By Ben White and Aubree Eliza Weaver | 04/19/2017 08:00 AM EDT
OSSOFF APPEARS HEADED TO RUNOFF - As of early Wednesday (with some results from Fulton County still outstanding), Democrat Jon Ossoff was slightly below the 50 percent margin needed to avoid a June runoff in the closely watched special election in Georgia's typically Republican sixth district.
Even if he winds up in a runoff with top Republican vote-getter Karen Handel, Democrats view Ossoff's strong performance as a good harbinger for the 2018 midterms and something of a rebuke to Trump (though the total R/D margin will be roughly the same as it was in the district in the presidential election in November). The runoff is likely to be very close with huge sums spent on both sides. Read more.
Jeff Hauser of the Revolving Door Project, emails: "Based on GA6, expect a brand new low for Trump in his relationship with Congress when they return from recess. Smart, wary Republicans seem more likely to seek to demonstrate independence by joining House Dems' discharge petition for Trump's tax returns than to join Trump on tax cuts for the rich or ending Obamacare."
QUARLES CONTROVERSY? - An eagle-eyed MM reader sent along a video of likely Fed Vice Chair for Supervision nominee Randy Quarles speaking at event in Utah in 2014 on how U.S. businesses and investors can expand globally. Some of the remarks seem a bit out of step with President Donald Trump's "America First" approach and promises of much faster domestic growth.
Quarles' presentation included a very grim view of the growth potential of the United States as the Fed begins the process of shrinking its giant balance sheet: "Markets, particularly in the United States, are acting as if we are on the other side of this process, as if we are at the tail end of the consequences of the financial crisis when in fact they have not begun.
"That shrinking of the balloon, which has to happen, the shrinking of the Fed's balance sheet from over $4 trillion, the recovery of the Treasury's balance sheet ... will take place for a long period of time and that creates a significant headwind to the real economy. ... We will remain below our potential output for a decade longer."
Quarles also offered a case study investment from Carlyle as an example of how investors can find growth: the high-end ski apparel maker Moncler, a foreign manufacturer that wouldn't fit into the Trump narrative.
His conclusion: "We are in a world of opportunity but it is an opportunity that is unbalanced. The developed world will face strong and significant headwinds for a significant amount of time. The emerging world has both robust growth and growth that is being driven by consumer consumption. It's possible for businesses around the world to take advantage of that." Full video is here.
Many of these arguments echo the case made by Obama officials for participating in the Trans-Pacific Partnership. And they likely fit well with views held by current administration officials such as NEC Director Gary Cohn and Treasury Secretary Steven Mnuchin. But we wonder how they will sit with the MAGA crowd.
TRUMP HIT ON H-1B VISAS - Following the executive order from the White House that includes a plan to review the system by which companies acquire H-1B visas for foreign works, the progressive group American Bridge pointed out Trump's own use of the program:
"Between 2008 and 2015, eleven Trump-affiliated organizations applied for H-1B visas. In total, they applied for 82 H-1B visas and received certification for 76 H-1B visas." Via American Bridge's Andrew Bates: "Donald Trump is a hypocrite and it's impossible to take his rhetoric seriously."
NEW PROMISES - POLITICO's Nolan D. McCaskill: "Trump made big promises on Tuesday, pledging to quickly deliver on health care, tax reform and infrastructure, while offering tough talk on trade, including putting Canada on notice.
"Despite the administration's failed effort to usher legislation to repeal and replace Obamacare through the Republican-controlled House last month, Trump suggested health care reform was imminent, casting it as the first major hurdle to cross before accelerating through his legislative agenda. 'We're also working with Congress on tax reform and simplification, and we're on time, if we get that health care approval, so press every one of your congressmen" Read more.
MAY CALLS SURPRISE ELECTION - Manulife's Megan Greene: "Speculation of a snap election in the UK died down once Article 50 was triggered and analysts assumed the British government would be busy trying to negotiate Brexit. Surprise! ... Prime Minister Theresa May announced there will be a snap ballot on June 8th.
"In our view, a snap election in the UK increases the chances of a Hard Brexit (from an already high level), slightly decreases the chances of the UK stumbling out of the EU with no new arrangement and may reduce the chances of a Scottish referendum on UK membership ... The most likely outcome of the UK snap election is that the Conservatives increase their majority in parliament ... and Mrs May finally wins the mandate to govern that she has been missing"
THIS MORNING ON POLITICO PRO FINANCIAL SERVICES - Zachary Warmbrodt on Elizabeth Warren's new book - and to get Morning Money every day before 6 a.m. - please contact Pro Services at (703) 341-4600 email@example.com
SIREN: O'REILLY OUT? - WSJ's Joe Flint: "Fox News is preparing to cut ties with its biggest star, Bill O'Reilly, according to people close to the situation. A final decision on Mr. O'Reilly's fate could come as early as the next several days, the people said. Mr. O'Reilly, host of 'The O'Reilly Factor,' has been ensnared in a sexual-harassment scandal related to previously undisclosed settlements he and Fox News paid to women who worked on or appeared on his program.
"Since an April 1 article in the New York Times detailing $13 million in settlements paid to five women, pressure has been growing on Fox News, both internally and from activists, to remove Mr. O'Reilly.
"Initially, Fox News and parent company 21st Century Fox stood by their highly rated host. Mr. O'Reilly has denied any wrongdoing, saying he paid settlements to 'put to rest any controversies to spare my children.' However, as advertisers fled his show, debate inside the company ensued over the pros and cons of keeping Mr. O'Reilly on the air." Read more.
TAX REFORM COULD TARGET OBAMACARE - POLITICO's Brent Griffiths: "A senior House Ways and Means member said today that an envisioned overhaul of the tax code could be used to roll back Obamacare taxes should Republican efforts to repeal the Affordable Care Act remain stalled.
"'I think we can [use tax reform], it is a different dynamic, but ultimately there is a need to fix our broken tax code,' Rep. Adrian Smith (R-Neb.) told POLITICO after meeting with constituents in Scottsbluff, Neb."
CHOICE ACT ANALYSIS - Left-leaning group Center for American Progress has a new analysis out this morning on the latest version of the House Financial Services Chair Jeb Hensarling's CHOICE Act: "[T]he CHOICE Act would erode the financial stability safeguards that the real economy needs to thrive, from mitigation of systemic risk, financial sector accountability, and consumer protection ...
"[T]he bill further concentrates - and makes even more unaccountable - economic power in the hands of those that will serve their own interests at the expense of the real economy" Read more.
** A message from Morgan Stanley: Morgan Stanley helped All Aboard Florida raise capital needed to develop Brightline, an express, intercity rail connecting Southern Florida. The project won't just reduce travel time-it's projected to add up to hundreds of millions in tax revenue over the next several years1. Learn more at morganstanley.com/brightline. Capital creates change. **
CONFLICTS FOR TRUMP'S BILLIONAIRE ADVISERS? - POLITICO's Isaac Arnsdorf and Josh Dawsey: "Billionaire investor Steve Schwarzman's newfound status as a trusted outside adviser for ... Trump has created blurred lines in which the Blackstone CEO is offering guidance on policies that could boost the fortunes of his company and his personal wealth.
"The starkest example was Trump's reversal last week on labeling China a currency manipulator ... While many factors likely played into Trump's decision ... it also followed extensive advice Schwarzman had given the president on the topic, warning Trump against such a move. Even if Schwarzman was acting in the capacity of an economic expert, those policy changes directly help Schwarzman's bottom line as CEO of Blackstone, the private equity giant"
Blackstone's Christine Anderson: "Just as Mr. Schwarzman has assisted presidents from both parties in the past, he has provided his views to President Trump when asked, alongside a long, bipartisan list of business leaders from around the country ... His only reason for doing so is serving the common good and helping produce positive results for the American people." Read more.
WHAT'S GOING ON WITH MARKETS? - Mohamed A. El-Erian on Bloomberg View: "Unless you believe the Federal Reserve will ease monetary policy, which I don't, it is getting harder to reconcile what are still historically low bond yields and relatively high stock prices. More consistent and sustainable levels probably lie somewhere in the middle. Exactly where, as well as when and how we would get there, depends primarily on the balance between geopolitical and economic-policy influences."
WHY MAY MADE HER MOVE - POLITICO's Tom McTague: "The first poll carried out after the announcement pointed to a comfortable Tory win. The snap survey by ICM put the Tories on 46 percent, 21 points ahead of Labour on 25 percent. If May was not confident of the numbers, she wouldn't be going for it, several Conservative MPs said. ...
"Ostensibly, the decision to bring forward the election is designed to strengthen May's hand in the upcoming negotiations with Brussels by seeing off the threat from Labour, the Liberal Democrats, Scottish National Party and the House of Lords, who all pose a threat to the approval of her final exit package" Read more.
THE RIGHT CALL - FT edit page: "[T]his is the right decision. Britain is embarking on the most important constitutional change in its postwar history. ... A strong mandate will help Mrs May to remain on this pragmatic [Brexit] course. It lessens the risk of her being held hostage at every stage of the negotiations by minority pressure groups.
"With polls giving her Conservative party a 21-point lead over the dysfunctional Labour opposition, she appears likely to win by a landslide. The prime minister is disingenuous, though, to claim the election has become necessary because of 'game-playing' by opposition parties. In fact, resistance has been lame to the point of culpability" Read more.
FIDUCIARY RULE ALREADY HAVING IMPACT - WSJ's Michael Wursthorn: "An Obama-era retirement-savings rule is in limbo, but investors already are pouring their retirement savings into brokerages' promise of conflict-free financial advice in exchange for a fee. Bank of America Corp.'s global wealth unit, which includes the 'thundering herd' brokerage force of Merrill Lynch, gained a record $29.2 billion in new fee-based assets in the first quarter, the bank said Tuesday. ...
"J.P. Morgan Chase said last week that $8 billion of new assets flowed into long-term products, including those that charge a recurring fee. Also on Tuesday, private-equity firms Stone Point Capital LLC and KKR & Co. agreed to acquire a majority stake in Focus Financial Partners, a New York-based investment firm that backs independent financial advisers who charge fees and pledge to minimize conflicts, in a $2 billion deal" Read more.
GOLDMAN STUMBLES - FT's Ben McLannahan: "Goldman Sachs punctured some of the optimism surrounding US bank stocks in the wake of the election of Donald Trump, revealing a poor quarter for bond trading that fell well short of analysts' expectations. Investors were primed for a bright update from Goldman, following better-than-forecast figures from the investment banking units of JPMorgan Chase, Citigroup and Bank of America.
"Banks with big trading businesses were expected to do well out of Mr Trump's victory in November, which fanned hopes of higher interest rates, lower taxes and lighter regulation towards the financial sector. But first-quarter revenues from Goldman's core debt-trading business were essentially flat, compared with a very choppy period a year earlier, at $1.69bn, as a pick-up in activity in mortgages and interest rate trading was offset by drops in commodities, currencies and credit" Read more.
IVANKA'S TRICKY TERRITORY - NYT's Danny Hakim and Rachel Abrams: "Ivanka Trump ... has been her family's leading globalist - doing deals around the world in her father's name and her own. Even since her father took office, her own fashion brand has continued to look abroad, filing four new trademarks in Canada and the Philippines, according to a New York Times analysis of trademark records.
"The continued activity is tricky territory for Ms. Trump's new job as White House adviser. While she has stepped down from both her own fashion company and from the Trump Organization and put her brand in a trust, she has not given up her financial control, an unusual situation to navigate now that she is subject to federal ethics rules on conflicts of interest" Read more.
ALSO FOR YOUR RADAR -
BPC PITCHES INSURANCE OVERHAUL - Via POLITICO's Zachary Warmbrodt: The Bipartisan Policy Center is out with a new report this morning that sketches out what a greater federal role for insurance regulation should look like if states that serve as the industry's primary regulators don't make changes over the next few years. The ideas include an optional federal charter system with a new insurance solvency agency and another proposal where Congress would let federal regulators set minimum standards for risky activities. Read more.
TRANSITIONS: DONAR TO CHASE - Per release: "Erin Donar joins Chase from the U.S. Department of the Treasury where she served as Deputy Assistant Secretary of Public Affairs and advised the Secretary and senior Treasury staff on a number of financial services issues.
"Erin will serve as Head of Communications for Mortgage Banking, reporting jointly to us and sitting on the CCB Communications team and Mortgage Banking Marketing & Communications leadership team"
TCH ON LENDING - In a new blog post, The Clearing House "analyzes a recent Fed survey on small business lending and provides evidence supporting TCH research that higher capital requirements are restraining lending to small businesses" Read more.
** A message from Morgan Stanley: When All Aboard Florida wanted to bring an innovative express, intercity railway to Florida, Morgan Stanley helped it raise capital to make the project happen. The new Brightline trains are expected to cut travel time across Southern Florida by about an hour, while potentially creating over 10,000 jobs on average per year during construction1. All with zero projected taxpayer subsidies1. Capital creates better connections for people, communities and cities. Read the whole story at morganstanley.com/brightline. Capital creates change.
Disclaimer: 1 Based on data provided by All Aboard Florida. For more information visit: http://allaboardflorida.com/projectdetails/ aaf-fact-sheet CRC 1737672 03/17 **
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