POLITICO's Morning Money, presented by the National Restaurant Association: Brady stays bullish — Debt soars above crisis levels — GOP on board with Mueller — White House knew Flynn under investigation

By Ben White and Aubree Eliza Weaver | 05/18/2017 08:00 AM EDT

BRADY STAYS BULLISH - As much as I pressed House Ways & Means Committee Chair Kevin Brady last night on the difficulty of getting tax reform done this year given the tight calendar, political explosions from the White House and big disagreements on fundamental issues like how or whether to pay for it, he would not step off his talking points that it will get done this year, though he acknowledged the challenges.

Brady, fresh off a meeting with Treasury Secretary Steven Mnuchin and NEC Director Gary Cohn, also disputed the idea that rolling scandals (leading to Robert Mueller as special prosecutor) were taking the administration's eye off the ball on taxes.

"When they're at the table, they're engaged," Brady said of Mnuchin and Cohn while also refusing to say which of the two men was the real leader for the White House on tax reform. Brady also dodged on giving an opinion on Trump's conduct in re Comey, saying only that he wanted all the facts.

Brady continued to insist the BAT is not really dead (even though it pretty much is) and that any tax effort would not really be growth-juicing reform without it. The previous panel featuring Jason Furman, James Pethokoukis and Maya MacGuineas all took a much dimmer view of the prospects with all doubting any big reform could get done this year. MacGuineas predicted straight-up supply-side cuts that would make the deficit worse and ultimately reduce growth. Good times. Full event is here.

Times "President Pence" came up in the event: 1, in a joke from Pethokoukis on what might happen by the end of the year (Pence signing a tax cut bill).

WALL STREET obviously believes the nay-sayers with the Dow finally coming around to the MM view of things and tanking nearly 400 points on Wednesday. More on this below.

DEBT SOARS ABOVE CRISIS LEVELS - POLITICO's Victoria Guida: "U.S. household debt has surpassed its peak level from during the financial crisis, according to the Federal Reserve Bank of New York. After increasing for the 11th consecutive quarter, household debt reached $12.73 trillion in the first three months of 2017, compared to $12.68 trillion in 2008, the regional Fed bank said in its report on household debt and credit.

"But 'the composition of current household debt is very different from that in 2008,' New York Fed staffers said in a blog post. Mortgages make up a much smaller share of the total, while auto and student loans are a larger portion, they said. 'Balances are increasingly shifting towards more creditworthy and older borrowers,' they added." Read more.

REACT - Brian Coulton of Fitch Ratings tells Victoria: "This is all about further evidence of normalisation in the US economy. The theme of private sector deleveraging that was so important in the early part of this decade - as firms and households sought to strengthen balance sheets in the aftermath of the crisis - is now behind us. And the clear implication is that the Fed will pick up the pace of normalisation in interest rates."

Greg McBride of Bankrate.com: "The increased debt burdens are a reflection of a stronger labor market where more Americans are working, can qualify for loans, and have borrowed for expenditures like cars that they may have postponed in years past.

GOP ON BOARD WITH MUELLER - POLITICO's Austin Wright: "Lawmakers in both parties hailed Wednesday's appointment of a special prosecutor to investigate Russia's election meddling - a shift in Republican sentiment after allegations Trump sought to shut down a related probe.

"The Justice Department has named former FBI Director Robert Mueller to oversee the Russia investigation, which includes looking into allegations of coordination between Moscow and the Trump campaign. 'I see it as a positive thing, especially having Bob Mueller involved,' Senate Intelligence Chairman Richard Burr (R-N.C.) told POLITICO. 'It brings a lot of public credibility to whatever process they go through.'" Read more.

WHITE HOUSE KNEW FLYNN UNDER INVESTIGATION - NYT's Matthew Rosenberg and Mark Mazzetti: "Michael T. Flynn told President Trump's transition team weeks before the inauguration that he was under federal investigation for secretly working as a paid lobbyist for Turkey during the campaign, according to two people familiar with the case.

"Despite this warning, which came about a month after the Justice Department notified Mr. Flynn of the inquiry, Mr. Trump made Mr. Flynn his national security adviser. The job gave Mr. Flynn access to the president and nearly every secret held by American intelligence agencies" Read more.

McCARTHY: PUTIN PAYS TRUMP - WP's Adam Entous: "A month before ... Trump clinched the Republican nomination, one of his closest allies in Congress - House Majority Leader Kevin McCarthy - made a politically explosive assertion in a private conversation on Capitol Hill with his fellow GOP leaders: that Trump could be the beneficiary of payments from Russian President Vladimir Putin.

"'There's two people I think Putin pays: Rohrabacher and Trump,' McCarthy (R-Calif.) said, according to a recording of the June 15, 2016, exchange, which was listened to and verified by The Washington Post. Rep. Dana Rohrabacher is a Californian Republican known in Congress as a fervent defender of Putin and Russia." Read more.

MNUCHIN HEARING PREP - Per a Hill source on today's Senate Banking Committee hearing with Mnuchin: "Senator [Chris] Van Hollen will open his questions with the issue of the Office of the Comptroller of the Currency. The Department of the Treasury responded to the Senator's letter late today, and he'll raise some additional questions he has about Mr. Noreika's conflicts of interest and his special status that allows him to skirt President Trump's ethics pledge."

Mnuchin opening remarks, via POLITICO's Zachary Warmbrodt, are here.

FIRST LOOK: WOULD YOU KEEP TRUMP AS U.S. CEO? - New Bloomberg Businessweek cover: "If America were a company would you keep this CEO?" Bloomberg Editor in Chief John Micklethwait writes "that Donald Trump should be judged on his competency as a chief executive since no president has tried to claim the mantle of CEO-in-chief as completely as Trump.

"The James Comey fracas is just the latest in a long list of apparent transgressions for which a normal CEO might lose his job. Yet there are four larger failings: This CEO-in-chief has failed to get things done; he has failed to build a strong team, especially in domestic policy; he hasn't dealt with conflicts of interest; and his communications is in shambles" Read more.

WALL STREET WAKES UP - Reuters BreakingViews' Rob Cox: "Wall Street is finally waking up to the reality in Washington. ... Stockholders nevertheless remain too optimistic about any policy uplift.

"The promise of relaxed regulation, corporate tax cuts and investment in America's crumbling roads and bridges under ... Trump and a Republican Congress has excited investors for most of the past six months. Clinging to that cheery outlook required overlooking a plethora of warning signals, not least the daily dysfunction in the nation's capital and the possibility of detrimental decisions on matters such as trade" Read more.

WELCOME BACK, VOLATILTY - Pantheon's Ian Shepherdson: "The turmoil in Washington has begun to hit markets. We don't know how this will end, but we do know that it isn't going away quickly.

"Congressional and FBI investigations move slowly, but they do move, and it seems reckless to assume that the next four months of the Trump administration, and beyond, will be any calmer than the first four."

PENCE RALLY? - CNBC's Michelle Fox: "Fears surrounding ... Trump drove U.S. markets sharply lower Wednesday, but longtime bull Jeremy Siegel certainly isn't concerned. That's because the market rally has been based on the Republican agenda, not the Trump agenda, he said. In fact, he believes Wall Street would prefer a President Michael Pence rather than Trump.

"'If Donald Trump resigned tomorrow I think the Dow would go up 1,000 points,' the Wharton School finance professor said in an interview Wednesday with 'Closing Bell.'" Read more.

GOOD THURSDAY MORNING - Thanks to all who turned out to the tax event and a special thanks to Bernie Becker and Colin Wilhelm for taking part! 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

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES - Victoria Guida on banks' responses to a new accounting standard that would require them to immediately record expected losses when they make a loan. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or info@politicopro.com.

DRIVING THE DAY - Trump meets with Cohn this morning and later welcomes President Juan Manuel Santos of Colombia. The pair will hold a joint press conference, which should be ... interesting. ... House Ways and Means holds a tax reform hearing at 10:00 a.m. featuring multiple senior executives ... Mnuchin testifies before Senate Banking at 10:00 a.m. ... Index of leading indicators at 10:00 a.m. expected to rise 0.4 percent.

** A message from the National Restaurant Association: Debit swipe protections save consumers $5.8 billion each year. But big banks are pressuring Congress to repeal these protections so they can pad their own bottom line, placing a multi-billion-dollar tax on American consumers and small businesses. Congress must stop this Debit Card Tax. Learn more at stopthedebitcardtax.com. **

FINANCIAL TRADES OPPOSE WALL FUNDING BILL - From a letter to financial services legislative assistants from a number of trade groups including the American Bankers Association, Consumer Bankers Association, Financial Services Roundtable, Independent Community Bankers of America and several others:

"This legislation, which would subject remittance transfers from the U.S. to certain countries to a 2 percent user fee, is an illadvised consumer tax on a legal and heavily regulated financial product used by millions of Americans"

WHISPER IN THE WIND: PRESIDENT PENCE - POLITICO's Matthew Nussbaum and Theodoric Meyer: "Not since the release of the Access Hollywood tape, in which ... Trump bragged about groping women by the genitals, have some conservatives thought so seriously, if a bit wistfully, about two words: President Pence.

"The scandals clouding Trump's presidency - including, most recently, his firing of FBI Director James Comey, his alleged leak of classified information to Russian officials, and reports that he urged Comey to drop an investigation into a top aide - have raised once more the possibility that Trump could be pushed aside and replaced by Vice President Mike Pence" Read more.

FRESH PUSH FOR DURBIN VOTE - POLITICO's Zachary Warmbrodt: "A House Republican is attempting to raise the stakes in the lobbying brawl over debit card fees. Rep. Ted Budd (R-N.C.) is trying to gather signatures for a letter to House GOP leaders that would urge them to let members vote on whether to repeal the debit card fee cap known as the Durbin Amendment." Read more.

ALSO TODAY: KRUEGER GETS MOYNIHAN PRIZE - Per release: "Professor Alan B. Krueger, winner of the American Academy of Political and Social Science's 2017 Moynihan Prize, will deliver the annual Daniel Patrick Moynihan Lecture on Social Science and Public Policy: "Independent Workers: What Role for Public Policy?" 4 p.m. Kennedy Caucus Room, 325 Senate Office Building.

MARKETS SUFFER AMID POLITICAL CONTROVERSY - FT's Eric Platt, Lindsay Fortado, Jamie Chisholm and Michael Hunter: "U.S. stocks suffered their worst trading day in eight months as political turmoil in Washington rattled investors, with some fearing President Donald Trump's ability to push through pro-growth policies has been weakened by the deepening political controversy.

"The S&P 500 ... slid 1.8 percent to 2,357 at the close on Wednesday, shedding all of its gains for May. Financial stocks were among the worst hit, with the KBW bank index down more than 4 percent. Shares of some of the country's largest financial institutions, including Morgan Stanley, Bank of America and Goldman Sachs, declined more than 5 percent" Read more.

NEW THREATS FUEL FEARS OF REPEAT CYBERATTACK - WSJ's Robert McMillan: "A new fast-spreading computer attack and a hacking group's threat to release a fresh trove of stolen cyberweapons are fueling fears among businesses and security experts of another global technology assault.

"The new attack, called Adylkuzz, follows last week's WannaCry outbreak ... Both attacks rely on a Windows bug that was patched on March 14 and only affect PCs that haven't installed the latest version of Microsoft's software updates. Unlike its predecessor, Adylkuzz doesn't lock up computer screens; it slows down systems as it quietly steals processing power to generate a little-known digital currency called Monero." Read more.

WORLD'S RICHEST PEOPLE LOSE OVER TRUMP TURMOIL - Bloomberg's Brendan Coffey and Jack Witzig: "The world's richest people lost $35 billion Wednesday when global equity markets were rocked by political turmoil in the U.S., according to the Bloomberg Billionaires Index.

"Bill Gates, the world's richest person with $86.8 billion, lost $1 billion as shares of Microsoft Corp., his largest holding, tumbled 2.8 percent, the most in almost a year. Amazon.com Inc. co-founder Jeff Bezos, who came within $4 billion of taking the top spot from Gates earlier this week, dropped to No. 3 after losing $1.7" Read more.

BIG U.S. COMPANIES TO FOLLOW TRUMP ON SAUDI ARABIA TRIP - FT's Ed Crooks, Ben McLannahan, Anjli Raval and Arash Massoudi: "Dozens of the biggest names in US business will be following President Donald Trump to Saudi Arabia on his first official overseas visit this weekend, seeking to sign deals and strengthen ties with the kingdom at a moment where his business agenda has been in doubt.

"Jamie Dimon of JPMorgan Chase, Michael Corbat of Citigroup, James Gorman of Morgan Stanley, Andrew Liveris of Dow Chemical and Stephen Schwarzman of Blackstone will be among the US chief executives attending a business forum, along with General Electric vice-chairman John Rice." Read more.

CISCO TO LAY OFF ANOTHER 1100 WORKERS - WSJ's Anne Steele and Rachael King: "Cisco Systems Inc. said it would lay off another 1,100 employees and forecast a drop in quarterly revenue as the networking company contends with market shifts, including customers favoring software over hardware.

"The fresh round of cuts expands a previous restructuring plan announced last August to cut 5,500 jobs, or 7 percent of Cisco's workforce at the time. According to a company filing, Cisco's head count as of Jan. 28 - amid the first round of cuts - was 71,959. Shares of Cisco fell 7.4 percent to $31.33 after" Read more.

FORD TO CUT JOBS AS SALES LEVEL OFF - AP's Dee-Ann Durbin: "Ford is getting leaner as it faces an onslaught of challenges, from slowing U.S. sales to high-tech challengers to its own disgruntled shareholders.

"The 114-year-old automaker said Wednesday it is cutting 1,400 non-factory jobs in North America and Asia Pacific. The company will offer voluntary early retirement and separation packages to around 10 percent of its salaried workers in departments such as sales, marketing and human resources." Read more.

IVANKA TAKES AIM AT CHINESE FACTORIES - Bloomberg's Stephanie Hoi-Nga Wong: "Ivanka Trump's apparel brand is facing criticism from a labor-rights group for relying on Chinese factories that it says force some employees to work long shifts at the equivalent of about a dollar an hour.

"The nonprofit organization China Labor Watch said it investigated two Chinese factories that produce goods for Ivanka Trump's brand. It then shared its findings in a letter sent to the first daughter, saying employees are forced to work at least 12 1/2 hours a day and at least six days a week - at a monthly salary of about 2,500 yuan ($363)." Read more.

** A message from the National Restaurant Association: Protections established in 2010 reduce the fees small businesses like restaurants must pay Wall Street banks every time a consumer pays with a debit card. Businesses have passed those savings onto their customers, saving consumers $5.8 billion each year. But now Wall Street is pressuring Congress to repeal these protections and place a huge tax on small businesses and consumers. If Congress repeals critical swipe fee protections as part of the Financial CHOICE Act, the cost of goods and services would increase dramatically for small businesses and consumers alike - making it more expensive for American families to eat out at their local restaurants.

Wall Street doesn't need another big bailout paid for by the American people. Congress should oppose the Debit Card Tax and keep the current protections in place. It's a win-win for restaurants and consumers alike. Learn more at stopthedebitcardtax.com. **

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http://www.politico.com/tipsheets/morning-money/2017/05/18/brady-stays-bullish-220375

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