By Ben White and Aubree Eliza Weaver | 04/21/2017 08:00 AM EDT
TRAIN WRECK NEXT WEEK? - Next week was shaping up as an opportunity for the GOP to show some quiet governing competence just weeks after House Speaker Paul Ryan admitted after the health care fiasco that Republicans were not yet ready to transition from being an opposition party. Doesn't look like it's going to turn out that way.
The White House is agitating both for a health care vote (despite grim prospects for passage) and big wins in any spending deal funding the government past Friday. This means Republicans could be looking at both a second health care fail and a government shutdown. That would be a catastrophic result both politically and for markets.
Thus far, Wall Street has shrugged off early Trump administration and Hill GOP dysfunction on the assumption that tax cuts, stimulus and Wall Street deregulation will eventually materialize. A total legislative crackup next week would severely test that patience.
Here's how a senior GOP Hill aide described the situation on health care: "The question is whether it can get 216 votes in the House and the answer isn't clear at this time. There is no legislative text and therefore no agreement to do a whip count on. And keep in mind, the all-hands member call for Saturday was noticed last week and is routine before we come back in session."
The facts: There is no plan for a vote on a bill GOP leadership hasn't seen and for which there is no clear path to 216 votes.
The squeeze play: Clearly some in the White House think they can simply force House Speaker Paul Ryan into jamming a vote in after the House comes back Tuesday. Don't bet on it.
At the risk of sounding like a broken record ... desperately trying to sledge hammer massive legislative changes through to beat an arbitrary and quickly forgotten 100 day milestone is ... well, it's not great.
SPENDING DEAL RUNS OFF COURSE - POLITICO's Burgess Everett, Heather Caygle, and Rachael Bade: "Congressional leaders' efforts to hatch a massive spending deal have been thrown off course by the Trump administration's eleventh hour intervention, leaving the bipartisan bill teetering on the brink of collapse just a week before a government shutdown deadline.
"The hard line taken by White House officials, particularly budget director Mick Mulvaney, has strained an emerging deal between House and Senate leaders that would skirt hot-button issues that could shut down the government.
"In particular, administration officials' hopes of giving President Donald Trump a win during his first 100 days, such as border wall funding or a crackdown on sanctuary cities, have complicated what had been a relatively smooth, bicameral, bipartisan negotiation, according to staffers in both parties." Read more.
WHITE HOUSE FRANTIC ON HEALTH CARE - POLITICO's Rachael Bade, Josh Dawsey, and Adam Cancryn: "A frantic and impatient White House is pressuring House GOP leaders for another showdown vote on repealing Obamacare next week so it can notch a legislative win before ... Trump's first 100 days in office.
"But while the outlines of a possible deal are starting to come together, it's far from clear that House Republican leaders have found the sweet spot to pass their embattled alternative health plan. ...
"The conflicting narratives suggest top administration officials and House Republican leaders are either miscommunicating - or, more likely, that White House sources are squeezing Speaker Paul Ryan and his team, telling them to move quickly. Notably, the same senior White House officials who suggested a vote would occur next week also said the text of a new deal will likely be circulated Friday 'or by the weekend.'" Read more.
TRUMP PLANS NEW FINANCE EXECUTIVE ACTIONS - POLITICO's Victoria Guida: "Trump on Friday plans to order a review of key financial rules - less than three months after he directed an even broader examination of Wall Street regulations.
Trump will send a signal that two important regulatory powers adopted in the wake of the financial crisis are in the crosshairs, along with tax rules put out by the Obama administration last year.
"Yet none of the executive actions will have an immediate, tangible impact on any rules. ... Trump will sign two presidential memos, according to a White House official. One will direct Treasury Secretary Steven Mnuchin to examine the government's so-called orderly liquidation authority ... Another memo will examine the risks of placing 'systemically important' nonbank financial firms under the oversight of the Federal Reserve" Read more.
FLASH-BACK - Victoria and Zach on Feb. 23rd "Trump is considering issuing more executive orders on financial regulations in what would be part of an effort to ease rules enacted after the 2008 credit crisis, a person familiar with the matter said.
"One of the orders would involve the government's authority to wind down failing megabanks outside of bankruptcy court ... Another relates to the placement of 'systemically important' non-bank financial firms under the oversight of the Fed" Read more.
IIF TALK WRAP UP - Cap Alpha's Ian Katz on remarks from Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn at the IIF meeting: "Mnuchin made it clear that the administration is targeting the Dodd-Frank Orderly Liquidation Authority ... The Treasury will recommend significant changes to financial regulations when it releases a presidentially ordered report on the topic in early June, Mnuchin said.
"Mnuchin reiterated that the administration is 'pretty close' to bringing forth a tax reform plan. He didn't shed much new light on that, but mentioned concerns about how a BAT tax could adversely affect the dollar. Cohn, on FinReg, played up the 'personnel is policy' point, and was clear that he's counting on Trump-appointed regulators to unshackle the finance industry once the president's people are in place."
HOENIG REACT - A close FinReg observer on FDIC Vice Chair Hoenig's comments on OLA: "Hoenig's comments on the orderly liquidation authority seem surprisingly ill informed. The authority was put in place largely in response to the fact that the government did not have an effective means of winding down large nonbanks during the crisis, such as Lehman or AIG.
"And we saw the alternatives play out - a bankruptcy process that seized markets and massive government bailouts. High bank capital standards would do little to address such large nonbank failures. His plan may help him get the FDIC chair, but ignores lessons learned from the crisis and the original impetus for the authority"
GOOD FRIDAY MORNING - Happy weekend everyone! Email me on firstname.lastname@example.org and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on email@example.com and follow her on Twitter @AubreeEWeaver
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SAVE THE BLS! - Former BLS commissioner Erica L. Groshe in a WSJ op-ed: "The BLS, which I led for four years, may be headed toward failure. Imagine a jobs report that contains consequential errors or is late by hours or days.
"Sources tell me that when Congress draws up the BLS's next budget, lawmakers plan to underfund the agency substantially. If so, Americans could experience the economic equivalent of flying blind." Read more.
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GLOBAL FINANCE LEADERS SEE MORE TEMPERATE TRUMP - Reuters' Howard Schneider and Jan Strupczewski: "Donald Trump took power in January pledging to overhaul a global order that he said cheated middle-class Americans with a promise to tear up trade agreements and impose tariffs on China and Mexico.
"Fast-forward almost 100 days into Trump's presidency and the world's most powerful finance officials, gathered in Washington for the International Monetary Fund spring meetings, have found an administration that is far from the disruptive force Trump promised. ... He has refrained from pulling out of [NAFTA], did not carry out a pledge to label China a currency cheat, and his administration has signaled the United States may stay in the Paris climate accord." Read more.
NOT LOOKING GOOD FOR VENEZUELAN ECONOMY - AP: "Venezuela's seizure of a General Motors factory Wednesday comes as that nation's economy is gripped by a long-running downward spiral that has caused widespread misery. The prices of food and other essentials have soared, and jobs have disappeared.
"Those struggles have been exacerbated by the country's repeated confiscation of foreign assets, with roughly 25 corporations now fighting Venezuela's government before a World Bank panel over such seizures." Read more.
DEUTSCHE BANK TO PAY UP - FT's Jessica Dye: "Deutsche Bank will pay a combined $156.6m in civil penalties in two separate enforcement actions brought by the Federal Reserve, one of which deals with its oversight of foreign-exchange traders and another dealing with its compliance programme for the Volcker rule, which generally prohibits banks from engaging in proprietary trading.
"Fed enforcers said they found deficiencies in Deutsche Bank's oversight and internal controls regarding FX traders buying and selling US dollars and foreign currencies both for the bank's own accounts and on customers' behalf. The central bank said that Deutsche Bank failed to detect and address its traders' use of electronic chat rooms to discuss their positions with competitors." Read more.
HURDLES AHEAD IN TRUMP'S BID TO SLOW STEEL IMPORTS - WSJ's Bob Tita: "President Donald Trump's bid to stanch imports flowing into the U.S. steel market is fighting strong currents: domestic prices that are among the world's highest and a buoyant dollar that pushes down the cost of imports.
"High labor costs have long pushed up the price of U.S. steel. Domestic producers increased prices further last year after new tariffs helped trim the share of imports in the U.S. steel market in 2016 for the first time in three years. Meanwhile, the U.S. dollar's recent strength has made imported steel a bargain for domestic manufacturers and construction companies." Read more.
BALANCE SHEET DISCUSSIONS HEAT UP - Bloomberg's Craig Torres and Christopher Condon: "Federal Reserve staff, widening their outreach to investors in anticipation of a critical turning point in monetary policy, are seeking bond fund manager feedback on how the central bank should tailor and communicate its exit from record holdings of Treasuries and mortgage-backed securities.
"Fed officials are intent on shrinking their crisis-era $4.48 trillion balance sheet in a way that isn't disruptive and doesn't usurp the federal funds rate as the main policy tool. To do that, they need to find the right communication and assess market expectations on the size of shrinkage, which is why conversations with fund managers have picked up recently." Read more.
IRS TURNS TO DEBT COLLECTORS - NYT's Jessica Silver-Greenberg and Stacy Cowley: "The Internal Revenue Service is about to start using four private debt-collection companies to chase down overdue payments from hundreds of thousands of people who owe money to the federal government, a job it has handled in house for years.
"Unlike I.R.S. agents, who are not usually allowed to call delinquent taxpayers by telephone, the outside debt-collection agencies will have free rein to do so. Consumer watchdogs are fearful that some of the nation's most vulnerable taxpayers will be harassed and that criminals will take advantage of the system by phoning people and impersonating I.R.S. collectors." Read more.
VISA BEATS ESTIMATES - The Street's Valerie Young: "Visa posted higher quarterly profit than analysts estimated amid accelerating payment growth and the integration of a former European subsidiary it repurchased. The San Francisco-based company's adjusted earnings of 86 cents a share for the three months through March, its fiscal second quarter, compared with the 79-cent average of analysts' estimates in a FactSet survey. Payment volume climbed 39 percent to $1.7 trillion.
"Revenue was $4.5 billion, up 23 percent, surpassing the $4.3 billion average of FactSet estimates, and aided by the Visa Europe acquisition, which the company completed in late June. Net income, including a one-time charge of $1.5 billion and $192 million related to the company's purchase of Visa Europe, dropped 75 percent to $430 million." Read more.
WALL STREET RALLIES ON EARNINGS - Reuters' Chuck Mikolajczak: "U.S. stocks rallied on Thursday, with the Nasdaq closing at a record, as a round of solid earnings led by American Express pushed equities higher. The credit card company closed up 5.9 percent as the top boost to the Dow Industrials after reporting a smaller-than-expected drop in quarterly profit late Wednesday.
"Of the 82 companies in the S&P 500 that have reported earnings through Thursday afternoon, about 75 percent have topped expectations, according to Thomson Reuters data, above the 71 percent average for the past four quarters." Read more.
MORTGAGE SERVICER OCWEN ACCUSED OF ABUSE - NYT's Stacy Cowley and Jessica Silver-Greenberg: "Federal and state regulators unleashed a fusillade of lawsuits and enforcement orders on Thursday against the Ocwen Financial Corporation, a large mortgage servicer, aimed at curbing what they said had been years of flagrant and repeated abuses, including illegal foreclosures, deceptive fees and extensive mishandling of customers' home loan payments.
"Some of the regulatory orders directly questioned Ocwen's ability to continue operating, and the market responded accordingly: Shares of the company fell 54 percent, closing at $2.49 per share. Twenty-two state mortgage regulators filed enforcement orders intended to limit or freeze Ocwen's ability to acquire new mortgage loans to service in their states" Read more.
ELON MUSK NEARS $1.4B PAYDAY - Bloomberg's Anders Melin: "Only six remaining milestones stand between Tesla Inc.'s Elon Musk and an estimated $1.4 billion windfall for the carmaker's billionaire chief executive officer. Musk, who was awarded 5.27 million stock options in 2012 tied to Tesla operational and market value targets, has achieved six of the 10 operational goals to date, up from five at this time last year, according to a proxy statement filed Thursday.
"The automaker has also met eight of the 10 market value milestones, up from seven last year, the filing shows. Musk has until 2022 to reach the goals that trigger the payout, but he could cash in the options sooner if the company hits targets ahead of schedule. They are worth an estimated $1.4 billion as of Thursday's close" Read more.
WORLD BANK PRESIDENT TALKS NEED FOR AID - WSJ's Ian Talley: "Two-thirds of all jobs in developing countries will be wiped out by automation, World Bank President Jim Yong Kim said Thursday, part of his pitch for the institution's role in tackling global poverty as major donors show signs of pullback.
"Those job losses over the coming decades could exacerbate conflict in already fragile states, Mr. Kim said at the launch of the semiannual gathering of World Bank and International Monetary Fund member countries. The bank has been trying to position itself as both a catalyst for private-sector financing in high-risk countries and a 'knowledge bank' that can counsel nations on building up their economies." Read more.
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