News: Not back to normal until Christmas? — Dems conflicted on Robinhood

Wednesday, February 17, 2021

Not back to normal until Christmas? — Dems conflicted on Robinhood — SEC to get tougher on Wall Street

Feb 17, 2021

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Quick Fix

Not back to normal until Christmas? — President Joe Biden threw some ice water on the back-to-normal by summer narrative in his CNN townhall in Wisconsin , suggesting it might not be until Christmas (which we just had!) until the U.S. gets back on something close to a normal footing in the wake of the Covid-19 epidemic.

That's not likely to sit especially well with the Wall Street narrative that the economy should be rocking again by summer. At this point, the amount of central bank cash coursing through the financial system should keep risk assets inflated for quite a while.

But make no mistake. There is a reckoning coming. If the economy is NOT normalizing by summer — which means the retail sector springing back to life — Biden will have a whole new problem on his hands. Markets, as we've reported before, are priced for perfection. And Christmas is .... NOT perfection.

What Biden said: "As my mother would say with the grace of God and the goodwill of the neighbors, that by next Christmas I think we'll be in a very different circumstance God willing, than we are today … A year from now, I think that there will be significantly fewer people having to be socially distanced, have to wear a mask, but we don't know."

Setting the bar low — In addition to Covid timing, Biden hedged on his ability to force through a $15 an hour federal minimum wage, instead suggesting the U.S. could get there gradually. And he again tweaked the timing on kids getting back to school suggesting that within 100 days he hoped that every child would be able to be back five days a week. But he didn't really promise it, instead suggesting it would all depend on vaccinations. Which we already knew.

Of course he can't really MAKE any big promises on these fronts because we simply don't know how fast we will reach heard immunity and whether the vaccines will outpace new Covid variants. It's frustrating for MM and for every other American suffering through this and trying to manage kids and work and (what currently constitutes) life. But it's smart politics for a president grappling with an enormously complex crisis not to over-promise. But he still has to over-deliver.

Via our Christopher Cadelago and Natasha Korecki in Milwaukee on Biden: "[A] dash of news, a nuance to boot, and a general attempt to not get bogged down too much on any one thing … At times, Biden seemed like someone craving basic interaction with humans beyond family members and those who count politics as their vocation."

GOOD WEDNESDAY 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.

Driving the Day

Biden in the afternoon "will meet with a group of labor leaders to discuss the American Rescue Plan and to get input on the President's infrastructure plan" … Producer prices at 8:30 a.m. expected to rise 0.4 percent headline and 0.2 percent core … Retail sales at 8:30 a.m. expected to rise 0.9 percent … Industrial Production at 9:15 a.m. expected to rise 0.5 percent

ALSO TODAY — Brookings has an event at 3 p.m. to release new research by the Financial Health Network's Dan Murphy that "examines how the delivery of economic impact payments, commonly known as stimulus checks, impacted the program's effectiveness. This new research shows that during the time it took some Americans to receive the stimulus checks, tens of millions of federal dollars were lost in trying to access payments."

NEW THIS A.M.: AMERICA'S HOTTEST CITIES — Per the 2021 Milken Institute Best-Performing Cities Index out this a.m.: "Provo-Orem, Utah has demonstrated the best economic performance among large cities … Idaho Falls, Idaho moves up six spots to top the list among small cities.

ALSO NEW THIS A.M. — Via the Boston Consulting Group on its latest investor survey: "Investors anticipate that the severe economic impact of the crisis will persist two quarters longer than previously expected, through Q4 2021 … 54% of investors expect a U- or W-shaped economic recovery, with 23% expecting an L-shaped recovery that causes structural, long-term damage to the economy

"Investors believe that an additional $1.3 trillion of stimulus—$600 billion less than the US administration's current proposal to Congress of $1.9 trillion—is required to support the US economy through this crisis."

GOLDMAN LAUNCHES ROBO-ADVISER — NYPost's Thornton McEnery: "Goldman Sachs has jumped into the red-hot retail investor market — but don't expect it to recommend stock tips that you've found on Reddit. …

"The megabank unveiled a new robo-adviser tool … But while regular Joes will now get Goldman Sachs investment advice for accounts as small as $1,000, the new product, Marcus Invest, is not designed to help clients get in on the social media 'meme stock' craze that fueled the shocking rise of shares in companies like GameStop and AMC Entertainment."

DEMS CONFLICTED ON ROBINHOOD — Our Victoria Guida: "Democrats have long been conflicted over financial technology companies like online lenders, praising the flashy upstarts for their ability to help lower-income Americans build wealth yet wary of the risks they pose to unsuspecting consumers.

"But the episode with Robinhood Financial … has unearthed a growing sentiment on the left: 'Fintech' is just a fancy word for everything they already hate about finance. As the Biden administration begins to take control of the government's regulatory machine, that souring view suggests financial technology firms will have a lot harder time than they did in the Trump era"

SPEAKING OF ROBINHOOD — Mohamed A. El-Erian on Bloomberg Opinion on Thursday's hearing: "While it is likely to produce many headlines, it is unlikely to arm regulators with clear guidance given the complex competing issues in play."

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Markets

STOCKS END WOBBLY DAY MOSTLY LOWER — AP's Damian J. Troise and Alex Veiga: "U.S. stock indexes closed mostly lower Tuesday as losses in health care and technology companies kept gains in energy and other sectors of the market in check.

"The S&P 500 ended down less than 0.1 percent after giving up a modest early gain. Energy companies that stand to benefit from record electricity prices due to the frigid cold impacting much of the country surged. Marathon Oil and Apache Corp. were among the biggest gainers."

SEC SIGNALS MORE AGGRESSIVE STANCE TOWARD WALL STREET — WSJ's Dylan Tokar: "The U.S. Securities and Exchange Commission's acting Democratic leadership hasn't wasted time letting Wall Street know a new cop is on the beat. SEC Acting Chair Allison Herren Lee last week said the regulator would roll back a policy giving publicly traded companies greater certainty about whether they will be able to maintain access to key regulatory exemptions after settling securities law violations. The move came as the SEC awaits the confirmation of Gary Gensler , President Biden's nominee to head the agency."

GAMESTOP'S SAGA MAY BE OVER, BUT ITS EFFECT ON WALL STREET ISN'T — AP's Stan Choe and Alex Veiga: "The frenzy around GameStop's stock may have quieted down, but the outsized influence small investors had in the saga is likely to stick around.

"No one expects another supernova like GameStop to happen again, where a band of smaller-pocketed investors helped boost a struggling company's stock 1,000 percent in two weeks. But the tools they employed can be used again and again, if those smaller investors stay connected on social media forums and if regulators don't change the rules to hinder them."

Fly Around

SENATE PANEL SETS CONFIRMATION HEARING FOR TREASURY NOMINEE ADEYEMO — Reuters' Andrea Shalal: "President Joe Biden's nominee for the No. 2 job at the U.S. Treasury, Wally Adeyemo, will appear before the Senate Finance Committee for a confirmation hearing on Feb. 23, the committee announced on Tuesday.

"Committee Chairman Ron Wyden in December said Adeyemo was 'eminently qualified' for the job and vowed to get the nomination through the committee as quickly as possible. The hearing, first reported earlier by Reuters, will start at 10 a.m. EST, the committee said."

BIDEN ADMINISTRATION EXTENDS MORTGAGE RELIEF — WSJ's Ken Thomas and Andrew Ackerman: "The Biden administration extended a federal moratorium on home foreclosures for another three months and expanded assistance for people behind on their mortgage payments during the coronavirus pandemic.

"The White House said Tuesday that it would extend a ban on home foreclosures for federally backed mortgages through June 30. President Biden had earlier extended the moratorium, which had been set to expire at the end of January, until the end of March in a series of executive actions on his first day in office."

WEAK DOLLAR MEETS WOBBLY EURO — Bloomberg's Lilian Karunungan: "Weakness in both the dollar and euro is posing a dilemma for investors about which is the best source of funding for emerging-market carry trades. On balance, the U.S. currency is still the crowd favorite.

"The dollar has been sliding since the second quarter of 2020 as the Federal Reserve cut interest rates to a record low and spiraling coronavirus infections pummeled the U.S. economy. The euro has begun a swoon of its own in recent weeks, briefly dropping below the key $1.20 level, as delays in coronavirus vaccinations sets back expectations for a European economic recovery."

CITIBANK LOSES BID TO RECALL $500M IN MISTAKEN REPAYMENT — NYT's Stacy Cowley: "It was one of the worst Wall Street mishaps in years: Citigroup accidentally wired $900 million last year to a group of lenders locked in a bitter dispute with the beauty company Revlon.

"On Tuesday, a federal judge ruled that the recipients don't have to have to return the cash. Citi had intended to make a small interest payment on Revlon's behalf but instead repaid the loan in full. And some of the lenders — who had sued Revlon and Citi seeking repayment of the loan — refused to return about $500 million."

A MUST-READ ON CAPITOL HILL: Looking for the latest insight on the power dynamic in House GOP Leadership? Want to listen in on the whispers coming out of the Speaker's Lobby? Trying to understand what is really going on inside the cloakrooms? Olivia Beavers delivers the scoop in Huddle, our morning Capitol Hill must-read, with assists from POLITICO's deeply sourced Congress team that reveal the state of play in the House and Senate. Subscribe to Huddle today.

For Your Radar

PAYDAY LOANS CARRY SKY HIGH RATES — Via CNBC: "In Texas, a typical payday loan comes with a 664% APR, now the highest in the country. In Illinois, a typical payday loan has a 404% APR, but the state legislature has passed a bill that would cap rates on consumer loans at 36%"

TRANSITIONS — The Bank Policy Institute "has tapped Ed Hill as Senior Vice President and Head of Government Affairs. In his new role, Ed will manage BPI's government affairs and advise on strategies to allow banks to maximize their support for their customers and U.S. economic growth. Ed joins BPI from Bank of America, where he spent more than 20 years"

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