| | | | | |  | | By Ben White and Aubree Eliza Weaver | 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 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. | | | Wall Street's silly little freak out — Somewhat amazingly, stocks sold off sharply for a bit following a report that the Biden White House would support a significant hike in the capital gains tax rate to 39.6 percent. OK. But this is LITERALLY exactly what was in Biden's campaign tax plan . It is no secret that President Biden and Democrats would like to tax capital gains at the ordinary income tax rate, which they would also like to return to … 39.6 percent. None of this means they will be ABLE to do it. It takes a lot to get from wish-list to law even with a slim Democratic majority in the Senate and access to reconciliation. It's not like moderate Senate Democrats are super eager to boost tax rates. And there would be intense lobbying against such a cap gains bump with opponents arguing that it would stymie investment and growth. Just another example that Wall Street often has absolutely no idea what is actually going on in Washington and what is new versus what is not. The idea that Biden looking to boost taxes on cap gains and the wealthy is somehow a new thing is … bonkers. Compass Point's Isaac Boltansky emails MM : "The market is efficient up until its forced to come to terms with the high likelihood of tax hikes after a year and a half of stimulus sugar highs … This isn't new, but it's the newest thing investors care about." More from Boltansky in his client note : "We continue to believe that any proposals at this point should be viewed as negotiating markers rather than red lines, and they will be moderated in time through the legislative process; The chatter about the Biden administration proposing an 80% capital gains tax on cryptocurrencies is possible, but highly improbable in our view." GOOD FRIDAY MORNING — Quick report on vax shot number two: Lots of fatigue. Some flu-like symptoms. But manageable. And we are so glad and thankful to be fully vaxxed and grateful to the scientific community. Get those jabs! 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 Sallie Mae®: You shouldn't need a college degree to figure out how to pay for college. Sallie Mae is here to help. We do more than provide families with responsible private student loans, we help them make sense of the entire planning and paying for college process. And if they need to borrow, we work with our customers to manage their loans successfully and achieve financial independence after school. Learn more here. | | | | | | President Biden will deliver remarks and participate in the virtual Leaders Summit on Climate Session 5: The Economic Opportunities of Climate Action in the East Room. … In the afternoon, the President will receive the Weekly Economic Briefing in the Oval Office. JOBS MARKET READY TO POP — Via Stan Chart's Steven Englander: "Early indications point to very strong job numbers for April (released May 7), possibly more than 1.5 [million] jobs. "We base this estimate on our analysis of unemployment insurance benefit payments in recent weeks. ... We find that unemployment may have decreased between 1.4M and 2.0M from March to April." BANK REGULATOR LOBBIES FOR TRUMP ERA RULE — Our Zachary Warmbrodt: "A career federal official overseeing one of Washington's most powerful bank regulatory agencies is quietly lobbying Congress to preserve a Trump-era rule that critics say is predatory, triggering a forceful rebuke from the Democratic chair of the Senate Banking Committee. "At issue in the unusual dispute between a federal agency and a senior lawmaker is the future of a rule finalized in October by the Office of the Comptroller of the Currency, which is responsible for policing many of the nation's biggest banks. The rule loosened restrictions on loans made by banks in partnership with other firms like online lenders. Consumer watchdogs have warned that it could unleash predatory loans by enabling "payday" lenders to evade state interest rate caps." GENSLER TAPS NEW SEC ENFORCEMENT CHIEF — Our Kellie Mejdrich: "SEC Chair Gary Gensler … named former prosecutor Alex Oh as the agency's new enforcement director, a critical hire as the agency prepares to ramp up scrutiny of Wall Street. "Oh was most recently a partner at the law firm Paul, Weiss, Rifkind, Wharton & Garrison, where she focused on anti-corruption cases … She earlier served in the Justice Department's criminal division in the Southern District of New York. … The SEC said she is the first woman of color to serve as the enforcement director." | | | | LAUNCHING THIS WEEK - A NEW PLAYBOOK PODCAST : Washington is full of whispers, colorful characters and hard to believe stories that are all too real. Playbook Deep Dive is a new, weekly podcast that pulls back the curtain on the political theater and dives deep into the most compelling, confounding and often shocking stories from the nation's capital. Featuring the Playbook authors, reporters from across POLITICO's newsroom, and larger than life personalities with stories that you need to hear for yourself to believe. SUBSCRIBE NOW. | | | | | | | | STOCKS END LOWER AFTER REPORT ON BIDEN'S TAX PROPOSAL — AP's Damian J. Troise and Alex Veiga: "A report that President Biden will propose a hefty tax increase on the gains wealthy individuals reap from investments triggered a stock market sell-off Thursday afternoon that left indexes broadly lower. Investors who earn $1 million or more would have to pay a 39.6 percent tax rate on any capital gains, nearly double the current rate for Americans in that income bracket, according to the report by Bloomberg. A separate surtax on investment income could boost the overall federal tax rate for wealthy investors as high as 43.3 percent, the report said, citing unnamed people familiar with the proposal." But tech and high-growth stocks could lose out from Biden's plan — Reuters' Stephen Culp, Lewis Krauskopf and David Randall: "Wall Street is skeptical President Joe Biden's expected proposal to hike capital gains taxes could pass the Senate, but investors see risks that tax-motivated selling could still weigh on technology and other sectors that skyrocketed during the pandemic. … "That would disproportionately weigh on technology stocks such as Apple Inc, which is up more than 90 percent over the last year, and hot growth stocks like Tesla Inc, whose shares have jumped nearly 400 percent since last April, said Steve Chiavarone, portfolio manager and equity strategist at Federated Hermes." And Wall Street says it will 'incentivize selling this year' — Bloomberg's Claire Ballentine and Katherine Greifeld: "Wall Street traders, predictably focused on the policy's implications for investing, said it was too soon to panic, but that prospects of a higher levy on stock profits could foment near-term selling as investors look to skirt a higher rate." CORPORATE BOND GAUGE SIGNALS DWINDLING ECONOMIC RISK — WSJ's Sam Goldfarb: "A key measure of the perceived risk in low-rated corporate bonds is hovering around its lowest level in more than a decade, highlighting investors' mounting confidence in the economic outlook. "The average extra yield, or spread, investors demand to hold speculative-grade corporate bonds over U.S. Treasurys dropped below 3 percentage points this month to as low as 2.90 percentage points for the first time since 2007, when it set a record of 2.33 percentage points, according to Bloomberg Barclays data." | | | |   | | | | | | UNEMPLOYMENT CLAIMS FALL TO NEW PANDEMIC LOW — NYT's Patricia Cohen: "New claims for unemployment benefits fell last week to the lowest level of the pandemic, the government reported on Thursday, offering fresh evidence of the labor market's recovery. "A total of 566,000 workers filed first-time claims for state benefits during the week that ended Saturday, the Labor Department said, a decrease of 57,000 from the previous week's revised figure. In addition, 133,000 new claims were filed for Pandemic Unemployment Assistance, a federal program that covers freelancers, part-timers and others who do not qualify for state benefits. On a seasonally adjusted basis, new state claims totaled 547,000." U.S. COMPANIES BEATING PROFIT ESTIMATES AT RECORD RATE — Reuters' Caroline Valetkevitch: "While it's still early in the earnings period, a record percentage of first-quarter profit reports from major U.S. companies are coming in above analysts' expectations. "Earnings are rebounding from last year's pandemic-fueled lows, but many companies were holding off on giving guidance, making it harder for analysts to estimate results for this year. Some strategists say stronger-than-expected earnings could help underpin the market even as valuations are considered expensive." | | | | SUBSCRIBE TO "THE RECAST" TO JOIN AN IMPORTANT CONVERSATION : Power dynamics are changing in Washington and across the country. More people are demanding a seat at the table, insisting that all politics is personal and not all policy is equitable. Our twice-weekly newsletter "The Recast" breaks down how race and identity shape politics and policy in America, and we are recasting how we report on it. Get fresh insights, scoops and dispatches on this crucial intersection from across the country and hear critical new voices that challenge business as usual. Don't miss out, SUBSCRIBE . Thank you to our sponsor, Intel. | | | | | AVERAGE MORTGAGE RATES UNDER 3 PERCENT FOR FIRST TIME SINCE FEBRUARY — AP: "Mortgage rates fell for the third straight week, dipping below 3 percent for the first time in two months. Mortgage buyer Freddie Mac reported Thursday that the benchmark 30-year home-loan rate declined to 2.97 percent this week from 3.04 percent last week. "At this time last year, the long-term rate was 3.33 percent. The rate for a 15-year loan, popular among those looking to refinance, dipped to 2.29 percent from 2.35 percent the week before." ICYMI: CREDIT SUISSE REPORTS LOSS AS REGULATORS OPEN INVESTIGATION — NYT's Jack Ewing: "Credit Suisse said on Thursday that it suffered a loss in the first quarter stemming from loans it made to the collapsed investment fund Archegos Capital Management, a debacle that has prompted Switzerland's financial regulator to investigate whether the bank was doing a poor job monitoring the riskiness of its investments. "The loss of 252 million Swiss francs, about $275 million, from January through March came after a loss of 4.4 billion francs from Archegos that wiped out a big increase in revenue. Credit Suisse also said on Thursday that it had sold bonds to investors to raise $2 billion to shore up its capital." | | A message from Sallie Mae®: We know our current student loan financing system isn't working for all students and families. Sallie Mae is committed to being part of the solution. We partner with students to help them find the right financing options — ranging from scholarships and grants to federal and private loans— that set them up for long-term success. We provide students and their families with the tools and information they need to make smart decisions that their future selves will appreciate. This responsible approach is working: 97% of Sallie Mae loans in repayment are being repaid on time and less than 2% default annually. We're eager to work with policymakers and other key stakeholders to build a higher education system that works for all students. Learn more. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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