THE TICKER

The dog days of summer will be especially hot for the Consumer Financial Protection Bureau. Its push to enable class-action lawsuits against financial firms is setting up a defining clash with Wall Street interests. The battle will come to a head in September, when Senate Republicans aim to sink the agency’s proposed ban on contracts that lock consumers out of suing their banks. 

The industry is already fighting back. And, as in the health-care debate that swallowed the summer, a handful of Senate Republicans will determine the outcome. House Republicans voted in January to scupper the rule. Their colleagues across the Capitol need to muster a simple majority to follow suit, which also means they can afford only minimal defections. One has already declared himself, as the Wall Street Journal’s Andrew Ackerman reported on Friday

Sen. Lindsey Graham (R., S.C.) in an interview said he opposed the resolution, saying arbitration is “a windfall for the companies in terms of how you settle their cheating.”

“You’ve had banks and credit-card companies nickel-and-diming consumers, and one of the things that makes them think twice is the idea of a massive lawsuit,” Mr. Graham said. “Nobody is going to get a lawyer over a $10 overcharge, but when you overcharge millions of people $10, the bank or the credit-card company makes out like a bandit” in arbitration.

Those on the bubble include the three Republican senators who sunk the party’s Obamacare repeal drive. Susan Collins of Maine and Lisa Murkowski of Alaska have said they’re undecided on the matter; and it’s not clear whether John McCain (Ariz.) will be back in time for a vote after undergoing treatment for brain cancer. John Kennedy (R) of Louisiana also says he has yet to make up his mind. 

With a broader rewrite of post-crisis regulation barely budging in the Senate, the debate offers the Trump era’s first live-ammunition test of Wall Street’s mettle in the upper chamber. The industry is facing off against labor unions, the progressive grass roots and the trial bar, forces that arguably enjoy the political upper hand. Marginal Republicans know a vote against the CFPB could be seen as anti-consumer.  

The five-year-old agency already repulsed a similar challenge to its authority back in May, when Senate Republicans couldn’t marshal the votes to kill a CFPB rule regulating prepaid debit cards. Advocates on both sides say the stakes are significantly higher this time.

The CFPB faces a rear guard assault, meanwhile, from House Financial Services Chairman Jeb Hensarling (R-Tex.) for its handling of the issue. The Texas Republican is considering whether to pursue a contempt of Congress charge against CFPB director Richard Cordray, whom he says failed to comply with subpoena requests from the panel related to the agency’s work on the rule. Hensarling’s committee issued a 36-page report on Friday arguing that Cordray has ignored its document requests; the CFPB maintains it has produced thousands of pages of documents and is trying to cooperate. 

Cordray provides a shrinking target. The former Ohio attorney general is widely expected to quit his post soon to mount a bid in his home state’s 2018 gubernatorial race. 

THE REGULATORS

The new administration's friendlier approach to Wall Street is already reflected in significantly lighter fines against the industry. Over the first half of the year, penalties against firms and individuals in financial services were down roughly two-thirds compared to the same period last year. The industry's government minders are on pace to collect the smallest amount in fines since 2010, the Wall Street Journal's Jean Eaglesham, Dave Michaels and Danny Dougherty write. Some of the change owes to turnover at the agencies:

"Each of the three agencies has changed its enforcement chief in the past five months, and both the SEC and CFTC have new chairmen. The SEC and CFTC have each been operating with less than the full roster of five commissioners: The CFTC had just two commissioners until last week, when the Senate voted to approve two more; the SEC had two until May and now has three."

But the industry has also launched a concerted effort to get regulators to go easier: 

"Wall Street is lobbying to reduce the size of financial penalties. Organizations including the U.S. Chamber of Commerce, the Financial Services Institute and Fidelity Investments have been pushing Finra, which is financed by the industry, to ease up. Finra, which is overseen by the SEC, is weighing a potential change to its enforcement guidelines, according to people familiar with the matter. The watchdog imposed only two fines of more than $1 million in January through June this year and didn’t announce either. In the first half of 2016, Finra imposed at least five fines of more than $1 million and publicly announced each of them. Overall this year, Finra has levied $17 million in fines, down 77% from the first half of last year."

TRUMP TRACKER

President Trump took some time out over the weekend from vacation at his Bedminster, N.J., golf club to tweet about economic progress during his presidency:
 

How much credit can Trump reasonably claim? The shorter answer: some, but not nearly as much as he’d like. It’s true that the stock market is up, the jobless rate is down, and he has some new U.S. investments by foreign manufacturers to tout. “Of course, as economists are fond of saying, correlation is not causation,” Nelson Schwartz of the New York Times writes. More from Schwartz:  

Many of the trends Mr. Trump is benefiting from — falling unemployment, steady hiring, a rising stock market — were firmly in place under his predecessor, Barack Obama.

And in the case of Friday’s jobs data, Mr. Trump is citing figures he called phony not long ago on the campaign trail.

In the end, there is no way to quantify exactly how much credit the president is due for attracting foreign investment or encouraging the creation of jobs here instead of overseas.

But even some skeptics of his overall approach concede that Mr. Trump’s promises of tax reform and higher infrastructure spending, as well as pressure to increase domestic manufacturing, are resonating in boardrooms in the United States and abroad.

My colleague Heather Long sees even less evidence of a Trump bump: 

Yes, more Americans are getting jobs. Hiring in July was stronger than experts expected, with a net gain of 209,000 jobs. That's good news, but the pace of hiring is a tad worse than under Obama. The economy has added 1,074,000 jobs since Trump took office. During the same stretch last year, the economy gained 1,246,000 jobs under Obama...

The fastest-growing job category last month was low-paying retail jobs. Trump used to slam Obama by claiming he was creating only crummy jobs. Now that's part of the Trump story, too.

As for stocks: The market is going up. It has gained more than 20 percent since Trump won the election. But Wall Street is not Main Street, and about half of Americans have $0 in the market. Numerous studies have shown that better stock returns don't mean a turbocharged economy is on the way with more growth and higher wages for the middle class.

The vice president says he is doing nothing but working for Donald Trump's reelection.
John Wagner
Use of a regulatory loophole will allow Sinclair to reach 72 percent of U.S. households after buying Tribune’s stations.
Politico
MONEY ON THE HILL

Republicans have set an ambitious timeline for a tax code rewrite this fall. But their failure in the Obamacare repeal drive is primed to stalk the effort, potentially driving it off course.  Politico's Bernie Becker and Aaron Lorenzo report

President Donald Trump has dropped hints that he might stop the Affordable Care Act’s cost-sharing reduction payments, through which federal funds flow to insurance companies to keep down coverage costs for low-income people.

At the same time, Sen. Lamar Alexander (R-Tenn.), the health committee chairman, is working with Democrats on potential measures to shore up the health care law.

That’s left key Senate tax writers frustrated that there’s potentially another issue to take precious time away from their tax reform efforts. Senators left Washington on Thursday for a monthlong recess and will return to a September already overloaded with legislative deadlines. With key Trump administration officials and some congressional leaders having said they want to get a tax revamp signed into law this year, tax writers believe they’ll need to make serious progress starting next month...

But the fear for Hatch and others is that further work on health care could linger for months, taking attention away from a potential tax overhaul that will require input on a wide range of complicated, dense provisions. The Finance Committee has its own jurisdiction over health matters, making it even more likely it would be dragged in should another Obamacare debate pop up in the fall.

Budget expert Stan Collender is sounding the alarm about the challenges facing Republican leaders aiming to raise the debt ceiling next month. "The debt ceiling increase is in far more trouble than the Republican congressional leadership, the Trump administration and Wall Street are admitting," he writes for Forbes. More: "Until last Thursday, Mnuchin and Office of Management and Budget Director Mick Mulvaney were at the opposite ends of the fiscal spectrum when it came to the debt ceiling. Mnuchin's insistence that the bill be 'clean,' that is, with no spending cuts or other policy changes, was matched by Mulvaney's demand that deficit reduction efforts had to be attached... If this were a normal year, the politics weren't so toxic and the Trump administration wasn't so dysfunctional, the safe bet would be that this would all somehow get worked out and the debt ceiling increase would be enacted by the time it's needed. That may be the case again. But this year continues to be anything but normal so the outcome is far less predictable than it has been in the past."

POCKET CHANGE

Deutsche Bank's bad run keeps getting worse. Germany's leading lender dropped out of the list of the worlds top 15 banks in 2016, according to a new set of rankings. The bank's tumble owes to a confidence-rocking Justice Department investigation into its role selling toxic mortgage-backed securities in the run-up to the financial crisis. Reuters reports: "Private banking assets at Deutsche Bank fell 28 percent in dollar terms to $227 billion at the end of 2016, sending it tumbling five places to 16th in Scorpio's rankings of the 25 biggest private banks in the world."

Bloomberg is out this morning with a fun graphic breaking down big GOP donor Paul Singer of Elliott Management's major investments in recent years and how they've performed. "Singer has targeted the world’s biggest mining company, taken on Warren Buffett in a battle for Texas’s largest electricity distributor, ousted chief executive officers on both sides of the Atlantic and set off a chain of events that led to the impeachment of South Korea’s president," they write. See how the firm with $34 billion of assets and a penchant for headline-grabbing tactics has done here

VEB, as Russia’s most politically connected bank is known, has been locked out of international debt markets by U.S. and European sanctions since 2014. But BlackRock Inc. and Fidelity Investments are among the money managers loading up on the Russian lender’s bonds.
Bloomberg
Two titans of the bond market are still clinging to the idea that inflation is going to make a comeback.
Bloomberg
The bank has expanded its investigation into fraudulent accounts, and the total could rise from the 2.1 million that it previously estimated.
New York Times
CHART TOPPER

From The Post's Lisa Rein: Even after flurry of Senate action, Cabinet agencies are still understaffed in Trump’s 7th month:

THE FUNNIES

From The Post's Tom Toles: "Here’s some early news from Trump’s vacation:"

 

DAYBOOK

Coming Up

  • The Carnegie Endowment for International Peace holds a discussion on oil corruption on Tuesday.
  • The Economic Policy Institute holds an event on the Regulatory Accountability Act on Thursday.
  • Congress is on recess until September 5. 
BULL SESSION

Are 1 in 4 Americans of prime working age not employed? Watch from The Post's Fact Checker: 

President Trump leaves D.C. for a 17-day vacation: 

There are few places President Trump loves more than his New Jersey golf course. Here’s why:

Watch Stephen Colbert's take on the president's 17-day vacation: 

The Daily Show's Trevor Noah on the Trump administration's theme weeks: