If the Trump administration just unshackled Wall Street, the news has yet to make it up to New York.
After rallying at the end of last week, bank share prices notched relatively modest gains Tuesday in the wake of the long-awaited Treasury proposal for putting the Trump stamp on financial-industry regulations. That, despite the fact that next to the House GOP package, Secretary Steven Mnuchin’s plan describes a more moderate approach — working within the existing regulatory framework rather than seeking to blow it up. And since Mnuchin’s vision relies on the Trump administration picking up its snails pace toward getting regulators in place and staffing up agencies, it could take a while (read: years) to fulfill.
But “a while,” no matter how long, will arrive sooner than “never,” which is the approximate effective date of much of the House GOP’s Financial CHOICE Act.
Goldman Sachs economist Alec Phillips drew the distinction more diplomatically in a note to clients on Tuesday. Changes possible through executive action “appear likely,” he wrote. “We assume that President Trump will nominate individuals to fill key financial regulatory positions who agree with the recommendations laid out in the Treasury’s report. If so, in most cases this should result in eventual implementation of many if not most of the changes that are possible via the rulemaking process.” Legislative changes, Phillips went on, are “less likely.”
To that point, Senate Banking Committee Chairman Michael Crapo (R-Idaho), who holds the legislative baton since the House passed CHOICE, acknowledges Republicans face long odds of enshrining in law a wholesale overhaul of financial regulations.
“There are a number of what I consider very positive things happening, and many of them are happening at the executive level because Congress has not been able to get legislation on the president’s desk in a number of these areas,” Crapo told a lunchtime crowd Tuesday at a financial-industry conference in Washington.
A bill to ease rules on the sector remains a top priority for the Banking chairman. To forge one, he’s trying to find common ground with the top Democrat on his panel, Sen. Sherrod Brown (D-Ohio), so that the package can clear the chamber’s 60-vote filibuster threshold. But that dramatically limits the scope of what it can include, especially with regard to relief for big banks. As the size of the regulated institution under consideration increases, Crapo said, “the ability to get bipartisan agreement diminishes.”
So, given the hurdles in Congress, why no bank stock surge on the rollout of a plan that largely allows the administration to end-run Congress?
Maybe, says Chris Kotowski, a senior analyst at Oppenheimer, because investors have learned to keep their eyes on the Fed as the regulator with the strongest arm and the longest reach. And until Trump formally names a successor to Daniel Tarullo — the central bank’s regulatory point man, who stepped down in April — they’ll view other moves in Washington with skepticism. Besides, Tarullo, whose get-tough attitude toward the big banks set the pace for post-crisis enforcement, already signaled the time had come for the Fed to rethink its approach. On his second to last day on the job, the former Harvard Law professor endorsed a less stringent leverage ratio for bank capital, a simplified Volcker rule, and easier stress tests for big banks — tweaks that the Treasury report echoed.
“A lot of this has been priced in already,” Morningstar’s Jim Sinegal told me. “It’s been broadly accepted that this is where you’d get action first.”
Bank share prices appeared to have benefited more last week from the selloff of tech stocks than any special enthusiasm for the House passage of CHOICE. The same performers ran up as much as 33 percent at the beginning of the year on expectations that Republican control of government would deliver quick wins on fiscal stimulus and deregulation. It turned out legislating is hard -- it still is even with single-party GOP control of Washington.
BREAKING NEWS THIS MORNING: A gunman opened fire this morning on Republican lawmakers practicing for the Congressional Baseball Game in Alexandria, Va., "possibly injuring several including at least one lawmaker, Steve Scalise, the majority whip, according to police and a congressman. Alexandria police would only confirm that a shooting had occurred and that one person was in custody," reports Peter Hermann, Paul Kane and Patricia Sullivan. For more real-time updates, check the Post website.
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—As the Fed wraps up a two-day meeting today likely by raising rates, the White House is preparing to launch a search for the next Federal Reserve chief. The Wall Street Journal reports that Gary Cohn, the president’s top economic advisor and a rumored possible candidate for the job himself, will lead the process.
Chairwoman Janet Yellen’s term expires in January, and Trump hasn’t ruled out reappointing her. He lambasted her on the campaign trail but has quieted that criticism since taking office.
—Steve Mnuchin said there may be such a thing as a “good” government shutdown. The Treasury secretary, testifying Tuesday before the Senate Budget Committee, said that outcome is not the administration’s “primary objective.”
But, he added, “there could be times, we could go through a lot of hypothetical things today, there could be reasons at various times why that is the right outcome.”
The White House is facing a one-two punch in the fall, with the potential looming for standoffs with Congress over both funding the federal government and lifting the debt ceiling. In an interview with Fox Business News, Mnuchin restated his position that the sooner Congress extends the federal government's borrowing authority, the better. Watch him here:
—Workforce Development Week is off to a rough start for the president. Nearly 200 Democratic members of Congress are filing a lawsuit against Trumptoday, alleging that he’s violated the emoluments clause of the Constitution by keeping his stake in his global business empire, my colleagues Tom Hamburger and Karen Tumulty report.
The suit — whose lead sponsor, Sen. Richard Blumenthal (D-Conn.), says sets a record for congressional plaintiffs against a president — argues the lawmakers have special standing because the Constitution requires the president to get the consent of Congress before accepting any gifts. It comes a day after the attorneys general in the District of Columbia and Maryland, both Democrats, sued Trump alleging that payments to him violate the Constitution's anti-corruption clauses.
—Meanwhile, in a frequently tense appearance before the Senate Intelligence Committee on Tuesday, Attorney General Jeff Sessions repeatedly refused to answer questions from senators over his private conversations with Trump. His former colleagues wanted to know whether he spoke to Trump about former FBI director James Comey's handling of the Russia probe.
—And all that comes as Trump has hit a new high in the polls — and not in the good way. On Tuesday, the share of Americans who disapprove of his performance as president topped 60 percent for the first time in the Gallup daily rating.
That’s an unpopularity rating higher that those ever recorded for Franklin D. Roosevelt, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Gerald R. Ford, Jimmy Carter, Ronald Reagan, Bill Clinton or Barack Obama.
- The House Appropriations’ Subcommittee on State, Foreign Operations and Related Programs will hold a hearing with Treasury Secretary Steve Mnuchin.
- The Senate Finance Committee will hold a confirmation vote on David Malpass to be under secretary, Andrew K. Maloney to be a deputy under secretary and Brent James to be general counsel of the Treasury Department.
- House Financial Services Committee will hold a markup of a flood-insurance bill this morning.
- National Journal is holding a webinar on what’s next for financial reform on Thursday.
- The National Economists Club hosts a discussion with author and economist Anthony Elson on Thursday.
- The Cato Institute holds an event on the financial crisis and government-sponsored enterprises on Thursday.
- The Senate Committee on Banking, House and Urban Affairs holds a hearing on “Fostering Economic Growth: Midsized, Regional and Large Institution Perspective” on Thursday.
- Rep. Blaine Luetkemeyer (R-Mo.) will speak at a Financial Services Roundtable event on Thursday.
- Vice President Pence is scheduled to give the keynote address at the conference of Prosperity and Security in Central America. Pence will speak in Miami on Thursday.
President Trump said the White House will announce an apprenticeship program for young people around the country:
Watch this brief recap of Attorney General Jeff Sessions' before the Senate Intelligence Committee:
As Attorney General Jeff Sessions prepared to testify before the Senate Intelligence Committee, Sen. Patrick J. Leahy (D-Vt.) criticized Sessions for canceling his appearance before the Senate Appropriations Committee that was scheduled for Tuesday:
Or Watch Stephen Colbert's recap of the Sessions hearing: