News : Dems' fiscal plans start to shift

Tuesday, September 28, 2021

Dems' fiscal plans start to shift

Sep 28, 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

Dem plans begin to change — We've banged on here for a while that Democrats would have to shift tactics and push through the bipartisan infrastructure bill before the giant reconciliation package and (eventually) keep the government open and the debt limit intact on their own. That's starting to happen as House Speaker Nancy Pelosi indicated that the bipartisan bill would have to go first, as our Heather Caygle and Sarah Ferris and report.

Not everyone is on board — "Democrats have not started to whip the infrastructure vote and some progressives signaled Monday night that they wouldn't go along with the plan. 'Absolutely not. A deal is a deal. We are not passing anything short of having the full Build Back Better agenda,' said Rep. Ilhan Omar (D-Minn.) when asked if progressives would be willing to advance the infrastructure bill even as the broader bill remained unfinished.

"Sources close to Pelosi say the speaker was left without a choice given the looming expiration date for highway and transit programs and the resistance from Senate moderates to publicly commit to overall funding or program guarantees within the broader spending package."

So far, Wall Street remains pretty confident that despite scary comments from progressives, Democrats will do what they have to and avoid any serious fiscal crises. Markets tanked a bit last week as these fears emerged (along with the China real estate scare). But they are back pushing toward record highs.

And at least on the DC front, that's probably with good reason. Democrats can find another route to funding the government after their initial push failed, as expected, in the Senate. And they can still attach a debt limit hike to reconciliation. Not the desired path, but probably the only viable one.

Blood-letting at the Fed — Our Victoria Guida: "Two top policymakers at the Federal Reserve announced … that they will step down after coming under fire for securities trades they made last year during the pandemic when the central bank was engaged in a sweeping rescue of financial markets.

"Dallas Fed President Rob Kaplan said he will depart as of Oct. 8, several hours after Boston Fed President Eric Rosengren announced he will retire on Sept. 30, citing health reasons. Their departures, which open up two key jobs at the central bank, could have significant policy implications as the Fed deliberates how quickly to remove its extraordinary support for the economy."

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 Blackstone:

Blackstone's investment approach is focused on the future. We identify companies that are shaping a stronger economy and help them accelerate their growth. We can deliver great returns for our investors by strengthening the communities in which we live and work. Learn more.

Driving the Day

Treasury Secretary Janet Yellen and Fed Chair Jerome Powell testify at 10:00 a.m. before Senate Banking on the CARES Act … Yellen speaks before NABE at 2:35 p.m. …

FIRST LOOK: NGOs CALL FOR TREASURY REPORT WITH TEETH — Our Victoria Guida: More than 30 advocacy groups on Tuesday urged Treasury Secretary Janet Yellen to take bolder action to fight climate change, including by using an executive order-mandate report to drive regulatory action beyond just disclosure of climate risks.

The signatories include Americans for Financial Reform, Better Markets, Ceres, Friends of the Earth US, Greenpeace USA, Institute for Agriculture and Trade Policy, League of Conservation Voters, Public Citizen and the Sierra Club.

UH OH — Via Yahoo Finance: "2021 is looking uncomfortably like 2020. Poets&Quants has learned that Harvard Business School is going back to remote instruction for all first-year MBA students courses after a 'steady rise in breakthrough infections' among students. The move is effective this week, September 27 to October 3."

DEMS PUSH LOWER BAR FOR IRS REPORTING — Bloomberg's Laura Davison and Colin Wilhelm: "Democrats in Congress are considering a plan that would require banks to report accounts with at least $10,000 to the Internal Revenue Service -- well above the Biden administration's proposed $600 threshold -- while also exempting some common transactions from the law."

BANKS FREAK OVER OCC PICK — Our Zachary Warmbrodt: "Biden's decision to nominate Cornell law professor Saule Omarova to regulate the nation's banks is triggering intense anxiety among the lenders and their Washington lobbyists and threatens to set off a bruising battle in Congress.

"Omarova is more than just a finance industry critic — she has proposed essentially ending the banking industry as we know it by letting the Fed … take on the deposit accounts of all Americans. News of her nomination this week to be comptroller of the currency has touched off a scramble among Washington's powerful bank lobbying associations about whether to take the rare and risky step of speaking out against someone who could end up being the industry's top regulator."

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down and who really has the president's ear in West Wing Playbook, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

Markets

STOCKS TRADE MIXED — AP's Damian J. Troise: "Stocks were mixed in early trading on Wall Street Monday as technology stocks fell and offset gains for banks and energy companies.

The S&P 500 index fell 0.2 percent as of 10:09 a.m. Eastern. The Dow Jones Industrial Average rose 214 points, or 0.6 percent, to 35,012 and the tech-heavy Nasdaq fell 0.8 percent. The benchmark S&P 500 had more gainers than losers. Banks made solid gains as bond yields continued climbing, which allows them to charge higher interest rates on loans. The yield on the 10-year Treasury rose to 1.47 percent from 1.46 percent late Friday. Bank of America gained 2.8 percent."

ROBINHOOD CEO UNWITTINGLY INSPIRED $1M MEME STOCK FRAUD — Bloomberg's Nick Baker and Matt Robinson: "It was easy-money arbitrage fueled by this year's meme stock mania. Some brokerages were essentially offering free cash, while others weren't clawing any of the funds back for the second leg of the wager.

And the traders who did it got the clever idea from Robinhood Markets Inc. Chief Executive Officer Vlad Tenev, who unwittingly inspired them with a remark he made at a high-profile congressional hearing in February."

A message from Blackstone:

Fly Around

KAPLAN, ROSENGREN TO RETIRE — Bloomberg's Catarina Saraiva and Craig Torres: "Two regional Federal Reserve presidents are retiring following embarrassing revelations of stock trading last year as the U.S. central bank battled Covid-19. In an unprecedented development in the Fed's 100-plus year history, Boston Fed chief Eric Rosengren and Dallas's Robert Kaplan on Monday separately announced plans to step down. Rosengren will depart later this week and Kaplan on Oct. 8.

"'Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve's execution of that vital work,' Kaplan said in a statement emailed by the Dallas Fed. 'For that reason, I have decided to retire.'"

TOP FED OFFICIALS SAY LABOR MARKET NEEDS MORE TIME TO HEAL — NYT's Jeanna Smialek and Madeleine Ngo: "Top Federal Reserve officials emphasized on Monday that the labor market was far from completely healed, underlining that the central bank will need to see considerably more progress before it will feel ready to raise interest rates. 'We still have a long way to go until we achieve the Federal Reserve's maximum employment goal,' John C. Williams, the president of the Federal Reserve Bank of New York, said in a speech Monday afternoon.

Leading Fed officials — including Mr. Williams, Lael Brainard and Jerome H. Powell, the Fed chair — have given similar assessments of the outlook in recent days and weeks. They have pointed out that the economy is swiftly healing, bringing back jobs and normal business activity, and that existing disruptions to supply chains and hiring issues will not last forever."

But Brainard says the labor market and inflation can return to pre-pandemic equilibrium — WSJ's Nick Timiraos: "A top Federal Reserve official said that the economy was likely to make a complete recovery from the coronavirus and warned against prematurely concluding that the central bank needed to raise interest rates.

Fed governor Lael Brainard, a top contender to become chairwoman of the central bank next year, pushed back against concerns that inflation might soon accelerate because of difficulties hiring workers."

And officials say a bond taper still hinged on continued job growth — Reuters' Howard Schneider and Ann Saphir: "U.S. Federal Reserve officials including one influential board member on Monday tied reduction in the Fed's monthly bond purchases to continued job growth, with a September employment report now a potential trigger for the central bank's bond 'taper.'

"The Fed last week said a reduction in its $120 billion in monthly bond purchases could be warranted 'soon,' and Fed Chair Jerome Powell at a press conference Wednesday said it would take one more 'decent' jobs report to set the process in motion."

Be a Policy Pro. POLITICO Pro has a free policy resource center filled with our best practices on building relationships with state and federal representatives, demonstrating ROI, and influencing policy through digital storytelling. Read our free guides today .

BUSINESS ECONOMISTS LOWER GROWTH FORECASTS — AP: "The nation's business economists now expect slower economic growth this year due to the widespread delta variant of the coronavirus, while also saying the economy could improve more quickly next year as vaccinations become more accepted.

"In a survey being released Monday, the National Association for Business Economics found that its panel now expects full-year economic growth of 5.6 percent, down from a forecast for 6.7 percent growth in NABE's previous survey in May. However, economists raised their forecast for 2022 economic growth to 3.5 percent from a previous outlook of 2.8 percent."

WELLS FARGO TO PAY $37.3M TO SETTLE CLAIMS IT FRAUDULENTLY OVERCHARGED CUSTOMERS — Reuters' Jonathan Stempel: "Wells Fargo & Co will pay $37.3 million to resolve U.S. government claims it fraudulently overcharged commercial clients on foreign exchange services, the latest in a string of scandals over the bank's treatment of customers.

"Monday's settlement resolves U.S. Department of Justice civil fraud charges against the fourth-largest U.S. bank. It includes a $35.3 million fine plus a $2 million forfeiture. Wells Fargo previously returned $35.3 million to customers as restitution, making its total payout nearly $73 million, court papers show."

NEW AT CITI — Via release: "As we announced in March, Rohan Weerasinghe is retiring this year. I am delighted to share that we will have a new General Counsel and Corporate Secretary, Brent McIntosh, joining us on October 25.While Brent will begin serving as General Counsel right off the bat, Rohan will stay with us through the end of the year to ensure a smooth transition."

A message from Blackstone:

Blackstone is investing to help power the modern economy, focusing on the sectors and themes where we see the greatest potential for growth and impact over the long term. This approach has led us to invest in entrepreneurs advancing how we use technology to connect, scientists developing novel therapeutics for patients, and businesses creating a more sustainable future. We're investing in the companies and leaders who are shaping the future, and we're dedicated to providing them with the partnership and resources they need to help accelerate their growth.

Over Blackstone's more than 35-year history, we have remained committed to this long-term investment approach -- because building successful, resilient businesses can lead to better returns for our investors, stronger communities, and economic growth that works for everyone. Learn more.