POLITICO's Morning Money, presented by Morgan Stanley: The road ahead for Trump — Wall Street gets w
By Ben White and Aubree Eliza Weaver | 04/03/2017 08:00 AM EDT
THE ROAD AHEAD FOR TRUMP - It doesn't get much easier after the health care failure. A potential shutdown looms on April 29th - Trump's 100th day in office. Senate Majority Leader Mitch McConnell on Sunday said he was confident the GOP could craft a deal to bring enough Democrats along in the Senate. But fights loom in both chambers over President Trump's proposed border wall, Planned Parenthood funding and military spending, to name just a few. And tax reform remains a highly challenging agenda item. Nancy Cook, Shane Goldmacher and Josh Dawsey report here on how the White House does not plan to outsource details of the plan to Congress as it did on health care. Instead, NEC Director Gary Cohn, Treasury Secretary Steven Mnuchin and other top West Wing aides will drive the package. But the issue is not really who writes the eventual bill but what's in it. The White House remains cool to the border adjustable tax that is central to House Speaker Paul Ryan's plan and provides over $1 trillion in revenue over ten years to offset the impact of rate reductions. Figuring out how to plug that gap will be extremely difficult if not impossible. And in the NYT over the weekend, Nick Confessore and Alan Rappeport further detailed the bitter split among lobbying groups over the BAT with multiple organizations funded the billionaire Koch brothers political network pushing hard against the plan. Big net exporters strongly support a BAT but they probably lack the power to overcome all the opposition arrayed against it. WALL STREET GETS WORRIED - Via Goldman Sachs's "Weekly Kickstart" report: "Equity performance and client conversations reflect growing concern about the likelihood of proposed policy tailwinds to corporate earnings. Despite posting the best quarterly risk-adjusted return since 2013, the S&P 500 has receded from its highs as stocks levered to tax reform, infrastructure spending, and deregulation reversed their post-election gains. "Our economists continue to expect corporate tax cuts late this year but few major reforms to the tax code. Firms with the highest effective tax rates should eventually outperform. Strong economic data helped drive and sustain the equity rally but also face risks from elevated policy uncertainty." ABOUT THAT SHUTDOWN - Stan Collender in Forbes: "[T]he Senate will be in recess from next Friday until April 24 (the House comes back on April 25) and isn't planning to consider a new funding deal until then. Once it comes back to Washington, Congress will be in session for less than a week before the shutdown will begin. ... "House Speaker Paul Ryan (R-Wisc.) said last week that the 2017 funding bill isn't the best way or time to deal with Planned Parenthood. That aligns him with Democrats and puts him on a collision course with the White House on this issue. ... Senate Republicans ... apparently are also planning a 'clean' bill for the whole government that rejects the president's spending cuts and has no non-budget policy riders. That puts them on a collision course with both the White House and House Freedom Caucus" Read more. SMALL BALL ON FIN REG - Cap Alpha's Ian Katz: "Coinciding with the start of baseball season, proponents of financial deregulation are embracing small ball as their main strategy. Gone is the chest-puffing rhetoric of repealing Dodd-Frank ... "In the aggregate, the changes will be substantial, and helpful to financial firms. But it will take a lot of bunts and singles - and time. Companies might not feel anything meaningful until next year" GOOD MONDAY MORNING - Big thanks to Victoria Guida for the great fill-in along with new MM'er Aubree Eliza Weaver. Had an amazing birthday in Miami featuring a blistering Radiohead show and dinner at Yardbird in South Beach. Get there if you haven't. Order the chicken, waffles and watermelon. Life changing. Email me on firstname.lastname@example.org and follow me on Twitter @morningmoneyben. Email Aubree on email@example.com and follow her on Twitter @AubreeEWeaver THE GLOBAL POLITICO PODCAST: 'THIS THEORY WE DIDN'T DO ANYTHING': In an exclusive new interview for The Global POLITICO, Obama's top homeland security adviser Lisa Monaco talks about the Russia hacking of 2016 and whether the White House should have talked more publicly about it before the election. Plus: her thoughts on how Trump is undoing their counterterrorism policies "with the stroke of a pen." Listen and subscribe on iTunes. Pro Health Care Briefing: Drug Safety and the Trump FDA - Join the POLITICO Pro Health Care team and experts as they discuss: How will changes to the FDA drug approval process protect safety, promote efficacy, maximize appropriate prescribing, and pass on cost savings to patients and taxpayers? What are the challenges and possible benefits of relying on surrogate markers to determine drug effectiveness and side effects? How can real-world data inform changes in the FDA? Wednesday, 8 a.m., The Mayflower Hotel. RSVP: here. THIS MORNING ON POLITICO PRO FINANCIAL SERVICES Lorraine Woellert on the CFPB's legal fight to remain independent - and to get Morning Money every day before 6 a.m. - please contact Pro Services at (703) 341-4600 firstname.lastname@example.org DRIVING THE WEEK - President Trump on Monday meets with brutal Egyptian strong man Abdel Fattah Al Sisi, a head of state never invited to the Obama White House ... Trump's bigger foreign policy moment comes at the end of the week when he meets with Chinese President Xi Jingping at Mar-a-Lago on Thursday and Friday ... Consumer Bankers Association annual meeting begins Monday in Dallas and runs through Wednesday ... Fed governor Dan Tarullo's last day at the central bank is Wednesday ... SCOTUS nominee Neil Gorsuch is expected to be confirmed by Friday even if it requires Senate Republicans to invoke the "nuclear" options and blow up the SCOTUS nominee filibuster rule ... House Financial Services has a hearing Tuesday at 10:00 a.m. on the Fed, one on Wednesday at 10:00 a.m. featuring CFPB director Richard Cordray and another on Thursday at 9:15 a.m. on reforming the financial regulatory system ... Senate Banking on Tuesday at 10:00 a.m. is expected to approve Jay Clayton to be SEC Chair .. On the data front: ISM manufacturing Monday at 10:00 a.m. is expected to dip to 57.1 from 57.7 ... ISM Non-manufacturing on Wednesday at 10:00 a.m. expected to dip to 57.0 from 57.6 ... March jobs report at 8:30 a.m. Friday expected to show a gain of 178K with unemployment unchanged at 4.7 percent and hourly earnings up 0.2 percent MULVANEY ON GROWTH - On his radio show this weekend, Larry Kudlow interviewed OMB Director Mick Mulvaney who called the CBO's projected growth rate of 2 percent "depressing" and that the White House figure would be higher. "Economic growth solves all of our problems," he said. Listen here. TRUMP ON CHINA/UNILATERAL ACTION ON N KOREA - Trump in an interview with the FT on President Xi: "I have great respect for him. I have great respect for China. I would not be at all surprised if we did something that would be very dramatic and good for both countries and I hope so. ... "[W]e will talk about North Korea. And China has great influence over North Korea. And China will either decide to help us with North Korea, or they won't. And if they do that will be very good for China, and if they don't it won't be good for anyone. ... [I]f China is not going to solve North Korea, we will. That is all I am telling you." "It is all about trade. How do you bring China's trade surplus down quickly? By telling China that we cannot continue to trade if we are going to have an unfair deal like we have right now. This is an unfair deal. Are you going to equalise tariffs? I don't want to talk about tariffs yet, perhaps the next time we meet. So I don't want to talk about tariffs yet. "[W]hen you talk about currency manipulation, when you talk about devaluations, they are world champions. And our country hasn't had a clue, they haven't had a clue. The past administration hasn't had and many administrations - I don't want to say only Obama; this has gone on for many years - They haven't had a clue. But I do." Full interview. ONE PROBLEM with this interview: China is no longer devaluing its currency and hasn't been for a decade. 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. ** TOOMEY STEPS UP TALK ON FIN REG - POLITICO's Victoria Guida: "Sen. Pat Toomey launched an opening salvo in his bid to increase the scope of financial regulations that Congress could target for elimination. The Pennsylvania Republican asked the [GAO] ... to determine whether the Congressional Review Act, which allows lawmakers to strike down certain regulations, could be used to overturn informal regulatory guidance as well. "The statute has never been used to cover agency guidance, and a number of lawyers told POLITICO that while it's a reasonable interpretation, it's not a given. Toomey's move demonstrates that congressional Republicans are willing to consider every conceivable path to rolling back regulations that they find excessive or burdensome" Read more. CHINA PREP - NYT's Mark Landler: "When ... Trump welcomes President Xi ... to his palm-fringed Florida club for two days of meetings on Thursday, the studied informality of the gathering will bear the handiwork of two people: China's ambassador to Washington and Mr. Trump's son-in-law, Jared Kushner. "The Chinese ambassador, Cui Tiankai, has established a busy back channel to Mr. Kushner, according to several officials briefed on the relationship. The two men agreed on the club, Mar-a-Lago, as the site for the meeting, and the ambassador even sent Mr. Kushner drafts of a joint statement that China and the United States could issue afterward." Read more. ROSS SAYS HE DIDN'T KNOWINGLY LEND TO SANCTIONED RUSSIANS - Bloomberg's Mark Niquette: "U.S. Commerce Secretary Wilbur Ross said he's not aware of the Bank of Cyprus Pcl having any significant dealings with Russians or other individuals and entities under U.S. sanctions while he was on its board of directors. "Ross, 79, resigned as vice chairman and member of the bank's board on March 1 after he was confirmed to his position in President Donald Trump's cabinet. Ross said in response to questions about the bank's business with Russian entities that no large loans he approved knowingly went to a person under sanctions. "'None of those loans went to anybody with sanctions that I'm aware of,' Ross said on CNN's 'State of the Union' on Sunday. 'Nor were there any great big deposits from sanctioned parties that came in while I was involved that I was I aware of.'" Read more. CENTRAL BANKS SAY BYE TO EURO - FT's Claire Jones: "Central banks are dumping euros amid concerns over political instability, weak growth and the European Central Bank's negative interest rate policy - and favour sterling as a long-term, stable alternative. "According to a survey published Monday of reserve managers at 80 central banks, who together are responsible for investments worth almost ���6trn, the stability of the monetary union is their greatest fear for 2017. The results ... show some respondents have cut their entire exposure to the euro, while others have reduced their holdings of investments denominated in euros to the bare minimum" Read more. COMPANIES URGE EMPLOYEES NOT TO BORROW FROM 401(K)S - WSJ's Anne Tergesen: "American companies are trying to stop employees from raiding their 401(k)s, in an attempt to ensure that older workers can afford to retire and make room for younger, less-expensive hires. Employers of all types - from Home Depot Inc. to a mortgage lender - are taking steps to better inform workers of the financial implications of borrowing from their retirement accounts and pulling the money out when they leave jobs" Read more. TESLA SEES RECORD DELIVERIES IN Q1 - Bloomberg's Dana Hull: "Tesla Inc. set a record for deliveries and production in the first quarter, beating analysts' estimates as Chief Executive Officer Elon Musk prepares to begin building the Model 3 in July. "The maker of electric cars and energy-storage devices shipped just over 25,000 vehicles in the year's first three months, Palo Alto, California-based Tesla said in a statement Sunday. That topped the average forecast of 24,200 from three analysts and should bolster confidence in Tesla's target of delivering as many as 50,000 autos in this year's first half." Read more. CREDIT SUISSE TAKES ACTION AFTER OFFICE RAIDS - Reuters' Paul Sandle: "Credit Suisse has taken out adverts in British Sunday newspapers stressing a zero-tolerance policy on tax evasion, as the Swiss bank tries to limit any damage to its reputation from raids on three of its offices. "Zurich-based Credit Suisse was pulled into an international tax evasion and money laundering investigation on Thursday when coordinated searches were carried out on its London, Paris and Amsterdam offices. The ads, which appeared in the Sunday Times, Sunday Telegraph and Observer, stated they were a 'response to recent reports about tax probes in various European countries.'" Read more. IRAQ MOVES CLOSER TO BECOMING INVESTMENT HOT SPOT - CNBC's Dawn Kissi: "War-torn Iraq recently got an unexpected boost on its way to becoming an investment hot spot, which may take its next step sooner than conventional wisdom suggests. Even as military forces wage a fierce offensive against ISIS, global ratings agency Fitch upgraded last month Iraq's outlook to stable, based largely on the country's improving public finances" Read more. APPLE SCORES AMID RENEWED INTEREST IN TECH STOCKS - WSJ's Ben Eisen: "Apple Inc. shares sported their best quarterly performance in five years, up 24 percent in the first three months of 2017, showing how some once-lagging trades have come back with force. "The tech giant added $144.8 billion to its market value in the first three months of the year as its shares set all-time highs. The only time an S&P 500 company has added more to its market capitalization in a single quarter was when Apple itself did so in the first quarter of 2012" Read more. CITIGROUP DROPS IN BRANCH RANKING - FT's Ben McLannahan: "Citigroup has dropped out of the top 15 banks by branches in the US, underscoring its post-crisis shift upmarket as it focuses on serving wealthier customers at home and abroad. "Citi ranked 16th by number of branches in the US with 756 at the end of June last year ... putting it in a peer group with Huntington Bancshares of Birmingham, Alabama, and Woodforest, based in The Woodlands, Texas. In 2009 Citi ranked five places higher with 1,049 branches, rubbing shoulders with Fifth Third of Cincinnati and Toronto's TD" Read more. ALSO FOR YOUR RADAR - ICYMI: BANNON'S MILLIONS - POLITICO's Josh Gerstein and Darren Samuelsohn: "Steve Bannon, a top adviser to ... Trump, earned more than half a million dollars last year from entities linked to a pair of major conservative donors, according to documents released by the White House detailing the personal finances of its officials. "Bannon reported an ownership stake of $1 million or more in a data-crunching firm that did work for Sen. Ted Cruz (R-Texas) during the presidential race. He also took in $191,000 in consulting fees in 2016 as executive chairman of the conservative media website Breitbart News" Read more. MEET DAN GILBERT - Ron Fournier in Crain's: "If you want to truly understand Dan Gilbert, ask him about fatherhood." Read more. A BANKER WHO LIKES DODD-FRANK - Amalgamated Bank CEO Keith Mestrich in The Hill: "[S]ome federal lawmakers insist the regulations formed in the wake of the crisis are holding markets back - claims which fly in the face of reality. These lawmakers are demanding a rollback of the Dodd-Frank Reform Act, despite the protections it offers to both consumers and our national economy. "The opponents of oversight and regulation insist the 'red tape' of Dodd-Frank's reforms are driving up mortgage and credit costs for consumers, even though the costs are consistently hitting record lows" 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.
1 Based on data provided by All Aboard Florida. For more information visit: http://allaboardflorida.com/projectdetails/aaf-fact-sheet
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