| | | | |  | | By Sam Sutton | | 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 5:15 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 economists have been dubious about Donald Trump ’s plans to overhaul tax, trade and monetary policymaking. Even one of his top economic advisers isn’t convinced that core elements of the former president’s agenda are a slam dunk. Kevin Hassett , who led Trump’s Council of Economic Advisers, told researchers at Goldman Sachs last week that reducing corporate taxes to 15 percent is unlikely to have the same “dynamic effects” for businesses as the 2017 Tax Cut and Jobs Act. Imposing universal, or even reciprocal, tariffs on imports would require legislation, he said. And when asked about whether the Federal Reserve should coordinate with the president on setting interest rates — which Trump wants — Hassett told Goldman that “suspicions of such coordination/partisanship should be taken seriously, and the next administration should choose a neutral Fed leadership.” Hassett’s comments, which were included in a report published by Goldman’s global macro research team, downplayed the possibility that Trump would be able to move forward with key planks of his platform. The former president has argued that punitive tariffs — which some former officials believe he could impose unilaterally — and massive tax cuts would spur growth and generate “trillions” in government revenue . (Many economists have warned that Trump’s policies would have the opposite effect). Hassett did not respond to requests for comment. His remarks to a Wall Street audience come amid speculation about who would inform Trump’s economic policy agenda in a second administration. As Trump’s former CEA chair, and someone who returned to the White House during the Covid-19 pandemic to advise the president on economic policy, Hassett’s name has definitely been in the mix. Former Small Business Administration head Linda McMahon, a co-chair of Trump’s transition team, name-checked Hassett as someone who could return during an interview with POLITICO. What’s more, Hassett had a hand in shaping campaign attack lines during Kamala Harris’ economic policy rollout this summer. Other top contenders for key roles in Trump 2.0 have also been making the rounds on Wall Street. Robert Lighthizer, a former U.S. Trade Representative, has reportedly been telling investors that Trump could announce 60 percent China tariffs and 10 percent across-the-board tariffs shortly after taking office. Scott Bessent, a hedge fund executive and prominent Trump donor and adviser, recently floated a plan in Barron’s to appoint a “shadow Fed chair” to negate Chair Jerome Powell’s influence. As far as former Trump administration officials go, Hassett’s views are often more in line with traditional GOP positions on taxes and trade. Before leading the CEA, the former Fed economist advised George W. Bush, John McCain and Mitt Romney in their presidential campaigns. His resume includes bylines for National Review and prominent roles at conservative think tanks like the Hoover Institution and the American Enterprise Institute. As he wrote in a book published in 2021, “I didn’t have the DNA of a Trump advisor.” And while his comments to Goldman are out-of-step with the former president’s campaign messaging, by Hassett’s own telling, Trump likes it when his advisers push back. His book describes an early encounter at the White House where Trump insisted that Hassett’s data on Florida’s then-sluggish real estate market was false. Hassett stood his ground and insisted it was accurate. “I later learned that this was not an incidental blow-up,” he wrote. “Trump usually challenged new people … Those who fumbled, apologized, or folded had a short tenure in the White House. Those who pushed back won the president’s trust.” As one former Trump administration official told MM, Hassett and former National Economic Council Director Gary Cohn provided ideological balance to the hardliners who advised Trump on economic policy. “You would not hire Bob Lighthizer and Peter Navarro and Gary Cohn if you wanted everybody singing for the same sheet of music,” they said. “Kevin is extraordinarily bright. The president knows it, and respects him.” IT’S MONDAY — Know anything about Trump’s transition efforts? Know anything about what the players are telling the investment world? I want to know, tell me at ssutton@politico.com.
| | A message from the American Bankers Association: Join us starting at 8:00 a.m. ET today as more than 1,000 bank leaders from across the country gather for ABA’s Annual Convention in New York City. After ringing the Nasdaq opening bell from the convention floor, ABA President and CEO Rob Nichols talks with JPMorganChase Chairman and CEO Jamie Dimon about the road ahead for America’s banks. View Monday’s livestream. | | | | | Monday … The American Bankers Association holds its 2024 annual convention starting at 8 a.m., with Nasdaq CEO Adena Friedman, JPMorgan Chase CEO Jamie Dimon, Rep. Claudia Tenney (R-N.Y.) and Former Joint Chiefs of Staff Chairman Army Gen. Mark Milley scheduled to speak … Treasury Secretary Janet Yellen will attend a meeting of the U.S. China Financial Working Group and the Economic Working Group at 11:15 a.m. … SEC Chair Gary Gensler will hold a fireside chat at the Money 20/20 conference at 2:40 p.m. …. Tuesday … Rep. Ritchie Torres (D-N.Y.) and Yellen will speak at the second day of the ABA conference … The Consumer Confidence index for October will be out at 10 a.m. … The September job openings report will be out at 10 a.m. … The Commodity Futures Trading Commission will hold an open meeting at 10 a.m. … Wednesday … The first GDP estimate for the third quarter will be out at 8:30 a.m. … The SEC holds a closed meeting at 2 p.m. … Thursday … The personal consumption expenditures index for October will be out at 8:30 a.m. … Friday … The October jobs report will be released at 8:30 a.m. … The ISM Manufacturing index will be released at 10 a.m. … Rachel Reeves on the U.K. economy’s big week (and Trump) – MM host emeritus Zach Warmbrodt sat down with U.K. Chancellor Rachel Reeves on Friday as she prepared to reveal the Labour Party’s first budget statement in more than a decade. It’s a huge moment for British politics and policy. Labour leaders are warning about tough decisions on tax increases and spending cuts as they try to shore up the country’s financial footing while also moving to jumpstart growth. As she visited Washington for the IMF-World Bank meetings, Reeves unveiled “fiscal rules” that will underpin her vision. She told Zach she wanted to set expectations – including for financial markets – around the challenges ahead. “I don't think surprising financial markets is a very good idea,” the Bank of England alum said. (One of her Conservative predecessors learned that the hard way a couple years ago.) The interview came just after Prime Minister Keir Starmer suggested that his pledge to protect “working people” from tax hikes would not apply to people who own shares. Asked to define the “working people” threshold, Reeves told Zach: “The commitment is around the specific taxes, rather than, you know, about a certain income level,” she said. As for the U.S. presidential election, Reeves was careful to steer clear of picking a side. Asked about whether a new U.K.-U.S. trade deal would be more likely under Trump or Harris, she said the U.K. wants to work with “whoever the US people elect.” Asked about growing criticism of Trump as a potential “fascist,” and warnings from Harris adviser Gene Sperling about looming “economic chaos,” Reeves said, “It’s really important that we don't get involved in election campaigns and the democratic process in other countries.” “We’ve always been able, whoever’s in power in the U.K., Labour or Conservative, and whoever’s in power here, Republican or Democrat, to work closely together,” she said. Yellen’s warning — Barak Ravid of Axios: “Treasury Secretary Janet Yellen and seven foreign counterparts sent Israeli Prime Minister Benjamin Netanyahu a letter, obtained by Axios, warning that his far-right Finance Minister Bezalel Smotrich might be about to cause the collapse of the Palestinian economy.” McHenry’s next steps — Eleanor Mueller reports: “Retiring House Financial Services Chair Patrick McHenry told reporters Friday that he is assembling a ‘list of people I want to call in January’ for a job off the Hill.”
| | | | A message from the American Bankers Association:   | | | | | Brave new world — Regardless of who wins the White House next week, finance ministers, central bank governors and other senior officials are reckoning with how the inward turn of the U.S. and a more protectionist world will affect developing economies, Adam Behsudi reports. “We are bystanders to this all-important election,” Nigerian Finance Minister Adebayo Olawale Edun said. ”There’s a reversal of globalization, of trade. There’s a move to protectionism in these countries.” — The U.S.’s drift toward protectionism reflects the fact that “we never had a sufficient domestic policy to [match] our international economic policy. We never focused as much as we needed to on making sure the benefits of globalization were broadly shared,” Council on Foreign Relations President Michael Froman , who was the U.S. Trade Representative during President Barack Obama’s administration, told your MM host. Responses to widening income inequality in the U.S. and a hollowing of the manufacturing sector are necessary in “order to really maintain support” for globalization, he added. Beatty, Waters introduce reform bills — California Rep. Maxine Waters, the ranking Democrat on House Financial Services, and Ohio Democratic Rep. Joyce Beatty introduced legislation last week that would incorporate anti-corruption measures in IMF lending agreements and force Treasury to oppose World Bank assistance to countries that repress LGBTQ+ communities or engage in human rights abuses.
| | | | Parsing the Trump trade — Investors are positioning for a Trump win, but that doesn’t mean there won’t be price action after Election Day even if they’re right, according to Dirk Willer, head of global macro strategy and asset allocation at Citi, Victoria Guida reports. Willer told reporters Friday that if Trump were to win the election, the Chinese currency would likely weaken “meaningfully” against the dollar and rates would probably rise more, he said, because “some of these things are so asymmetric.” He also said it’s hard to separate out how much of the market’s movements this month are attributable to increased certainty that the GOP nominee will win versus data showing the economy is still strong. “The macro and the Trump trade overlap,” he said. “After the last [jobs report], people concluded, ‘OK, the US is doing better than we thought, therefore dollar strong, rates higher.’ … Trump picked up momentum almost at the same time.” What about the Harris trade? Willer said he disagreed with the conventional wisdom in markets that she’d be bad for stocks: “If she sweeps it, maybe, but if she were to win with a Republican Senate, I think the S&P sells off for a day, max, and people buy it again, because, in the end, it’s just status quo.”
| | A message from the American Bankers Association: Join us starting at 8:00 a.m. ET this morning as more than 1,000 bank leaders from across the country kick off ABA’s Annual Convention in New York City. ABA President and CEO Rob Nichols shares his outlook on the state of the industry before a conversation with Nasdaq Chair and CEO Adena Friedman. Nichols and Friedman will invite bank leaders to join them in ringing the Nasdaq opening bell from the convention floor. Afterwards, Nichols will be joined by JPMorganChase Chairman and CEO Jamie Dimon to discuss the challenges and opportunities facing America’s banks, Dimon’s outlook for the economy, and the importance of maintaining a diverse and vibrant banking sector. View Monday’s livestream. | | | | | | First in MM: FHLBNY to accept VantageScore 4.0 – Katy O’Donnell reports that New York Democratic Reps. Ritchie Torres and Gregory Meeks will announce today that members of the Federal Home Loan Bank of New York can now pledge mortgage collateral using VantageScore 4.0 credit scores, which incorporate rental payments and other data not used in traditional credit scores. Torres and Meeks had in August called on the FHLBNY to start accepting mortgages originated with alternative credit scoring models in order to boost access to housing. “One of the pathologies ailing America is the persistent wealth gap between white households and households of color,” Torres said in an interview. “America continues to struggle with overcoming the legacy of racial discrimination and nowhere more so than in housing.” The FHLBs of Chicago and San Francisco have also moved to accept mortgage collateral originated using VantageScore 4.0, and the Federal Housing Finance Agency has approved the model’s use for Fannie Mae and Freddie Mac. “The inclusion of alternative data like rent payments in credit scoring is a simple sensible policy change that will revolutionize access to credit for the lowest-income families,” Torres said. “Once VantageScore has the imprimatur of a liquidity provider like the Federal Home Loan Bank of New York, the sky’s the limit.” VantageScore was started by the three major credit reporting companies — Experian, Equifax and TransUnion — as an alternative to traditional FICO scores. The company estimates the use of the 4.0 credit model will bring roughly 33 million more consumers nationwide into the credit score fold, with 3.1 million of those in the FHLBNY’s district.
| | | First in MM: Barr, Gonzalez introduce overhaul of CFPB investigations — Reps. Andy Barr (R-Ky.) and Vicente Gonzalez (D-Texas) introduced a bill Friday that would restrict the CFPB's ability to investigate financial services providers, Eleanor Mueller reports. That includes limiting the agency's administrative subpoenas, known as Civil Investigative Demands, to six years unless it can prove it needs longer. Barr, who is running to replace retiring House Financial Services Chair Patrick McHenry (R-N.C.), sent a letter to the CFPB last year raising concerns that "the burdens [of CIDs on providers] are disproportionate to potential consumer harm." | | | | Follow us on Twitter | | | | Follow us | | | | |
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