News : Wall Street’s Trump conundrum

Friday, January 26, 2024

Wall Street’s Trump conundrum

Jan 26, 2024

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QUICK FIX

The Republican presidential primary’s bitter turn has Wall Street caught in the crosshairs.

As Donald Trump works to push Nikki Haley out of the race and secure the GOP nomination following decisive victories in Iowa and New Hampshire, he has turned the heat up on the group that may determine how long her campaign can stay alive: her donors.

Trump said on his social media site that anyone who gives to Haley will be “permanently barred from the MAGA camp.” It’s a salvo that could leave the Wall Street crowd, many of whom were long seen as eager to find a Trump alternative, in an awkward spot — especially as his path to the nomination becomes clearer.

Haley’s super PAC, which has drawn support from an array of business and finance executives, told the New York Times on Thursday it brought in $50.1 million in the second half of 2023, outraising Trump’s PAC, which brought in $46 million. Wall Street billionaires Stanley Druckenmiller, Henry Kravis, Ken Langone and Cliff Asness are hosting a Haley fundraiser in New York next week, according to Bloomberg.

But Haley’s odds of securing the GOP nomination look longer by the day — giving executives ample reason to avoid Trump’s ire.

“Trump knows how to play the system against itself,” said former Republican National Committee Chair Michael Steele.

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Some top finance and business leaders had already begun to sound more open-minded about Trump in recent weeks as his path to the nomination became clearer.

JPMorgan Chase CEO Jamie Dimon told CNBC in Davos last week that Trump “wasn’t wrong about some of these critical issues,” saying: “Just take a step back, be honest. He was kind of right about NATO. Kind of right about immigration. He grew the economy quite well. Tax reform worked. He was right about some of China.”

Blackstone CEO Stephen Schwarzman, a one-time Trump backer, said in 2022 he would not support him again in 2024. But asked in Davos about whether he would back the former president in the 2024 general election, he told CNBC: “We’ll see what happens. There are always surprises in these elections.”

Trump oversaw economic growth and signed into law large corporate tax cuts that executives cheered, but high tariffs from his trade war with China hurt U.S. stock prices. And business leaders vowed to ditch him following his claims about election fraud and the Jan. 6 Capitol riot.

“The executives on Wall Street and people in the business community in general tend to be incredibly pragmatic,” Sen. Bill Hagerty (R-Tenn.), a former investor who served as Trump’s ambassador to Japan, told MM. “And the pragmatic view of this should be that President Trump is the absolute best thing that could happen for the economy here in the United States, for economic security, for our national security.”

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Driving the day

Latest monthly reading for the personal consumption expenditures index released at 8:30 a.m.

U.S. growth shatters expectations — “The U.S. economy is growing faster than expected as inflation falls, and the Biden administration is seizing the moment in a bid to counter one of the fiercest lines of attack by former President Donald Trump,” our Victoria Guida reports.

“The Commerce Department reported Thursday that GDP expanded 3.1 percent in 2023, a year that began with heavy odds of a recession and closed out with fourth-quarter growth that blew away projections. The news comes during a week bookended by sales pitches from two top officials, White House economic adviser Lael Brainard and Treasury Secretary Janet Yellen. At the heart of their message: President Joe Biden’s strategy to help the middle class is working.”

“‘This story of the middle class is not separate from the state of the economy. It’s at the heart of it,’ Yellen said in remarks in Chicago Thursday afternoon. ‘By middle class, I don’t mean a narrow or fixed group. I mean workers across industries and occupations — from firefighters to nurses to factory workers.’”

White House economist to take top tax job at Treasury — A scoop from our Brian Faler and Daniel Lippman: “A White House economist will be taking over as the top tax official at the Treasury Department, an agency official said.”

“Aviva Aron-Dine, now a deputy director at the National Economic Council, will replace outgoing Assistant Secretary for Tax Policy Lily Batchelder.”

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On the Hill

A tipping point for flood insurance? — Senate Banking Chair Sherrod Brown predicts that Congress will act to bolster the National Flood Insurance Program this session after years of inertia, our Eleanor Mueller reports.

"There's become more seriousness and purposefulness about this," Brown said in an interview after a Thursday hearing. The flood insurance program historically "doesn't have an emergency nature and urgency to it that anybody really feels or sees — but now, there's enough people on this committee that see that urgency," the Ohio Democrat said.

The U.S. weathered record-breaking flooding in 2023 — a trend that the federal government predicts will continue into 2024. As of this month, nearly 45,000 homes have flooded repeatedly, according to federal data compiled by Natural Resources Defense Council.

That's pushed premiums high enough that "it jeopardizes the whole system," Brown said. "It's happening now, because people [in Congress] just see: There's more and more people at risk, more and more public dollars are at risk, more and more people are dropping out of the Flood Insurance Program."

Congress needs to extend the program's funding past Feb. 2 "for a short period of time," Brown said. Then he and ranking member Tim Scott (R-S.C.) will "start really negotiating" reforms to the program as part of a long-term reauthorization.

In a separate interview, Sen. Jack Reed (D-R.I.) said he, too, sees a tipping point for NFIP reform.

"In the past, we just punted every year, because it was an important issue — but it wasn't critical enough," Reed said. "Now, with flooding taking place, with insurance companies backing off, we're going to have to" act.

Not everyone on the panel is buying it.

"Of course Sherrod's going to say that; he's running for reelection," Sen. John Kennedy (R-La.), a longtime advocate for overhauling NFIP, told Eleanor. "I've tried to work with him to get something done, and I haven't seen any indication he's willing to do it."

McHenry declines to back Trump — House Financial Services Chair Patrick McHenry declined to say Thursday whether he would back Donald Trump if he is the Republican presidential nominee. “I haven’t played in this zone,” McHenry said on CNBC. “I’ve had a pretty complicated 2023 and I’m retiring from Congress.”

Pressed by host Andrew Ross Sorkin about comments he made following the Jan. 6., 2021, Capitol attack, McHenry said: “I stand by every word I said. But I’m a Republican, I want Republicans to win. So it’s a complex thing, it’s a difficult thing. I think the rule of law and the constitutional restraints in our society are massively important — more important than who gets elected. And that’s what I’m going to uphold no matter what.”

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Regulatory Corner

AI on Wall Street — The CFTC has officially launched a campaign to learn more about how financial firms dealing in the derivatives markets are using artificial intelligence, our Declan Harty reports. Chair Rostin Behnam previously said that the request-for-comment could feed into future rules and guidance. The agency is accepting comments until April 24.

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