the bigger story here actually is that all of these companies, whichever way they're doing it, they want to clear out those convertible notes, which was the hot on fire way for them to buy Bitcoin in the past. So Seda is Strive's version of STRC, STRC is strategies version. Both of them want that to be the only way or the major way that they are going to be buying Bitcoin into the future. I mean, meanwhile, we saw

09:59 Scott Melker

STRC once again just put in absolutely monster record volumes over the past few days and it was over par. Now it's trading back down to $99 now that it's past X dividend day. And so, Michael Sailor able to buy arguably another 9, 10, 11, 12,000 Bitcoin this week. We will see that announcement on Monday. But the Bitcoin buying machine was massive. I do think that that was part of the push up to $82,000. People were probably pre-empting that move that's very transparent coming from Sailor to take advantage of that trade.

10:48 Scott Melker

And I think that that was just an incredible trade that you can make and it's going to be one you're going to be able to make into the future. And now we have to get on to the last story of the day and probably the biggest. Jerome Powell rides off into the sunset this week. Eight years, two presidents and one major pandemic. 40 year high inflation and the most extraordinary monetary policy experiment in the history of the Federal Reserve. Kevin Warsh has the keys now. So before we close the book on the Powell era, let's roll the tape.

11:21 Scott Melker

Because if you remembered every Powell prediction and traded the opposite, congratulations, you're rich. This is the Powell Hall of Shame. December 2018. Powell hikes rates four times into Trump's economy. The market is begging for mercy and then Powell goes on stage and tells the world the balance sheet runoff is, quote, on autopilot.

11:51 Jerome Powell

So we thought carefully about this, um, how to normalize policy and came to the view that we would effectively had have the balance sheet run off on automatic pilot and use monetary policy, rate rate policy to adjust to incoming data.

12:15 Scott Melker

The market heard autopilot and threw itself right out of the plane. Worst Christmas Eve in the history of the S&P 500. Two weeks later, Powe folds like a lawn chair on a panel in Atlanta.

12:30 Jerome Powell

As always, there is no preset path for policy. And particularly with the muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves. If we ever came to the conclusion that uh any aspect of our normalization plans was was somehow interfering with our achievement of our statutory goals, we wouldn't hesitate to change it.

13:00 Scott Melker

The Powe pivot is born. Lesson one guys, don't trust forward guidance ever.

13:10 Jerome Powell

You know, we're not thinking about raising rates. We're not even thinking about thinking about raising rates.

13:15 Scott Melker

Then came the magic word. Transitory.

13:21 Jerome Powell

So I think the word transitory has different meanings to different people to

13:26 Scott Melker

He said it in March, said it in June, said it in September. Muhammad El-Aan called it the worst inflation call in the history of the Federal Reserve.

13:37 Mohamed A. El-Erian

So it is a is going to go down in history as one of the worst inflation calls um by the Federal Reserve.

13:48 Scott Melker

Then May 2022, right before his second confirmation, Powell looks the world in the eye and says 75 basis points is off the table.

14:02 Jerome Powell

75 basis point, uh, in an increase is not something the committee is actively considering.

14:09 Scott Melker

Four jumbo hikes in a row. The largest tightening cycle in 40 years. So much for forward guidance. Again, Act three, March 7th, 2023. Powell sits before the Senate Banking Committee, two-hour testimony, talks about inflation, the labor market, monetary policy. What does he not talk about? Banking stress, interest rate risk on bank balance sheets. The fact that the second largest bank failure in American history is 48 hours away. Just two days after Powell's testimony, Silicon Valley Bank suffers a 42

14:48 Scott Melker

billion dollar bank run. The next day, it's gone. Signature bank follows. First Republic follows. Three of the four largest bank failures in US history. all on Jerome Powell's Watch. Two weeks later, Powe stands at the podium and says the banking system is sound and resilient.

15:13 Jerome Powell

Our banking system is sound and resilient with strong capital and liquidity.

15:23 Scott Melker

Same line, different week. One catastrophic banking crisis in between, sound, resilient, and about to require the largest emergency liquidity facility since 2008. Act four, February 2024, Scott Pelly asks Powe directly, was the Fed too slow on inflation?

15:52 Scott Pelley

Was the Fed too slow to recognize inflation in 2021?

16:01 Jerome Powell

So in hindsight it would have been better to to to have tightened policy earlier.

16:09 Scott Melker

Happy to say that. Six months later, Jackson Hole, Powe takes the podium and delivers the most Powe sentence ever uttered.

16:19 Jerome Powell

The good ship transitory was a crowded one.

16:25 Scott Melker

The good ship transitory was a crowded one. Translation Wolf pack, everyone else was wrong too. Don't blame me, that's not accountability, that's a press release. Then September, seven weeks before the election, strong economy and inflation still above target. Powe cuts 50 basis points anyway.

16:49 Jerome Powell

The Federal Open market Committee decided to reduce the degree of policy restraint by lowering our policy interest rate by a half percentage point.

17:02 Scott Melker

Jumbo. Out of the gate, into a fire that wasn't out yet. By April of 2025, inflation's back to 3.8%, the highest in two years. You can't make this up. Act 5, Trump comes back and Trump has receipts.

17:21 Donald Trump

I mean, Scott, you got to work on this guy. He's got some real mental problems. No, he's something wrong with him. It's just you did. I I'd be honest, I'd love to fire his ass. You got to work on him, Scott. I'll be picking a new head of the Fed soon. Our Fed person is absolutely despite him, we have numbers that really nobody's ever seen. Vince, right?

17:59 Scott Melker

So we're taking a look and it looks like it's about 3.1 billion. It went up a little bit or a lot. So the 2.7 is now 3.1. I'm not aware of that. It just came out. I haven't heard that from anybody. It just came out. Well, he's he's he's billions of dollars over budget. So he either is incompetent or he's crooked. I don't know what he is, but he doesn't certainly he doesn't do a very good job.

18:31 Scott Melker

Trump called him every name in the book, then opened a DOJ investigation over a two and a half billion dollar renovation of the Fed building. and Powell, a political measured Central Bank J had to publicly defend himself on whether there were marble bathrooms in his office.

18:50 Jerome Powell

There's no VPI dining room. There's no new marble. We took down the old marble, we're putting it back up. We'll have to use new marble where some of the old marble broke, but

19:02 Scott Melker

That's the chair of the Federal Reserve defending his elevators. The empire ends not with a bang, but with a question about Wayne Scotting. And now, Kevin Warsh, confirmed this week, 54 to 45. The most divisive Fed chair vote in history. Warsh has been Powell's loudest public critic. He wrote an op-ed in the Wall Street Journal calling Powell's record one of quote unwise choices. He went on CNBC and called for, and I love this, regime change at the Federal Reserve. Regime change at the Central Bank.

19:40 Scott Melker

We've officially entered a new era. So here's the question. Was Powell the worst Fed chair in history? Peter Navarro thinks so. Trump definitely thinks so. The Heritage Foundation already crowned him. Or did he pull off the impossible? A soft landing after the worst inflation shock in 40 years, no recession, unemployment under 4% the whole way down. You decide. But understand this, every Fed chair makes mistakes. How just happened to be on camera, every single one of them.

20:19 Scott Melker

New Sheriff, new regime, same Fed, same dual mandate, same impossible job. We'll see if Warsh does it better or just does it differently. I'm Scott Melker. This is the Daily Wolf.

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