News : Forget the debt? — Barr pushback — Wild ride for markets and GameStop

Tuesday, January 26, 2021

Forget the debt? — Barr pushback — Wild ride for markets and GameStop

Jan 26, 2021

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 6 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.

Quick Fix

Forget the debt? — Sure as night follows day, some lawmakers are fretting once again about soaring national debt and yawning annual deficits after largely ignoring them during the Trump years. People not currently worried but instead focused on the need for much more stimulus: Wall Street, the Fed, a large number of leading economists.

There will come a point for deficit and debt attention — and President Biden himself is a worrier — but it's probably not with rates still low and large segments of the economy — particularly at lower-income levels and among people of color — still absolutely crushed under the brutal anvil of Covid-19.

Our Victoria Guida has more this a.m.: "Senior U.S. lawmakers are stressing out about mounting government debt as they resist … Biden's $1.9 trillion plan to boost the economy … But investors in the federal debt, a wide range of market-focused economists and officials in the Biden administration have a firm response: Don't worry about it right now.

"The debt poses no imminent danger to U.S. finances, they say, so the more pressing concern should be jumpstarting the economy to avoid the type of sluggish recovery that persisted for years following the Great Recession.

The numbers : "The U.S. government spent its way to a record-busting $3.1 trillion budget deficit in fiscal 2020 — and that was before Congress passed another $900 billion coronavirus-relief package … But interest rates have barely budged from their rock-bottom levels, signaling that investors … aren't the least bit concerned"

Why the foot is still on the gas — Part of the reason for not caring about the debt right now — and why the Fed will do nothing on rates for a while — is that we are far from clear of the Covid threat and the second-half boom theory is super far from a lock to occur. In fact, it is at very serious risk.

Via our Sarah Owermohle and Adam Cancryn: "The Biden administration is rushing to prevent the spread of new strains of the coronavirus that scientists worry could be more transmissible or render vaccines less effective.

"The government is already collaborating with Moderna to develop vaccine booster shots aimed at strains first identified in South Africa and the United Kingdom. … Biden on Monday also unveiled travel restrictions, implementing new limits for South Africa and reinstating bans for much of Europe that … Trump had stripped back."

Yellen runs up the score — We try to keep "stuff that happened yesterday" out of the top of MM. But it's worth quickly noting the massive 84-15 vote that made Janet Yellen the first female U.S. Treasury Secretary. Couple other Biden nominees have gotten bigger votes. But Treasury – unlike some national security slots – is often a post subject to bitter partisan and fiscal battles and political point scoring.

Yellen, ordinarily too dovish and liberal for many Republicans, simply crushed most opposition with unquestionable competence and a deft touch with GOP lawmakers. That touch could prove key in stimulus talks where Yellen will be deployed as a top White House asset.

GOOD TUESDAY MORNING — Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

A message from Altria:

Moving beyond smoking. Altria's companies are leading the way in moving adult smokers away from cigarettes – by taking action to transition millions toward less harmful choices. We are investing in a diverse mix of businesses to broaden options beyond traditional, combustible cigarettes. See how we're moving.

Driving the Day

Senate Commerce has a hearing at 10:00 a.m. on Rhode Island Democratic Governor Gina Raimondo's nomination to be Commerce Secretary … Case-Shiller Home Prices at 9:00 a.m. expected to rise 0.9 percent … Consumer Confidence at 10:00 a.m. expected to rise to 89.1 from 88.6

BARR PUSHBACK — MM got a flood of emails and texts from financial reformers objecting to the idea that Michael Barr should head the OCC (in response to yesterday's lead MM item).

Many were akin to this from Jeff Hauser, executive director of the Revolving Door Project: "Barr's defenders love to skip past his enormous conflict of interests on fintech issues.

"Do Barr defenders deny Barr has been intertwined with sketchy fintech companies over the past decade, or are they unaware that the Office of the Comptroller of the Currency has fintech at the top of its 2021 agenda? Or do Barr defenders argue that the Trump Administration proved an executive branch replete with conflicts can function well?"

WILD RIDE FOR GAMESTOP — Shares in seemingly dead game retailer GameStop helped lead Wall Street on a wild ride and led to calls for the SEC to start monitoring … Reddit. Yup. That's where we are now.

Via Bloomberg's Brandon Kochkodin: "Short sellers have been called a lot of things. Bloodsuckers. Parasites. … Now in the vortex engulfing GameStop Corp., they have a new name: the establishment.

"It's a role cast for them with relish by their chat-room usurpers, the tens of thousands of average Joe day-traders whose fervor for a left-for-dead retailer has become a self-fulfilling prophecy in its 245% rally this year.

"GameStop has become a money geyser for the options-obsessed crowd that gathers in Reddit's WallStreetBets forum. For those wagering on a decline, it's been a catastrophe. Give credit where it's due. In their frenzy, WSB's cocky hordes have managed to turn the tables in a game short sellers invented"

Top Tweet — Via @Peter_Atwater on the flash money mob moment: "I find it pretty funny that in a cycle defined by 'Move fast and break things' and 'blitzscaling' that people are now surprised by the 'flash mob with money' phenomenon that we are now seeing."

BIDEN BOOSTS VACCINE GOALS — Our Nick Niedzwiadek: "Biden said … he was eyeing a more ambitious target for daily coronavirus vaccinations as parts of the country start to bump up against limitations on the number of shots they can administer.

"Biden said he was hopeful that the U.S. could ramp up its capacity to administer 1.5 million shots daily. That would be a significant jump from the policy of 100 million shots in 100 days that he made a tenet of his nascent administration. … Biden said he was optimistic that the vaccine would be readily available to those who want it by sometime in the spring."

LISTEN TO POLITICO'S ENERGY PODCAST, SPONSORED BY CHEVRON: Check out our daily five-minute brief for the latest energy and environmental politics and policy news. For must-know stories and candid insights to analysis from POLITICO's 10-person energy team, don't miss out. Subscribe for free and start listening today.

BANKS WARN OVER PPP REBOOT — Our Zachary Warmbrodt: "Banks … warned the Biden administration that the restart of the government's massive small business rescue program is facing significant operational problems preventing many employers from receiving aid.

"In a letter to the Small Business Administration and the Treasury Department, American Bankers Association President and CEO Rob Nichols flagged a 'technical error' with the software portal that lenders must use to submit applications … Widespread technical problems plagued the first iteration of the program last spring"

HOW GENSLER WILL BRING THE HAMMER — Our Kellie Mejdrich: "When Gary Gensler chaired a Maryland financial protection commission in 2019, the group called on state lawmakers to adopt a strict standard to prohibit conflicts of interest by professionals offering investment advice.

What was striking about Gensler's move is that it came just before the [SEC] … finalized its own national rule … one that investor advocates had denounced as too weak. With Gensler tapped … to become the new chair of the SEC, that contrast illustrates how, if confirmed, he's likely to lead the market regulator in a sharply different direction"

TUBMAN TWENTY IS BACK — Our Nick Niedzwiadek: "Biden is looking to resume work to redesign the $20 bill to feature abolitionist Harriet Tubman."

Markets

BUMPY DAY ON WALL STREET ENDS WITH STOCKS MIXED— AP's Ken Sweet and Damian J. Troise: "Stocks swerved to a mixed finish on Wall Street Monday, ahead of a deluge of corporate earnings reports scheduled to arrive this week. The S&P 500 rose 13.89 points, or 0.4 percent, to 3,855.36 as gains for influential Big Tech stocks were big enough to steady the index and return it to a record.

"It recovered from a 1.2 percent loss earlier in the day, as investors expect Apple and other tech giants to report healthy profits for the end of 2020 in coming days."

WALL STREET EXECS RETURN TO 'DAVOS IN THE DESERT' — NYT's Lauren Hirsch and Michael J. de la Merced: "It's been more than two years since bankers kept their name badges obscured behind ties at a high-profile investment conference in Riyadh, the capital of Saudi Arabia, held weeks after the killing of the journalist Jamal Khashoggi by Saudi agents.

"After a wave of cancellations at that 2018 event, the following year's Future Investment Initiative, often called "Davos in the Desert," saw many business leaders attend as the immediate furor over the killing subsided. The next installment of the two-day conference begins on Wednesday, and even more — and more senior — executives are expected to appear."

A message from Altria:

Moving beyond smoking. Altria's companies are leading the way in moving adult smokers away from cigarettes. Today, we are taking action to transition millions toward less harmful choices.

From cigarettes to innovative alternatives. By investing in a diverse mix of businesses, Altria is working to further broaden options. Our companies are encouraging adult smokers to transition to a range of choices that go beyond traditional, combustible cigarettes.

From tobacco company to tobacco harm reduction company. And while Altria is moving forward to reduce harm, we are not moving alone. We are working closely with FDA and other regulatory bodies, and will work strictly under their framework.

See how we're moving.

Fly Around

DEMS FACE CHALLENGES IN REPEALING WALL STREET-FRIENDLY RULES — Reuters' Pete Schroeder and Michelle Price: "With Democrats controlling the Senate, progressives want to repeal the Trump administration's Wall Street-friendly rules, but they may struggle to win enough votes in a thinly divided Congress and risk obstructing … Biden's agencies from writing stricter new rules, said lobbyists and legal experts.

"Sherrod Brown , expected chair of the Senate Banking Committee, said this month he was drawing up a list of rules passed by Trump regulators that he hopes to kill using the Congressional Review Act (CRA), a 1996 law that allows Congress to reverse recently finalized federal regulations."

FED SET TO LOOK BEYOND POSSIBLE INFLATION SHOCK — Reuters' Howard Schneider: "Between the closed theaters and restaurants, the prices slashed by airlines and half-empty hotels, and the government benefits paid or in the pipeline, Americans may have as much as $2 trillion in extra cash socked away by this spring.

"For the Federal Reserve, that is both blessing and curse: fuel for the economic recovery once coronavirus vaccines take hold and people can travel and shop freely, but also the possible spark for a surge in prices that policymakers already are bracing to explain."

JOB LOSSES FROM COVID FOUR TIMES AS BAD AS 2009 FINANCIAL CRISIS — AP: "Four times as many jobs were lost last year due to the coronavirus pandemic as during the worst part of the global financial crisis in 2009, a U.N. report said Monday."

TRANSITIONS — Meaghan Lynch is now press secretary at HUD. She previously was deputy comms director for Kamala Harris in the Senate. ... Kara Gustafson, a former Goldman Sachs social impact executive, is joining The Aspen Institute as Executive Director of the Finance Leaders Fellowship.

GET THE SCOOP ON CONGRESS IN 2021 : Get the inside scoop on the Schumer/McConnell dynamic, the new Senate Bipartisan Group, and what is really happening inside the House Democratic Caucus and Republican Conference. From Schumer to Pelosi, McConnell to McCarthy and everyone in between, our new Huddle author Olivia Beavers brings the latest from Capitol Hill with assists from POLITICO's deeply sourced Congress team. Subscribe to Huddle, the indispensable guide to Congress.